The decision late today by the 9th U.S. Circuit Court of Appeals allows Napster to remain in operation past midnight PT tonight, when a previous court order would have forced the company to halt the sharing of copyrighted music--effectively shutting it down.
In its two-page order, the court said Napster "raised substantial questions (on) both the merits and the form of the injunction."
The court also granted Napster's request for an expedited appeal. The company is required to file a legal brief with the court by Aug. 18; a responding brief by the music industry is due Sept. 8. After the briefs are filed, the court will schedule oral arguments.
The decision does not address the merits of the case. Rather, it only maintains the status quo until the case receives a full hearing, which is likely to occur this fall.
"Wow, I'm surprised," said Fred von Lohmann, a copyright attorney with Morrison & Foerester, which is not involved with the case. "I didn't think they were going to do it. All I can think is that Napster's lawyers made a very compelling argument that if you don't stay the injunction, we'll go out of business, and there won't be anything left to appeal."
Hilary Rosen, CEO of the Recording Industry Association of America (RIAA), which filed the suit against Napster, issued a statement calling the decision "a disappointment," but said she was confident about the final outcome.
"It is frustrating, of course, that the tens of millions of daily infringements occurring on Napster will be able to continue, at least temporarily," Rosen said. "In fact, since the district court issued its order, the illegal downloading of copyrighted music openly encouraged by Napster has probably exceeded all previous records.
?We look forward to the day when the infringements finally cease.?
Napster attorney Daniel Johnson, of the law firm Fenwick & West, praised the ruling, explaining that unique legal questions posed by the case require full consideration by the courts.
"Before the court of appeals was prepared to put Napster out of business, these very serious issues had to be resolved," Johnson said. "Can a consumer have a right to copy? Can you use the Internet for sharing information? Is Napster entitled to protection under the Digital Millennium Copyright Act?"
Rosen of the RIAA agreed that the novel issues raised by the case may have prompted the court's decision.
?The Court of Appeals apparently regards this case as the first of its kind and wants to consider it before any injunction takes effect," she said in a statement. "The court's order sets an expedited schedule for that review."
Carl Oppedahl, an intellectual property expert at the law firm of Oppedahl & Larson, said the stay will probably remain in effect until after a full appeal is heard by the 9th Circuit. It is unlikely the Supreme Court will weigh until after the appeals court hears the case, he added.
Oppedahl said the decision to grant an expedited appeal could be seen as characteristic of the 9th Circuit, which has "tried to assume a leadership role among courts of appeal on novel intellectual property and Internet issues."
Today's reprieve follows a flurry of activity this week in the case, which pits the start-up against the titans of the music industry.
On Wednesday, U.S. District Judge Marilyn Hall Patel granted the RIAA's request for an injunction in the lawsuit filed late last year, accusing the service of massive copyright violations. In granting the RIAA's request, Patel found that the plaintiffs had provided enough evidence to show a strong likelihood of success at trial.
Patel's order applied only to the swapping of copyrighted music on Napster. The company could still trade music that is approved by artists, and it could operate its message boards, which have been flooded with angry postings from fans.
At the same time, Patel refused Napster's request to stay the injunction, saying the company must comply by midnight PT today despite objections that it could only do so by shutting down completely.
Napster attorneys yesterday filed an emergency stay request with the 9th Circuit to postpone the injunction while it prepares an appeal. The appeals court granted that request today.
In a statement by the company, Napster said it will continue its "buy-cott" this weekend. It is urging its fans to buy the CDs of the artists who have been supportive of Napster. A list of these artists can be found on Napster's Web site.
In a telephone interview from Napster's headquarters, CEO Hank Barry said he was grateful for the court's ruling and is planning to go spend the weekend at home with his three daughters. "It's been a very long week."
Asked about the mood around Napster's offices, where employees faced losing their jobs as soon as this weekend, Barry said he wasn't sure. "I've been in my cube most of the time."