Court: Napster infringes copyright, but plays on

The Ninth Circuit of the U.S. Court of Appeals ruled recently that Napster Inc. infringes on record company copyrights through the operation of its music file-trading service. As of press time however, the ruling also directed that the Napster service be allowed to continue operations until the original injunction is modified to comply with the appeals court’s decision.

The court upheld the findings of a lower court almost universally, holding that Napster’s service is not protected by fair use, is guilty of two kinds of copyright infringement, has failed to police its system in an attempt to stop the spread of copyrighted works and that its service does cause substantial harm to record companies.

“Napster, by its conduct, knowingly encourages and assists the infringement of (record company) copyrights,” the court wrote in its decision, which one analyst said was no surprise.

Napster is guilty, the court said, of two types of copyright infringement: contributory and vicarious. Contributory infringement is the act of aiding knowingly in the infringement of copyright. Vicarious infringement is the result of having the power to stop the infringement and failing to do so, as well as benefiting financially from the infringement.

The court found that Napster is aware that infringing material is being traded on its service, that it could, if it chose, block those users supplying the material and that it has failed to do either, thus making the company a contributory infringer.

A failure to adequately monitor the system for such abuses, combined with a financial stake in the trading in copyrighted works, makes the company responsible for vicarious infringement, the court said.

“Napster got nailed, plain and simple,” said P.J. McNealy, an analyst with Gartner Group Inc. “I’m not surprised that they got what they got.”

Despite setting aside the vast majority of Napster’s argument, the court stayed the injunction, thereby keeping the service running – for now – because it deemed the injunction “overbroad.” The original injunction must be modified, the court said, so that Napster be only guilty of contributory infringement if it is given notice of specific copyrighted files, does or should know that they are on the system and then fails to act the stop their spread. With these provisions, the company will also be guilty of vicarious infringement only if it fails to act.

“The mere existence of the Napster system, absent actual notice and Napster’s demonstrated failure to remove the offending material, is insufficient to impose…liability,” the court wrote. As such, the appeals court remanded the matter to the lower court to modify the injunction to comply with the new terms laid out. Until such modifications are made, the court said, Napster will remain active.

But probably not for long, McNealy said. He expects the service will be shut down soon or Napster could decide to voluntarily shut down, he said.

One Recording Industry Association of America Inc. (RIAA) official, however, was not so quick to sign Napster’s death certificate. Russ Frackman, the RIAA’s lead trial attorney, said at a press conference that he did not believe that Napster would be shut down but only that it would be forced to stop the transmission of copyrighted material.

But another RIAA lawyer, Chuck Cooper of the Washington law firm Cooper Carvin & Rosenthal PLLC, sounded a different note. “I think it’s fair to say that the decision pretty much writes Napster’s epitaph. Its days as an instrument for electronic shoplifting are over.”

As might be expected, Napster CEO Hank Barry issued a statement expressing disappointment in the ruling because “under this decision Napster could be shut down – even before a trial on the merits.”

The appeals court “ruled on the basis of what it recognized was an incomplete record before it,” the statement said. “While we respect the court’s decision, we believe…that Napster users are not copyright infringers and we will pursue every legal avenue to keep Napster operating.”

A better service

Napster founder Shawn Fanning also weighed in, saying in the statement that he is focused on developing a better service that will pay artists for their music. That system, he said, could be in place this year.

“The new technologies we are developing are amazing; I hope that, by further court review or by agreement with the record companies, we can find a way to share them with the community.”

Napster attorney David Boies said in a press conference that the company would appeal and seek an en banc review of the case, meaning that it would be heard by all the judges of the Ninth Circuit.

The ruling was the result of a lawsuit brought by the RIAA on behalf of the five major record labels – BMG Entertainment Inc., Warner Bros. Music Group Inc., EMI Group PLC, Sony Music Entertainment Inc. and Universal Music Group Inc. – in December 1999.

The RIAA had asked the court to find the company guilty of copyright infringement and to shut down the service because it was causing its member companies irreparable harm. The trading of MP3 files, it said, amounted to stealing as it allowed users who had not purchased songs to download, play and store them. The RIAA charged that Napster executives knew that infringement was taking place and were contributing to it by providing the service.

– IDG News Service