In Victory for Record Industry, Judge Bars Napster Music Site

July 27, 2000

In Victory for Record Industry, Judge Bars Napster Music Site

By MATT RICHTEL

DIGITAL MUSIC
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Napster Press Conference
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AN FRANCISCO, July 26 -- In a major victory for the recording industry, a federal judge today ordered the Napster online music service to stop permitting the exchange of copyrighted music owned by the major music labels.
Napster's lawyer said the decision could effectively shut down the service altogether.
In granting the industry's request for a preliminary injunction, Chief Judge Marilyn Patel of United States District Court in San Francisco ruled that the popular Napster service was used primarily to trade copyrighted material, a behavior that she said Napster knew about and had started the service to make easier.
"A majority of Napster users use the service to download and upload copyrighted music," the judge said.
The injunction is scheduled to take effect at midnight Friday, and will continue pending trial.
The case has become the rallying point for competing interests in the unresolved copyright issues on the Internet, with lawyers, consumers, policy makers and entrepreneurs watching closely. Legal experts have said the implications for the case extend beyond music, to the sharing of other media like movies, and may set a tone for how intellectual property law is defined on the Internet.
David Boies, Napster's lawyer, said the company would appeal immediately. He said Napster did not have the ability to sift out which of the millions of songs on Napster represented copyrighted works owned by the plaintiffs and which did not.
The injunction "does not give us any fair ability to comply and still operate," Mr. Boies said.
Hank Barry, the company's interim chief executive, held an Internet Webcast tonight to address the ruling.
"We'll fight this in a variety of ways, to keep the Napster community going and strong," he said. The company says 20 million people have downloaded its software.
The recording industry declared the decision a complete victory.
"This sends the message to others who are building businesses based on other people's copyrighted works without permission," said Cary Sherman, general counsel for the Recording Industry Association of America.
Howard King, who represents the rock group Metallica and the rap artist Dr. Dre in separate lawsuits against Napster, said, "From the judge's language, this was not a close call." He also said the decision was a "huge win."
The recording association said it would post a $5 million bond requested by the judge against any financial losses Napster could suffer from being shut down pending the trial.

Napster, a year-old company based in San Mateo, Calif., makes software that allows computer users to download free software that lets them in turn post to the service lists of music files they store on their own home or office computers. Other Napster users then can listen to or download music kept on one anothers' home computers. It is not alone; other services that permit file sharing, like Gnutella, have grown, too. Last week, the recording industry and the movie industry filed a lawsuit seeking to shut down Scour Exchange, a Los Angeles-based Internet service that lets users download music and video files.
The legal battle over Napster began in December when Time Warner Inc., the Sony Corporation, Bertelsmann and other record companies, represented by the recording association, sued the service for copyright infringement.
From a technical legal standpoint, the Recording Industry Association of America, asserts Napster is guilty of contributory copyright infringement. The industry contends that Napster has built a business by encouraging individual users to share files of music they do not own.
But Napster says its users are doing nothing wrong, and therefore it is doing nothing wrong. Rather, it says, they are engaging en masse in a practice that has been permitted all along -- the copying of music and other media for personal use.

The company will appeal a ruling that it says has the effect of shutting it down.

Judge Patel concluded that Napster users were engaged in "wholesale infringing," and that the users were not engaged in "typical personal use of music copies, as Napster lawyers asserted."
Moreover, she said the users reap economic advantage from making copies on the Napster service by getting music free they might ordinarily pay for.
In seeking the preliminary injunction, lawyers for the recording industry said Napster was on pace to have 70 million users within six months. The lawyers said Napster users already download 14,000 songs a minute. "This is the most egregious case of massive copyright infringement that has ever existed," Russell Frackman, a record label lawyer, told the judge.
Mr. Boies, who represented the government in its antitrust case against Microsoft, said that an injunction should not be granted because it would have the side effect of impinging on Napster's uses that do not infringe on copyrights, like sharing works from independent artists.
Mr. Boies cited the United States Supreme Court's 1984 decision that Sony was not guilty of contributory copyright violation with its Betamax videocassette recorder, in part because the device was "capable of substantial noninfringing uses."
But Judge Patel did not accept the argument. "While Napster may be capable of some other things, they seem to pale in comparison to what Napster was created for," she said.
The two sides wielded competing studies to show Napster's impact, or lack thereof, on music sales.
One study, commissioned by Napster and prepared by Peter S. Fader, associate professor of marketing at the Wharton School of the University of Pennsylvania, found that "over 91 percent of Napster users buy as much or more music than before they used Napster, with 28 percent purchasing more."
Meanwhile, according to a survey the recording association commissioned from the Field Research Corporation, a San Francisco-based research firm, 22 percent of Napster users said that because of Napster, they did not buy CD's any more or they bought fewer CD's.
Judge Patel suggested that by the time of the trial, more work on the effect of Napster will have to be done, noting that none of the studies presented were "without flaws."
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