The Music Industry’s Fight Against Napster – Part 3: The Trial

On December 6, 1999, the Recording Industry Association of America (RIAA) sued the first file sharing platform Napster for copyright infringment. This was the start of a still ongoing campaign against file-sharing and related practises. On the occasion of the 15th anniversary of RIAA’s lawsuit against Napster, I would like to retell the story of Napster relying on Joseph Menn’s book “all that rave. The Rise and Fall of Shawn Fanning’s Napster” (2003) as well as on court documents and press articles.

In part 3 the trial on the preliminary injunction against Napster is highlighted that eventually let to the shut down of the file sharing service in summer 2001.

 

In view of the preliminary injunction, the new Napster CEO Hank Barry hired the hotshot solicitor David Boies to embark on a new defensive strategy. Boies referred to the “fair use” clause in the Audio Home Recording Act (AHRA). “Fair use” allows consumers – amongst others – to make a copy for private use. Napster users did nothing else and, therefore, did not infringe copyright. Boies also referred to the Supreme Court decision in Universal City Studios v. Sony in 1984. Universal City Studios sued Sony for selling video recorders that allowed consumers to infringe their copyrights by taping their film and TV productions. In a disputed decision, the Supreme Court outlined that the manufacturers of home video recording devices such as Betamax – therefore the “Betamax case” – were not liable for copyright infringement. Although the judges argued that video recording did infringe copyright, they saw a significant non-infringing use of the technology. Therefore the Betamax case was decided in favour of Sony.[1]

Boies’ office also motivated prominent proponents of the open-source community and free-speech movement such as the co-founder of Electronic Frontier Foundation (EFF) and Grateful Dead songwriter John Perry Barlow[2] as well as Stanford Law-School professor Lawrence Lessig to testify for Napster. Lessig argued in his expert report that most of the innovative copying devices such as the photocopier, the cassette recorder and the video recorder initially infringed copyright. In a longer perspective the non-infringing use of those technologies outperformed the infringing use by far and new ways to compensate rights holders were found.[3]

On July 26, 2000, Judge Patel, who already conducted the preliminary hearings, opened the trial of the record labels against Napster in a San Francisco district court building. In his opening statement the plaintiffs’ lawyer Russell Frackman pointed at the immense economic damage for the record labels and music publishers caused by Napster: “Since the court walked in several minutes ago, 30, 40, maybe 50,000 recordings have been downloaded using the Napster system; 14,000 recordings are downloaded a minute (…). If we take the six months that Napster has posited it will take to get to trial, there will be 3.6 billion separate recordings downloaded using the Napster system. And 90 percent of those, Your Honor, are copyrighted.” (Menn 2003: 241). The 75 million Napster users would not pay any compensation to the rights holders Frackman continued, and warned: “The longer this goes on, Your Honor, the more impossible it will be for us, and we believe for the court, to do anything realistic.” (ibid.). Napster had not just a negative impact on CD sales but make it impossible for the music industry to develop a sustainable online music business.

The legal representative of the music publishers, Carey Ramos, was next: “All we request is that Napster be required to comply with the law, to follow the same rules of the road that other media business have followed for years by obtaining permission before enabling the copying. Napster doesn’t want to do that. It doesn’t want to have to engage in clearances whether they need to get clearance and to seek permission. It’s too much effect. It requires them to work before they become Internet billionaires.” (ibid: 241-242).

Ramos’ line of argument unveiled that RIAA did not worry about the artists’ rights, but about the allegedly economic harm caused by file-sharing. Although it was not directly asserted by the plaintiffs’ lawyers, but is can be read between the lines that each unlicensed download from Napster was an economic loss for the labels and publishers. The lawyers also warned of a copyright-less anarchy that prevented to establish a functioning digital music business model. The incompetence of the music industry to develop attractive online music services, thus, were fully blamed on Napster.

The statement of the music publishers’ lawyer also unveiled the main motive of the plaintiffs: to license their music catalogues. It is inacceptable that an Internet start-up company earns billions of dollars without sharing them with the copyright holders! Napster was accused of having no interest in licensing its music service. That was, however, a downright lie. Napster was indeed interested to be licensed by the copyright holders, but not under the major labels’ dictate.

