Ronald P. Oines is of counsel in the Orange County office of Morrison & Foerster LLP, where he has a litigation and intellectual property practice. His litigation practice includes the following areas: patent, copyright, trademark, right of publicity, business torts, contracts, defamation, real estate, construction defect, insurance coverage, consumer class actions, and employment.Paul V. McLaughlin is an associate in the Orange County office of Morrison & Foerster LLP where he is engaged in a litigation and intellectual property practice. McLaughlin's areas of practice include patent, copyright, trademark, business torts, contracts, real estate, and securities litigation.
For more information about this topic, please contact Oines at roines@mofo.com or McLaughlin at mclaughlin@mofo.com.
I. Introduction
Most people have heard of MP3.com, Napster.com, or both. These companies have had more than their share of press lately, first for their cutting edge technology and second, for the lawsuits aimed at preventing the use of such technology. This article discusses recent Federal Court decisions involving claims of copyright infringement against these companies and certain developments since those holdings. But first, some background.
II. What is MP3?
An increasing number of consumers and audio professionals are using their computers to create, edit, transmit, and/or store audio files. Prior to MP3 (short for Motion Picture Experts Group, Layer 3), this was difficult because uncompressed audio files are very large. An uncompressed audio file of an average song may be approximately 50 megabytes. MP3 allows an audio file to be shrunk down to between one-tenth and one-twelfth of its original size with little decrease in sound quality. As computer hard drive memory capacity has increased (and become more affordable), and as compression technology, such as MP3, has improved, it has become feasible to store a library of songs in the MP3 format on home computers. Additionally, there are many portable MP3 players on the market which allow a person to listen to MP3 files anywhere.
A concurrent improvement in modem technology and increased use of high-speed DSL or cable lines for internet access has enabled computer users to share MP3 files relatively easily. Computer users can download MP3 files from the internet in minutes, or even seconds. Of course, computer users are also able to upload MP3 files to the internet. The ease with which computer users can access and share MP3 files has made the format extremely popular for downloading music from the internet. According to one survey, 180 million MP3 files are exchanged every week.
III. What is MP3.com?
MP3 is not a proprietary format and is not owned by MP3.com. MP3.com, however, owns and operates one of the most popular MP3 music sites on the internet. MP3.com launched a service called "My.MP3.com," which enables a subscriber to store, customize, and listen to his or her CD collection from any internet connection. A user must first prove that he or she owns the CD version of the music either by inserting the CD in the user's computer for a few seconds, or by buying the CD online from one of MP3.com's cooperating online retailers. Once the subscriber proves that he or she owns the CD in question, MP3.com allows the subscriber to access MP3.com's copy of the recording via the internet and play it on any computer anywhere in the world. In order to offer this service, MP3.com purchased tens of thousands of CDs and copied them onto its computer servers.
IV. What is Napster?
Napster owns and operates a web site that allows users to share MP3 files with other users who are logged onto the Napster system. Napster charges no fee for this service, or to download the necessary software. Napster provides a searchable index of song titles and artists that makes it convenient to find the desired selection to download from other users. Napster also allows users to play downloaded music using the Napster software.
V. Why do Record Companies (and Some Individual Artists) Dislike MP3.com and Napster.com?
Record companies and artists are understandably disturbed at the ease with which programs such as Napster and MP3.com facilitate the transfer of copyrighted materials. One record industry group estimates that there are one million illegal MP3 files available for download on the internet. All it takes is one purchased CD to generate infinitely many illegal copies on the internet. Troubled by this prospect, the record industry and several prominent artists have initiated lawsuits against both Napster and MP3.com. These suits have met with some initial success.
VI. The Recent Holding in the Lawsuit Against MP3.com
In UMG Recordings, Inc. et al. v. MP3.com, Inc., a group of record companies challenged the My.MP3.com service described above. On February 28, 2000, Judge Jed S. Rakoff of the U.S. District Court for the Southern District of New York granted the record companies' motion for partial summary judgment, finding that MP3.com's unauthorized copying of the tens of thousands of CDs constitutes copyright infringement. MP3.com argued that its service was the "functional equivalent" of storing its subscribers' CDs. The court rejected this argument, noting that MP3.com was actually replaying converted versions of recordings that it had copied (without permission) from CDs. This, the court held, made out a presumptive case of infringement tinder the Copyright Act of 1976.
Judge Rakoff similarly rejected MP3.com's argument that its copying was protected by the doctrine of "fair use." Generally speaking, the fair use doctrine recognizes that, in certain circumstances, people other than the owner of a copyright may use copyrighted material in a reasonable manner without the copyright owner's consent. Judge Rakoff examined each of the statutorily enumerated factors and found that MP3.com did not meet any of them.
Finally, MP3.com argued that it provided a useful service to consumers that in its absence would be served by "pirates." Judge Rakoff was not persuaded. He noted that the copyright laws were not enacted for consumer protection or convenience; rather, they were enacted to protect the property interests of the copyright holders. On the basis of these findings, the court granted partial summary judgment holding that MP3.com infringed the record companies' copyrights.
