Court Slaps Napster

By Robert Menta- 2/12/01

The ruling has come down and for Napster it's bad. In a 58-page opinion the US Court of Appeals for the Ninth Circuit ruled that the online service is guilty of infringement and must stop trading in copyrighted material.


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To make matter worse, the court also proclaimed that the company may be held liable for ``vicarious copyright infringement", meaning even though the service only serves as a delivery portal and does not store copyright material, it may be still liable under current laws for extensive monetary damages. The plaintiffs in the case, the major music labels claim Napster is in the business of wholesale reproduction and distribution of copyrighted works and it appears the court agrees with them, declaring that Napster is not Fair Use.

To comply, Napster must prevent its user base from gaining access to copyright material. The three-judge panel then passed the case back down to the lower court of U.S. District Judge Marilyn Hall Patel with the instructions to retool her previous injunction. The appellate court called Patel's original injunction overly broad. It was Patel who originally ordered Napster to shut down last October, an order the appellate court stayed until it could investigate the merits further.

Hilary Rosen, president and chief executive of the Recording Industry Association of America gave this response to the verdict. "This is a clear victory. The court of appeals found that the injunction is not only warranted, but required. And it ruled in our favor on every legal issue presented".

Today's ruling has already had an effect on several struggling web companies who sell, rather than give away, digital music online. Shortly after the court announced its decision, shares of EMusic were up 60% while Liquid Audio gained about 15%.

Gene Hoffman, President and CEO, made this announcement shortly after the decision was handed down. ``Today's decision is a fair, important re-affirmation of the rights of copyright holders to be able to determine how and where their work is used. We are pleased that the district court will be issuing a new injunction against Napster that will effectively block the unauthorized distribution of music files. This should establish a clear foundation for the growth of legitimate music download services on the Internet -- where artists, labels and consumers all have a voice in how digital music is enjoyed".

Napster can continue for now, its execution stayed temporarily, but how long it will be allowed to operate before it must comply with the ruling is unknown. The trial is set for April and the company would like to be able to stay open throughout it, but Patel will most likely modify her original injunction fairly quickly and shut the service down for the course of the trial.

Napster will certainly appeal today's decision in hopes of staying in business until the actual trial concludes. With Bertelsmann as a deep-pocketed owner, the company can now afford to take this to the Supreme Court if it must, but that is only a realistic option if it is allowed to operate during the litigation process.

Today's ruling makes that very difficult.

Copyright MP3 Newswire 2001

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