CASE NOTE
The Napster Appeal
A&M Records v Napster 00-16401,
filed 02/12/01, 9th Cir.
Peter Dehlsen∗
Background
Napster, an Internet start-up based in California, is the proprietor of
the freely available music sharing software program known as
MusicShare. The software allows users to share MP3 music files
directly over the Internet with other users logged into the Napster
system. Napster’s software is generically known as peer-to-peer
software, or P2P.
To use the Napster system, the user makes available their personal
MP3 music files for download to others, by using MusicShare to send
a list of files to the Napster servers. The list is then available for
searching by other users logged onto the Napster system. When a
user requests a file the request is routed to the host users address, if
the host user can supply the file, MusicShare will inform the
requesting user, a connection is made and the file transferred. The
Napster system, in its relatively brief history, has been extraordinarily
successful because of its ability for users to swap copyright music
files over the Internet for free. Napster has attracted well over 65
million users in less than three years of operation. It is claimed that 20
million songs are downloaded daily, of which nearly 90 percent are
copyrighted, and that Napster aimed to have 75 million users by the
end of the year 20001 .
The volume of users and the amount of copyright material traded over
the Internet has caused alarm to the recording industry and artists
alike. Accordingly, several suits have been filed against Napster by
∗ Peter Dehlsen, LLB, Solicitor, Wall Lawyers, Byron Bay. The author acknowledges
the generous assistance of Associate Professor Brian Fitzgerald, Dean, Faculty of Law,
Southern Cross University.
1 Bowman L, “Judge slams door on Napster”, ZDNet News, 26 July 2000,
<http://www.zdnet.com/zdnn/stories/news/0,4586,2601877,00.htmll>, (27 July
2000).
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CASE NOTE – The Napster Appeal
both industry and artists, most notably though, and for the purposes of
this note, that of Recording Industry Association of America (RIAA)2 .
RIAA filed its complaint against Napster in the US District Court in
December 19993 , essentially claiming contributory copyright
infringement, arguing that Napster provided the tools for infringement.
Napster countered that it was a service provider within the ‘safe
harbour’ provisions of the US Copyright Act4 and thus were not liable
for contributory infringement. Whether Napster was an ISP within the
meaning of 512 was not fully determined at the preliminary trial, Patel
J of the District Court assumed though that Napster was a service
provider.
The District Court found that there was sufficient evidence of damage
and that the balance of hardship tips in favour of the Plaintiff and in
July, 2000 issued a temporary injunction placing the onus on Napster
to remove all offending material. Napster immediately obtained a stay
of the injunction pending an appeal.
The Appeal
The United States Court of Appeal for the Ninth Circuit handed down
its decision on the Napster case on 12 February 20015 . The Court
affirmed in part and reversed in part, the District Court’s ruling that a
preliminary injunction should be granted against Napster for
contributory and vicarious copyright infringement. This case note
examines a number of points of the Court of Appeals decision.
Infringement
The Court of Appeal agreed with the District Courts finding that direct
infringement of the rights of reproduction and distribution occurrs
when Napster users engage in uploading or downloading copyright
2 Separate suits have been filed by heavy-metal band Metallica, rap artist Dr Dre,
Emusic, A&M Records and TVT Records.
3 See A&M Records, Geffen Records, Interscope Records, Sony Music Entertainment,
MCA Records, Atlantic Recording Corporation, Island Records, Motown Recording
Company, Capital Records, La Face Records, BMG Music, Universal Records, Elektra
Entertainment Group, Arista Records, Sire Records Group, Virgin Records, Warner
Bros, (Plaintiffs) v Napster Inc (Defendants) No. C 99-05183 MHP (US District Court)
Marilyn Hall Patel, Chief Judge, Northern District of California. Filed 6 December
1999.
4 17 U.S.C. 512
5 RIAA v Napster 2001 US App. LEXIS 5446, Amended opinion by Beezer J ,
<http://www.lexis.com> (Accessed 21 May 2001).
