After deliberating for more than four months, a California federal appeals court ruled on Monday that Napster must stop its users from exchanging copyrighted material. The decision, which Napster CEO Hank Barry acknowledges could shut down the controversial file-sharing service, is less cut-and-dried than expected, upholding part of the district court's July 26th injunction order, while simultaneously remanding another part back to the lower court for revision.
The initial injunction order was requested as part of the Recording Industry Association of America's lawsuit against Napster, filed in December of 1999. The three-judge appeals panel agreed with Judge Marilyn Patel's ruling that Napster may be liable for contributory and vicarious copyright infringement, saying that the Web site "knowingly encourages and assists its users to infringe the record companies copyrights." The panel also disagreed with one of Napster's crucial legal defenses, arguing that the Audio Home Recording Act cannot be applied to the downloading of music onto a computer's hard drive.
"This is a clear victory," said RIAA President and CEO Hilary Rosen. "It's time for Napster to stand down and build their business the old-fashioned way. They must seek permission first. It's time for the marketplace to begin to work properly."
Barry, meanwhile, said that Napster plans to "pursue every legal avenue to keep...operating." The company will file yet another appeal, this time requesting a hearing before the entire appeals board, rather than just the three-judge panel. If the court agrees to hear the case again, Napster will likely remain up-and-running, with the same access it now provides, until another ruling is issued.
If the court denies this latest appeals request, Judge Patel will rewrite the injunction, focusing on the principle that Napster may be held liable for instances where it is aware that the files being exchanged are copyrighted. Barry and Napster founder Shawn Fanning, however, have long insisted that the technology does not allow them to identify whether files are licensed, and maintain that it would be impossible for them to filter out copyrighted material. Ever since Napster struck a deal with major music distributor Bertelsmann AG (parent company to record labels such as Arista and RCA) last October, the Web site has been working on developing a new version of the service that would track the exchange of copyrighted material, thereby allowing artists to be compensated for the exchange of their music. At a press conference Monday afternoon, Barry said that Napster will continue discussions with other record labels in order to find "an industry-supported solution that makes payments to artists, songwriters and other rightsholders while preserving the Napster file sharing community experience."