February 14, 2001, 1:07 PM — In what many are calling a potential death knell for Napster Inc.'s free online music-swapping service, the U.S. Court of Appeals in San Francisco today upheld a lower court ruling that said Napster violated record company copyrights and can no longer facilitate the unfettered sharing of recordings through its Web site.
In a short statement issued after the appeals court handed down its decision, Napster said the ruling hasn't closed its popular service, and it vowed to "pursue every avenue in the courts and the Congress to keep Napster operating."
But the San Mateo, Calif.-based company also acknowledged that the decision could eventually lead to a shutdown of the current service. Napster said it was "very disappointed" by the ruling and will now seek further appellate review, adding that the appeals court "ruled on the basis of what it recognized was an incomplete record [of facts]."
The appeals court upheld much of a preliminary injunction that was issued against Napster last July by U.S. District Court Judge Marilyn Hall Patel (see story), although it did remand the case to Patel to rework the wording of her injunction before the ban is allowed to take effect. That allows Napster to continue operating its service for the time being.
But the three-judge panel, which heard arguments in the case last fall (see story), said it agreed that the record companies behind the lawsuit against the company "have shown that Napster users infringe at least two of the copyright holders' exclusive rights: the rights of reproduction and distribution."
The court said the plaintiffs provided "statistical evidence of massive, unauthorized downloading and uploading of . . . copyrighted works" that far outweighs what it described as the "speculative" destruction of Napster that could be caused by Patel's injunction against the company.
P.J. McNealy, an analyst at Gartner Group Inc. in Stamford, Conn., said Napster still has legal avenues it can pursue that might ultimately keep the company's free service alive. "This could end up in the Supreme Court," McNealy said.
But officials at the Recording Industry Association of America (RIAA) in Washington hailed the decision as a complete victory.