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Peter Dehlsen
music. However, the Ninth Circuit went further, “Napster users who
upload file names to the search index for others to copy violate
plaintiff’s distribution rights” (emphasis added)6 .
Fair Use
The fair use provisions under 17 USC 107, contain 4 elements; i)
the purpose and character of the use, ii) the nature of the use, iii) the
portion used, and iv) the effect of the use on the market. The Court
affirmed the District Court findings that Napster users were not
engaged in fair use of copyright material. However, in discussing the
purpose and character of the use, the Court made some notable points.
The purpose and character of the use, was discussed under two sub-
heads of argument, i) whether the use is transformative, and, ii)
whether the use is commercial or non-commercial. If the use was
transformative, arguably it may have been fair, whether commercial or
not, as it would have been a different product. However, according to
the Court, since an MP3 copy is ‘not transformative’, and even where
no money changes hands, the use is unfair because the user profits
from not paying for the copyright product7 . The Court was harsh on
this point saying the use was “commercial use…repeated and
exploitative…made to save the expense of purchasing authorised
copies”8 . The Court pushed the point by noting that trading
infringing copies for other copyright works fell within the definition of
a “financial gain” for purposes of criminal liability under the No
Electronic Theft Act (18 USC 101)9 .
Sampling
Napster argues that its user download files in order to ‘sample’ the
music to decide whether to purchase or not and that the sampling tends
to increase audio CD sales. At first instance the court disagreed. On
Appeal, the Court found that the District Court did not err in its
analysis that even if some users eventually purchase the CD,
“sampling remains a commercial use”10 . The Court distinguished
between record company samples and Napster samples. The record
6 Already cited at n5, p 10.
7 RIAA v Napster, note 5, at [11].
8 RIAA v Napster, note 5, at [12].
9 RIAA v Napster, note 5, at [12].
10 RIAA v Napster, note 5, at [14].
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CASE NOTE – The Napster Appeal
companies provide 30-60 second samples that ‘time out’, or disappear
of the users hard drive, whereas Napster users download the whole
song, which remains on the hard drive11 .
The Court agreed with the District Court that even if the sampling were
non-commercial, the Plaintiff’s have demonstrated that it adversely
affects their ‘potential market’ if it were to become widespread12 . And
further, even if CD sales did increase, due to unauthorised uses, that
should not deprive the copyright holder’s right to licence the work13 .
Space
ShiftingNapster argues ‘space shifting’ occurs when a user
downloads an MP3 file, to listen to music he or she already owns.
However the Court disagreed, distinguishing both Sony Betamax and
Diamond Rio cases14 , where the space shifting did not also involve the
simultaneous distribution of copyright material to the general public15 .
Other Uses
As the Plaintiffs did not challenge other non-infringing uses, such as
permissive reproduction by an artist, chat rooms, message boards and
Napster’s New Artist Program, the court merely noted the point16 .
Overall, the Court found that Plaintiffs are likely to succeed in
showing, “Napster users do not have a fair use defence” 17 .
Contributory Infringement
There must be direct infringement of copyright before a defendant will
be found liable for contributory infringement. The District Court
found that prima facie Napster users directly infringed the Plaintiff’s
11 RIAA v Napster, note 5, at [14].
12 RIAA v Napster , note 5, at [14].
13 RIAA v Napster , note 5, at [15].
14 RIAA v Diamond Multimedia System Inc, 180 F. 3d, 1072, 1079 (Ninth Cir. 1999).
Sony Corp v Universal City Studios, Inc 464 US 417 (1984).
15 RIAA v Napster, note 5, at [15].
16 RIAA v Napster, note 5, at [15].
17 RIAA v Napster, note 5, at [15].
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Peter Dehlsen
copyrights. As this finding was not appealed, Napster could therefore
be found liable for contributory infringement18 .
