Napster's Appeal Denied

By Richard Menta - 6/26/01

Napster, in an effort to lift a lower court order that forced the company to install filters to block music on its service, appealed to The U.S. Ninth Circuit Court of Appeals in San Francisco. In a short, two-page order the answer was no.

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The company had petitioned for an en banc or full Appellate Court hearing but the judges declined the request. "The full court has been advised of the petition for rehearing en banc, and no judge in active service has requested a vote to rehear the matter," said the order.

The en banc was Napster's best shot at removing the filters, arguably its last hope. Now only an appeal to the US Supreme Court is left, a conservative court that accepts far fewer cases per year than the more liberal courts of past. It is also more prone to side with the arguments of the big business interests trying to shut Napster down.

But the point of all this legal wrangling may be moot now. The reason is because Napster is now the property of one of the major recording labels trying to shut it down, Bertelsmann AG. Bertelsmann plans on converting Napster into pay service this summer

As it is, the lawsuit between the five major labels and Napster has turned into a lawsuit by four of those labels to prevent Bertelsmann from hogging all of Napster's 70 million active and inactive user base for itself. In unison the five labels are telling the court it's about music piracy and copyright infringement, but in reality it is all about control over Net music and how the pie is going to be sliced.

There are huge potential damages to be won in the actual copyright trial, damages Napster can never pay and Bertelsmann won't have to. Large judgments will effectively shut down the service and rob Bertelsmann of its trophy audience. The other labels figure if they can't have it too, then no one will have it and that is how they are pressuring Bertelsmann.

Napster's recent agreement with MusicNet, the upcoming service between Bertelsmann, AOL, Time Warner, and EMI is essentially an agreement to share Napster's powerful audience between three of the five major labels. That alleviates some of the pressure from Bertelsmann as it cashes in on some of Napster's cache. The remaining members, Universal and Sony have formed their own competing service and will probably keep up the court case to make sure they are cut in and cut in on terms favorable to them.

Had Napster been able to upend the court order, the company would not only have a stronger bargaining position as a "member" of Big Music, it also would have more power to garner a greater autonomy from the rest of the music industry. Even though they are against the free trading of music, Bertelsmann would also like to see this as it raises their acquisitions value.

Now to stay alive, Napster will probably have to play subservient as it is tossed about like a shuttlecock in hard ball negotiations between the major labels. They will have to sit there and shut up as others make their decisions for them.

Napster is no longer the service it was nor will it ever be again, win or lose. That is the real point. The good news is its spirit still exists in clones like Gnutella, Imesh, Aimster, and Morpheus. The bad news is all those services are in the record industry's cross hairs and the Napster trial may set legal precedents that will allow the record cartel to eventually control them too.


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