February 13, 2001, 10:35 AM — The Ninth Circuit of the U.S. Court of Appeals ruled Monday that Napster Inc.
infringes on record company copyrights through the operation of its music file-trading
service. The ruling, however, also directed that the Napster service be allowed
to continue operations until the original injunction is modified to comply with
the appeals court's decision.
The court upheld the findings of a lower court almost universally, holding
that Napster's service is not protected by fair use, is guilty of two kinds
of copyright infringement, has failed to police its system in an attempt to
stop the spread of copyrighted works and that its service does cause substantial
harm to record companies.
"Napster, by its conduct, knowingly encourages and assists the infringement
of (record company) copyrights," the court wrote in its decision, which
one analyst said was no surprise.
Napster is guilty, the court said, of two types of copyright infringement:
contributory and vicarious. Contributory infringement is the act of aiding knowingly
in the infringement of copyright. Vicarious infringement is the result of having
the power to stop the infringement and failing to do so, as well as benefitting
financially from the infringement.
The court found that Napster is aware that infringing material is being traded
on its service, that it could, if it chose, block those users supplying the
material and that it has failed to do either, thus making the company a contributory
A failure to adequately monitor the system for such abuses, combined with a
financial stake in the trading in copyrighted works makes the company responsible
for vicarious infringement, the court said.
"Napster got nailed, plain and simple," said P.J. McNealy, an analyst
with Gartner Group Inc. "I'm not surprised that they got what they got."
Despite setting aside the vast majority of Napster's argument, the court stayed
the injunction, thereby keeping the service running -- for now -- because it
deemed the injunction "overbroad." The original injunction must be
modified, the court said, so that Napster be only guilty of contributory infringement
if it is given notice of specific copyrighted files, does or should know that
they are on the system and then fails to act the stop their spread. With these
provisions, the company will also be guilty of vicarious infringement only if
it fails to act.