Court Silences Napster

U.S. District Court Judge Marilyn Hall Patel granted a request by the Recording Industry Association of America (RIAA) for a preliminary injunction against online music swapping company Napster, ordering the company to stop making files of copyrighted music available for download as of midnight Friday.

The court’s action represents a major victory for the music industry, which sued the San Mateo, California-based Napster earlier this year for copyright infringement. Judge Patel said, “When the infringing is of such a wholesale magnitude, the plaintiffs are entitled to enforce their copyrights.” Reportedly, 20 million users regularly access Napster’s free service.

The judge also asked the RIAA to post a $5 million (US$) bond to protect Napster against any financial damages it might incur for being shut down pending a trial.

Predictably, Napster disagrees with the order. According to published reports, the company’s CEO Hank Barry said, “We understand the ruling and basis for it. We disagree with it, and we will continue to work hard between now and Friday to allow Napster users to continue to use our service by preparing for the Court of Appeals.”

Napster says its service is legal because its users are swapping files for non-commercial use.

The VCR Defense

In a brief filed earlier this month opposing the injunction, Napster attorney David Boies argued that the popular site has been targeted by the RIAA because the trade organization wants to dominate the $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.

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, to defend against the requested shutdown.

Boies asserted in the 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.

Cary Sherman, RIAA Senior Executive Vice President and General Counsel, claimed the injunction is a victory for the recording industry. “This decision will pave the way for the future of online music,” Sherman said. “This once again establishes that the rules of the road are the same online as they are off-line and sends a strong message to others that they cannot build a business based on others’ copyrighted works without permission.”

Changing the Landscape

At least one industry insider believes that Napster has already succeeded in changing the face of the music industry.

Jason Pascal, who has experience in both the traditional and digital music industry, told the E-Commerce Times that Napster has forced the industry to take a serious look at how music can and will be distributed in the future.

Pascal spent three years as a corporate lawyer for BMG Music, and he is currently the Executive Director of the Music Division of EverAd, a company involved in the digital download business.

Pascal said that prior to Napster, downloading music files from the Internet was a complicated process that involved using File Transfer Protocol (FTP) and searching the Internet to find the files. The ease with which users can download and share files using Napster’s service has made the company the focus of the music industry’s attack on digital downloading, according to Pascal.

The music industry will be forced to come to terms with the new technology, Pascal told the E-Commerce Times. He sees the traditional and digital music industries eventually working together to use new technology to profit from the file sharing phenomenon. He said, “There will always be a place for the music industry as an organization that promotes new artists.”

He believes the Internet could eventually be the place that the major labels go to look for new talent.

New Models

Although the RIAA scored a major victory in court, Pascal said the music industry has not seen the last of digital download technology. He said there are 20 to 30 other technological innovations in the works, separate from Napster. According to Pascal, these new inventions will cause “even more disarray.”

There are already several new models for the digital download business. One such model is that run by Pascal’s company. EverAd’s PlayJ.com is a service that lets users download specially formatted digital music files that contain built-in ads. When the users play the music files, banner ads are displayed on their computer. PlayJ.com licenses content from the music industry and shares ad revenues with the labels.

Other new initiatives include a subscription based service launched earlier this week by EMusic and new technology from MP3Board that lets copyright holders destroy links to files that infringe upon their copyrights.

Even Napster seems to be making an effort to go legit. The company announced Monday that it has partnered with Liquid Music — a software company that provides technology allowing music to be sold securely online — to explore different ways of distributing digital music files.

Meanwhile, file-swapping sites such as Scour Exchange and iMesh that use technology similar to Napster’s are still up and running. How they could ultimately be affected by the injunction is still unclear.

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