Article 2 of 428
loses key ruling Court gives record industry `a clear
Star-Tribune Newspaper of the Twin Cities Mpls.-St. Paul
Napster vowed to let the band play on Monday despite a
federal appeals court ruling that said the company might be
liable for enormous monetary damages if it continued to let
Internet users download copyrighted music for free.
In rejecting almost all of Napster's legal defenses, a
panel of three judges on the 9th U.S. Circuit Court of Appeals
in San Francisco ruled Monday that Napster's service
"knowingly encourages and assists" millions of people in
violating the law.
The Napster case is the first big battle over how copyright
law should be applied in cyberspace, and its ultimate outcome
is likely to shape how music, movies, art and books will be
The judges agreed with the record industry's arguments that
Napster cuts into sales of CDs to college students and harms
the recording companies' efforts to distribute music online.
Napster lawyers said Monday that they will appeal the panel
ruling to the full 9th U.S. Circuit Court of Appeals.
"We look forward to getting more facts into the record,"
said Napster officials, contending that the court ruled with
"an incomplete record before it."
Hilary Rosen, president of the Recording Industry
Association of America trade group, said, "This is a clear
However, the judges did not restore an earlier U.S.
District Court injunction ordering the company to eliminate
all copyrighted music from its files. Instead, the appeals
court sent the case back to the lower court, saying that
record companies have the obligation to first notify Napster
specifically about which music is being illegally copied.
"Napster, however, also bears the burden of policing the
system . . .," wrote Chief Judge Robert Beezer. If Napster
refuses to take action, the District Court could then issue
the injunction, which essentially would put Napster out of
"Napster is not shut down, but under this decision it could
be," the company said in a prepared statement. "We will pursue
every avenue in the courts and the Congress to keep Napster
Napster users, which the company estimates to be about
10,000 per second at peak times, access digital copies of
thousands of commercially released albums and songs without
paying for them. Napster argues that it is not causing
economic harm to the recording industry, only allowing music
fans to sample music before deciding to purchase it.
This clash of business, culture and the First Amendment was
unleashed in 1999 by Shawn Fanning, then an 18-year-old
college student who wrote the source code for the program that
allows computers to share files.
Both sides of the issue realize that public opinion about
whether the same rules should apply to the Internet is just as
important as the court decisions.
Even if Napster is stopped, it might be too late to change
the expectations that online music should be free, said
Nicholas Economides , a professor at New York
University's business school. "There will be a proliferation
of alternative programs, and to shut them down the music
industry will have to start suing individual consumers, their
own customers," he said.
Also, a renegade company could set up a similar operation
overseas in a country that is not bound by U.S. copyright law.
"Given the nature of the Internet, even if it is stopped in
the U.S. it can survive someplace else," Economides
Some of the alternative programs such as Gnutella and
FreeNet, which make it impossible to identify users, are
expected to benefit if Napster is shut down.
Some of Napster's Twin Cities fans thought the ruling was
the beginning of the end for the free Net music-sharing
service. Scott Herold of St. Paul said he thinks Napster is in
"I'm in despair because I think Napster is cooked at this
point," said Herold, who works for Llewellyn Worldwide, a St.
Paul publishing company. "A lot of people who use Napster,
including myself, do buy music as a result of being able to
hear things on Napster. But the record industry has never been
behind a Web-based media format."
Others are philosophical about Napster's troubles, but
unmoved by the record industry's claims that it has been hurt.
Evan Olcott of the Minneapolis-based band 12Rods, whose music
is traded on Napster, said he didn't think Napster's free
music would last forever. But he doubts that the music
industry has been damaged by it.
"I don't think Napster has existed long enough to see if it
would cause damage," Olcott said. "The record industry is
still going strong. There have been no layoffs."
Still others said they believe Monday's ruling is just the
latest development in the standoff between Napster and the
Bertelsmann's BMG music unit, has promised Napster capital
to develop a subscriber-based service that would pay artist
Bertelsmann invited competitors in October to join it, but
none has announced any intention to do so and the German
company's plans remained vague after Monday's decision.
Steve Vonder Haar, an analyst with the Boston-based Yankee
Group consulting firm, said Napster has plenty of legal
maneuvering room that will allow it to survive until a final
ruling in its court case, which could take another six to 12
For instance, while Monday's court ruling gives record
companies the right to demand that their music be taken off
the Napster service, "I think Napster could ignore the
requests to remove the music pending the outcome of the
trial," Vonder Haar said.
Legal wiggle room
David Ulmer, CEO of earjam.com, a music player software
company in San Jose, Calif., said Napster's battle for
survival is far from over because Monday's ruling was vague.
For example, if record companies demand that certain songs be
dropped from the service, Napster might get around the
requirement if its users rename their MP3 files so they don't
match the original song titles, he said.
As a result, Napster is down but not out, Vonder Haar said.
"The court case is a battle over bargaining-table position.
Right now the record companies are holding almost all the
cards. But Napster is holding on to a pair of deuces, throwing
away three cards and seeing what it gets on the draw," Vonder
- Staff writer Steve Alexander contributed to this report.
What's next for Napster
- For now, napster.com is operating.
- The judge who issued the original injunction is expected
to revise her ruling in the next few weeks; then Napster must
stop unauthorized trading of copyrighted music.
- Napster is preparing another appeal to the entire 9th
Circuit Court of Appeals.
- Napster's executives are trying to strike deals with