Court Rules Against Napster

Napster also argued that it is protected under the 1992 Audio Home Recording Act, which resulted from the perceived threat of digital audio tapes, or DATs, to the music industry. The legislation allows consumers to make digital recordings for their personal use but mandates manufacturers of devices such as the DAT machine and the mini-disc recorder to pay a royalty to the copyright owners.

Napster reasoned that since individual users are protected from copyright infringements under the act, the company cannot be doing anything illegal by helping facilitate this on a larger scale.

Lawyers for the music industry argued that Napster should be prevented from infringing on copyrighted material.

Napster History

The controversial Napster program was developed by former Northeastern University student Fanning when he was 18. The software debuted in September 1999 and quickly gained notoriety and popularity as more and more of the online community turned to it to tune into MP3s. (For a full history of the company, click here.)

It became such a big hit on college campuses that their high-speed connections were slowing down because of too many Napster downloads clogging the pipes. Anyone can download Napster onto his or her computer, search for titles or artists and then download for free whatever songs are found by simply clicking on them.

The MP3 files can be played on any computer with a sound card and speakers, and can even be recopied on a blank CD. MP3 music files have been around for several years, but they were difficult to find. With Napster, they’re easy to find and they’re free.

The RIAA estimates that song-swapping via Napster by millions of people worldwide has cost the music industry more than $300 million in lost sales.

But data has been mixed, showing in certain areas that music buying is not necessarily on a decline while in other areas there might be.

In the end, today’s ruling might be moot for the future of online music swapping because Napster is not the only option. Similar peer-to-peer programs like Gnutella and Freenet allow music trading but without having to go through a centralized database. So though they haven’t yet caught on as much as Napster, when they do, industry experts argue, they’ll be a lot harder to shut down.

"The technolgy is changing so fast Napster is not the worst problem the music companies face because at least Napster is a centrally controlled switching point for this music," said Toobin.

ABCNEWS.com’s Beth McCorry contributed to this report.

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