Caso Napster - Appeal No. 00-16401 UNITED STATES COURT OF APPEALS NINTH CIRCUIT
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Published on: Mar 3, 2016
Transcripts - Caso Napster - Appeal No. 00-16401 UNITED STATES COURT OF APPEALS NINTH CIRCUIT
Appeal No. 00-16401
UNITED STATES COURT OF APPEALS
NAPSTER, INC., a corporation,
A & M RECORDS, INC., a corporation,
(For Continuation of Caption See Next Page)
NAPSTER, INC., a corporation,
JERRY LEIBER, individually and doing
business as JERRY LEIBER MUSIC,
(For Continuation of Caption See Next Page)
Appeal from the United States District Court
for the Northern District of California,
San Francisco Division Jointly Heard In
Civil Nos. C 99-5183 MHG (ADR)(A&M Records) and
C 00-0074 MHG (ADR)(Leiber) Judge Marilyn Hall Patel
APPELLANT NAPSTER INC’S EMERGENCY MOTION FOR STAY
PURSUANT TO RULE 27-3 AND MOTION TO EXPEDITE APPEAL
BOIES, SCHILLER & FLEXNER LLP
80 Business Park Drive, Suite 110
Armonk, New York 10504
Telephone: (914) 273-9800
Facsimile: (914) 273-9810
LAURENCE F. PULGRAM (CSB No. 115163)
DAVID L. HAYES (CSB No. 122894)
FENWICK & WEST LLP
275 Battery Street, Suite 1500
San Francisco, CA 94111
Telephone: (415) 875-2300
Facsimile: (415) 281-1350
JONATHAN D. SCHILLER
MICHAEL A. BRILLE
SAMUEL C. KAPLAN
WILLIAM C. JACKSON
SETH A. GOLDBERG
BOIES, SCHILLER & FLEXNER LLP
5301 Wisconsin Avenue, N.W., Suite 570
Washington, D.C. 20015
Telephone: (202) 237-2727
Facsimile: (202) 237-6131
DANIEL JOHNSON, JR. (CSB No. 57409)
DARRYL M. WOO (CSB No. 100513)
MARY E. HEUETT (CSB No. 197389)
EMILIO G. GONZALEZ (CSB No. 197382)
FENWICK & WEST LLP
Two Palo Alto Square
Palo Alto, CA 94306
Telephone: (650) 494-0600
Facsimile: (650) 494-1417
Attorneys for Petitioner/Appellant
GEFFEN RECORDS, INC., a corporation,
INTERSCOPE RECORDS, a general partnership,
SONY MUSIC ENTERTAINMENT INC., a corporation,
MCA RECORDS, INC., a corporation,
ATLANTIC RECORDING CORPORATION, a corporation,
ISLAND RECORDS, INC., a corporation,
MOTOWN RECORD COMPANY L.P., a limited partnership,
CAPITOL RECORDS, INC., a corporation,
LA FACE RECORDS, a joint venture,
BMG MUSIC d/b/a THE RCA RECORDS LABEL, a general partnership,
UNIVERSAL RECORDS INC., a corporation,
ELEKTRA ENTERTAINMENT GROUP INC., a corporation,
ARISTA RECORDS, INC., a corporation,
SIRE RECORDS GROUP INC., a corporation,
POLYGRAM RECORDS, INC., a corporation,
VIRGIN RECORDS AMERICA, INC., a corporation,
WARNER BROS. RECORDS INC., a corporation,
MIKE STOLLER, individually and
doing business as MIKE STOLLER MUSIC,
FRANK MUSIC CORP., on behalf of themselves
and all others similarly situated,
CORPORATE DISCLOSURE STATEMENT
This statement is made pursuant to Federal Rule of Appellate Procedure 26.1.
Petitioner/Appellant, Napster, Inc., has no parent corporation, subsidiaries or affiliates that have
issued shares to the public.
CIRCUIT RULE 27-3 CERTIFICATE
Daniel Johnson, Jr., counsel for Petitioner/Appellant, hereby certifies:
1. I am a member of the bar of this Court, and of Fenwick & West LLP, counsel for
Petitioner/Appellant Napster, Inc. (“Napster”). I make this certificate in support of Napster’s
motion for a stay pending appeal and for an expedited appeal pursuant to Circuit Rule 27-3.
2. The office addresses and telephone numbers of the attorneys for the parties are as
Jeffrey Knowles, Esq.
Coblentz, Patch, Duffy & Bass, LLP
222 Kearny Street, 7th
San Francisco, CA 94108-4800
Carey Ramos, Esq.
Paul Weiss Rifkind Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019
Counsel for Plaintiffs-Respondents Jerry Leiber, et al.
Russell Frackman, Esq.
George Borkowski, Esq.
Mitchell Silberberg & Knuff LLP
11377 West Olympic Boulevard
Los Angeles, CA 90064-1683
Hank Goldsmith, Esq.
Proskauer Rose LLP
New York, New York 10036-8299
Counsel for Plaintiffs-Respondents A&M Records, Inc., et al.
Laurence F. Pulgram
David L. Hayes
Daniel Johnson, Jr.
Darryl M. Woo
Mary E. Heuett
Emilio G. Gonzalez
Fenwick & West LLP
275 Battery Street, Suite 1500
San Francisco, CA 94111
Boies, Schiller & Flexner LLP
80 Business Park Drive, Suite 110
Armonk, New York 10504
Jonathan D. Schiller
Michael A. Brille
Samuel C. Kaplan
William C. Jackson
Seth A. Goldberg
Boies, Schiller & Flexner LLP
5301 Wisconsin Street, N.W., Suite 570
Washington, D.C. 20015
Attorneys for Petitioner/Appellant Napster, Inc.
3. Petitioner/Appellant Napster, is located in San Mateo County, California, and is
an Internet company engaged in the business of providing users with an index of other users who
are prepared to share music files on a peer-to-peer basis without compensation.
