Napster must begin blocking songs from being traded through its service. But U.S. District Judge Marilyn Hall Patel gave the music-swapping company much of what it asked for in court Friday, denying the record industry's appeals for a much broader order.
Although the order will considerably reduce the amount of music available through Napster, it appears the company will not have to shut down the service altogether--for now. The company faces billions of dollars in damages and a possible shutdown at a pending trial into alleged previous copyright violations.
Regardless of any bright spots in Monday's ruling, Napster has been facing an almost certainly crippling decision since last month's record industry victory in 9th U.S. Circuit Court of Appeals in San Francisco. Patel's ruling simply adds details to the circuit court's ruling, attorneys said.
"I think this is a pretty damaging blow," said Mark Radclyffe, an intellectual property attorney with Gray Cary Ware & Freidenrich. "I think this is going to be pretty hard on Napster."
Patel said that record labels must share some of the burden of identifying songs on Napster's service that are infringing their copyrights. The labels must identify individual infringing file names as well as song titles and artist names to be blocked.
That's far less broad--and far easier for Napster to comply with--than Patel's original order, which simply ordered that all the labels' copyrighted works must be taken off the service.
The order does require Napster to help police for misspellings and other variations that are slipping through filters. The company has three days to block a file after determining that it likely infringes on copyrights.
"All parties shall use reasonable measures in identifying variations," Patel's order read. "If it is reasonable to believe that a file available on the Napster system is a variation of a particular work or file identified by plaintiffs, all parties have an obligation to ascertain the actual identity...of the work and take appropriate action."
How the injunction works:
1. A song, such as Metallica's "Enter Sandman," appears on Napster.
2. The copyright holder must give Napster the song title, the performer's name, the file name of the infringing work as posted on Napster, and a legal certification of copyright ownership.
3. Within three business days, Napster must block the file from being traded.
4. Both parties must look for "reasonable" variations of this file, such as "Enter The Sandman" or "Enter Thee Sandman." If such versions are found, Napster must block those files within three days.
5. If a new song is released, the record label can give Napster the artist name and the song title in advance. Napster must block such a title from being traded as soon as it appears on its system.
6. If there are disputes about how well Napster is blocking, the issue goes back to court. But that won't serve as an excuse to put the order on hold.
The requirement that individual file names be identified before they are blocked will make it considerably more difficult to screen all infringing songs from the service by just searching for their full titles, record industry attorneys said in court last week. The labels had asked that they simply be required to provide lists of song titles and artist names to Napster; they requested that the company draw additional songs to block from sources such as Billboard's Top 100 singles list.
Nevertheless, the Recording Industry Association of America won enough in the order to make it palatable, record label sources said.
Particularly important was the ability of the record companies to provide Napster with a list of upcoming releases. Napster will be required to block these new songs the moment they appear on the music-swapping service, the order said.
"We are gratified the district court acted so promptly in issuing its injunction requiring Napster to remove infringing works from its system," RIAA Chief Executive Hilary Rosen said in a statement. "We intend to provide the notifications prescribed by the court expeditiously and look forward to the end of Napster's infringing activity."
Record labels also welcomed the injunction.
"The issuance of the injunction by the U.S. District Court underscores that going forward, music in the online world will not only be protected, but flourish in a legitimate marketplace where the artists' work will be respected and rewarded," said a statement released by AOL Time Warner's Warner Music Group. "It is in this environment that we will bring to market innovative services that offer consumers high-quality music that is trusted, secure, attractive and easily accessible."
The injunction largely mirrors the system Napster has already set up to screen some infringing songs out of its service.
Beginning late Sunday night, the company began blocking access to about 1 million files, representing thousands of individual songs that had been identified as infringing industry copyrights over the past few months.
Napster said it would comply with the order, noting that it had already laid the technological framework for the filtering. Previously, it had said that Patel's first injunction blocking all copyrighted material would have forced it to shut down.
It will also continue to seek a settlement deal, executives said.
"Even before the court entered the order, we began making efforts to comply with what we believed to be the dictates of the 9th Circuit's ruling," Chief Executive Hank Barry said in a statement. "As we receive notice from copyright holders as required by the court, we will take every step within the limits of our system to exclude their copyrighted material from being shared."
However, the version of the screen Napster launched over the weekend easily allows misspelled files to slip through. Thus, a person looking for Metallica's "Enter Sandman" could still download many copies of the song that had been named "Enter The Sandman."
Under the terms of the preliminary injunction, Napster will likely have to take action itself to close some of these loopholes as well as continually monitor the system for new infringing files. According to the order, it must begin blocking access to songs using the terms of the injunction within five days.
A gloomy future?
The question facing Napster--and its partner Bertelsmann, with which it plans to transform today's free service into a paid subscription model by July--is how to make it through the next few months and years without collapsing. Every court that has ruled on the copyright infringement issue has said Napster is likely to be held responsible for facilitating massive copyright infringement as the case comes to a full trial.
That means the company is potentially on the hook for billions of dollars in damages. According to research company Webnoize, 2.7 billion songs were traded though the service in February alone. Damages for such infringement can hit $150,000 per song.
With this cloud hanging over it, the company is hard pressed to strike settlements with the record labels. But this could be difficult on anything less than draconian terms. Napster and Bertelsmann already have offered the industry a guaranteed $1 billion over five years--wholly outside any potential damages in the case--in return for a temporary legal cease-fire and licenses to distribute music through a paid Napster subscription service.
The record labels didn't bite, calling the offer a "publicity stunt." But since Napster has begun filtering songs from its service, signs of warming have begun to appear. Vivendi Universal Chief Executive Jean-Marie Messier reportedly said Monday that the "Duet" service his company is creating with Sony Music Group might be willing to license music to Napster if the company's anti-piracy protections are proven.
The labels are now in the driver's seat, steering toward the ability to put Napster out of business.
"This gives the record labels enormous clout," Gray Cary's Radclyffe said. "The question is whether they use that clout to make a deal or just keep banging on Napster until it's gone."