Bulletins Story: IT’S ONLY A MATTER OF TIME FOR NAPSTER

Date: 28.02.2001

The fact that the Recording Industry Association of America (RIAA) won a significant victory in its battle against music file swapping service Napster in a US Appeals Court on Monday has been well publicised.

The appeal was from an injunction granted against Napster by a District Court last year.  The Appeals Court decided that the injunction was too broad as it placed on Napster the entire burden of ensuring that no “copying, downloading, uploading, transmitting or distributing” of copyright works occurred.

The Appeals Court ruled that the District Court must reframe the injunction to reflect the fact that Napster may be held liable for contributory copyright infringement if it:

1. knows of specific infringing files of copyright musical compositions or sound recordings;
   
   
2. knows or should have known that the files are available on the Napster system; and
   
   
3. fails to act to prevent the viral distribution of copyrighted materials. 

The following report takes an in depth look at the issues thrown up by this important decision and is therefore longer than our usual bulletins.

1.  WHAT EXACTLY DOES NAPSTER DO?

Napster allows individual users to copy sound recordings stored as MP3 files on the hard drives of other individual users’ computers.  MP3 files (compressed audio or audiovisual files) allow the transfer of relatively large chunks of data over the Internet at speeds faster than would be possible with non-MP3 files.

Napster works as follows:

1. Users register with Napster and download software known as MusicShare. 
   
   
2. Users convert particular sound recordings that they wish to make available to other users into MP3 files and store them on the hard drive of their own computer (this practice is known as “ripping”).  Typically, this might involve placing a favourite CD into the CD Rom drive of their computer and using software to convert one or more tracks into MP3 files and copying the converted tracks onto their hard drive.  Alternatively, MP3 files may be downloaded onto a computer’s hard drive from the Internet.  Each file will be given a name by the user to identify the track (usually by reference to artist and title).
   
   
3. Users move their MP3 files into a specific directory on their hard drive.
   
   
4. Users log onto Napster and the MusicShare software searches the user’s directory to establish that the files are in the correct format.  The names of the MP3 files are then uploaded onto Napster’s servers (as opposed to the MP3 files themselves, which remain on the user’s hard drive) and placed in a database.
   
   
5. Users are able to search the database for tracks that they wish to copy by artist or title.  Napster displays a list of track titles matching the artist or title searched that have been submitted by other users who are logged on to Napster at the same time as the requesting user.
   
   
6. Napster passes the address of the computer with the tracks stored on its hard drive to the requesting user’s computer.  This allows the requesting user’s computer to contact the computer with the tracks on it and download the requested MP3 files.  The passing of files between individuals’ computers in this way is an example of a “Peer to Peer” network.

Napster became very popular very quickly with its users as a free way to locate and share recordings of their favourite performers.

2.1    THE LEGAL PROCEEDINGS SO FAR
 

1. The RIAA issued proceedings against Napster on behalf of its record company members.  It argued that Napster’s users were infringing the copyright in its members’ sound recordings by copying and distributing copies of them without authorisation (primary infringement) and that Napster was liable for contributory and/or vicarious infringement (secondary or indirect infringement).  Napster accepted that its users copy and distribute copyright sound recordings but argued that the users and Napster had a defence to copyright infringement under US law. 
   
   
2. In August last year, the RIAA successfully applied to the District Court for an interim injunction ordering Napster to stop its users from copying, downloading, uploading, transmitting or distributing the RIAA members’ copyright sound recordings via Napster’s system until the full trial is heard.  Napster had argued that it would be unable to comply with this since it could not distinguish between RIAA members’ works and other works.

2.2          APPEAL

Napster immediately appealed against the injunction.  The Appeals Court reserved its judgment but suspended the injunction on the grounds that the appeal raised substantial questions going to the merits and form of the injunction.   Napster has been fully operational since this original decision.

The Appeals Court finally gave its judgment on Monday. The judgment sets out the reasons why the District Court was entitled to grant an injunction.  The judgment does not say that Napster is liable for secondary copyright infringement (this will be determined by the court at the full trial).  The Appeals Court’s preliminary finding was that the RIAA is entitled to a narrower injunction than the District Court had ordered. 

3.1          PRIMARY INFRINGEMENT

In order to be liable for secondary infringement of copyright the RIAA had first to establish that there had been primary infringement of copyright by Napster’s users.  The RIAA alleged that the users had infringed the RIAA members’ copyright by reproducing and distributing their sound recordings.  Napster accepted that primary infringement by its users had taken place.