Let’s come to the arguments of the legal representatives of Napster. In his statement, David Boies directed the court’s attention to the Betamax decision of 1984. With the help of a graphic chart, he tried to point out the substantial non-infringing use of Napster: “We have at tab No 2 of the book that the court has, a reference to a whole series of substantial non-infringing use of which Napster is capable (…)” and then he was interrupted by Judge Patel: “What does it mean, ‘is capable’? As opposed to ‘is in fact’ or ‘has in fact been performing’?” (Menn 2003: 242). This objection already weakened Boies’ reasoning. Whereas in the Betamax case no usage data was available, it was contrary in the Napster case. The court had insight into the traffic on Napster’s servers that unveiled a substantial infringing use. In the following, the infringing use got into the focus of the trial and, therefore, the Betamax decision became obsolete.

In the following, David Boies argued that Napster as a music service provider could not be blamed for the illegal activities of its users. Judge Patel, however, was not impressed. She referred to several e-mails by Napster representatives showing that they were not only aware of the infringement of copyright by the users, but fostered piracy. Judge Patel: “Isn’t that the guts of what Napster was all about? ‘Pirating be damned’, I think, was pretty much the sense one gets in reading some of the exhibits from some of these early meetings or memos, et cetera. I mean, piracy was uppermost in their mind, right? Free music for the people, right?” (Menn 2003: 242). Thus, the Napster lawyer could not easily point to the “fair use” doctrine in the Audio Home Recording Act. Therefore, they referred to a recent court decision that the Rio MP3-player was not substantially infringing copyright. Again Judge Patel was not impressed and rhetorically asked if the use of the Rio player enables the unauthorized sharing of copyrighted content around the world (ibid).

The second Napster lawyer, Daniel Johnson Jr., once again targeted on the “safe habor” clause of the DCMA. He argued that the Napster representatives could not know that copyrighted content was shared by the Napster users. This argument did not convince Judge Patel again: “If you have in fact designed a product, a system that is in fact designed to do just what it’s been doing, enabling infringing, enabling piracy, you can hardly stand back and say, ‘Gee, I didn’t know all that stuff on there was pirated’.” (ibid: 243). Furthermore, Johnson raised the Betamax decision, but again was rebuffed by the judge, who did not want to believe that video recorders were mainly used for file-sharing. In a last ditch-attempt, Johnson referred to the Rio decision, what Judge Patel countered laconically: “[The rio case] doesn’t apply here, and I will explain why, when I render my decision.” (ibid.). This marked the end of the hearing and Judge Patel adjourned to her office for a break.

After the hearing, it had become clear that the opinion would not be in favour of Napster. However, nobody in the courtroom – not even the plaintiffs – expected that Judge Patel would rule so drastically against Napster. When Judge Patel returned to the bench, she clarified that most of the Napster users were infringing copyrights and stated therefore: “This, in fact, should come as no surprise to Napster, since that (…) was the purpose of it.” (ibid: 244). Then, she argued why the Betamax decision was inapplicable for the Napster case: “While it may be capable of some of these other things, those uses seem to pale by comparison to what Napster is actually used for, and what it continues to be used for” (ibid). She conceded that the question of personal use was trickier to answer, but if users disseminate files to such a large number to strangers it “(…) cannot be said to engage merely in the typical personal use” (ibid: 244). She then turned again to the video recorder case and argued that when the VCR manufacturers sold their devices to the consumers they lost then the control of. Last but not least she declared that the Audio Home Recording Act did not play any role in the case since computers were no “audio home recording devices” as defined by the law.

