Napster to Block Some Music Soon

March 2, 2001 -- Napster won't shut down tonight. But the file-swapping service will block trading of more than 1 million pirated music files in an attempt to survive, the company's lawyer said today.

The song-swapping Net company, which has been accused by recording companies of facilitating copyright infringement, told a judge today that it has created a way to filter out specific file names that might be clips of pirated songs.

"Sometime this week we will have completed the software implementation so thatthese file names will be blocked," lawyer David Boies told U.S. District Court Judge Marilyn Patel. "This screen will start sometime this weekend."

Patel was hearing Napster and music industry lawyers discuss new terms for a legal order to block the trading of pirated music. Although there hasn't yet been a trial on the music studios' allegations against Napster, Patel has already commanded the service to stop trading copyrighted files without permission.Last summer, she granted a request by the Recording Industry Association of America to halt Napster's service until the landmark copyright lawsuit was resolved. A last-minute stay kept the company running business as usual until last month.

In February, judges at the 9th U.S. Circuit Court of Appeals agreed with most of Patel's decision on the block, but asked her to amend the broad order so music studios would have to inform Napster of which songs they wanted removed from the service. (Click here for a complete timeline.)

Recording industry lawyer Russell Frackman told Patel at today's hearing that Napster should start by blocking Billboard 100 singles and Billboard 200 albums.

Incomplete Blocking

Music industry lawyers weren't satisfied with Napster's effort. When new albums come out, they want Napster to block the songs in advance. Napster wants studios to first show a song is being traded to have it blocked. Music industry lawyers say that's a loophole that will allow pirated music into the wild, if only for short periods of time.

And a blocking strategy based on file names won't screen out all of the copyrighted material. A copy of Eminem's song "The Real Slim Shady," for instance, might slip through if the file is misspelled "Thereal Slimshadey," or even "That Big Eminem Hit."

Napster's aware of that, Boies said, and will at least try to block common or obvious misspellings. Users could put filenames in code, but then songs would be much more difficult to find, he said.

None of these moves would stop the burgeoning growth of Napster clones and copies. Volunteers have set up Napster networks independent of the company. These networks use the popular software, but aren't part of this lawsuit. Many volunteer Napster servers are based overseas, adding another legal tangle. And other programs, such as Gnutella and Freenet, can also be used to distribute pirated files and are completely decentralized, making it much harder for lawyers to find a target to sue.

Napster's Critical Moment

Patel probably won't act today, court observers said. She can issue a ruling next week or wait until after a court-ordered mediation session between Napster and recording industry lawyers next Friday.

While Napster has argued it has a number of legal, fair uses — an argument that helped Sony win its Betamax videocassette recorder case against Hollywood in the Supreme Court in 1984 — the appeals court shot down that argument, saying the cases' issues are different. It also agreed with Patel’s finding of clear copyright infringement.

“Napster, by its conduct, knowingly encourages and assists the infringement of plaintiffs’ copyrights,” the appeals court wrote in its opinion.

But while the appeals court agreed with the lower court decision to issue the injunction that would halt at least some of Napster’s operations, it found Judge Patel’s wording too broad and sent it back to the district court for reworking.

“Judge Patel has the discretion now to decide how and when and what she wants to enter” with respect to the injunction, said Russell Frackman, lead attorney representing the record companies. The appeals court has given her guidance, though, including placing “dual burdens … both on us to some respect to identify copyrighted works and on Napster.”

Wiggle Room?

But Napster won’t go down without a fight, and has requested a new appeal of the injunction with all 25 9th Circuit Appeals Court judges.

“You don’t get a rehearing en banc [with all 25 justices] just because you ask for one,” said ABCNEWS legal analyst Jeffrey Toobin. “Unless the appeals court decides to step in, [Napster] has to go back to district court. Their problems remain.”

And the company is running out of options. If Napster doesn’t get an appeal or if it loses this appeal, the only other recourse to reconsider the preliminary injunction is the U.S. Supreme Court. It’s unclear if Napster will go this route or if the Supreme Court would even hear the case.

The real issue now, says Toobin, given the appeals court decision, is whether Napster has any business left to salvage.

“There seems to be a real challenge for Napster to carve out a real business while complying with the appeals court injunction,” said Toobin.

Takin’ Care of Business

Just how Napster will proceed is unclear.

When asked its plans should the court issue the preliminary injunction today, a Napster representative told ABCNEWS.com in an e-mail earlier this week: "We really can't talk to this, as it's all speculation at this point."

The injunction only pertains to the illegal copying and swapping of copyrighted materials. But some copyright holders may not object to their music zipping through the Internet from one Napster user’s computer to another. The court order allows that such material could still be available through Napster.

"To the court Napster says we're trying to ban the technology. It's not the technology," Frackman told ABCNEWS.com. "It's the system. It's the model."

But from a technical standpoint, there’s no way for Napster to block certain songs or musicians, says a company representative. Instead, when copyright holders who do not want their music on Napster see their songs listed, they can tell the company, and Napster will block access to the computers where the songs reside.

Some see the scenario as a do-or-die situation for Napster. Although the online swap shop announced in October a roughly sketched deal with German media giant Bertelsmann AG, which owns the BMG music label, just how that will pan out in light of the imminent court injunction remains to be seen. Bertelsmann says it will drop its suit if Napster is able to come up with a viable business plan and is working with the company toward that end, but it still faces the copyright lawsuit brought on by four major labels — Sony Music Entertainment, AOL Time Warner's Warner Music Group, Universal Group and EMI Group.

Last week, Napster proposed a settlement to pay $150 million to the major record labels each year for five years, and $50 million toward indie labels. The offer came on the eve of the Grammy Awards, a timing that some industry watchers saw as peculiar. The record labels reacted coolly to the offer.

"We're a year after this lawsuit started," said Frackman, "and Napster is only starting to talk about ways they could have [put in place a business model] from the beginning. … I will tell you from my experience that litigation in this area for copyright holders is a last resort."

Napster's destiny is in limbo. “Status quo is that Napster’s lost, and they have to figure out how to survive,” said Toobin.

ABCNEWS.com's Sascha Segan and Steve Futterman of ABCNEWS Radio contributed to this report.