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Napster heads to court
July 3, 2000: 5:04 p.m. ET

Charges recording industry with stifling its music swap technology
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NEW YORK (CNNfn) - Think of Napster, if you will, as a musical buffet, an online sampling tray where you can try out artists' tunes, and buy their songs if they suit your taste.

At least, that's how Napster, the controversial Internet song sharing service, views itself, according to documents filed on Monday.

San Mateo, Calif.-based Napster contested the music industry's legal request to shut the company's service by informing a federal court in California that neither it, nor its users, violate copyrights, and that enthusiasts utilize Napster to test music, which they often eventually purchase.

graphicWhat's more, the 10-month old company, in the court documents, argued that the Washington, D.C.-based Recording Industry Association of America (RIAA), the main lobbying group for the music industry, is trying to suppress its technology in order to maintain dominance in the $39 billion global music business.

Napster's technology can threaten the economic control of a dominant trade association based on the existing technology and the RIAA is trying very fast to catch up and shut down Napster until they can dominate, the company said.

"The law provides that companies cannot get together and pool their copyright and use them for anticompetitive purposes," David Boies, Napster's New York-based attorney, told in an interview. "Only about 2 percent of musical artists are signed to record label contracts. Napster enables the other 98 percent to reach audience and compete with record labels."

RIAA, in response, called the charge "silly."

"It is silly since the RIAA is not even a plaintiff in the case, said Cary Sherman, RIAA Executive Vice President and General Counsel, in a statement. "Individual music publishers and record companies are the plaintiffs, all of whom have partnerships with multiple legitimate technology companies."

"Furthermore, Napster has never even sought licenses for their activities.

They are engaged in wholesale piracy," Sherman added.

The charge was part of a response by Napster, whose software lets fans exchange songs by trading computer files compressed in the MP3 format, to an injunction request filed two weeks ago by RIAA.

The request for a preliminary injunction by RIAA -- representing Seagram Co. Ltd.'s Universal Music, Bertelsmann AG's BMG, Sony Corp.'s Sony Music and Time Warner Inc.'s Warner Music Group, which is merging with EMI Group PLC EMI Music - followed a lawsuit it filed in December against Napster that charged it was a haven for online music piracy.

Time Warner is the parent of

The case will be heard in U.S. District Court in San Francisco on July 26, but Boies said Napster has asked for an evidentiary hearing, so that the judge has an opportunity to study the facts of the case.

David - with money and lawyers - vs. Goliath

Many are closing watching the developments in this case, which addresses issues in a space where old and new media collide: copyright for art and property and digital distribution over the Internet.

A David-and-Goliath clash of sorts, the case pits the multibillion-dollar music industry against Napster, a company founded by 19-year-old Shawn Fanning and 20-year-old Sean Parker last September, that still has no formal business plan, no revenue, and has yet to officially release the free software that started the court fight.

Business plan or no, Napster in recent months has beefed up its front-line defense with heavyweight players. In June, the company hired New York law firm of Boies Schiller & Flexner, led by David Boies, who assisted the Justice Department in its fight with Microsoft.

Boies' appearance comes only weeks after Napster received $15 million in funding from Hummer Winblad, a venture capital firm, which placed Hank Barry as the new chief executive.

Napster's documents filed on Monday also argue that the RIAA's charge that Napster has harmed sales of recorded music is incorrect. In fact, sales have been encouraged by the service, Boises added.

RIAA asserts that at any single moment, hundreds of thousands of users may be patched into Napster's systems, just a few clicks away from downloading millions of pirated sound recordings - for free.

Both sides of the argument have previously cited surveys and studies supporting claims that Napster's service does - or does not - hurt sales of recorded music.

Napster: Non-commercial copying of music is OK

In its 44-page filing, Napster argues that its technology is merely a conduit for users to exchange music files, and law covers the copying of certain artistic property made by consumers.

"We point out that there has been a recent decision by (Northern California's) 9th circuit court of appeals, that holds that the "main purpose" was to provide that all non-commercial copying by consumer is lawful," Boises told

In that case, The 9th U.S. Circuit Court of Appeals in San Francisco found that the Rio MP300, manufactured by Diamond Multimedia Systems Inc., did not qualify as a "digital audio recording device" and was not subject to the restrictions of the 1992 Audio Home Recording Act.

"The Rio's operation is entirely consistent with the act's main purpose - the facilitation of personal use," Judge Diarmuid F. O'Scannlain wrote, saying the device would allow consumers to record copyrighted music for their own private, non-commercial use.

RIAA, in a statement said that Napster couldn't hide behind users actions to build a business.

"Whether or not it is lawful for users to share music one on one, it is entirely different for a commercial entity to create a business that induces users to do that," said RIAA's Cary Sherman said. "The courts have repeatedly rebuffed attempts by businesses to hide behind the "fair use" privileges of their customers."

Napster also said that it has made more clear its statement to its sties visitors that says it will boot users who misuse copyrighted material. The company has already worked with artists Metallica and Dr. Dre - who each sued Napster -- to bar members accused of illegally swapping their tunes.

"Users are responsible for complying with all applicable federal and state laws applicable to such content including copyright laws. Napster respects copyright law expects our users to do the same."

-- Warning on Napster's Web Site.

Industry experts suggest that the music industry does not seek simply to crush Napster, particularly in light of its popularity, but note that a settlement is unlikely. Instead, they say, the industry wants to set a legal precedent, a foundation to stand in coming years as the Internet becomes a mainstream method of distributing music, and ahead of the appearance of other inevitable rogue programs that aim to abuse copyrights.

During a press briefing on Monday, Napster interim Chief Executive Officer

Hank Barry denied rumors that Napster had been holding settlement talks with the record industry. "We've been too busy to be involved in any meaningful settlement negotiations, so there's nothing ongoing at this time," Barry said. Back to top

-- from staff and wire reports.


Napster hires legal top gun - June 16, 2000

Can computers hurt music sales? - May 25, 2000

Napster, RIAA use 'spin' - May 8, 2000


RIAA / Napster Lawsuit Q & A


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