Respondents/Appellees alleged that Napster was a contributory and vicarious copyright infringer
because it knew that many of the users of the Napster system, among other things shared MP3
files of copyrighted song recordings. The Napster system neither makes, stores, or copies MP3
files. The Napster directory service enables users to identify MP3 files stored on the hard drive
of another Napster user and the system provides internet addresses of users who will permit other
users to copy their music files and a list of the music files available for copying. A user wishing
to copy music can then directly connect his or her hard drive to that of the other user. The
Napster technology has been referred to as so revolutionary that it is redefining the Internet.
4. As such set forth more fully below, the trial court’s decision that a preliminary
injunction was appropriate was based on several rulings of first impression and several rulings
contrary to prior decisions in the district, recent statements by this Court (which Plaintiffs
convinced the court below were dicta), principles articulated in controlling Supreme Court
5. The preliminary injunction entered was impermissibly broad in that (a) because
Napster is required to block the copying of any music whose copyright is owned by plaintiffs,
and plaintiffs refused to identify such music, Napster again can avoid contempt sanctions only by
terminating its basic service, and (b) because the peer-to-peer architecture of Napster makes it
impossible for Napster to monitor and control what its users’ share, the injunction in necessary
effect required Napster to block the sharing of all music files despite the uncontradicted evidence
that a significant amount of music copying by Napster does not infringe any copyright. The
court below found that “as much as 87% available on Napster may be copyrighted, certainly a
substantial amount of it is.” Excepting the court’s finding, a substantial (but not quantified)
amount of the music available on Napster is not copyrighted at all. In addition, none of the
copyrighted music is available with permission, and much of the copying of music by Napster
users is protected by the AHRA or the doctrine of fair use. The court then ruled directly contrary
to Sony that “Plaintiffs are entitled to enforce their copyright rights not have them infringed just
because the nature of the technology is such that it’s too hard to identify. TR 85:12-15, R153.
The effect of the court’s injunction is to prevent Napster users from sharing any and all of the
6. For reasons set forth below, unless the Preliminary Injunction against Napster is
stayed pending appeal, Napster, a privately owned business, will not be able to continue with its
peer-to-peer technology, and its 20 million subscribers will be unable to use Napster’s services.
Approximately 40 employees will have to be laid off within a matter of days. Napster will also
suffer irreparable injury to its business reputation and customer goodwill, and will lose a
customer base for Napster services that it has invested large amounts of time, money and hard
work in building. Further, a stay will not harm plaintiffs at all. The copying of MP3 files
already number in the millions if not billions. Enjoining Napster will have no affect on
Respondents/Appellees' business ability to prevent MP3 files from being shared by the public.
Further, the evidence shows that (certainly between now and the resolution of this appeal)
plaintiffs’ compact disc sales have and will continue to increase due to the existence of Napster.
7. To avoid irreparable harm to Napster in this case, relief from this Court is needed
by Friday, July 28, 2000, at midnight.
8. Napster's request for a stay pending appeal was submitted to the District Court in
open court. The District Court summarily denied Napster's request for a stay pending appeal to
9. Napster also requests an expedited briefing and hearing schedule. Appellant
proposes the following schedule
Appellant’s opening brief due Friday August 18, 2000
Respondents Opposition brief due Friday September 8, 2000
Appellant’s reply Brief due Friday September 12, 2000
Appellant requested that a copy of the transcript be completed on an expedited basis.
Appellant believes that the transcript will be completed prior to the filing of appellant’s opening
10. On July 27, 2000, the Clerk of this Court, notified counsel for
Respondents/Appellees by telephone of Napster's intention to file this motion today.
Respondents indicated that they will oppose the request for expedited motion and stay. Napster's
motion papers are being served by fax on Respondents/Appellees' counsel contemporaneously
with the filing in this Court. On July 26, 2000, Daniel Johnson, Jr. also notified the Clerk of this
Court that Napster intended to file this motion today.
11. The following Memorandum of Points and Authorities, and a separately bound
appendix containing the relevant portion of the record, are submitted in support of this motion.
TABLE OF CONTENTS
CORPORATE DISCLOSURE STATEMENT
CIRCUIT RULE 27-3 CERTIFICATE
PRELIMINARY STATEMENT. ...........................................................................1
I. NAPSTER MEETS THE STANDARD FOR A STAY PENDING
II. THE TRIAL COURT’S DRACONIAN ORDER WILL FORCE
NAPSTER TO CLOSE ITS SERVICE WITHIN 48 HOURS.....................6
III. THE TRIAL COURT FUNDAMENTALLY MISINTERPRETED
THE SONY DECISION AND THE DOCTRINE PROTECTING
TECHNOLOGIES WITH NON-INFRINGING USE. ..............................10
A. THE TRIAL COURT ERRED IN FINDING INSUBSTANTIAL
NON-INFRINGING USES. .................................................................10
1. AUTHORIZED USES.....................................................................10
2. UNAUTHORIZED, BUT FAIR, USES..........................................12
TABLE OF AUTHORITIES
Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 590-91 (1994) ...................................2
Cole v. Allen, 3 F.R.D. 326, 237 (S.D.N.Y. 1942...............................................................8
Genentech, Inc. v. Novo Nordisk, A/S, 108 F.3d 1361, 1364 (Fed. Cir. 1997)...................3
Kodadek v. MTV Networks, Inc., 152 F.3d 1209, 1211 (9th Cir. 1998).............................7
Lewis Galoob Toys, Inc. v. Nintendo of America, 964 F.2d 965, 970 (9th
Lopez v. Heckler, 713 F.2d 1432, 1435-36 (9th Cir. 1983)................................................6
National Endowment v. Finley, 524 U.S. 569, 602 (1998)...............................................10
Nintendo of America, Inc. v. Galoob Toys, Inc., 16 F.3d 1032, 1036 (9th
Ozawa v. United States,
260 U.S. 178 (1922) ....................................................................................................18
RCA/Ariola Int’l, Inc. v. Thomas & Grayston Co., 845 F.2d 773, 776-77
(8th Cir. 1988).............................................................................................................15
Religious Technology Ctr. v. Netcom On-Line Communic. Corp., 907 F.