For Judge Patel it was not just evident that the Napster users were violating copyright, but that – according to internal documents – the Napster representatives knew about their infringing behaviour: “[It] overwhelmingly establishes that the defendant had actual or, at the very least, constructive knowledge.” (ibid). The blocking of hundreds of thousands of IP addresses to prevent the sharing of Metallica’s and Dr. Dre’s songs was an evidence for the judge that Napster was able to prohibit copyright infringement. Therefore, Napster had to ensure that no copyrighted material would be shared in the future, otherwise it could be shut down by the court. And she ironically added: “I’m sure that anyone as clever as the people who wrote the software in this case are clever enough (…) to do it, and come up with a written program that will help identify infringing items.” (ibid: 244-245). When David Boies objected that it would be nearly impossible for Napster to list all songs infringing copyright, Judge Patel laconically replied: “That’s their problem. They created the ‘monster’.” (ibid: 245). Napster got a deadline of 48 hours to install an effective filtering software. When Boies complained that it would be impossible to distinguish authorised from unauthorised use in such a short period, Judge Patel sarcastically asked: “What about all those substantial non-infringing uses you were trying to convince me of?” (ibid). The preliminary injunction was granted to the plaintiffs and the trail was finished.

In the written opinion, dated August 10, 2000,[4] Judge Patel discussed her ruling in detail. A crucial point was that Napster caused severe economic damages for the recorded music companies: “Plaintiffs have produced evidence that Napster use harms the market for their copyrighted musical compositions and sound recordings.” (Patel 2000: 20). Judge Patel highly valued the Field Research Study as well as the SoundScan study, both backing the plaintiffs’ position (ibid: 15). In addition, the judge was convinced that Napster prevented the record companies to establish an effective and sustainable online music business by themselves. (ibid: 20). The studies commissioned by Napster were assessed by the judge as insignificant and irrelevant. (ibid: 15-16). Judge Patel did not see any plausibility for a positive sampling-effect of Napster that was highlighted by the defendant’s experts “(…) a Napster user who downloads a copy of a song to her hard drive may make the song available to millions of other individuals, even if she eventually chooses to purchase the CD. So-called sampling on Napster may quickly facilitate unauthorized distribution on an exponential rate.” (ibid: 21).

The judge’s reasoning highlights that she did not understand the sampling-effect. Since file-sharing helps to disseminate music files on the Internet on a large scale, it also results in recorded music sales because of promotional effects. An economic damage results when the substitution effect exceeds the sampling effect. In this respect, the scientific findings are contradictory, but Judge Patel followed those studies stating a negative impact on recorded music sales. And even if there was a positive sampling effect, it “(…) would not constitute “fair use” even if it enhanced CD sales” (ibid: 24).

Judge Patel line of argument was clear. The Napster users infringed copyright on a large scale and Napster did not intervene and even supported the users in their infringing activities. Therefore, the judge referred to Sean Parkers e-mail stating that he did not want to know the real names behind the IP addresses “since they are exchanging pirated music” (ibid: 27). That e-mail was the main piece of evidence – the so-called “smoking gun” in the Napster trial. The Napster executives were aware of the copyrights violations by the users and therefore Napster committed contributory as well as vicarious copyright infringement, since it financially benefited from the infringing behaviour of the users. Napster, therefore, had to ensure, “(…) that no work owned by plaintiffs which neither defendant nor Napster users have permission to use or distribute is uploaded or downloaded on Napster. The court ORDERS plaintiffs to cooperate with defendant in identifying the works to which they own copyrights.” (ibid: 40).

 

See also:

Part 1: Napster’s Rise to Fame and the RIAA Lawsuit

Part 2: The “War of Expertise”

 

Sources

[1] Sony Corporation of America v. Universal City Studios, Inc., 464 U.S. 417 (1984) https://supreme.justia.com/cases/federal/us/464/417/case.html (accessed January 26, 2015).

[2] Declaration of John Perry Barlow in A&M Records et al. v. Napster Inc., case no. C99-5183-MHP (accessed January 26, 2015).

[3] Expert report of Lawrence Lessig in A&M Records et al. v. Napster Inc., case no. C99-5183-MHP (accessed January 26, 2015).

[4] Opinion of Judge Marilyn Hall Patel in A&M Records et al. v. Napster Inc., August, 10 2000, case no. C99-5183-MHP and case number 00-0074-MHP (accessed January 26, 2015).