Napster Wins Reprieve

To the chagrin of the recording industry, a U.S. appellate court has allowed controversial music swapping site Napster, Inc. to remain online until its appeal of the landmark shutdown ruling against it is heard.

Napster, which allows users to swap MP3 files of their favorite artists without paying per use, had been ordered by U.S. District Court Judge Marilyn Hall Patel to pull the plug by midnight Friday. The injunction was based on the lower court’s finding that Napster was not likely to prevail at trial in the pending copyright infringement case brought by the major record labels.

According to a company spokeswoman, Napster employees screamed with with approval when the two-judge panel decided to grant the temporary reprieve. The appellate court granted the stay because, it said, “substantial questions” had been raised about “the merits and form of the injunction.”

The attorney for the Recording Industry Association of America (RIAA) said he would not file an appeal with a higher court.

Record Industry Disappointed

Still, RIAA president and CEO Hillary Rosen said the stay was “obviously a disappointment” for her organization.

“The Court of Appeals apparently regards this case as the first of its kind, and wants to consider it before any injunction takes effect,” Rosen said. “It is frustrating, of course, that the tens of millions of daily infringements occurring on Napster will be able to continue, at least temporarily. In fact, since the district court issued its order, the illegal downloading of copyrighted music openly encouraged by Napster has probably exceeded all previous records.”

Unintended Consequences

According to Keynote Systems, a company that measures online traffic, Napster’s site is being swamped with four to five times its normal traffic because of all the media attention.

Another unintended consequence of the case is that many online music swappers are now trying out “peer-to-peer” sites such as Gnutella for the first time. Because these sites allow individuals to swap MP3 files directly from each other’s hard drives, analysts say they would be impossible to shut down.

In fact, research firm GartnerGroup says that the industry could end up in a position where it cannot control online music swapping at all because it would no longer be able to negotiate with a particular company.

Ultimately, when the case resumes in the trial court, Napster is expected to continue to assert that its service is legal because its users are swapping files for noncommercial 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 $39 billion (US$) 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 at the time.

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 from 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 initial brief opposing the injunction 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.