Supp. 1361 (N.D. Cal. 1999)...................................................................................4, 19
RIAA v. Diamond Multimedia Syst., Inc., 180 F.3d 1072 (9th
RTC v. Netcom, 907 F. Supp. at 1383...............................................................................10
Sony Corp. v. Universal City Studios, 464 U.S. 417 (1984)......................................passim
Train v. Colorado Public Interest Research Group,
426 U.S. 1 (1975) ........................................................................................................18
United Steel Workers v. Weber, 443 U.S. 193 (1979) ......................................................18
Vault v. Quaid, 847 F.2d 255 (5th
TABLE OF AUTHORITIES
17 U.S.C. § 512(d)......................................................................................................19, 20
Audio Home Recording Act
17 USC § 1008 .....................................................................................................passim
2 Melville B. Nimmer & David Nimmer, Nimmer on Copyright Section
S. Rep. No. 105-190 (1998),..............................................................................................20
This case is one of the most important, and closely watched, cases involving the
application of copyright laws to Internet activities. Yesterday (July 26) at 5:30 pm the court
below entered a preliminary injunction requiring Napster, no later than midnight Friday (July
28), to prevent Napster users from sharing music whose copyright was owned by any of the
plaintiffs. In doing so the court resolved numerous issues of first impression, and decided
numerous other issues contrary to decisions of other courts in the District, contrary to recent
statements by this Court, and contrary to principles articulated in controlling Supreme Court
The court denied Defendant’s application to stay the injunction until this Court had an
opportunity to act on a motion to stay. The court below further declined to limit the injunction to
music whose copyright had been proved, or even to music as to which Plaintiffs notified Napster
that they claimed they had copyrighted.
Since defendant has no way to ascertain what music made available by Napster users for
copying by other Napster users is copyrighted by Plaintiffs, and since Plaintiffs have refused to
identify what music copyrights they claim, defendant is unable to comply with the injunction.
The only way for Defendant to avoid contempt sanctions is to block the peer-to-peer copying by
Napster users of all music – despite the uncontradicted evidence that a significant amount of
music copying by Napster users does not infringe any copyright. This would essentially destroy
Napster as a business, and deprive the more than 20 million Napster users of their service.
The court below issued its preliminary injunction from the bench, after earlier denying
defendant’s request for an evidentiary hearing. Plaintiffs’ motion for a preliminary injunction
was not filed until June 12, 2000 even though plaintiffs complained to Napster as early as
September, 1999, and Plaintiffs’ lawsuit was commenced on December 6, 1999.
The court ordered a bond of $5 million without any findings or support in the record.
(Defendant had argued for a $800 million bond since the breadth and impossibility of the
injunction would destroy the economic viability of Napster; even plaintiffs’ expert placed the
litigation depressed-value of Napster of between 60 and 80 million. (Teece Rep. at 12, R540)
The court below found that Plaintiffs had a strong likelihood of proving both that Napster
users were engaged in copyright infringement when they copy each other’s music, and that
Napster was engaged in contributory/vicarious infringement because Napster knew that much of
the music shared by its users was copyrighted.
The court reached its conclusion that Napster users were engaged in direct infringement
in part because
• it ruled (contrary to the section’s express terms) that the immunity from suit
provided by 17 USC § 1008 only applied to actions under the AHRA.
• it ruled that 17 USC § 1008’s protections only applied to copying by specifically
identified devices rather than, as this Court said in RIAA v. Diamond Multimedia
Syst., Inc., 180 F.3d 1072 (9th
Cir. 1999), to all noncommercial copying by
• it ruled that Defendant had the burden of proving the absence of harm from the
allegedly infringing activity of Napster users rather than, as the Supreme Court
held in Sony Corp. v. Universal City Studios, 464 U.S. 417 (1984) (and reaffirmed
in Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 590-91 (1994) ), that
The court relied on the fact that this Court in Diamond Multimedia had held (in the
context of the AHRA’s serial copying and royalty provisions) that digital audio recording device
did not include computer hard-drives. The court below ignored, however, that 17 U.S.C. § 1008
permits non-commercial copying by consumers using either analog or digital audio recording
devices or “such a device”; that the legislative history makes clear that Congress intended by that
language to immunize all non-commercial copying of music by consumers; that the same
Diamond Multimedia Court expressly said that 17 U.S.C. § 1008 “protects all noncommercial
copying by consumers of digital and analog musical recordings” (180 F.3d at 1079); and that
throughout the Diamond Multimedia opinion the Court discusses copying of music using
computer hard-drives as AHRA protected activity.
plaintiffs had the burden of proving such harm by a preponderance of the
• it ruled, contrary to RIAA v. Diamond Multimedia Syst., Inc., that space shifting
was not a fair use.
• it ruled that non-commercial sampling was not a fair use even if such sampling
increased rather than decreased sales of the music sampled – contrary to the Sony
Court’s holding that: “A challenge to a noncommercial use of a copyrighted work
requires proof either that the particular use is harmful, or that if it should become
widespread, it would adversely affect the potential market for the copyrighted
work.” (464 U.S. at 451).
• It wrongly imposed on Defendant the burden of proof both on fair use and
substantial non-infringing uses. Tr. 71:21-22, R139. See Genentech, Inc. v. Novo
Nordisk, A/S, 108 F.3d 1361, 1364 (Fed. Cir. 1997) (plaintiffs’ burden to negate
affirmative defenses on motion for preliminary injunction).
The court below held that all, or virtually all, of Napster’s more than 20 million users
were guilty of copyright infringement because of their non-commercial sharing of music, basing
its holding on the assertion that the scale of such sharing could not be viewed as “personal”
• neither Sony nor 17 U.S.C. § 1008 uses the term “personal”; each uses the term
• neither Sony nor 17 U.S.C. § 1008 makes any reference to a quantity or scale
• there is nothing in the record to support an assumption that any given Napster user
shares music with a large number of users.
The court below expressly sought to try to adapt existing copyright provisions to the new
realities of Internet technology. In doing so, the court ignored the counsel of the Sony Court
(464 U.S. at 431-432) and this Court in Diamond Multimedia that extending copyright
protections in response to new technologies should be left to Congress.
