Napster Stopped in Its Tracks

SAN FRANCISCO (07/27/2000) - Napster Inc. had better come up with Plan B.

A federal judge today has ordered the company to stop assisting its users in the downloading of copyrighted music, a broad if surprisingly sudden decision that the popular MP3-swapping startup said would effectively shut down its service. The company vowed to appeal the decision immediately.

U.S. District Judge Marilyn Hall Patel ruled that the major recording companies that brought suit against Napster in December, known as the "big five" labels, had a "strong likelihood" of prevailing in the case and faced irreparable harm if consumers continued to use Napster's system to download copyrighted music.

She gave the San Mateo, Calif.-based company until midnight Friday to remove all copyrighted songs from its directory unless the service had the copyright owners' explicit permission. Napster said it would seek to have the injunction stayed while its appeal moved forward.

The decision was a major setback for Napster, which in less than a year has garnered 20 million users with no marketing. In May, prominent venture capital firm Hummer Winblad funneled $13 million into Napster, hoping to capitalize on its broad appeal among music fans. Unless today's decision is overturned, "Napster's service is obviously going to be very, very curtailed and perhaps eliminated entirely," said Napster attorney David Boies.

Although the preliminary injunction is a decisive first-round victory for copyright holders, Napster is unlikely to settle with the record labels, Boies said after the hearing, because "the purpose of the [lawsuit] is to prevent the distribution channel that Napster represents."

The decision, if upheld, also could spell trouble for file-sharing technologies in general, or at least for those that plan to make a business out of providing such services. By far the most popular file-swapping service, Napster is under scrutiny to see if it can weather the assault that the powerful Recording Industry Association of America has waged against it. A decision forcing Napster to drastically scale back its service is likely to discourage other businesses, but the effect on less centralized file-sharing forums, such as Gnutella, Freenet and chat rooms in which peers swap copyrighted music, is less certain.

The RIAA contends that Napster users commit copyright infringement every time they download a song published by one of the association's members, which include but are not limited to the five largest record labels. Under copyright doctrine, the group alleges, Napster is liable for "contributory" and "vicarious" infringement because it is aware of its violations, declines to take action to prevent those violations and derives financial benefit from them. The association presented email and other internal Napster documents that showed the company planned to "usurp" the music business and distribute "pirated" music.

At today's hearing and in legal briefs, Napster has fallen back on a host of defenses. Its main argument is that the American Home Recording Act, passed in 1992, immunizes consumers from copyright infringement when they make recordings for noncommercial purposes. Napster also argued that the Digital Millennium Copyright Act, passed in 1998, insulates it under a provision that protects Internet service providers from being held responsible for the actions of their users. Napster also based its defense on a landmark Supreme Court case that gave Sony the go-ahead to manufacture VCRs even though some consumers used them to tape copyrighted programs.

Patel soundly rejected each argument, saying that none applied to Napster, whose primary purpose was to assist its users in finding and downloading copyrighted music. "You can hardly stand back and say, 'Gee, I didn't know all that stuff was ... infringing,' " Patel scolded Napster's counsel at one point.

She also appeared unsympathetic to Boies' contention that an injunction essentially would shut down the fledgling service because it was impossible to know which of the songs it indexes are copyrighted. "That is the system that's been created, and I think you're stuck with the consequences of that," she said.

At points during today's hearing, Boies, the superstar litigator who was instrumental in the resounding win the Department of Justice recently scored over Microsoft, was visibly flustered. He argued that the court shouldn't base its decision on what "some 19-year-old" said, referring to an e-mail written by Napster programmer Shawn Fanning that referred to "usurping" the traditional recording industry, which the RIAA entered as evidence in the case. Fanning, now 20, wrote the software at the heart of Napster's service.

Although the swiftness of the ruling came as a surprise to many, the substance did not. "Napster clearly violates the spirit of copyright law, whether or not it violates the letter of the law," MP3.com (MPPP) CEO Michael Robertson said in an interview prior to the hearing. Robertson has some experience in copyright law, given that MP3.com was found liable for copyright infringement in April and so far has settled with BMG and Warner Music.

"Now that Napster's management understands that they need the authorization of copyright owners to engage in their business, we hope that they will work with the record companies to devise innovative ways to user their technology for legitimate purposes with permission," Cary Sherman, the RIAA's senior VP and general counsel, said in a prepared statement. He wouldn't speculate on what those legitimate purposes might encompass, however.

The decision to halt Napster's operation is likely to provide copyright holders with powerful ammunition in at least one other legal battle over file swapping that is currently under way. Last week, the RIAA was joined by the Motion Picture Association of America in suing multimedia file exchange service Scour.net. Today's decision "should send a message to Scour that they are on very thin ice and they should probably revise their business model very, very quickly," Sherman said. Scour responded in a statement that it needed time to review Patel's decision, and the company canceled a series of interviews with journalists that had been scheduled for after the hearing.

Like Napster, Scour maintains that it is protected by the DMCA and that it has substantial noninfringing uses. For example, the multimedia file exchange recently launched a promotion with Dimension Films (a subsidiary of Miramax) to make available a downloadable version of the trailer for "Scary Movie."

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