Appeals Court Tells Napster To Stop the Music

The US Court of Appeals today said Napster
must put an end to the sharing of tunes from the world's biggest
record companies, unveiling a long-awaited decision that backs a
preliminary injunction ordered by a lower court in July.

The ruling from the Court of Appeals for the 9th Circuit - a
California-centered jurisdiction under which many technology
oriented legal battles have been fought - calls for Napster to
prohibit its 50 million users from exchanging MP3 files containing
tracks produced by the record labels and music-publishing companies
now suing the company for copyright infringement.

"This is a clear victory," Hilary Rosen, president and chief executive
officer of the Recording Industry Association of America (RIAA), said
in a prepared statement. "The court of appeals found that the
injunction is not only warranted, but required. And it ruled in our
favor on every legal issue presented."

The temporary injunction, originally issues July 26 by US District
Court Judge Marilyn Hall Patel, is designed to freeze most file-
sharing on Napster's peer-to-peer network while the record industry
lawsuit is waged in Patel's court. However, the setback delivered
to Napster from the Appeals Court today has dimmed the company's
chances of ever winning that fight.

Napster users have been waiting for more than six months for the
court to rule of the MP3 sharing company's appeal of Patel's
injunction. Originally, Patel had given Napster just two days to
put an end to swapping of the record companies' tunes. But just
hours from a July 28 deadline, the Appeals Court stayed the
injunction order and agreed to hear Napster beg to stay in
business.

Just as they did during the final hours before July's last-minute
stay, Napster users this weekend flocked to their peer-to-peer
network in fear that the courts could pull the plug. Users racing
to download as many MP3 files as they could from each others-
computers doubled the usual traffic and made it difficult for some
subscribers even to log on.

Today, it was the federal court's Web servers that felt the impact
of Napster interest, as Internet users inundated sites for the
Ninth Circuit in hopes of downloading copies of the decision.

Oral arguments for the appeal were heard Oct. 2, with the panel -
Chief Judge Mary Schroeder and judges Robert Beezer and Richard
Paez - taking the unusual step of encouraging television coverage
of the event.

Leading the case for Napster was lawyer David Boies, famed for his
role as the top Justice Department attorney in the Microsoft anti-
trust case and, later, his Supreme Court efforts for former Vice
President Al Gore in the disputed US presidential election race.

The plaintiffs in the lawsuit include a list of some 20 record
labels, but almost all of those labels belong to the world's five
record company giants: the EMI Group, Bertelsmann's BMG
Entertainment, AOL Time Warner's Warner Music Group, Sony's Sony
Music Entertainment, and Vivendi Universal's Universal Music Group.

On Friday, after the Appeals Court announced its decision would be
rendered today, each side in the dispute expressed optimism that it
would emerge the victor.

"We're confident that the Ninth Circuit understands the severity of
our claim and will uphold the decision of the US Federal Court,"
RIAA President Hilary Rosen said in a prepared statement. "Monday's
decision may finally clear the way for the legitimate online
marketplace to thrive in an environment that encourages both
creativity and a respect for copyright."

A company post on the Napster Web site stated simply that the firm
had "great confidence in (its) legal position."

In addition to keeping Napster in business for a few months, the
wait for the Appeals Court decision has delayed separate lawsuits
launched against Napster by some independent record labels, artists
and publishers. Those cases have been shunted to Judge Patel's
court, but have been in a holding pattern pending news from the
Appeals Court judges.

Meanwhile, Napster used the wait to forge its alliance with media
giant Bertelsmann that is expected to see the two companies launch
a fee-based MP3 distribution service for the German company's BMG
labels. The deal, fueled by Bertelsmann's $50 million investment
(or loan, if the service does not launch), could also see BMG drop
its end of the lawsuit.

Two of the independent labels that had sued Napster - New York-
based TVT Records and Germany's Edel Music - joined in the good
vibes surrounding the Bertelsmann deal and settled out of court.
Both said they would allow their music to be shared by Napster
users, albeit in more restrictive ways, when Bertelsmann and
Napster launches the paid service.

However, the other major record companies involved in the lawsuit
have given no indication they are willing to back down.

Napster is at: http://www.napster.com/.