The court below ruled that (assuming that Napster users were engaged in direct
infringement) Napster was engaged in contributory/vicarious infringement even though
• a significant amount of music copied by Napster users was not copyrighted (or, if
copyrighted, the copying was authorized).
• Napster did not, and because of its peer-to-peer directory approach could not,
control whether the music shared by its users was infringing.
• even assuming that 17 USC § 1008 is not applicable and that non-commercial
music sharing by consumers is not fair use, Napster was “capable of substantial
noninfringing uses” under Sony – including the sharing of uncopyrighted music ,
of music whose copyright had lapsed, of music whose copying was expressly
authorized, of music whose sharing (e.g., sampling, space-shifting) otherwise
represented fair use.
The court below also held, contrary to the Sony decision and to numerous subsequent
cases, including Religious Technology Ctr. v. Netcom On-Line Communic. Corp., 907 F. Supp.
1361 (N.D. Cal. 1999) (Judge Whyte), that Defendant had the obligation to modify a service that
was used for both infringing and non-infringing uses to guarantee that it could only be used for
non-infringing uses – and to do so even if the modification were impossible to implement.
The court held that Plaintiffs had made out sufficient threatened harm (both to avoid fair
use and to justify a preliminary injunction) based on a survey by Plaintiffs’ paid expert of 500
college students by even though
• a survey by Defendants’ paid expert, and six out of seven reported independent
surveys, found that Napster increased music sales.
• the undisputed fact that music sales have increased, not decreased, since Napster
started – and that Plaintiffs’ expert found a decrease in sales through college area
music stores only by ignoring the facts that
o college area sales were up if both store and on-line sales were considered
o college area store sales were falling before Napster (because of a shift to
on-line purchases), and indeed sales in college area stores fell more before
Napster than after Napster
In relying on speculation as to what might happen in the future, the court below
• departed from Sony’s holding that a copyright plaintiff must prove by “a
preponderance of the evidence that some meaningful likelihood of future harm
• ignored the fact that for preliminary injunction proposes the period of
expected harm is the period between now and trial
The Napster Peer-To-Peer Technology
Napster’s “peer-to-peer” file sharing technology has ignited a revolution. Andy Grove,
the President of Intel has asserted that “the whole Internet could be re-architected by Napster-like
The power of peer-to-peer is its decentralization. Previous Internet architecture
relied on large centralized file storage servers. Tygar Rep. at 25, R1300. In the peer-to-peer
system, by contrast, available files are distributed all over the Internet and the world, residing on
individual users’ computer hard drives. Id. The names of files that individuals choose to share
are compiled into a computerized directory, which can be searched by other users. The
decentralized structure multiplies the information available to the public, while also enabling
easier delivery and avoiding the expense and bottlenecks of centralized servers. Barry Decl ¶ 5,
R654; Expert Report of Professor Lawrence Lessig ¶¶ 43, 48, R1237, R1239. In the case of
music, an artist—whether new or established—may share and promote his or her works to
millions worldwide at minimal cost. Chuck D. Decl ¶¶ 10-13, R687, R689.
Napster provides software that may be downloaded by users for free from the
Napster.com website. The software enables the user to sign onto the Napster service over the
Internet, and then delivers to the Napster service a list of the names of music files that the user
has chosen to share with others. The Napster Internet directory service compiles an index of the
names of all the files that its users choose to share. A user may search the index to find a file
name he wishes to download. If the user clicks to download a particular file name, the Napster
Fortune, “The Idea of the Year,” Barry Decl. Exh. B. at R678.
service provides that user with the Internet protocol address of the corresponding user and file
name selected, and the download is accomplished directly between these two users on a one-to-
one basis. No file or music or copy is ever held by Napster. No file ever passes through the
Napster server. And no copy of the file is ever made by Napster. Kessler Decl. ¶ 12, R1119-
MP3 files, are the predominant format of choice on the Internet and are unsecured. MP3
files may be easily created from any CD (which are also unencrypted) by use of freely available
encoding, or “ripping” software some of which is offered by Respondents themselves. Files are
individually named by their creators. There are currently millions of such files and the files
carry no reliable indication of copyright protection. Kessler Decl. ¶ 29-34, R1126-1128.
I. Napster Meets The Standard For A Stay Pending Appeal.
To obtain a stay, Napster must show “either (1) a combination of probable success on the
merits [of the appeal] and the possibility of irreparable injury [should the stay be denied], or
(2) that serious legal or factual questions are raised by the case and the balance of hardships tips
sharply in its favor.” Lopez v. Heckler, 713 F.2d 1432, 1435-36 (9th Cir. 1983) (also noting that
public interest may be considered), rev’d in part on other grounds, 463 U.S. 1328 (1983).
As will be shown below, Napster raises both very serious legal issues, and very serious
factual questions. Because the balance of hardships tips decidedly in Napster’s favor, an
immediate stay is necessary to preserve the status quo pending appeal.
II. The Trial Court’s Draconian Order Will Force Napster To Close Its Service Within
The District Court’s Order required Napster to block any Napster user from copying any
“copyrighted songs, musical compositions or material in which plaintiffs hold a copyright or
with respect to which plaintiffs’ pre-1972 recordings in which they hold rights.” The court
issued this far reaching order knowing that Napster’s architecture would not enable it to do so.
“That’s the system that has been created…… And I think you’re stuck with the consequences of
that.” TR at 87, R155.
Moreover, the Court refused to limit the injunction to music that plaintiffs had listed.
When Napster asked how Napster could block the copying of music that was not identified, the
court stated “they’re going to have to figure [it] out.”
Without even a list of the millions of song names that the Court has ruled must be
excluded (a list plaintiffs refuse to provide), Napster cannot know whether any song is or is not
off limits and acts in peril of contempt if it allows any materials to be shared by any users.
Napster cannot conceivably comply with the order in any way other than by turning off its
service. Kessler App. Decl. ¶¶4, 9.
