INTC--Napster Fight May Touch Off Bigger Battle
By: Benny Evangelista
9/19/00 10:52:12 AM
Source: The San Francisco Chronicle
The high-profile court fight between technology upstart Napster and the powerful recording industry is generally portrayed as a David versus Goliath confrontation.
But Napster is quietly picking up support from some Goliaths of its own, technology titans that add more weight to the online-music-sharing company's cause.
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Yet for firms like Intel, 3Com and Microsoft, the issues extend far beyond whether consumers should download Metallica's hit ``Master of Puppets'' without paying. Those companies see the possibility of a broad court ruling that strikes down Napster as limiting the future development and sale of consumer devices and technologies.
And by picking copyright fights with small technology startups like Napster, Scour and MP3.com Inc., analysts say the entertainment industry may be setting the stage for a more-bruising, Goliath versus Goliath wrestling match with high-technology and consumer-electronics companies that have just as much political and financial clout.
``It's not just a matter of the music industry going out and stomping out little dot-coms,'' said Eric Scheirer, an analyst with Forrester Research Inc. ``We're definitely seeing the battles lines drawn for a war that's going to wage on over the next two, three or four years.''
Already, a trade group representing consumer electronics giants such as Microsoft, Hewlett-Packard, IBM, 3Com and Nintendo has filed a friend-of-the-court brief asking that the preliminary injunction against Napster be thrown out.
Some of the same companies also find themselves siding with the biggest record labels, represented by the Recording Industry Association of America. The record companies sued Napster in December, claiming the program is nothing but a vehicle for mass music piracy.
At the center of the ring is Napster, the San Mateo company whose teenage founder created an easy-to-use computer software program that enables people to share digital MP3-formatted songs by connecting with each other through the Internet.
Since its release in August 1999, Napster proved to be a grassroots blockbuster - the firm says it has 28 million registered users.
Similarly, a company called Scour developed a program that enables users to also share computer versions of first-run films. The Motion Picture Association of America filed its own copyright infringement suit in July against that Beverly Hills startup.
No matter what their fate in court, Napster, Scour and other so-called peer-to-peer programs have technology pundits talking about a consumer-led revolution that will reshape how entertainment ``content'' such as music, film and books are distributed in the future.
Even chip-making giant Intel Corp. has declared that peer-to-peer computing ``could be as important to the Internet's future as the Web browser was to its past.'' Intel has formed a peer-to-peer industry working group to promote the idea that desktop PCs can offer information and resources over far-flung networks.
Napster lost a key round in court during July when U.S. District Court Judge Marilyn Hall Patel in San Francisco ruled in favor of the record companies and issued a preliminary injunction against Napster.
Napster appealed, and the U.S. Court of Appeals in San Francisco issued a stay of the injunction. A hearing on the stay is scheduled for Oct. 2.
Yet Patel's ruling has already caused technology and consumer-electronics companies to jump into the arena, not necessarily as full Napster defenders, but as keenly interested spectators.
The Consumer Electronics Association, a trade group representing 600 technology and consumer electronic firms, filed a friend-of-the-court brief asking the appeals court to throw out the Injunction.
Patel rejected one of Napster's key defenses, that Napster members cannot be held liable for copyright violations under the doctrine established in 1984 in the U.S. Supreme Court's ruling in favor of the Sony Betamax.
``The thing that is so upsetting about Judge Patel's ruling (is that) her interpretation of the Sony Betamax decision would trivialize it and provide the opportunity for Hollywood to essentially declare war against the technology industry,'' said Pamela Samuelson, professor at the University of California at Berkeley Boalt Hall School of Law.
``How the Ninth Circuit interprets it is going to have very profound ramifications,'' she said.
Samuelson is part of a group of 18 noted copyright-law professors That filed a brief supporting reversal of the injunction. The professors said the Sony decision held that ``intellectual-property owners are not entitled to prohibit or exercise monopoly control over new technologies that incidentally ... threaten their established business models.''
In this case, the professors believe that the law was not intended to protect record industry profits from new technology, and that ``having to change business plans in response to evolving technologies is what competition is all about.''
Napster's case can be seen as a sequel to the groundbreaking Sony Betamax case, in which the movie industry complained the then-new home video tape recorder opened the door for rampant film piracy. The high court held that such a technology could not be banned if it also could be ``capable of substantial noninfringing uses.''
The CEA brief argues that Patel misapplied the Sony case in her ruling against Napster. (Ironically, Sony Electronics Inc. is a CEA member, while Sony Music Entertainment Inc. is one of the record companies suing Napster.)
Patel's ruling ``has expanded copyright in a way that unreasonably threatens the manufacture and supply of digital technology equipment and software and hampers development and use of new Internet architectures,'' according to the brief, also signed by the Digital Future Coalition and the Computer & Communications Industry Association.
``This decision now has taken on an impact far greater than just dealing with the Napster question,'' said Jim Burger, a copyright lawyer with the Washington, D.C., law firm of Dow, Lohnes & Albertson.
The record industry could attempt to get stronger copyright laws passed by Congress, said Burger, who is not involved in the Napster case but has represented the computer industry in a variety of copyright issues.
But if such proposed legislation ``has anything to do with how our computers or consumer electronic devices work, we're going to lay our bodies across the tracks'' to block the law, Burger said.
A political fight between the content producers and the consumer devicemakers could be an interesting clash of titans, because both have experience and clout in that arena, said Malcolm Maclachlan, media analyst with International Data Corp.
But with technology driving the country's economy, entertainment companies ``may be underestimating the battle they're going to get themselves into,'' Maclachlan said.
CEA President Gary Shapiro has already said his group is prepared to make sure copyright laws don't cancel out technology's right to innovate.
During a July speech in Washington, D.C., Shapiro noted that every new consumer technology - from VCRs to CDs to MP3s - has been attacked by copyright holders, yet in the long run, these technologies made them more money.
``The balance between the legitimate rights of the copyright owners and the rights of the public to access and use new technologies must be preserved even if the technology, as copyright interests frequently note, is capable of being abused,'' Shapiro said.
``The structure of the Internet, the balance required by the First Amendment, the digital divide and the basic need for knowledge will reject a world where every transmitted bit is paid for,'' he said. ``While pay-per-view for movies may make sense, paying for every play or bit is a dark and sad world where restrictions rather than access dominate.''
To be sure, the battle lines are still quite blurred and it's not purely content versus technology.
In addition to two divisions of Sony Corp. being on opposing sides in the Napster case, the Business Software Alliance has also filed a brief asking the appeals court to uphold Patel's injunction.
The BSA, an alliance of software- and hardware-makers formed to fight software piracy, includes CEA members Microsoft and Apple. Other BSA members include Adobe Systems, Macromedia and Intuit.
``BSA recognizes that peer-to-peer technology is inherently a promising and positive technological development and should not be condemned,'' the BSA brief said.
``At the same time, however, the courts have the authority ... to enjoin illegal uses of this or any other technology that undermine the statutory and constitutional protections afforded to copyright holders.''
And then there's the proposed America Online-Time Warner merger, which would create a media giant with interests covering every portion of the Napster issue. The new company would be a major player in both entertainment and technology.
But entertainment companies should start looking beyond Napster to a day when technology companies have more direct control over content distribution, said Forrester analyst Eric Scheirer.
``It's not hard to imagine the music industry being owned by the consumer electronics industry,'' he said. |