There are two elements to a finding of contributory infringement i)
whether the defendant had knowledge and ii) whether the defendant
materially contributed to the infringing actions. Napster’s main
defence to contributory infringement is the Sony Betamax case19 . In
Sony, the Supreme Court held that allowing copyright holders to ban
technology that has substantial non-infringing uses would go beyond
the power of the copyright monopoly even where the creator knew that
the technology could be used to infringe copyrights. “The Sony Court
declined to impute the requisite level of knowledge”20 .
The Appeals Court felt compelled to draw a distinction between the
architecture of the system and the conduct of the operators of such a
system21 . However, it is unclear from the judgement exactly what that
distinction was, but it would appear that the architecture of the system
includes such things as infringing and non-infringing uses with
knowledge of such uses, either actual or constructive.
At first instance, the District Court found that Napster had failed to
demonstrate that its system was capable of “commercially significant
non-infringing uses”. On appeal, the Court disagreed and found that
the District Court had placed “undue weight on the proportion of
current infringing use compared to current and future non-infringing
use”, in other words, Napster is capable of non-infringing use. The
Court thus applied Sony and declined to impute the requisite degree of
knowledge because of the non-infringing potential22 . Nevertheless, the
Court concluded that there was sufficient evidence to support the
preliminary injunction because of Napster’s actual and specific
knowledge of direct infringement23 .
The Court stated in very clear terms, “if a computer system operator
learns of specific infringing material available on his system and fails
to purge such material from the system, the operator knows of and
contributes to direct infringement” 24 . The Electronic Frontiers
18 RIAA v Napster, note 5, at [10].
19 See also Universal City Studios, Inc v Sony Corp 480 F. Supp. 429, 459 (C.D. Cal
1979), rev’d 659 F. 2d 963 (Ninth Cir. 1981), rev’d 464 US 417 (1984).
20 RIAA v Napster , note 5, at [16].
21 RIAA v Napster. note 5, at [16].
22 RIAA v Napster, note 5, at [17].
23 RIAA v Napster, note 5, at [17].
24 RIAA v Napster, note 5, at [17].
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CASE NOTE – The Napster Appeal
Foundation argued that the ruling chips away at the Betamax defence
for third party liability25 .
Vicarious Liability
A defendant may be held liable for the activities of another under the
doctrine of vicarious liability where the defendant has a right and
ability to supervise, and a financial interest in the activity. The Court
said that Napster’s financial interest was the “ample evidence” that
Napster’s future revenue was dependent upon increases in its user
base26 .
According to the Ninth Circuit the “right and ability to supervise”, is
shown by Napster’s express rights posted on its web site to refuse
and terminate accounts where Napster believes the conduct violates
applicable laws27 . Said the Court this right is a “right to police” that
“must be exercised to its fullest extent”, and is only curtailed by the
boundaries of the premises to be policed28 . The premises, being the
architecture of the system. The Court said that while Napster does not
read the content of MP3 files, it has practical access, along with the
plaintiff’s and users, to the file names, and therefore has the ability to
police the file name indices. The Court believed that the District Court
had failed to correctly identify the boundaries of the premise to be
policed, but, because Napster failed to police the file name indices,
combined with the financial benefit, Napster was nevertheless
vicariously liable29 .
Arguably, the finding casts an affirmative onus on operators of a P2P
system, dependant on central servers for file indices, such as Aimster,
to police the system. On the other hand operators of P2P systems that
have no central servers, such as Freenet, would appear to have a legal
advantage, being an inability to police the system.
25 Gross R. EFF Staff Attorney Ninth Circuit Napster ruling requires P2P developers t o
ensure no one misuses their system. <www.eff.org.a.>
26 RIAA v Napster, note 5, at [19].
27 RIAA v Napster, note 5, at [19].
28 RIAA v Napster, note 5, at [19].
29 RIAA v Napster, note 5, at [19-20].
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Peter Dehlsen
Statutory Defences
Digital Millenium Copyright Act (DMCA)
Section 512 DMCA30 is the safe harbour provision that protects
qualifying service providers from all monetary relief for direct,
vicarious and contributory infringement. At first instance Napster
failed to pursuade the District Court that 512 DMCA shelters
contributory infringers. The Court of Appeal however, relying on
Nimmer on Copyright and Congressional Reports, believed that there
were significant questions to be determined, such as whether Napster
is a service provider within the definition of the section, and that these
questions would be “more fully developed at trial” 31 . But, for the
issue at hand, the balance tipped in favour of the plaintiff’s, since
without the injunction, the uploading and downloading of copyright
material will “mushroom”, due to “publicity” and the “scramble to
obtain as much free music as possible before trial” 32 .
