One Year Ago: Napster Bites Back with VCR Defense

Fighting for its life, online music swapping site Napster, rallied its legal defenses in an attempt to thwart a court challenge to shut it down. The company argued that its service was not anymore illegal than using a VCR to record television shows.

In a brief filed in the United States District Court for the Northern District of California, Napster attorney David Boies argued that the popular site has been targeted by the Recording Industry Association of America (RIAA) because the trade organization wants to dominate the US$39 billion global music business.

"It's clear the RIAA sees Napster as a threat not because it's going to reduce record sales, but that it will reduce the RIAA's control over record sales," Boies said.

In June, the RIAA -- which characterizes Napster as an enabler of music piracy -- filed a request for a preliminary injunction against the site seeking to remove its members' songs from Napster directories.

Like a VCR

Napster based its non-infringement argument on the 1984 decision in the Motion Picture Association of America's challenge of Betamax, one of the first technologies developed to enable home recording of televised material.

Under the Betamax ruling, even a technology that enables users to infringe copyrights can be excused of liability if the technology is found also to have substantial non-infringing uses, Napster said. Napster argued that sampling music and sharing files between hard drives and players is an example of a non-infringing use.

Legal Heavyweight

Napster recently hired Boies, the attorney who helped the Justice Department prosecute its antitrust case against Microsoft (Nasdaq: MSFT) , to defend against the requested shutdown.

Boies asserted in Monday's brief that it is perfectly legal for Napster users to share MP3 music through its service, so as long as the site does not charge a fee. He also argued that Napster's service is simply an extension of the "fair use" doctrine that allows someone who buys a CD to record it on tape for listening enjoyment.

"As long as a consumer is not acting with a commercial purpose, that consumer is not acting unlawfully," Boies added.

Wholesale Piracy?

Responding to Boies remarks, RIAA attorney Cary Sherman defined Napster's activities as "wholesale piracy." He added that Napster never sought licenses for its activities.

Some legal experts think that Napster's defense will not hold up in court because they believe the fair use doctrine applies only to personal use of copyrighted materials within a household -- and not to sharing music files with thousands of strangers via the Internet.

"Whether or not its lawful for users to share music one on one, it is entirely different for a commercial entity to create a business to do that," Sherman said in published reports. "The courts have repeatedly rebuffed attempts by businesses to hide behind the 'fair use' privileges of their customers."

Helping Record Sales

Napster also argued that file sharing, which research shows has become immensely popular on college campuses, has helped to drive an eight percent increase in CD sales this year alone, "undermin[ing] record industry claims of harm."

"Napster users are buying CDs after sampling music and making portable copies of their music files for private use, and both practices are protected under the law," the company said. Napster claims five independent studies have confirmed Napster's "substantial positive effect on music purchases," while a sixth study found "no significant reduction in CD purchases."

Napster compared use of its service to visiting a listening station in a music store or borrowing a CD from a friend to decide whether to make a purchase. More than 84 percent of Napster users say they download music files to see if they want to buy the work, Napster said.

Kettle Black?

The fact that record companies have tentatively embraced MP3 technology, Napster contended, makes their claim of harm from file sharing less persuasive. "Far from opposing file sharing as a matter of law or principle, the brief shows that the plaintiffs in this case encourage the sharing of MP3 files but want this activity to be their exclusive province," Napster argued.

Napster used Sony Corp. of America as an example. While its Sony Music division is challenging the use of Napster technology, Sony's electronics manufacturing arm markets a portable listening device that plays MP3 files, "regardless of whether the files were made with the authorization of the copyright holders," Napster says.

Time to Talk

A hearing for oral argument on the injunction is set for July 26th in the U.S. District Court in San Francisco, but in its brief filed Monday, Napster requested an evidentiary hearing on that date. Apparently, Napster would like to present witnesses and other evidence to refute the charge of infringement.

The action comes soon after the talks between Napster and representatives of the music industry to resolve their differences reportedly broke down in June. Another online music service MP3.com, Inc. recently reached an out-of-court settlement with several record labels.

Napster interim CEO Hank Barry denied recent rumors that Napster had been holding eleventh hour settlement talks with the recording industry.

"We've been too busy to be involved in any meaningful settlement negotiations," Barry said. "So there's nothing ongoing at this time."