SAN FRANCISCO (07/31/2000) - Napster Inc.'s been given a little breathing room.
In a dramatic last-minute development that averts a curtailment of Napster's MP3-sharing service, a panel of federal appellate judges granted an emergency stay of a lower court's injunction that would have forced Napster to temporarily halt the swapping of major-label music as of midnight Pacific Daylight Time Friday.
The ruling means that the software company's 20 million-plus users can continue downloading copyrighted MP3s from one another's hard drives -- and Napster can stay in business -- while the company prepares its appeal of the injunction decision. The 9th U.S. Circuit Court of Appeals in San Francisco has set an Aug. 18 deadline for the initial rounds of briefs.
In requesting the emergency stay, Napster "raised substantial questions of first impression going to both the merits and the form of the injunction," the appeals court's order reads. In other words, the court found Napster's arguments opposing the injunction compelling enough to reconsider.
"I am happy and grateful that we do not have to turn away our 20 million users and that we can continue to help artists," Napster co-founder Shawn Fanning said in a statement.
Wednesday's surprise injunction sent tremors throughout the Internet economy and prompted at least one company, GlobalSCAPE, to restrict access to its CuteMX peer-to-peer software program.
U.S. District Judge Marilyn Hall Patel issued a scathing response along with her decision, in which she categorically dismissed all of Napster's key defenses. Napster contends that its users have the right to share MP3s for personal use and that file sharing ultimately benefits the record industry.
In a curious effort to show the major record labels just how much commerce Napster promotes, a day after the injunction was issued the company urged its users to purchase CDs of artists who have spoken out in support of Napster. The company hopes the weekend "buy-cott" would prove that its service is helping rather than harming record sales. The record industry probably was hoping for a surge in CD sales while Napster was disabled (had the injunction taken effect), thus reinforcing Napster's argument.
Attorneys for the Recording Industry Association of America (RIAA), which sued Napster in December, had asked the court to enjoin Napster from helping users download copyrighted songs pending a full trial, saying that the activity is causing "irreparable harm" to the traditional record business. In a statement, RIAA President Hilary Rosen said Friday's court order to stay the injunction was "a disappointment, but we remain confident that the court will ultimately affirm (the motion for preliminary injunction) once it has had an opportunity to review the facts and the law."
The RIAA, along with the National Music Publishers Association (NMPA), a co-plaintiff in the case, also filed a brief in the appeals court Friday, reiterating its arguments favoring an injunction. The appeals court now will hear formal testimony in the record industry's motion for an injunction in advance of a trial.
The stay order is good news for Scour.net, a multimedia search engine that was sued last week by the RIAA, NMPA and the Motion Picture Association of America.
"We're encouraged that the court has decided to take a closer look at all the issues involved," says Scour President Dan Rodrigues. "It hasn't changed anything for us - we believe our service is legal and believe the courts will find that it is legal."
According to Nielsen NetRatings, traffic to Napster's Web site has jumped 71 percent since Tuesday, as consumers hurried to stock up on digital music in anticipation of a shutdown.
That's bad news to Rosen. "Since the district court issued its order," she lamented, "the illegal downloading of copyrighted music openly encouraged by Napster has probably exceeded all previous records."