Such an injunction is completely unfair. It also defies the copyright law. Under
17 U.S.C. § 411(a), “no action for infringement of the copyright in any work shall be instituted
until registration of the copyright claim has been made.” “Copyright registration is not a
prerequisite to a valid copyright, but it is a prerequisite to a suit based on copyright.” Kodadek v.
MTV Networks, Inc., 152 F.3d 1209, 1211 (9th Cir. 1998) (citation omitted). In this case,
Plaintiffs have identified only about 200 works in which they allegedly claim copyrights.
Compl. App. A. It would undermine the mandate of § 411(a) if, by merely identifying a few
selected works, Plaintiffs were able to obtain relief for millions of songs they will not even
identify, in a manner to shut down a technology that cannot itself differentiate copyrighted
material. Plaintiffs request for relief for multiple works without both specifying the works with
particularity and providing proof of their registrations is fatally defective (see Cole v. Allen,
3 F.R.D. 326, 237 (S.D.N.Y. 1942)), as well as vastly overbroad.
Second, even if Napster were provided an authoritative list of copyrighted songs, it would
be technologically impossible to comply with this injunction. Judge Patel ordered Napster to
write software to “fix” the perceived problem. This would require Napster to compile a database
of millions of artist and band names, and then to compare every user’s search request against that
list, attempting to exclude any file name contained on the “off-limits” database, all within 48
hours. The sheer burden this would impose on the Napster system would preclude its operation.
Kessler Decl. ¶ 4, 9, R1116-1118.3
Judge Patel suggested that Napster might “stay open” to continue its non-infringing uses,
identifying its chat room and the New Artist Program. This comment reveals a fundamental
misunderstanding of Napster’s technology. Napster’s New Artist Program does not supply
music. It is a stand alone registry in which over 17,000 artists have registered to promote their
works on Napster. Krause Decl., ¶ 9, R1047. The registry contains the names, hometowns,
genres, and “sounds like” descriptions of these artists. It does not contain any song names, nor
does Napster hold or make available any song of any artist. Thus, these artists’ materials can be
found only through the same decentralized, user-named index that Napster must terminate to
comply with the Court’s order.
Ironically, Judge Patel herself noted last month that, if any interim relief were
appropriate, “the Court has to tailor an injunction” to fit the evidence and parties; and that it
should be cautious of Plaintiffs’ seeking an order “the effect of which, even if it doesn’t [ask to]
close them down, will be to close them down.” Hearing of 6/19/00 at 22:12-14, 24:3-4. R303,
To compound the hardship to Napster, Judge Patel has required an essentially nominal
bond. Even Plaintiffs’ experts valued Napster at between $60 and $80 million in its litigation-
depressed condition. Teece Report at 12. Comparably sized Internet companies, are valued in
the billions of dollars. Barry Decl. ¶ 7, R654-655. Napster’s potential losses if this injunction is
ultimately reversed at trial or on appeal approximate that amount, as it will lose ground to its
numerous competitors in the peer-to-peer marketplace, lose employees and business
relationships, and fall quickly behind in the fast-paced Internet marketplace. Barry App. Decl.
¶ 3. It is settled law that Napster’s recovery for any losses suffered are capped at the amount of
the bond, even if actual losses are much higher. See Nintendo of America, Inc. v. Galoob Toys,
Inc., 16 F.3d 1032, 1036 (9th Cir. 1994). An injunction shutting down the service, coupled with
a bond far below its actual losses itself will irreparably injure Napster.
Finally, the overbreadth of this injunction subverts the public interest. This injunction
would deprive 20 million Napster users of access to a much valued resource for finding and
sharing new music. It would also destroy peer to peer technology because, under the judge’s
order, because such systems are capable of transferring copyrighted material, such systems must
be barred. Further, the order would also deprive the 98 percent of artists that the RIAA has
Plaintiffs’ only submission on this point in the trial court was an untimely reply
declaration of Daniel Farmer. That reply declaration, however, testified only that it was
technologically feasible for Napster to compile a database of those songs for which Napster had
received express authorization to distribute—a far smaller universe than all Plaintiffs’
copyrighted works for fifty years. Further, that declaration merely stated that Plaintiffs could
then require works that were to be shared through Napster to contain those precise file names--
the converse of what is required by Judge Patel’s order, which requires Napster to exclude all
rejected of a valuable forum to disseminate their protected speech. See National Endowment v.
Finley, 524 U.S. 569, 602 (1998) (“It goes without saying that artistic expression lies within the
First Amendment protection.”) “[a] valid First Amendment question” is raised by “injunctive
relief that is broader than necessary to prevent [Napster] from committing copyright
infringement.” RTC v. Netcom, 907 F. Supp. at 1383. “Requiring [Napster] to pre-screen
postings for possible infringement would chill their users’ speech.” Id. Napster’s information
dissemination functions are independently entitled to First Amendment protection.
The overwhelming equities require that Napster, its users, its employees, and non-RIAA
artists not be victimized pending appeal by the trial court’s ill-considered order.
III. THE TRIAL COURT FUNDAMENTALLY MISINTERPRETED THE SONY
DECISION AND THE DOCTRINE PROTECTING TECHNOLOGIES WITH
Under the seminal decision in Sony Corp. of Am. v. Universal City Studios, 464 U.S. 417,
442 (1984), as long as a technology “is capable of substantial non-infringing uses,” a provider
making a technology available cannot be liable for copyright infringement. The Sony Court
refused, over the vehement objection of the entertainment industry, to enjoin sale of the Betamax
video recorder—notwithstanding that it was being used primarily for the copying of copyrighted
works without permission. As the Supreme Court recognized:
“Sound policy, as well as history, supports our deference to
Congress when major technological innovations alter the market
for copyrighted materials. Congress has the constitutional
authority and the institutional ability to accommodate fully the
varied permutations of competing interests that are inevitably
implicated by such new technology.” Id. at 431.4
files, regardless of their names, that contain copyrighted works.
