July 27, 2000 Judge Orders Napster to Stop Downloads of Copyrighted Music
By LEE GOMES
Staff Reporter of THE WALL STREET JOURNAL
A federal judge ordered Napster Inc. (www.napster.com), the popular Web music service, to stop making much of its music available for downloading by the weekend, thus shutting down the most popular service of the controversial Internet site.
The unexpected ruling by U.S. District Court Judge Marilyn Hall Patel in San Francisco is likely to be appealed -- possibly all the way to the U.S. Supreme Court -- in a case that could clarify what responsibilities Internet businesses have to police the growing number of perfect digital copies of music, movies, books, software and the like that are now freely circulating online.
David Boies, one of Napster's attorneys, said the San Mateo, Calif., company would immediately ask a higher court to postpone the closure. While Napster has said it will appeal, it has also said that it will comply with an order from the court, which becomes effective midnight Friday, Pacific time.
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The judge's oral order, which is likely to be refined in writing in coming weeks, doesn't shut Napster down completely, and only covers the music that is copyrighted by the plaintiffs. The site, for example, will still be able to operate chat rooms, and it will still be able to offer for downloading the music files of artists who have approved their distribution.
But, even if Napster is shut down tomorrow night, the rampant downloading of copyrighted music on the Internet is likely to continue. Software such as Gnutella (gnutella.wego.com) allows users to share music as well as other kinds of files; its use is spreading, and it is much harder to police. What's more, there is a growing list of Napster-like computers run outside of Napster itself. While Napster has taken certain steps to block the spread of this "Open Napster" movement, these servers can be expected to get a huge boost should the company be shut down. But the recording industry is likely to target them as well, just like they have gone after other forms of bootleg music sites.
Still, Judge Patel's ruling from the bench was a stinging defeat for Napster, as she rejected all of the company's arguments -- some of which had been considered implausible by copyright lawyers -- about why its operation shouldn't be curbed.
While the suit against Napster is six months old, neither side had expected the judge to rule yesterday. But at the end of a lengthy series of oral arguments in a packed courtroom, with the crowds spilling out into the hallway and into an overflow room with TV monitors, the judge said she had heard and read enough to grant the preliminary injunction that several record labels and music publishers were seeking.
Napster, she said, was mainly used to download copyrighted music, something she said should come as "no surprise" to the company, since internal Napster documents from the early days of the company acknowledged its main use was in pirating music. She said the service could be used for other, entirely legal purposes, such as promoting new and unknown artists who consent to their music being circulated online. But she said those uses "pale" in comparison to the illegal uses to which Napster is being put, and were added well after the lawsuit was filed.
She also rejected Napster's argument that music fans had a "personal-use" right to put their music online, much like they may have a right to make tapes of CDs for use in their car. "It's not a typical personal use when music is distributed to many anonymous users" on the Internet, she said. And she said that while music sales may be increasing -- a point Napster said augured against an injunction -- Napster's continued operation hurt record labels because it would make it vastly more difficult for them to compete with Napster when they unveil their own online music businesses.
Judge Patel acknowledged that her order may pose technical challenges to Napster, since the site said it has no way of knowing which of the hundreds of thousands of songs available for downloading are copyrighted and which aren't. She had little patience for the argument, though, comparing it to the oft-told tale of the person who kills both parents and then pleads for judicial mercy on account of being an orphan.
"That's their problem. They created this monster," she told Mr. Boies, when he told the judge of how hard it would be for the company to comply with the order. She also somewhat taunted Napster, saying that the "clever" programmers who dreamed up the software in the first place should now get busy trying to make it legal.
The Recording Industry Association of America, which represents many of the record labels who brought suit, praised the decision, saying it, "once again establishes that the rules of the road are the same online as they are offline and sends a strong message to others that they cannot build a business based on others' copyrighted works without permission."
Write to Lee Gomes at lee.gomes@wsj.com
Napster Appeal Is on Legal Fast Track After a Stay That Delayed Closing Site
By LEE GOMES July 31, 2000
Staff Reporter of THE WALL STREET JOURNAL
The Napster case is on a fast legal track.
