Napster Users Create Legal Gray Area for Employers

FRAMINGHAM (07/13/2000) - Alan Rhea, the information systems director at U.S.

Diamond Wheel, doesn't want his end users installing Napster Inc. software on their computers. Its file-sharing technology poses a security risk, and personal use of work computers violates company policy.

But otherwise, Rhea loves Napster.

From his home PC, Rhea uses Napster to listen to new artists and hard-to-find music, such as a digital recording of the first 45-rpm record he ever bought, "Tell Her No" by the Zombies.

"I think Napster is one of the best promotion tools that ever came out of the Internet for music, and it's a shame that you've got some people driving Lamborghinis saying that it's going to make them paupers," said Rhea, whose Oswego, Ill.-based company makes abrasive products.

San Mateo, Calif.-based Napster Inc. may soon be shut down if Federal District Court Judge Marilyn Patel in San Francisco agrees to a preliminary injunction sought by the recording industry. A hearing is scheduled July 26. Napster argues that its users are simply legally "sharing" music for personal use. But the Recording Industry Association of America, which is representing the major record labels in court, says Napster is helping users violate copyright law.

This battle has created a legal gray area for Napster users and potentially for their employers as well. If employees are using computers at work to download copyrighted digital recordings, employers could be dragged into a lawsuit, say several intellectual property attorneys.

But even if the record labels could legally justify suing end users, the record companies "would be hard-pressed to hold an employer liable," said Jeffrey Lewis, an attorney at Gordon & Glickson PC in Chicago. Regardless, it's important for companies to have rules and policies in place on equipment use, he said.

But legal experts don't believe the recording industry will start alienating its customers.

"The music industry would be insane to sue individuals . . . that doesn't mean they might not be insane," said attorney James Burger at Dow, Lohnes & Albertson in Washington.

Congress has begun investigating the copyright and competition issues raised by Napster and businesses such as MP3.Com Inc. in San Diego.

At a Senate Judiciary Committee hearing Tuesday, rock band Metallica's co-founder, Lars Ulrich, derided Napster for violating copyright, while Roger McGuinn, formerly of The Byrds folk rock group, praised and Internet downloads generally for exposing new people to his music.

Judiciary Committee Chairman Orrin Hatch, a Republican from Utah, warned recording industry representatives to be wary of "competition concerns" if they are reluctant to license their music to the new digital companies.

But Gene Hoffman Jr., founder, CEO and president of Inc., which sells digital music online, said it has seen its stock value plunge because of Napster.

"The reason my stock has declined is [investors] are afraid that Napster will validate the concept of not paying for music," said Hoffman at the hearing.

Over the past year, the company's stock has declined from more than US$20 per share to just under $2.

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