The company, which hosted digital versions of thousands of magazines, said on its Web site that it had run out of money. But recent legal proceedings also appear to have left the company without a viable business plan.

Mygazines touted itself as a one-stop shop for people to "read, archive and upload content" from magazines. The site, which launched over the summer, offered unauthorized copies of around 2,000 publications, including popular titles like People, Martha Stewart Living and Esquire.

Not surprisingly, publishers viewed the site as illegal and promptly filed suit--both in New York federal court and Toronto, where most of the site's executives were based. Last month, the company executives settled the case by agreeing to remove all copyrighted content and promising that in the future, the site would accept uploads only from copyright holders. They also agreed to pay damages of $200,000 (around $168,000 in U.S. currency).

When Mygazines launched in July, the company said in a statement that it intended to work with the industry "with the aim of fortifying the future of all those either directly or indirectly supported by the production, sales and distribution of magazines."

At that point, however, publishers were not in the frame of mind to collaborate with the site. "Infringing people's rights is a bad way to start a business deal," said Robert Balin, one of the magazine companies' attorneys.

Balin added that the case did not present the same legal challenges as some other lawsuits brought by media companies against Web sites. Viacom's copyright infringement case against Google's YouTube, for instance, is different because users--not YouTube employees--uploaded the copyrighted material. At Mygazines.com, the company appears to have scanned in and uploaded the magazines.

"It was not a close case," Balin said. "Collectively, everybody's jaw dropped at how blatant this infringement was."

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