Before Monday's decision, Napster had taken steps toward forging agreements with the recording industry to establish a subscription service. In November, Napster sold a major stake in itself to Bertelsmann AG, the German media giant, and announced that it would eventually evolve into an unspecified form of fee-based downloading service. Bertelsmann said last month that Napster would switch to a paid-subscription basis by June or July.
February 12, 2001
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Federal Court Orders Napster
To Stop Copyright Infringement
A WSJ.COM News Roundup
SAN FRANCISCO -- A federal appeals court Monday said that Napster Inc. must stop its users from trading copyrighted material but will allow the popular music-sharing service to stay in business until a lower court clarifies an injunction against the company.
The 9th U.S. Circuit Court of Appeals said Napster (www.napster.com) may be held liable for copyright-law violations if it doesn't monitor its users and asked U.S. District Judge Marilyn Hall Patel to rewrite her July 2000 injunction blocking the online music service from helping Internet users download copyrighted music. It was unclear when the judge will revisit her decision.
The three-judge panel also directed Napster, Redwood City, Calif., to remove links to users trading copyrighted songs stored as MP3 files.
Read the text of the federal appeals court's ruling on Napster.
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Fate of Napster's Music-Sharing Service Could Be Settled in Court Ruling
Napster Will Become Subscription Site by July, Bertelsmann Chairman Says (Jan. 30)
Edel Music Reaches Accord With Napster to Provide Songs for Fee-Based Service (Jan. 3)
Napster Files Intellectual-Property Suit Against Merchandiser for Use of Logo (Jan. 2)
Bertelsmann Is Poised to Unveil Napster Plans (Nov. 28, 2000)
The court (www.ce9.uscourts.gov) in its decision said that "Napster, by its conduct, knowingly encourages and assists the infringement of plaintiffs' copyrights" and agreed with Judge Patel's ruling that Napster profits from that infringement and can "police its system."
The appeals court said that Napster may be held liable for copyright infringement "only to the extent that Napster: (1) receives reasonable knowledge of specific infringing files with copyrighted musical compositions and sound recordings; (2) knows or should know that such files are available on the Napster system; and (3) fails to act to prevent viral distribution of the works.
"Napster is not shut down, but under this decision it could be," Napster said in a brief statement. "We are very disappointed in this ruling by the three judge panel and will seek appellate review. The court today ruled on the basis of what it recognized was an incomplete record before it. We look forward to getting more facts into the record. We will pursue every avenue in the courts and the Congress to keep Napster operating."
Napster can appeal the decision to the U.S. Supreme Court but is unclear whether the justices will hear the case.
The Recording Industry Association of America, the trade group seeking curbs on Napster's service, hailed the decision as a big win. The group has argued that Napster illegally connects users bent on giving away copyrighted material without permission.
"This is a clear victory. The court of appeals found that the injunction is not only warranted, but required," said Hilary Rosen, president and chief executive of the Recording Industry Association of America. "And it ruled in our favor on every legal issue presented."
Napster has argued it isn't to blame for its subscribers' use of copyrighted material, citing the Sony Betamax decision of 1984, in which the U.S. Supreme Court refused to hold VCR manufacturers and videotape retailers liable for people copying movies.
But the appeals court said no such protection extends to Napster because the company clearly knew its users were swapping copyrighted songs.
Before Monday's decision, Napster had taken steps toward forging agreements with the recording industry to establish a subscription service. In November, Napster sold a major stake in itself to Bertelsmann AG, the German media giant, and announced that it would eventually evolve into an unspecified form of fee-based downloading service. Bertelsmann said last month that Napster would switch to a paid-subscription basis by June or July.
U.S.-based TVT Records announced in January that it was dropping its lawsuit against Napster, becoming the second such record label to do so after Bertelsmann itself.
Officials of other labels have said privately that Napster and Bertelsmann executives haven't been able to give satisfactory answers to the many legal, technical and business questions they had about what a legal Napster would look like.
Bertelsmann called Monday's ruling "another step in the process of accommodating the legitimate rights of copyrights holders and the important interests of Napster users."
Andreas Schmidt, president and chief executive of Bertelsmann's eCommerce Group, said in a statement, "File sharing is here to stay, and we will continue working to build a membership-based Napster service that will be supported by the music industry."
Meanwhile, Napster's fans continued to flock to the site for free music. Saturday, nearly 10,000 users logged on to just one of Napster's more than 100 computer servers sharing nearly two million free MP3 song files, according to the Web site. A sample use last July saw 7,300 users sharing 800,000 files. Webnoize, which monitors the digital entertainment economy, estimated that 250 million songs were downloaded using Napster over the weekend. Webnoize said that, on average, 1.5 million users |