The trial court, in enjoining Napster’s technology, has failed to follow Sony in four
A. The Trial Court Erred In Finding Insubstantial Non-infringing Uses.
1. Authorized Uses.
Napster presented compelling, indeed, undisputed, evidence of the following authorized
non-infringing uses of its system.
• Independent managers and record labels are using Napster to promote and distribute
their products worldwide. For example, the bands “Of a Revolution” and “Pancho’s
Lament” have successfully promoted themselves through Napster. Issacs Decl. ¶ 17
R1043; Xealot Decl. ¶¶ 1-8, R1845; Gilbert Decl. ¶ 11, R692; Nichols Decl. ¶¶ 6-8,
R1145-1146; Chuck D. Decl. ¶¶ 6, 11, R686-687; Sivers Decl. ¶¶ 6-11, R1842-1843;
Guerinot Decl. ¶¶ 4-7, R1035.
• Major stars like The Offspring and Chuck D use Napster as a mechanism to reach
fans directly, without having to rely on the whim and be bound by the “standard”
financial terms of the major labels. Chuck D. Decl. ¶¶ 6-13, R686-688; Guerinot
Decl. ¶¶ 7-9, R1035-1036.
• Thousands of artists post MP3s on the Internet, over 3,000 artists are using Napster
to circulate their music for free, while also listing themselves at the MP3.com
website, where they can sell CDs and charge for downloads. Gonzalez Decl. ¶¶ 2-4,
R783; Krause Decl. ¶ 16, Exh. 1, R1049, R1077-R1096.
• Napster’s new artist program has already enlisted over 17,000 artists who expressly
approve of sharing their music through Napster; by contrast, the major labels
released a total of only 2,600 albums last year, and only 150 of those songs were
played on the radio on a regular basis. Krause Decl. ¶ 16, R1049; Vidich Dep. 94:2-
96:8 & Exh. 277 at T0009. R1593-1595, R1657.
• Napster permits the transfer of secure file formats, subject to the conditions
governing access to the file, thereby facilitating viral distribution, which Plaintiffs
recognize as maximizing product penetration at little cost.5 Kenswil Dep. 44:20-
46:16, R1490-1491; Chuck D. Decl. ¶ 8, R687.
Appropriately, Congress is, even this month, conducting its own investigation into the
peer-to-peer file sharing phenomenon. See Pulgram Decl. Re. Evidentiary Objections at ¶ 10,
• Hundreds of artists allow the digital taping of their live performances and the trading
of these recordings among their fans. Barlow Decl. ¶¶ 8-9, R650; Gonzalez Decl.
¶¶ 2, 8, Exh. J, R783, R785, R961-R1006. For example, Metallica itself has
authorized trading of hundreds of concert recordings on Napster, and Courtney Love,
The Offspring, the Beastie Boys, and Motley Crüe have made their concert
recordings available in MP3 format. Gonzalez Decl. ¶ 9 (R785).
The District Court’s only acknowledgement of these authorized uses was to deem the New Artist
Program—just one of many authorized uses--insubstantial, to erroneously assume that it would
continue notwithstanding her ruling, and to ignore all others. Tr. at 38 (R106). Compare Sony
Corp. of America v. Universal City Studios, 464 U.S. 417, 444-445 (1989) (the district court
properly concluded that there existed not only “significant quantity of broadcasting whose
copying is now authorized” but also “a significant potential for future authorized copying”.
Here, Plaintiffs’ own documents confirm that they represent merely 2% of America’s
musical artists, thus the injunction has an impact on Napster users and 98% of America’s musical
artists. The court below found only that 87% of the music available on Napster may be
copyrighted. At least 13% by the Court’s reasoning would not be. Other music would used by
permission or pursuant to the AHRA or fair use. Standing alone, these millions of non-
infringing uses must be deemed substantial.
2. Unauthorized, But Fair, Uses.
As in Sony, this case presents fair uses in addition to authorized uses. “In an action
claiming third-party liability for infringement, the focus of the fair use inquiry is the conduct of
the alleged direct infringers.” See Lewis Galoob Toys, Inc. v. Nintendo of America, 964 F.2d
965, 970 (9th
Cir. 1992). The record below demonstrates that Napster users engage in several
substantial fair uses including: sampling music to decide whether to buy it and space-shifting –
Napster is a member of, and compliant with, SDMI, and will honor any security placed
on any files. Kessler Decl. ¶ 37, R1129-R1130. The transfer of these secured files will only
which the Court below disregarded in issuing its injunction. The record below left little doubt,
and the court below did not disagree, that the predominant use of Napster is to make temporary
copies of a work to sample the work to decide whether to buy it.6
Instead, the court below held
that sampling was not fair use, and in so holding, made two fundamental legal errors.
First, in cases involving noncommercial uses, Sony requires the copyright holder to
establish by a preponderance of the evidence that the challenged use poses “a meaningful
likelihood of future harm.”7
The court below improperly reversed this burden shifting, placing
the burden on Napster to establish that sampling does not harm the potential market for
plaintiffs’ copyrighted works. The court compounded this error by using this presumption to
rule against Napster on a record that is completely devoid of evidence that plaintiffs are harmed,
or likely to be harmed, by the widespread sampling that occurs via the Napster system. Further,
rather than assess the potential market harm of sampling, the Court simply asserted that
downloading was displacing the market and thus market harm was occurring. If it were proper
to assess the market affect of an alleged fair use by reference to a different and unfair use, the
fair use doctrine would be meaningless.
expand the non-infringing uses of the Napster System as Plaintiffs bring such formats to market.
Out of approximately 300 college students surveyed by plaintiffs’ expert E. Deborah Jay,
stated that Napster had an effect on their music purchases, nearly 100 stated that they used
Napster to sample. Typical comments were “I can listen to it before I buy it” (B3-2, R495), “To
listen to some of the newer stuff before I buy it” (B3-2, R495), “It lets you preview them before
you buy them” (B3-3, R496), “It lets me hear before I buy” (B3-4, R497) and “I use Napster to
sample songs on a CD before I buy it.” Defendant’s expert found that 84 percent of Napster
users download music to see if they want to buy it, and 90 percent of Napster users’ files are
deleted after sampling. Fader ¶¶43, 74, R1361, R1373.
