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What the appellate decision means for Napster fans

CNET News.com takes a look at some of the most important questions for Napster fans and foes after the appeals court gives the music-swapping service a temporary reprieve.

Monday's appeals court ruling gives popular music-swapping service Napster a temporary reprieve in the copyright infringement suit filed by the record industry, but millions of dollars in damages loom in the company's future.

CNET News.com takes a look at some of the most important questions for Napster fans and foes after the decision.

Was Monday's decision a victory or a loss for Napster?
The ruling is largely a loss, but not a final one. The appeals court dismissed most of Napster's legal arguments as irrelevant or misapplied. It said the July decision that threatened to shut down Napster's service went too far, but it asked the lower court to issue a new ruling that ultimately might block most music from being traded through the service.

What's next in this court case, and for Napster?
The case goes back to U.S. District Judge Marilyn Hall Patel, who has been instructed to issue a new injunction barring Napster from swapping specific songs, instead of all copyrighted songs. Napster has said it intends to appeal any injunction. The next step is to ask the full 9th Circuit to review the case, a so-called en banc hearing. The circuit as a whole must vote to accept the case.

Hasn't Napster already blocked usernames or songs?
The company has blocked hundreds of thousands of usernames from the service in response to allegations of copyright violation. Heavy-metal band Metallica was the first to give the company more than 300,000 names last summer, but several other bands have followed suit. In these cases, Napster takes the username identified as an infringer and blocks access to the Napster servers. It has not yet blocked specific songs or artists from being traded.

How might Napster's service change for users in the future?
During the next few days, and possibly weeks, nothing is likely to change. But sometime after that, a lower court will issue a new injunction that will likely bar Napster from swapping a long list of songs that have been identified by record labels as copyrighted works. At that point, Napster will have to figure out whether it can block just those specific songs, or it will have to shut down altogether.

In the long term, Napster will continue to appeal the preliminary injunction rulings as long as it can. The full case could take months or even years to complete. If Monday's ruling and the lower court's second attempt at an injunction are upheld by higher courts, the Napster that survives through the next few months may have far fewer songs available for download. But ultimately, the company plans to start a subscription service with Bertelsmann and other record labels. At that point, consumers will be asked to pay for access to most of the service.

Could Napster users be liable for monetary damages?
The record labels are not suing individuals. Two other suits, filed by Metallica and Dr. Dre, have raised the possibility of individual liability, but no one has been specifically named. It remains a possibility, however.

Will there be a trial?
Unless Napster and the record industry settle, a trial is likely. The injunction at the heart of Monday's developments is a preliminary step that resulted from a record industry request that music swapping be halted until the trial is held. A trial date will not be set until the injunction issue has been resolved.

How much might Napster be liable for in damages?
Some legal experts say damages could run up to billions of dollars. Contributory copyright infringement can carry a price tag of $750 to $30,000 per incident.

No one is sure how many songs have been swapped on Napster, but research company Webnoize estimated that more than 250 million songs were downloaded last weekend alone. That figure would be settled in a damages phase of the trial, which is still far off.

Does Napster plan to become a subscription service?
Yes. The company has already made a deal with Bertelsmann, the parent company of BMG Entertainment, to create a subscription version that would charge customers a fee. The two companies are trying, so far unsuccessfully, to bring the other major labels onboard. Bertelsmann executives have said they plan to launch in June or July, but some analysts believe that is optimistic.

If Napster does charge a subscription fee, would it compete directly with MP3.com?
Yes and no. Both would offer music subscription services online. But Napster would offer access to more music that consumers hadn't already purchased in CD form. MP3.com offers access to a storage-locker system that holds online copies of music that consumers already own, as well as access to music created by independent and unsigned artists.

Are other technologies such as Gnutella subject to the same enforcement?
Yes, but with a twist. Any company that maintains central servers, such as Napster, and allows unrestricted file trading risks being sued. For example, Scour was forced out of business by a lawsuit similar to the one Napster faces. But services such as Gnutella and FreeNet are not maintained by a single company or individual and are thus harder to target with a lawsuit. Individuals on these networks could be targeted, but the networks as a whole are far more resistant to enforcement.

If Napster begins to filter individual usernames and song files, is there a privacy risk?
It depends on how Napster does this or whether it filters at all. The company could block certain file names from being traded without logging any information about who tried to make the trade. The company has consistently said it keeps little information about its members. A more aggressive, and probably unlikely, filtering technique could see the company build dossiers on the types of files individuals associated with specific usernames try to trade over time.