Court Rules Against Napster

Napster could be singing the blues soon.

A federal court ruling handed down today all but shuts down the online music swap shop, where millions of users trade small music files called MP3s. Service is still up and running for the moment, but it could be forced to stop soon.

For the past six months, Napster has been operating under a stay from the 9th U.S. Circuit Court of Appeals that stalled a district court's temporary injunction that would have halted Napster's operations pending the outcome of a landmark lawsuit by the Recording Industry Association of America.

But today, the federal appeals court ended that stay. In their ruling, the justices said that while the initial injunction was overbroad, "Napster has knowledge, both actual and constructive, of direct infringement."

The appeals court sent the injunction back to the lower court, but with instructions that all copyrighted material should cease being traded, said Nicholas Economides, a New York University professor and a specialist on the Internet and public policy.

Essentially, the court said Napster must stop the bulk of what it is doing — facilitating the trading of copyrighted music.

For many in the recording industry, the appeals court's ruling was music to their ears. Heavy metal band Metallica, which has publicly expressed its distaste for Napster and has brought its own lawsuit against the company, applauded the ruling, seeing it as a victory for artists.

"The 9th Circuit Court has confirmed that musicians, songwriters, filmmakers, authors, visual artists and other members of the creative community are entitled to the same copyright protections online that they traditionally been afforded offline," said Metallica in a statement.

Napster could appeal today's ruling all the way to the U.S. Supreme Court. But there's no guarantee the high court will agree to take it up. And that process could take months.

Lawyers for Napster argued in October in front of the appeals panel that the many legal uses of the company should preclude it from being shut down. Attorneys for the RIAA argued Napster allows users to violate copyrights and should be stopped.

"[Today's ruling] appears on the surface to be a death sentence to Napster," said ABCNEWS legal analyst Jeffrey Toobin. "But I think the situation is more complicated than that because music companies want to tap into the tremendous surge of interest that Napster has tapped into."

Getting a Piece of the Action

The 9th Circuit announced on Friday that it would hand down its decision today, launching a last-minute scramble by Napster users to download as much music as possible.

Webnoize, a Massachusetts-based company that tracks digital entertainment, noted a definite spike in Napster usage over the weekend.

"We estimate there were 250 million downloads," said Webnoize analyst Matt Bailey, who has been conducting a study on the popular online music destination since September.

Webnoize, which has calculated that Napster runs 170 servers, arrives at its download numbers by monitoring the Napster network and keeping track of how many users and how many files are logged onto each server.

From the pattern of the average number of files a user has, says Bailey, we can get an idea of the number of downloads.

The number of users over this weekend average about 1 1/2 million at any given time, compared to 1 1/4 million in January, said Bailey.

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