Napster May be Shut Down by Injunction

Napster argued in court that its software increases music industry revenues just as VCR technology has increased the revenues of the movie industry. Napster submitted several other arguments in its favor, including the argument that it should be treated as an ISP.

by Patricia Fusco
of internetnews.com

Napster's defense of its file-swapping service took on mythical proportions Monday when the firm outlined its case in response to a suite filed by the Recording Industry Association of America (RIAA).

The RIAA filed a motion filed on June 12, asking that U.S. District Judge Marilyn Hall Patel grant a preliminary injunction that would shut Napster down until the industry's suit against the service could be heard.

With Napster's response at hand, Judge Patel is currently considering both sides of the argument and is scheduled to release her decision at the end of the month.

Don't sue your revenues
In essence, Napster's legal teams told the court don't shoot it; it's only the messenger, and it comes bearing good news for CD sales.

In order to shut Napster down, the RIAA must show that it is likely to prevail at trial. It must also show that the recording industry would suffer "irreparable harm" should Napster be allowed to continue swapping MP3 files over the Internet in the interim.

Napster's brief, jointly filed by the firms of Boies, Schiller & Flexner LLP, and Fenwick & West LLP, opposed the RIAA's move to shut the service down based on six core arguments.

The RIAA should study the data
Napster introduced the results of a study by Peter Fader at the Wharton School of Business at the University of Pennsylvania as key to its defense. The study showed that 70 percent of Napster file-swappers surveyed use the service to sample music before they buy the CD.

The data indicates that Napster is not harming the record industry, if anything, Napster contends that its service helps generate CD sales. Fader said his survey provides evidence suggesting Napster use is associated with overall increases, not decreases, in CD purchases.

"Of 1,605 respondents who have downloaded digital music files using Napster, 28 percent say their purchasing of music has increased since using Napster," Fader said. "Only 8 percent say their music purchases have declined while almost 64 percent state their purchases have not changed."

According to the report, using Napster to point potential CD buyers toward music files is analogous to a music-lover visiting a listening station at a record store or borrowing a CD from a friend before deciding whether to buy the recording.

The record industry argued that Napster users infringe on copyright protections when they share files for their personal use. But according to Napster, legal precedent disagrees with the RIAA's stance on intellectual property.

Citing the Federal statute dubbed the "Audio Home Recording Act," Napster lawyers stated users have an absolute right to create and transfer digital music for noncommercial purposes. Because there is no profit from swapping files freely over the Internet, the legal team asserted that Napster could not be held liable for copyright infringement.

The RIAA is trying to kill the cash cow
Just as the motion picture industry originally considered the video recorder to be an industry killer, the RIAA contends that its industry is at risk if it can not protect the intellectual property rights of its artists.

But Napster cited a second landmark decision. known as "Betamax Case." The Supreme Court ruled that if a technology is capable of substantial non-infringing uses, a company that provides the technology cannot be held liable for copyright infringement.

Lawrence Lessig, Stanford law professor, said the Betamax defense is a particularly powerful line of defense for Napster.

"The Supreme Court's consistent approach has special relevance in the context of this case," Lessig said. "It demonstrates the importance of considering the practical effect of a regulation upon the technologies of the Internet before directly applying that regulation through the use of injunctive power."

"In my view, a consideration of that effect weighs against a ban on the Napster technology," Lessig added.

The RIAA doesn't get it
Napster's third line of defense argues that its users are buying CDs, in order to shift the music to a different format for personal use. The practice of buying a CD and transferring all or part of its contents to a cassette or MP3 format is protected under the law. Napster is another type of "space shifting," so no injunction can issued against the firm.

Sony vs. Sony
Fourth, Napster contends that if the companies represented in the RIAA suit can promote MP3 Web sites, so could Napster.

The Napster legal brief cited one plaintiff's public marketing strategy that encourages sharing MP3 files, then spanked the recording industry for selfishly attempting to maintain its exclusive hold on the technology and content.

Sony Corporation of America, which owns one of the lawsuit plaintiffs, Sony Music Entertainment, markets a portable listening device that plays MP3 files, regardless of where the files originated. While Sony Music claims that Napster is harming its bottom line, Sony Electronics is profiting from sales of devices that play MP3 fails that are available over the Internet.

Napster's legal team said Sony's advertising encourages consumers to log-on and download ATRAC3, MP3 or WAV files from their favorite music Web sites. In doing so, Napster argued that the RIAA has waived its right to sue.

Constitutional rights
Napster invoked its right to free speech as its fifth line of defense. The legal brief informed Judge Patel that shutting down Napster in lieu of the lawsuit would violated its users' First Amendment rights, succinctly silencing Napster users on the Net.

Is Napster an ISP?
Finally, Napster asked the court to consider it an Internet service provider. Because Napster does not physically store any of the recordings at issue in the lawsuit on its premises, it must be considered a directory, or Internet service just like Alta Vista, Yahoo!, and others.

Power to the people
Chuck D., leader of the rap group Public Enemy and founder of Rapstation.com said Napster is a music accumulator that is freeing artists to pursue deals that major labels don't desire to record. (The rapstation swapmeet page says, "Rapstation believes in file sharing. You'll find in Rapstation Swapmeet news and tools to help you share and manage your music, video, and other digital files. Are you ready to break out of the Matrix? Check out the real deal.")

"Napster and its distributed aggregation model over the Internet represent a valuable alternative to having artists rely on the large recording companies to select, record, promote, and sell their music," the rapper said. "Napster allows these artists and labels to reach millions of music enthusiasts for a fraction of the cost required by the mainstream recording industry as it currently exists."

Don't believe the hype
Rhetoric aside, there remains a chance that the lawsuit may be dropped if a settlement between the RIAA and Napster can be reached, just like MP3.com, BMG and Warner Music Group agreed to share files in mid-June.

Napster executives said a settlement remains a possibility.