Napster asserted that its users were protected by the US Audio Home
Recording Act33 . However any defence under the Act would not apply
as the action was not brought under the Home Recording Act. The
Court also stated that the Act did not apply to MP3 downloads
because a computer and its hard drive is not a digital audio recording
device as defined by the act34 .
Scope of Injunction
Since the Napster system does not read the content of MP3 files, the
Appeals Court found the preliminary injunction overbroad because it
placed the onus on Napster to ensure that “no copying, downloading,
uploading, transmitting or distributing” of the plaintiff’s works occur.
The Court concluded that while Napster bears the burden of policing
the system within the limits of the architecture the onus is on the
copyright owner to provide notice of copyright works on the system
before Napster has a duty to remove the material. The injunction was
therefore stayed and sent back to the District Court for modification in
30 17 U.S.C. 512
31 RIAA v Napster, note 5, at [21].
32 RIAA v Napster, note 5, at [21], quoting the District Court at 114 F. Supp. 2d at 926
33 17 U.S.C. 1008
34 RIAA v Napster, note 5, at [20].
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CASE NOTE – The Napster Appeal
a way that directs the record companies to give Napster reasonable
notice of specific infringing files35 .
The modified injunction was issued 6 March 2001, by Judge Patel of
the District Court. Under the modified injunction the record
companies must provide Napster with a list of songs to which they
own copyright, along with evidence that those songs are being traded
on Napster. Both Napster and record companies must seek to identify
any variation in song names. The record companies may also give
notice of songs awaiting release, of which Napster must block access
“beginning with the first infringing file”36 . Since the naming of files
is determined by the user, and with over 65 million users and as many
as 10,000 files traded per second, it is clearly not a simple task.
On 9 March 2001 the Plaintiffs were preparing to hand to Napster a
list of 135,000 songs to be removed within three working days, with
more lists to be delivered in the future37 .
As at the time of writing there has been no indication of the success of
the modified injunction. Napster is however negotiating with several
record companies to develop a user pays system.
Conclusion
There are significant difficulties that the music industry must
overcome in the near future. Such as, the amount of infringing material
in MP3 format residing on users hard drives and the simplicity in
converting to MP3 format; the global nature of the Internet; the ready
availability of alternate P2P systems; and the willingness of users to
download free music. Further, the proliferation of alternate P2P
systems, such as Freenet, Dalnet, gnutella etc, that do not rely on a
centralised server system, will be exceedingly difficult to police by
present legal methods. These issues and more must be addressed if the
incentives offered by copyright protection are to be preserved.
The Appeals Court confirmed the argument by many, that i) the more
music that sampling users download, the less likely they are to
purchase, and ii) even if the audio CD market is not harmed, Napster
has adverse affects on the developing digital market38 . Unfortunately,
35 RIAA v Napster, note 5, at [23].
36 Richtel, M, “Judge Orders Napster to Police Trading”, New York Times, March 7 ,
2001.
37 Richtel, M, “Record Labels Sending Napster List of 135,000 Songs to Block”,
New York Times, March 10, 2001.
38 RIAA v Napster, note 5, at [14].
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Peter Dehlsen
the Napster case, while it sends a strong message to service providers,
software developers and over 65 million Napster users that
unauthorised trading in copyright music will not be tolerated, will do
little to stem the flow of unauthorised copyright material. As the
injunction will cause many users to install alternate P2P software
offering better privacy and security.
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