The Napster Decision: What's It All About?

The quick take: If the appeals court's decision foreshadows how the trial will pan out, it's certainly bad news for Napster, but it's equally bad news for consumers, Internet service providers, and, ultimately, the public enthusiasm for musical expression that the Internet has done so much to foster.

Chances are you spent last weekend downloading songs like crazy from Napster, fearing--correctly--the 9th Circuit Court of Appeals in San Francisco would sustain the lower court's order to shut down the MP3-trading service. The appeals court did just that, using unusually tough language: the injunction, said the three-judge appeals panel, was "not only warranted", but "required". In other words, the appeals court agrees that Napster is causing "irreparable harm" to copyright holders and such harm must immediately stop, even though the trial hasn't actually taken place. To be sure, though, the plaintiff--the major CD producers--didn't get everything they wanted from the decision, and some key questions will have to be worked out during the course of the trial.

In this article, I'll review exactly where the appeals court departed from the lower court's decision, and assess what the court's decision might mean for Napster, the future of music trading on the Internet and copyright laws in the US. The quick take: If the appeals court's decision foreshadows how the trial will pan out, it's certainly bad news for Napster, but it's equally bad news for consumers, Internet service providers, and, ultimately, the public enthusiasm for musical expression that the Internet has done so much to foster.

THE BACKGROUND

In brief, the plaintiffs argued that Napster is guilty of contributory and vicarious infringement of the plaintiffs' rights to intellectual property, which were routinely traded by means of Napster's on-line facilities. Last July, the lower court granted the plaintiffs' request for a preliminary injunction, which means the lower court agreed that Napster's operations were causing the plaintiffs irreparable harm, and the plaintiffs would probably win the case when it went to trial. On Monday, the appeals court stayed the injunction, which it found justifiable but "overly broad". The case now goes back to the lower court, which will enforce the injunction according to the appeals court's instructions.

To understand what is going on in this case, it's important to understand the distinctions among direct, contributory and vicarious copyright infringement:

<il>Direct infringement occurs when an action infringes on at least one of the exclusive rights possessed by copyright holders under U.S. copyright law (17 U.S.C. § 106). These exclusive rights include the right of reproduction and the right of distribution.

<il>Contributory infringement occurs when a secondary party to copyright infringement knows or has reason to know that direct infringement is occurring on its systems or premises.

<il>Vicarious infringement occurs as an outgrowth of contributory infringement but with the added dimension of profit. A vicarious infringer has the right and ability to control direct infringement on its systems or premises. However, the vicarious infringer elects not to exercise such control because it is financially rewarding to ignore it. The classic case of vicarious infringement involved a flea market owner who knew perfectly well that pirated movies were on sale on his premises, and did nothing to stop it, largely because the availability of the infringing material brought him more customers.

In the Napster case, the plaintiffs argued that, although Napster did not engage in direct infringement, it is nevertheless guilty of both contributory and vicarious infringement. In other words, the plaintiffs are saying that Napster executives and personnel knew perfectly well that massive direct infringement was occurring on their system, and they had both the right and ability to stop this infringement, but failed to do so because they hoped to profit from it.

If there's no direct infringement, there can't be contributory or vicarious infringement. Not surprisingly, Napster sought to establish that the company's users are protected by the fair use exemption to the otherwise exclusive rights of copyright holders. Even if the court were to find that its users were engaged in direct infringement, Napster argued, the company should still be protected from liability for contributory or vicarious infringement based on the U.S. Audio Home Recording Act (AHRA, 17 U.S.C. § 1008), motivated in large measure by the famous Sony v. Universal Studios squabble over video cassette recorders. The AHRA holds, essentially, that manufacturers or distributors of analog or digital audio recording devices cannot be held liable for copyright infringement just because some people might use such devices for illegal purposes.

In addition, Napster sought protection under the Digital Millennium Copyright Act (DMCA, 17 U.S.C. § 512). The DMCA contains provisions inserted at the behest of Internet service providers (ISPs), who feared they could be held liable for contributory or vicarious copyright infringement, even though they could not possibly police the millions of bits flowing through their systems. In essence, the DMCA holds that an ISP cannot be held to possess "knowledge" of direct infringement unless a copyright holder expressly notifies the ISP that infringing material is present on the ISP's system. Under the DMCA's safe harbor provisions, the ISP is sheltered from liability if the infringing material is immediately removed.

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