3.2          DEFENCES TO PRIMARY INFRINGEMENT

Napster argued that its users were entitled to defences under US copyright law fair use provisions in that:

1. Much of the copying was for so-called space shifting purposes (allowing a user to listen to a record that he already owns on CD from the hard disk of his computer).  This defence was successfully raised by Sony in 1984 when it was sued by Universal who alleged that Sony was guilty of contributory copyright infringement when it introduced its betamax video recorder (this defence was also used by Diamond Multimedia when it introduced its Rio portable MP3 player).  However, the Appeals court distinguished Napster from Sony because the method of shifting in this case involves distribution of copyright material to the public;
   
   
2. Many sound recordings were downloaded by users as “tasters” in order to decide whether to purchase a CD of the recording.  This was rejected by the Appeals Court because the use was not “fair”.  Whole recordings of songs were distributed and users gained a commercial advantage by copying the recordings, because they would save themselves the cost of buying CDs.  Such distribution harmed the record companies’ market not only for CDs but also for downloads.  Interestingly, the Appeals Court said that the uploading of a list of copyright sound recordings onto Napster’s search list, from which other users are able to access those recordings without the authority of the copyright owner, is an infringement of the copyright owner’s distribution right (akin to the right to issue copies to the public under UK law).

These defences were rejected by the Appeals Court.

3.3          SECONDARY INFRINGEMENT

Having established primary infringement, the Appeals Court turned to the issue of whether the District Court was entitled to find that the RIAA is likely to be successful at trial in its argument that Napster is liable for secondary infringement.

3.3.1          Contributory Infringement

The Appeals Court stated that a person is liable for contributory infringement if with knowledge of infringing activity he materially contributes to the infringing conduct of another.

Napster argued that even though it had knowledge that infringing activity was taking place, it was protected by the Sony decision. (Sony was successful because even though Sony knew that its video machines could be (and were) used to infringe copyright, the Court refused to impute the requisite knowledge to Sony, where the equipment in question had substantial non-infringing uses.)  The District Court found that Napster’s system was devoid of substantial non-infringing uses.  The Appeals Court disagreed.  However, since Napster had actual knowledge that specific infringements were taking place (not least because the RIAA provided a list of 12,000 infringing sound recordings available via the service), the Sony defence argument failed.  The Appeals Court found that Napster provided the facilities for direct infringement and held that the RIAA is likely to succeed with its claim for contributory copyright infringement at the full trial.

3.3.2          Vicarious Infringement

Under US law a person is liable for vicarious copyright infringement if he has the right and ability to supervise infringing activity and also has a direct financial interest in such activities.

The Appeals Court found that Napster was able to search its own databases and generally has the right to terminate membership (indeed it has exercised this right in the past).  There was ample evidence that Napster’s future revenue was dependent upon increases in its userbase and that as more users register the quality and quantity of available music increases.  The Appeals Court held that the RIAA was likely to succeed with its claim for contributory vicarious infringement at the full trial too.

3.4          DEFENCES TO SECONDARY INFRINGEMENT

Napster put forward two main defences relying on particular US statutory provisions.

1. Napster argued that it had a defence under the US Audio Home Recording Act which provides that no action for infringement of copyright can be based on the “manufacture .... or distribution of a digital audio recording device .... based on the non-commercial use by a consumer of such a device for making digital musical recordings” (the home recording defence).  The Appeals Court rejected this argument on the grounds that the primary purpose of a computer hard drive is not to make digital audio copied recordings and it could find no grounds for interpreting “digital musical recordings” to include songs fixed on computer hard drives.
   
   
2. Napster also relied on the “safe harbour” provisions of the US Digital Millennium Copyright Act (DMCA), which protect ISPs from copyright infringement suits.   The District Court had held that Napster was not an ISP.  The Appeals Court did not agree that the DMCA was inapplicable but preferred that the issue be fully developed at trial.

Napster also claimed that it was entitled to defend the claims on the grounds that RIAA members had waived the right to object to infringement since they had supplied consumers with technology designed to copy MP3 files over the Internet, that Napster had an implied licence because RIAA members encouraged MP3 file exchange over the Internet and that RIAA members were trying to secure a monopoly not granted by the Copyright Office.  These defences were all thought unlikely to succeed.

4.       CONCLUSION

The Appeals Court placed the burden on the RIAA members “to provide notice to Napster of copyrighted works and files containing such works ... before Napster has the duty to disable access to the offending content”.

Napster is free to continue to operate until the District Court re-issues the injunction and may appeal against the Appeals Court’s decision.

Once the new injunction is in place Napster may continue to operate within the boundaries of the injunction pending a full trial.  Whether the service will still be attractive to Napster’s users and whether Napster can or will continue to a full trial remains to be seen.

Stuart Barry and Jonathan Sellors
February 2001
63

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