Monday, February 12, 2001
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Posted on: Monday, February 12, 2001

Court to rule on Napster

By Ron Harris
Associated Press

SAN FRANCISCO — Major record labels hope Monday's long-awaited appellate court ruling in their case against Napster Inc. will force millions of computer users to pay for music the online music swapping service has allowed them to get for free.

But if Napster wins, the ruling could unleash any number of other ventures that have been waiting for guidance on whether a "personal use'' exception to copyright law allows or prohibits trading songs over the Internet.

Even if Napster loses, the technology it introduced is here to stay, particularly in an industry that both loathes and loves the idea of getting music to consumers via the Internet and is developing a range of pay-for-play schemes.

"Monday's decision may finally clear the way for the legitimate online marketplace to thrive in an environment that encourages both creativity and a respect for copyright,'' Hilary Rosen, president of the Recording Industry Association of America, said in a statement Friday.

The five largest record labels — Sony, Warner, BMG, EMI and Universal — sued as soon as the Redwood City-based service took off, saying it could rob them of billions of dollars in profits.

The issue before the U.S. 9th Circuit Court of Appeals is whether to uphold U.S. District Judge Marilyn Hall Patel's injunction ordering Napster to shut down pending a trial on the music industry lawsuit. The injunction was stayed pending the 9th Circuit review.

But the three-judge appellate panel also could rule more broadly, describing how copyright law should apply to emerging technologies that make it ever more difficult to control and profit from the distribution of music, software, books, movies and other creative content.

U.S. copyright law includes a "doctrine of fair use'' which allows copies to be made and used without permission if the copying is for a nonprofit purpose, and won't cause the creative content to lose value in the marketplace.

The question is whether it is personal use when Napster users collectively make millions of music files available for free to anyone else with a computer and a modem.

In May 1999, Napster founder Shawn Fanning released software that made it easy for personal computer users to locate and trade songs they had stored as computer files in the MP3 format, which crunches digital recordings down to manageable lengths without sacrificing quality.

The concept of "peer-to-peer'' song trading quickly proved too popular to contain. As Napster users grew by the millions, other file-sharing programs also popped up, such as Gnutella and Freenet. And the labels themselves are looking to use the same technology, only with paying subscribers and secure digital formats that prevent copying.

Since the appellate judges began deliberating in October, Napster has made agreements with former business foes like Bertelsmann AG, the parent company of the BMG music unit. The German media giant has promised much-needed capital if Napster switches to a subscription-based service that pays artists' royalties.

The other four major labels are holding out for Napster's demise.

Napster is not the only player the recording industry has dragged into court., geared toward connecting emerging artists with listeners, folded in December. Last month, online music retailer cut more than one-third of its staff. And last week, the ripple effect brought down the Internet Underground Music Archive, which had been acquired by EMusic. Napster fans flocked to Scour Inc., but that company's similar file-sharing application also fell victim to copyright lawsuits and shut down in October.

Napster's more than 100 computer servers did brisk business late Sunday. At 8:45 p.m., just one server listed 2,267,476 MP3 files being shared among 12,909 users. That number of songs, at an average playing time of 4 minutes per song, would take more than 17 years to listen to if played back to back. On the eve of Monday's ruling, University of Southern California constitutional law professor Erwin Chemerinsky wondered whether record companies would have any financial incentive to produce music if it is increasingly copied and given away electronically.

"Authors and producers need the assurance of a return that free downloading undermines,'' Chemerinsky said. "Napster is a real threat to creativity and production.''

But a recent appellate ruling in another case went against the industry's right to clamp down on computer duplications of musical works.

In 1999, the 9th Circuit ruled that makers of a portable MP3 player did not violate the Audio Home Recording Act of 1992, which prohibits devices that make copies from digital music recordings. The court ruled that Diamond Multimedia's Rio player made copies from computer hard drives, not digital music recordings.

"The Rio's operation is entirely consistent with the act's main purpose — the facilitation of personal use,'' said the Rio opinion by Judge Diarmuid O'Scannlain.

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