All
songwriters should be aware of the recent decision by the 9th Circuit
Court of Appeals in the Napster litigation. It's important for anyone
who does or may depend upon intellectual property for a livelihood
to understand the basics of the decision and its potential implications.
This column will outline the court's decision, and discuss the potential
near-future scenarios for Napster.
1.
The Decision
In
what most have seen as a stinging defeat for Napster, the Court
ruled that the company is engaged in both "vicarious" and "contributory"
copyright infringement. Before it reached that ruling, it had to
conclude that what Napster users do is direct copyright infringement.
The court rejected the argument that Napster downloads are "fair
use", citing evidence at the lower court level that found such activity
negatively impacted college CD sales, and adversely affected the
record labels' digital distribution efforts. Similarly, the court
held that downloading on Napster was not akin to the "time-shifting"
of TV programs by VCR approved in the 1984 "Betamax" decision by
the U.S. Supreme Court.
Contributory
infringement requires a defendant who, with knowledge, induces,
causes, or materially contributes to infringement. The court found
Napster a contributory infringer because its conduct encourages
and assists direct infringement. Vicarious infringement occurs when
someone has a right and ability to supervise infringing activity
coupled with a direct financial interest in that activity. Stating
that Napster turns a blind eye to deliberate acts of infringement
and has technology that acts as a "draw" to infringing acts, the
court concluded Napster is a vicarious infringer.
What
most people wanted to know after the decision was published was:
"Is it shut down or not?" The Court of Appeals did not order an
immediate shut down because it found that the injunction issued
by the lower court was too broad. Significantly, the higher court
put the burden upon the copyright owners to provide notice to Napster
of their copyrighted works and the files containing such works.
The lower court held a hearing March 2nd, centered on the issue
of how to craft a technologically feasible injunction that complies
with the Court of Appeals' order. On the same day, Napster stated
it intended to use filtering technology to block access to some
one million file names on the network, starting March 3rd. One outstanding
point of contention is who should bear the burden of policing Napster's
network for copyrighted songs-the labels argue Napster should, Napster
of course argues the opposite.
When
the lower court judge decides upon an order, Napster will examine
it and perhaps institute a fresh appeal if it decides the order
does not comport with the 9th Circuit's opinion. At that point,
it is likely Napster will be shuttered as to "noticed" copyrighted
works.
2.
The Fallout & Comment
In
the days directly following the decision, several developments occurred.
First, Napster requested an "en banc" hearing. The Court of Appeals
decision was by a three-judge panel, but the Court has 25 judges
on it. An en banc hearing would involve 11 of the rest, drawn by
lot. It is discretionary, and by no means likely that they would
agree to hear the case. The probable outcome: they won't take it,
but if they do, that decision will affirm 3 judge panel decision.
(Winners at the panel level have the advantage because the rest
of the judges rely on the original decision makers to inform them
about the case, especially in a case where the decision was unanimous--no
dissenting judge to muck up the picture.) Napster's risk--if it
loses en banc, it has an adverse decision rendered by the whole
circuit, not just a panel, against it.
Napster
can't appeal to the Supreme Court until it gets a definitive ruling
out of the 9th Circuit. In the meantime, it can try to fight a battle
of delay and attrition at the district court level. For instance,
it could argue that it can't police its system in the way the 9th
Circuit assumes it can. Also, Napster may try to develop its alternative
arguments dealing with the Digital Millennium Copyright Act, the
defense of copyright misuse, and perhaps reiterate their argument
for a "compulsory license".
As
for the copyright holders, they apparently smell blood. And with
all the focus on an injunction shutting Napster down, some have
lost sight of the potential damages in this case, but not the labels
or the publishers, you can be sure. In fact, perhaps the labels
are thinking they can bankrupt Napster and then pick up its bones
in bankruptcy court as a cheap way to buy its technology, which
the market clearly demands.
In
addition to their courtroom strategy, the labels, via their trade
association RIAA, have hired a who's who of ex-politicians to fight
their battles on Capitol Hill. Among them are former Senator Bob
Dole, former Montana governor Marc Racicot (with close ties to President
Bush). Bertelsmann, having struck a deal with Napster to secure
and thus monetize its technology, has hired Joel Klein, the Justice
Department's guru from the Microsoft case. Klein was likely hired
to smooth the anti-trust seas should Bertelsmann somehow get the
other labels to agree to license their material to Napster.
Also
in the wake of this decision came an offer from Napster of $1 Billion
dollars to settle the case. In a good example of "the devil's in
the details", the billion was spread over five years, and payments
to the song composition copyright holders were included in that
figure. As analysts began to do the math, many saw the offer as
a publicity stunt to try to paint the labels as greedy and intransigent.
An obscure Minnesota company (J. River) that owns the "MusicMaker"
digital jukebox technology quickly upped the bid to 3 Billion dollars.
If it weren't for the NASDAQ debacle, perhaps a Yahoo, Microsoft,
or similar technology company would put some serious money on the
table.
3.
Effect on Songwriters?
The
great debate rages amongst the artistic community about the pros
and cons of Napster and its ilk. Some see it as the greatest promotional
vehicle since the advent of radio, some see it as the devil itself,
sent by tech anarchists to steal artists and writers' livelihoods.
Drop a line with your opinion, and please include your thoughts
on what songwriters should do in response to all this change.
