Proving Napster Legal Is a Tough Job for Boies
(FORTUNE Magazine) – After a federal judge in Manhattan ruled last month that MP3.com must pay Universal Music Group up to $250 million in damages for copyright violations, a lot of people's attention shifted to Napster, Public Enemy No. 1 of the record industry because its software lets people copy songs for free. Napster is staying alive only because it persuaded an appeals court to delay an injunction that would have effectively shut it down. Now the company faces a crucial hearing Oct. 2, and many see the MP3.com ruling as an ominous sign. Napster--represented by superlawyer David Boies (of Microsoft-slaying fame)--insists it has a strong case. Most people have taken Boies at his word. We thought we'd take a closer look.
The gist of Boies' argument is that there are enough exemptions in the copyright laws to permit Napster to exist. First Napster cites the 1992 Audio Home Recording Act, which allows anyone to copy music for "noncommercial use." However, many legal scholars question Boies' reading of this act, saying it applies only to specialized recording equipment and not computer hard drives. Plus, they argue, Congress intended the law to cover limited recordings for personal use, not the widespread distribution of music that Napster allows. Boies concedes that may be a fair point but says it is up to Congress to change the law, not the courts. "The law draws a distinction between commercial and noncommercial copying," Boies says, adding that it makes no mention of the number of copies that may be made.
Next Napster cites a standard the Supreme Court established in 1984 when movie companies tried to stop Sony from selling VCRs because they feared widespread copying of movies and television shows. In that case the court narrowly decided that as long as a technology like a VCR had "substantial" legitimate uses, it couldn't be banned. This standard is relevant, Boies says, because even though the vast majority of traffic on Napster violates copyright law, Napster can be used for legal purposes--like promoting new artists who give permission for their songs to be downloaded. What isn't clear is whether this meets the "substantial" part of the test. Another problem, says Columbia law professor Jane Ginsburg, is that the Sony standard demands that the technology be intended for legitimate use. She says Napster was developed with the trading of pirated music in mind and therefore does not qualify. Boies disputes this, and Napster in its legal filings says the standard requires only that a technology be capable of a legal use.
The third part of Napster's argument rests on a part of the 1998 Digital Millennium Copyright Act that applies to Internet service providers and search engines. Napster hardly meets the definition of an Internet service provider, but it might be considered a search engine. This law exempts a search engine from copyright claims if the company that owns it is unaware that the information the engine retrieves violates copyrights. However, in court the record industry introduced several internal memos that seem to indicate Napster knew that much of the music being traded on its site was pirated. Besides, a search engine company is supposed to block access to illegal material once it realizes the situation.
Finally, Napster argues that the record industry's copyrights are unenforceable because the major music labels "misused" them by exploiting their monopoly power to overcharge consumers. This argument plays well with a public already suspicious of Big Music, but it's wholly unconvincing, most lawyers say. "They threw everything up against the wall to see what sticks," says Alan Sutin, a copyright lawyer with the firm Greenberg Traurig in New York. Boies says the misuse argument is "significant but not the most important one we make by any means." Translation: It is pretty lame.
So where does this leave Napster and MP3.com? Most experts say they'll have to make a deal. "The good result of this ought not to be that Napster and MP3.com go out of business," says New York University law professor Marci Hamilton. "They ought to negotiate a licensing arrangement with the record industry." After all, both Napster and MP3.com have interesting technologies. And these companies are probably correct when they claim the future of music lies in single-song downloading. Just don't count on that future to be free.