The Ninth U.S. Circuit Court of Appeals, in giving the music-sharing site a reprieve on Friday, said it would hear the matter with a timetable that court observers said was twice as fast as even the court's normal "expedited" schedule. The San Francisco-based court could render a decision, possibly involving the closure of Napster Inc. (www.napster.com), as soon as late September or early October. That means the losing side could then petition the Supreme Court.
Napster's reprieve, a blow to the recording industry, gives the revenueless company a chance to find ways to withstand an injunction that might remove recordings from major record labels from its service. The delay also gives consumers more time to use Napster to fetch songs from their favorite artists, hurting the labels' own plans to charge for downloaded music.
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The company's prospects appeared bleak when U.S. District Judge Marilyn Hall Patel on Wednesday said she would issue a preliminary injunction that would require the San Mateo, Calif., company to essentially shut down its service, which allows users to download MP3 music files of popular music. In her action, Judge Patel agreed with the recording industry that Napster is essentially a service to facilitate music piracy on a massive scale. Napster maintains it simply allows users to share music, which it contends is legal.
Napster immediately appealed. The two-judge panel granted the company's motion for a stay of the preliminary injunction, saying Napster had raised "substantial questions of first impression" involving "both the merits and the form of the injunction."
The key phrase in the appeals-court ruling, according to legal analysts, was "first impression," which refers to issues that are coming up for legal review for the first time. Marcie Mihaila, an appellate court specialist in San Diego with the firm of Gray Cary Ware & Freidenrich, said the court was apparently persuaded that there were so many new legal questions posed by the Napster case that a higher court should look at the matter before allowing the service to be shut down pending a full trial.
Among the issues: Does the Audio Home Recording Act of 1992 give consumers a right to put digital copies of music online? Does the Digital Millennium Copyright Act of 1998 offer some protection for Napster from the actions of its users? In addition, some courtroom observers said Judge Patel's order on Wednesday may have been overly broad, in that she didn't require the record industry to tell Napster which specific songs it considered subject to the court's order that they be kept off the service.
Many lawyers following the case say that the law is on the music industry's side and that the decision of the appeals court to hear the case didn't necessarily mean it disagreed with Judge Patel. Indeed, one interpretation of the court's decision to expedite the matter, said Ms. Mihaila, is that "the court is cognizant of the chronic infringement going on, and wants to deal with it expeditiously."
The court ordered Napster to submit a brief by Aug. 18, and for the record industry to reply by Sept. 8. A date for oral arguments hasn't yet been scheduled, nor is it yet known which judges will hear the case.
Russell J. Frackman, the Los Angeles attorney who is handling the record industry's case, said he wouldn't attempt to get a higher court to reverse the order of the two judges.
The delay gives Napster a chance not only to sharpen its legal defenses, but also to pursue settlement talks with the music industry. The two sides had discussions in early summer, but nothing came of them. What's more, the extra time gives Napster a chance to build up the parts of its business that aren't being challenged in court, such as one promoting new artists who have consented to their songs being traded online. But stopping any legally problematic services wouldn't necessarily mean that Napster would be clear of the record industry; the industry could argue that the company built its brand name and following through massive copyright infringements, and could seek monetary damages.
Besides any talks with opponents, Napster is expected to step up efforts to try to turn its audience of more than 20 million users into a business that generates revenue. Some other companies also are interested in Napster's huge following and brand name.
One person familiar with the situation said that EMusic.com Inc., a Redwood City, Calif., music service that charges for downloads, recently proposed buying Napster, though nothing has come from its proposal to Napster management. EMusic.com declined comment on any talks with Napster, which didn't respond to requests for comment over the weekend.
The five major recording labels, meanwhile, are expected to continue rolling out music services with technologies that make it hard for consumers to download or pass along music without paying for it. People familiar with the matter say that Seagram Co.'s Universal Music Group this week will become the third label to begin a pay download service, using security features developed by InterTrust Technologies Corp. Both Universal and InterTrust declined to comment.
-- Don Clark contributed to this article.
Write to Lee Gomes at lee.gomes@wsj.com