Ray Suarez talks with Rick Dube of Webnoize and American University law professor Peter Jaszi about yesterday's legal decision against Napster, the online music swapping service.
RAY SUAREZ: Yesterday a federal appeals court ruled that the Internet music company Napster cannot let its users share copyrighted music. The group representing major record labels said it was happy with the decision.
HILARY ROSEN: American intellectual property is our nation's greatest trade asset. We cannot stand idly by as our nation's assets are in jeopardy or dismissed by those who would use them for their own enrichment. That's why today's decision is so especially important.
RAY SUAREZ: Napster is a service that runs over the Internet. Created by a 19-year-old college student, it lets users swap music with anyone else signed onto the service. The music is stored on millions of personal computers, not on Napster, so swappers consult a billboard posted at the Napster Web site, then use their computer to reach through the Napster doorway into the computer of another user, downloading music from the other member. The result: A huge network of listeners who can gather and store music files on their computers, all for free. Since it launched in May of '99, Napster has attracted some 50 million users from around the world, enough to prompt five record labels to ask the courts to shut down the service. For more on the court's decision and the future of Napster, we turn to Peter Jaszi, a professor of law at American University. He signed an amicus brief submitted to the court in support of Napster; and Ric Dube -- an analyst at webnoize, a research firm covering the digital entertainment industry. Professor, last fall the district court came down with a ruling that many said was the doom sounding for Napster. Now an appeals court says basically we agree with everything that the district court said but Napster hasn't been shut down. Why?
PETER JASZI: Well, although the appeals court certainly favored the recording industry on most points, there was one very important one on which it disagreed with the district judge. It found that the injunction that she had issued originally was overbroad, and so the case has been returned to the district court so that she can craft a more narrowly drawn injunction. And it will be under that injunction, which is yet to come, that Napster either will continue to do business in some form or will eventually cease to do business.
RAY SUAREZ: Ric Dube, is that just a formality wanting the lower court judge to get the words of the injunction right or is the door still open a crack for Napster?
RIC DUBE: Well, the door is open a crack for Napster. If they can come up with a way to stay in operation without letting files through that are copyrighted, then they can continue to operate. On the other hand, they don't necessarily have that technology in place right now, so unless they could get it done real quick, they would have to shut down for some period of time. On the other hand, they could just keep this injunction in legal limbo through the appeals process because there are still other places they could take this appeal just enough to stay in operation until they can launch a commercial version of their service later this year.
RAY SUAREZ: So I understand it better the requirement, Ric Dube, would be for Napster to somehow ride herd on copyrighted material even as millions of people look for each other's files. Is that possible?
RIC DUBE: Yeah, it is possible. There are technologies called audio fingerprints that they can use so that when Napster looks at a person's hard drive to see what files they have stored on it, then it could simply disregard any of the ones that they don't have authorization to make available through the service.
RAY SUAREZ: Now, Peter Jaszi, one of the big points that Napster tried to make in court was that this constituted fair use as established in earlier cases about recording music, and the court shot that down, said it is simply not fair use. Was that a big setback for the long haul?
PETER JASZI: I think there were two parts of the court's opinion, one more surprising than another. I don't think anyone was much surprised by the court's finding that a lot of what Napster users do as individuals isn't fair use. I think many of us were more surprised that the 9th Circuit gave so little weight to the defense that Napster had asserted based on the Supreme Court's 1984 Sony decision, which held that when a technology has both infringing and non-infringing uses, the suppliers of that technologies-VCR's back in 1984; Napster today-- can't be found to have secondary liability for copyright infringement.
RAY SUAREZ: But in the opinion, the court said that Napster, while it doesn't do the infringing itself, provides the site and facilities for others to do the infringing. They said that that's not a big difference to them.
PETER JASZI: And again I think that that was, for some of us, the surprising thing about this decision -- because, back in 1984, there was a strong argument to be made that VCR manufacturers provided the means by which some infringement of motion pictures could occur. The court there held though that because there were also many non-infringing uses for that technology, the suppliers of the technology, as distinct from its users, couldn't be held liable. Here, in this case, despite recognizing the existence of substantial non-infringing uses of Napster, the 9th Circuit Court of Appeals nevertheless failed to recognize an equivalent defense.
RAY SUAREZ: Ric Dube, is there going to be a way... Is this technology so compelling that somebody is going to have to figure out a way to make it legal?
RIC DUBE: Well, Napster's trying to work on making it legal. You know, for now it was up for debate as far as they were concerned whether its current state was illegal or not. But there are really two Napsters. There's the current one that people have grown to know and love. And then there's a commercial version of the service that they're trying to develop using a loan from one of the five major media conglomerates that control music, ironically one that has a music company is suing them right now. Really the name of the game for them is to bide their time and keep people coming there as long as they can until they can rule out this commercial service and hopefully maintain as big as an audience as they can. They want to charge about $5 a month.
RAY SUAREZ: Does Napster provide the basis, sort of the structure, the outline for what might be a service in the future that will become as ubiquitous as cable television?
RIC DUBE: Well, that's hard to say. If music companies got their act together and put music in a centralized location so that it sounds good and it's at a fair price and has terrific selection and maybe some added value, then maybe you wouldn't need to swap with other people. You just go to that one location and be able to get all the music that you can. We know that people love Napster. Our research shows that well over 70% of college-aged Napster users would pay $15 a month to use the service. Now Napster is shooting for a $5 price tag. With that difference, if it's the same service, if the commercial service provides at least as much value as this current controversial service, they could maintain a significant number of users.
RAY SUAREZ: Peter Jaszi, does the music business take a risk at this point in ending up with so many legal encumbrances on delivering music over the Web that something that may be very promising for them may end up being more difficult now?
PETER JASZI: I think that's absolutely true. I also think there's another risk as well. And that is that unless the music industry finds a way to make an arrangement with Napster that is going to permit this very popular and well liked service to continue, there is a significant risk that current Napster users are going to migrate to other second generation peer-to-peer file sharing technologies which are going to be much less easy to manage and control both practically and legally. So I think the industry does have a considerable incentive now to try to come to terms with Napster along the lines that have been mentioned a few moments ago.
RAY SUAREZ: Ric Dube, do you agree that what's coming down the road may be harder to ride herd on?
RIC DUBE: What's already here is much harder to deal with than Napster and most of the other peer-to-peer environments out there have no centralized server and in some cases really don't have any commercial intentions behind them. There's nobody to sue. That said, yesterday's decision means that the music industry has a little bit of the pressure off of them to do something more quickly than they would have had to before. Additionally, it gives them the upper hand in any sort of settlement negotiation with Napster that could follow from this.
RAY SUAREZ: A lot of other artists, Ric Dube, were involved in the amicus briefs, people who not only write songs but to shoot movies, who write books, who provide all kinds of artistic content. Are they looking down the road and seeing a future where their creative goods are swapped over the net as well?
RIC DUBE: Yeah, bits are bits. Right now it's music. It's already movies. If you know where to go on the Internet, there are current theatrical films, a movie comes out on Friday by early Saturday morning if you know where to go it's on the Internet for free. This is going to happen with books. It's already happening with games and software. Everything is affected by this.
RAY SUAREZ: So how long until we see some sort of resolution quickly Professor Jaszi?
PETER JASZI: In the particular case I think matter of months probably -- Until Judge Patel fashions the injunction under which Napster will finally stand or fall.
RAY SUAREZ: Peter Jaszi, Ric Dube, thanks a lot.