U.S. District Judge Marilyn Hall Patel during a closed-door session Wednesday ordered Napster to remain offline until it can show that it is able to effectively block access to all copyrighted works on its network.
According to a transcript of the session between Napster and the record industry, Patel also said the company would have to get authorization from the court before it resumes service.
Napster said it would appeal the ruling.
Additionally, the session transcript revealed that Napster has reached a settlement with artists Dr. Dre and Metallica, who independently sued Napster claiming the service was allowing people to illegally trade their copyrighted songs.
During the hearing, an attorney for the recording industry said the suits had been "resolved," and Napster confirmed the settlement.
Under the terms of the settlement, Napster agrees to block access to unauthorized copies of Metallica and Dr. Dre songs. In exchange, Napster said Dr. Dre agrees to make songs available once an acceptable business model is in place. Napster also said it would work with Metallica to develop such a model.
Napster attorney Steven Cohen said the company's new system was preventing 99.4 percent of copyrighted works from being traded on the system.
"We are approaching a system that has a zero rate of error," Cohen told Patel during the hearing. "And...according to what the engineers tell me, you'll never get to a zero because that would assume human perfection, and humans aren't perfect."
Cohen also pointed out that the music industry itself has uncovered only 174 copyrighted works out of 950,000--or .02 percent--slipping through the system.
But music industry attorney Russell Frackman told Patel that just one unauthorized song on the system could have deleterious effects on an artist because it could be distributed to millions of people. "The law does not tolerate any infringement," he said.
Patel agreed, saying she would have a zero tolerance policy for swapping. "There should be no copyright infringement, period," Patel said.
When Napster attorneys asked Patel for a standard that would allow them to go back online, Patel replied, "the standard is to get it down to zero, do you understand that?"
After the hearing, Napster said it would comply with Patel?s order and that the service would remain down until further notice.
"While we are disappointed by this ruling, we will work with the technical expert to enable file transfers as soon as possible and we are continuing full steam ahead toward the launch of our new service later this summer," Napster CEO Hank Barry said in a statement Wednesday.
The order comes more than a week after Napster began a self-imposed blackout as it seeks to install new audio fingerprint technology aimed at filtering unauthorized works from its service.
At an April 10 hearing, Patel called Napster's filtering efforts up to that point "disgraceful," saying that if a song could be found by people on the service, Napster ought to be able to block it.
"You find a way to filter out (those songs) for which you can search," she told the file-swapping service at that time, adding that if it couldn't block copyrighted songs, "maybe the system needs to be closed down."
At that hearing she also appointed A.J. "Nick" Nichols as a court mediator to handle technical issues related to proposed filtering solutions.
Patel had ordered Napster to begin blocking songs in early March, after the 9th U.S. Circuit Court of Appeals asked her to revise an earlier injunction that gave the company room to continue its swapping service as long as it took all "reasonable" steps toward blocking copyrighted songs identified by the record companies.
Wednesday's decision may help shed light on a nearly 2-week-old blackout that Napster executives imposed on the company. Napster has repeatedly cited database "upgrades" as the source of its blackout.
Even before the most recent blackout, Napster wasn't functioning normally. In late June, Napster disabled old versions of its software and forced members to a new version that rendered the service unusable. The new software blocked even the most obscure, uncopyrighted works from being traded.
If Napster interprets the ruling as a complete blackout on all trading, the company's ability to test new business strategies and comply with copyright law could be seriously undermined.
The company unveiled a technique two weeks ago that allows it to identify songs by their audio "fingerprint"--literally matching the sound of musical tracks to a list of copyrighted tunes banned from the service. The technique avoids the pitfalls of filters that block songs based on file names, which can be easily changed. But it carries its own uncertainties, including significant logistical barriers in building a database of banned songs.
If Napster is allowed to continue its fingerprinting experiments, it's unlikely to help boost the number of recordings available to online consumers.
Napster claims fingerprint filtering will reverse the decline of music being traded. But it has had the opposite effect in its initial use.
Almost all the music that remained on the service vanished. According to analysis firm Webnoize, the average number of files shared by people online dropped to just one. But a few days later, the company pulled the plug altogether, saying some copyrighted songs were still getting through and an "upgrade" to the database was necessary to make the new filtering technology work perfectly.
Between 100,000 and 150,000 people have remained logged in to the service throughout the outage--a far cry from the 18.7 million people who were using Napster in October. According to market-research company PC Data, nearly one-fifth of the total online population downloaded free music from Napster.
The voluntary blackout, consumer defection and technical delays highlight the extraordinary logistical hurdles Napster and any other company must go through to implement audio fingerprinting, which has been touted as one of the most surefire ways to block unauthorized trades of songs.
In theory, the fingerprinting technology takes a snapshot of the actual audio characteristics of a song and sends this to Napster's central servers. This is compared against a master list of fingerprints and either given the go-ahead or blocked.
But this master list does not exist and has never existed. A company called Loudeye Technologies has rights to much of the music created by major and other North American music labels and is creating "fingerprints" from these files for Napster. These files must then be independently matched to the lists of song titles and artists that have been identified by the record companies.
Napster itself has said that the file-identification technology works and that just a few details are holding up the decision to restart the service.