MP3.com recently announced that it has reached a settlement with Warner Music Group and BMG Entertainment, which includes a licensing agreement that will allow MP3.com to store music owned by those companies.
VII. The Recent Holding in the Lawsuit Against Napster
Unlike MP3.com, Napster took the offensive in A & M Records, Inc., et. al. v. Napster, Inc. The record companies brought suit alleging that Napster was liable for contributory and vicarious federal copyright infringement and related state law violations. In response, Napster moved for summary adjudication.
Napster argued that a safe harbor provision of the newly enacted Digital Millennium Copyright Act ("DMCA") applied to the Napster system. The safe harbor provision in question, 17 U.S.C. section 512(a), limits liability "for infringement of copyright by reason of the [service] provider's transmitting. routing, or providing connections for, material through a system or network controlled or operated by or for the service provider," if five conditions are met. Napster essentially argued that it was nothing more than a "passive conduit." Chief Judge Marilyn Hall Patel of the U.S. District Court for the Northern District of California denied Napster's motion, holding that Napster does not meet the requirements of the safe harbor provision because it does not transmit, route, or provide connections for allegedly infringing material through its system.
In a way, the very attribute of the Napster system that makes it attractive to users compelled the court's decision that the safe harbor provision did not apply. The court focused on the fact that Napster enables and facilitates connections between users' computers. The individual users then share information with each other using the internet--not the Napster system. Thus, the court concluded that Napster does not transmit, route, or provide connections for infringing material.
Judge Patel also held that Napster was not entitled to summary adjudication because there were genuine issues of material fact as to whether Napster had met another safe harbor requirement; namely, whether Napster had adopted and reasonably implemented a policy that terminates repeat copyright infringers. Napster's policy was to change the password of repeat infringers so that the user could not log onto the system using that password. Of course, nothing prevented the user from reapplying with a different password and continuing their infringing activity. In addition, the record companies raised a question as to whether Napster's policy had even been in place before they filed their lawsuit.
On June 12, the record companies in the Napster litigation moved for a preliminary injunction that would effectively shut Napster down pending a final decision.
VIII. Other Pending Lawsuits
Napster now finds itself battling on several, very public, fronts. Not only is its suit with the record companies still ongoing after the denial of its motion for summary adjudication, but high-profile artists such as Metallica and Dr. Dre have publicly criticized Napster for promoting the unauthorized sharing of their music. Metallica filed a lawsuit against Napster.com and also named several universities Metallica claimed facilitated infringement by allowing students to access Napster's site. Some of the universities responded to the suit by blocking access to Napster from university computers and were subsequently dropped from the suit.
Metallica also delivered to Napster documents identifying over 300,000 Napster users who had allegedly illegally swapped Metallica songs through Napster. (Dr. Dre has recently taken similar action.) On May 10, 2000, Napster responded to Metallica's action by blocking access to Napster by those users identified by Metallica. In a sign of the difficulty copyright holders will face curbing the spread of files through programs such as Napster, however, Metallica songs remain readily available on Napster.
IX. The Future
Given the proliferation of freely available copyrighted music on the internet, it was inevitable that the record companies would take action. Moreover, the decisions of the courts in the cases against MP3.com and Napster are not surprising. If services like My.MP3.com and Napster are to co-exist with record companies, they will have to do so by mutual agreement, such as through licensing. However, although MP3.com is reportedly in the process of negotiating licenses with the record companies, and Napster will likely have to do the same, we have not likely seen the last of the legal wrangling over music on the internet.
New programs such as Freenet and Gnutella claim to represent the cutting edge in information sharing technology and demonstrate the difficulty the recording industry may face in its attempts to protect copyrighted music. Freenet, for example, claims that its program enables a user to acquire or exchange information anonymously while simultaneously frustrating any attempt to either remove the information from the internet, or to determine its source. Freenet's genius is in its ability to find and acquire files without reference to a single database. This is a potential nightmare for copyright holders attempting to track down infringers. Freenet also uses encryption technology to cover the tracks of its users. A test version or Freenet was posted on the internet in March of this year, and has been downloaded more than 15,000 times. Thus, there may he thousands of network servers already running Freenet. Moreover, Freenet allows users to exchange any file format; it is not limited to MP3 files.
Record companies and artists will soon learn whether their aggressive legal stances might negatively affect sales. Consumers are not likely to stop buying their favorite artists' music based on something the artists' record company does. However, consumer backlash against the artists themselves, such as the reported negative reaction of Metallica fans to Metallica's action against Napster, could potentially hurt sales. A person who feels strongly about Napster may be more likely to support bands like The Offspring or Limp Bizkit (both of whom publicly support Napster) rather than Metallica.
One thing is certain. Record companies (like any other well-run company) will do whatever they believe will, in the long run, be most beneficial to the bottom line. The biggest challenge will be to figure out what that is.
Copyright 2000, Metropolitan News Company
