Napster attorneys said the injunction could shut down the service until a trial is held later this year because the company cannot easily filter copyrighted material. If a planned appeal fails, the order takes effect Friday at midnight PT.
The order, however, does not directly affect the estimated 20 million people who have used Napster's software to download countless MP3-encoded songs since last year. The record industry would have to file separate lawsuits against individuals, which is highly unlikely.
"Napster is enjoined from copying or assisting or enabling or contributing to the copy or duplication of all copyrighted songs and musical compositions of which the plaintiffs hold rights," U.S. District Judge Marilyn Hall Patel ordered during a hearing in San Francisco federal court.
The ruling handed the recording industry its first major victory against online piracy and touched off a flurry of angry postings on a Napster message board. The company said it would host a live chat session at 7 p.m. PT on its Web site, but the event apparently suffered from technical problems and was not accessible.
The timing of Patel's ruling was a surprise, but the content was expected. The injunction was issued during a hearing at which Patel grilled Napster attorneys and was highly critical of some of their arguments.
The hearing was part of a lawsuit the Recording Industry Association of America filed against Napster earlier this year, alleging that the company's technology facilitates massive music piracy. In granting the RIAA's request for a preliminary injunction today, Patel found that the plaintiffs had provided enough evidence to show a strong likelihood of success at trial.
She also ordered the RIAA--which represents companies such as Bertelsmann's BMG Entertainment, EMI Recorded Music, Sony Music Group, Seagram's Universal Music Group and Warner Music Group--to post a $5 million bond to compensate Napster for lost business should Napster eventually prevail in the case.
"Napster wrote the software; it's up to them to write software that will remove from users the ability to copy copyrighted material," Patel said. "They created a monster...That's the consequence they face."
Attorneys for the recording industry praised the decision as a vote of confidence for copyright holders who say the Internet is fostering unprecedented piracy of their property.
"Now that Napster understands that they need the authorization of copyright owners to engage in their business, we hope they will work with the record companies to devise novel ways to use their technology for legitimate purposes with permission," Cary Sherman, general counsel for the RIAA, said in a statement.
Attorneys for Napster expressed doubts that the service could continue under the terms of the injunction.
"By getting an injunction that requires us to block an unidentified set of songs, it makes it impossible for us to comply with the injunction without removing the main components of our service," said Napster attorney David Boies, who also represented the Justice Department in the historic antitrust case against Microsoft. He added that the company would seek a stay of the decision, noting that if it is not granted, the order would "greatly curtail or even eliminate the service."
Patel's order applies only to the swapping of copyrighted music on Napster. The company could still make available music that is approved by the artists and could operate its message boards.
The debate over Napster has polarized the music community, with some artists attacking the company during recent congressional hearings. Others have endorsed it as a valuable marketing tool for distributing music without the backing of a major record company.
Howard King, a lawyer representing anti-Napster artists Metallica and Dr. Dre, said, "We couldn't have written a better decision if we had been given the pen ourselves."
The case has drawn enormous attention as one of the first legal confrontations pitting novel Internet technologies against the rights of intellectual property holders.
Fred von Lohmann, a copyright lawyer with San Francisco-based Morrison & Foerster, which is not involved in the case, said Patel's oral ruling will have broad implications.
"A lot of the things she said about copyright in there will have an impact on other Internet companies. This is going to be a big deal when she writes it down," he said.
The RIAA's Sherman, for example, said that the suit "should send a message to Scour.net that they are on thin ice and they should revise their service very quickly." Scour is a Napster-like service that allows people to swap a range of files, including songs and full-length movies. The RIAA and the Motion Picture Association of America filed a suit against the company last week.
But von Lohmann noted that Patel's ruling "does not necessarily spell the doom" for other tools that are used to download music and other files. Gnutella and Freenet, for example, are "peer-to-peer" networks that allow individuals to trade files without going through a central server. Shutting them down would require suits to be filed against individuals.
?Today?s ruling is not the death of peer-to-peer networks, but a call to resolve how this runaway success will work with existing copyright and intellectual property," said Bill Bales, CEO of AppleSoup, which is a Gnutella-like service.
Napster's attorneys ran into trouble early at today's hearing as Patel systematically shot down key defense arguments. She found, for example, that computers and hard drives are not audio home recording devices. She also said the potential for noninfringing uses of Napster is minimal and that the commercial and substantial purpose of the site is copying popular music.
"'Piracy be damned' was pretty much the sense one gets from reading some of the early (Napster documents)," Patel said. "Isn't that what the guts of Napster is all about...essentially a system created to facilitate the download of music?"
Napster attorney Boies countered that just because a recording is made doesn't mean copyright infringement takes place. He said the Audio Home Recording Act explicitly allows unlimited copying for personal use. He also cited two earlier court cases--RIAA vs. Diamond Multimedia Systems and Sony Corp. vs. Universal City Studios--in which courts have waived copyright liability for companies that make copying devices.
Patel seemed unconvinced, pushing Boies to show how those cases apply to Napster, which is not a device but an Internet technology. She also flatly rejected some of the arguments.
Asked by one Napster lawyer how she would deal with the Diamond case, she responded: "Easy. It doesn't apply."
Boies found himself in the hot seat following a 30-minute presentation by lawyers for the RIAA, who asked Patel to issue an immediate injunction against Napster. RIAA attorney Russell Frackman said the step was necessary to stop further illegal downloads and to counter what he called a growing perception among consumers that taking music from the Internet is legal.
Frackman estimated that 3.6 billion music files could be downloaded illegally in the six months before a scheduled trial in the case if Napster were allowed to continue.
Today's courtroom showdown was the first meeting between Napster representatives and the record industry in months--and the first time since Napster hired high-profile antitrust lawyer Boies to present its case.
Nearly the entire 40-seat courtroom was filled by lawyers representing the two sides, forcing all but a handful of public observers to view the proceedings over closed-circuit television in an adjacent room.
Napster co-founder Shawn Fanning, 20, was also spotted in the crowd, eschewing his usual baseball hat for a suit and tie.
Napster has made some moves to establish a rapprochement with the record industry, saying that it wants to respect copyrights and work with the labels. But so far, the gap between the two sides' views of what is legal and acceptable has proved unbridgeable.
Even if the ruling does shut down Napster in its current form, aficionados have created a way to run their own servers unaffiliated with the company. If Napster itself is shut down, many of these servers will likely continue without it.