The court below erroneously suggested that Campbell v. Acuff-Rose Music, Inc., 510 U.S.
569 (1994), undermined this presumption. Transcript at 37-38, R105-R106. That case simply
held that there was no presumption of market harm for commercial uses where the use involved
more than mere duplication for commercial purposes.
Second, the court erroneously held that sampling was not a fair use because the purpose
and character of sampling was not consistent with “personal” use due to the widespread sharing
of MP3 files by Napster users. As an initial matter, there was no evidence in the record as to the
number of files that are actually transferred by any single Napster user. Moreover, the test for
fair use is whether the purpose and character of the use is noncommercial, not whether such a use
is “personal.” Because Napster users do not gain a commercial advantage from sampling,8
application of the correct test, combined with the overwhelming evidence that sampling does not
cause harm to (and indeed benefits) the plaintiffs, establishes that sampling is fair use.
The record also established the widespread use of Napster for “space-shifting,” which
this Court characterized last year as “paradigmatic noncommercial personal use entirely
consistent with the purposes of the [AHRA].” RIAA v. Diamond Multimedia Sys., Inc., 180 F.3d
1072, 1079 (9th
Cir. 1999). Apparently accepting this Court’s finding in Diamond, the court
below held that space-shifting by Napster users was not a “substantial” use of the Napster
system. Plaintiffs’ expert found, however, that 49 percent of Napster users space-shift from 10
percent to 100 percent of the time, Jay Rep. Table 7 (R425), and defendant’s expert found that 70
percent of Napster users use the Napster directory service to space shift. Fader Rep. ¶ 77,
R1374-R1375. Again, there are millions of users making non-infringing uses of the Napster
system—which clearly qualifies for protection under Sony.
The court below erroneously assessed the substantiality of space-shifting, sampling and
authorized uses by comparing on a percentage basis those uses to what the court believed to be
the infringing uses of Napster. Yet this is clearly improper under Sony. In the context of the
caselaw, the term “substantial” does not mean that non-infringing uses must predominate, but
rather that they must be important or “commercially significant.” Sony, 464 U.S. at 442. Vault
v. Quaid, 847 F.2d 255 (5th
Cir. 1988) (advertisement and sale of software whose sole purpose
was to defeat an anticopying program did not constitute contributory infringement because
software was capable of making archival copies an important use; no analysis of which use was
the predominant use or of the relative percentages of the uses). RCA/Ariola Int’l, Inc. v. Thomas
& Grayston Co., 845 F.2d 773, 776-77 (8th Cir. 1988) (court did not disturb the finding that a
machine for duplicating cassette tapes using special timed tapes was capable of substantial
noninfringing uses even though the machine was used for making unauthorized copies of
copyrighted music); Mathieson v. Associated Press, 23 U.S.P.Q.2d 1685, 1687 (S.D.N.Y. 1992)
( a single noninfringing use was sufficient where that use was news reporting, a traditional fair
use). Moreover, because the technology need only be “capable” of such uses, and because the
“potential for future authorized copying” must be considered, Napster’s service plainly qualifies
and cannot be terminated.
B. The District Court Improperly Focused On Intent Rather Than Use
The Court below found that Napster’s founders knew of and encouraged the sharing of
copyrighted material. Reliance on that conclusion to discount the present non-infringing uses
was clear error under Sony. The Supreme Court expressly rejected claims by plaintiffs in that
case that “supplying the means to accomplish an infringing activity through advertisements are
sufficient to establish copyright liability.” Sony 464 U.S. at 436. Under Sony, knowledge of, or
even intent to profit from, infringing uses does not justify foreclosing a new technology that has
There is no evidence in the record that there is a market of customers that are willing to
pay to sample music or that Plaintiffs would license individuals to offer tracks to others for
sampling on a non-commercial basis.
C. The Court Erroneously Required That Napster Redesign Its System To
Prevent Infringing Uses.
Most importantly, the District Court disregarded Sony in requiring Napster to redesign its
product in order to prevent infringing uses. The court concluded that, having created a product
capable of both infringing and non-infringing uses, it was incumbent on Napster to redesign its
product to prevent the former. It stated, ‘[Napster] created the, quote, ‘monster,’ for want of a
better term, and I guess, you know, that the consequence they face…… Whatever it did, it’s
going to have to figure out how to undo it. ……” The same could have been, and was, said
about the Betamax recorder. The Supreme Court held that Sony was not required to convert its
video cassette recorder into a product that could only play and not record. Indeed, other than the
Court below, we know of no Court which, in lieu of legislative action, has taken upon itself to
order the redesign of such a technology.
IV. The Lower Court Misinterpreted The AHRA.
Under § 1008 of the AHRA, the making and distribution of digital and analog musical
recordings for noncommercial use by a consumer is not infringement.9
Despite its plain, straightforward language, the district court ruled that § 1008 is
“irrelevant” to this case because (i) the plaintiffs made no claims under the AHRA against
Napster and (ii) the court read the Ninth Circuit’s decision in RIAA v. Diamond Multimedia Sys.,
180 F.3d 1072 (9th Cir. 1999) to hold that computer hard drives are “not covered by the AHRA”
at all. TR at 76-77, R144-R145. Both of these bases were legally erroneous.
With respect to the first basis, the language of § 1008 itself does not condition its
2 M. Nimmer & D. Nimmer, Nimmer on Copyright § 8B.01 (2000) (“Nimmer”).
immunity on whether the plaintiffs have made a claim under the AHRA against Napster. Section
1008 by its terms bars any action “under this title”. The court’s ruling to the contrary is simply
With respect to the second basis, the Diamond case held that the portable Rio MP3
recorder/player was not a “digital audio recording device” for purposes of the AHRA’s SCMS
requirements on the following rationale. A “digital audio recording device” is defined as a
device having a digital recording function whose primary purpose is to make a “digital audio
copied recording,” which is defined as a reproduction of a “digital musical recording.” 17
U.S.C. § 1001(1), (3). However, a “digital musical recording” is defined to exclude a material
object “in which one or more computer programs are fixed.” Id. § 1001(5)(B)(ii). This court
ruled that a computer hard drive falls within this exemption, and therefore that MP3 files stored
on a hard drive do not constitute a “digital musical recording.” Diamond, 180 F.3d at 1078-79.
Because the Rio did not make copies from “digital musical recordings,” it was not a “digital
audio recording device” and was therefore not subject to the SCMS requirements. Id.
Although this Court ruled that computer hard drives were not within the SCMS
requirements of the AHRA, with respect to the immunity provisions of § 1008, the Court said
that a consumer has the right to create personal MP3 files on computer hard drives:
As the Senate Report explains, “[t]he purpose of [the] Act is to
ensure the right of consumers to make analog or digital audio
recordings of copyrighted music for their private, noncommercial
use.” The Act does so through its home taping exemption, see 17
U.S.C. § 1008, which “protects all noncommercial copying by
consumers of digital and analog musical recordings.” The Rio
merely makes copies in order to render portable, or “space shift,”
those files that already reside on a user’s hard drive.
Id. at 1079 (citations omitted; emphasis added). This passage makes clear this court read the
immunity provisions as not being limited by the definitions of the technical terms that it held
limited the scope of the SMCS requirements. Prof. Nimmer is in accord.10
Indeed, the Court
found space-shifting using the Rio to be “paradigmatic noncommercial personal use entirely
consistent with the purposes of the Act[‘s]” immunity provisions. Id.
The district court’s narrow application of § 1008 establishes the absurd construction that
a manufacturer of a device whose primary purpose is copying a CD (which is clearly a digital
musical recording) onto a hard drive is immune, yet when a consumer uses that very same device
to copy her musical recording from the hard drive back onto a CD or onto a Rio for her own or a
friend’s personal use, she does not have immunity. Constructions of statutory language that lead
to absurd results clearly contrary to legislative intent must be rejected. See, e.g. United Steel
Workers v. Weber, 443 U.S. 193, 204 (1979); Train v. Colorado Public Interest Research Group,
426 U.S. 1, 7 (1975); Ozawa v. United States, 260 U.S. 178, 194 (1922). The immunity
provisions of § 1008 clearly apply to Napster’s users, and the district court’s ruling to the
contrary is plain error.
1. The Court Applied the Incorrect Standard for Knowledge
Ignoring precedent, the statute, and the intent of Congress, the Court applied an erroneous
legal standard to find that Napster had knowledge of direct infringements and was a contributory
infringer not entitled to the online service provider safe harbors of the Digital Millennium
Copyright Act (the “DMCA safe harbors”). The Court held knowledge of direct infringement
existed based on internal documents indicating awareness that Napster could be used for
infringing purposes, Napster’s decision to remain ignorant of users’ IP addresses, Napster’s
“Based on the legislative history’s characterization of ‘all noncommercial copying by
consumers of digital and analog musical recordings’ as falling under the protection of the home
taping exemption, the court appears ready to apply that provision beyond its precise wording.”
Nimmer § 8B.07[C], at 8B-94.
executives’ recording industry experience, and Napster employees’ downloading of files through
Tr. at 79-81 (R147-R149). Even if true, these facts establish nothing more than
generalized knowledge that some people use Napster to engage in conduct that might be
infringing – which Sony expressly held was insufficient for liability.
No prior case has ever held that generalized knowledge alone is enough. Religious Tech.
Center, Inc. v. Netcom On-line Communs., Inc., 907 F. Supp. 1361, 1374 (N.D. Cal. 1995). As
Netcom recognized, knowledge only should be found in the online setting where the service
provider had an opportunity to become aware of a specific infringing act and the infringing
nature of that act. Id.
When combined with the court’s broad interpretation of the material contribution
standard as being satisfied simply by providing software, a search engine, and connections,12
sweeping standard for contributory infringement renders every online service provider liable—
effectively burdening each with examining millions of communications to permit only those
deemed noninfringing. Such a standard is not in the public interest.
Because the court applied an erroneous knowledge standard, the court also improperly
denied Napster the information location tools safe harbor by finding knowledge where there was
none. 17 U.S.C. § 512(d). Furthermore, the court ignored the plain language of the DMCA safe
The record shows that Plaintiffs mischaracterized the sources of MP3s files disclosed as
having been on the hard drives of employees of Napster. For example, the MP3s on founder
Shawn Fanning’s computer were ones Fanning ripped off CDs he owns to his hard drive for his
own personal use. Second Pulgram Decl., Exh. 94, Fanning Dep. 92:22-93:25. None of these
files were shared on Napster. Id. at 98:7-99:18.
The Court inexplicably found Napster provides “connections” for the purpose of issuing a
preliminary injunction, while denying Napster’s earlier motion for summary adjudication under
17 U.S.C. § 512(a) on grounds that Napster did not “provide connections.” A&M Records,
Inc. v. Napster, Inc., 54 U.S.P.Q2d 1746 (N.D. Cal. 2000).
harbors and the legislative history stating that knowledge that deprives one of the safe harbors
must be either actual or “awareness of facts and circumstances” from which the presence of
infringement would be apparent and failure to expeditiously disable access to such materials
upon development of such knowledge. Id. “Awareness of facts and circumstances” arises only
where the service provider observes “red flags,” such as the word “pirate,” indicating that works
at a specific location are infringing and nevertheless indexes the material. See S. Rep. No. 105-
190 (1998), at 48. Plaintiffs allege only generalized constructive knowledge of the conduct of
Napster users. The court did not deny that Napster has expeditiously taken down materials upon
receipt of actual notice from the infringer or that Napster has a policy for taking down repeat
infringers. 17 U.S.C. § 512(d). Rather, the court set the level of knowledge that triggers an
obligation to act so low that no service provider will be able to come within the scope of the safe
harbor, rendering it meaningless.
Dated: July __, 2000 FENWICK & WEST LLP
Daniel Johnson, Jr.
Attorneys for Petitioner/Appellant Napster, Inc.