Digital Dilemma: Could the Digital Millennium Copyright Act Have Inadvertently Exempted Napster And Its Progeny From Liability?

• Author: Matthew James Fantaci
• Pages: 643-671

Matthew James Fantaci

Until recently, copyright protection of sound recordings by the Recording Industry Association of America¹ (the "RIAA") has been a fairly easy task. Prior to the advent of digital technology, copyright holders had little to fear from the mass "pirating" of musical recordings because the quality of music recorded on "analog" tapes degrades with each successive copy.² In contrast, when digital copies are made, the copy and each of its successors retains the exact same quality as the original regardless of how many generations of copies are made.³ Even so, the threat of mass pirating was minimal because of the enormous size of the files and painfully slow modem speeds. Prior to the development of compression algorithms and high-speed Internet connections, a five minute song could take several hours to download.⁴

Recently, however, computer programmers have developed compression algorithms which allow data occupying a large amount of space to be significantly "compressed into files that are easily transferred across the Internet and downloaded onto a personal computer."⁵ The preferred compression format is known as "lossy."⁶Basically, the lossy format eliminates those sounds in the original material which are imperceptible to the human ear, allowing for a Page 644 huge reduction in storage requirements.⁷ The most popular, and most feared, lossy format is the MPEG-1 Audio Layer 3, or MP3.⁸ Files compressed into the MP3 format, when combined with a high speed modem, reduce the amount of time it takes to download a song from hours to merely minutes.

Two years ago, a nineteen-year old college student turned the music industry upside down when he created the revolutionary new file sharing program known as Napster. The system, run by Napster, Inc. (Napster), enabled users to swap songs configured in the MP3 format on an unprecedented scale. Limited by only the need of a computer with Internet access, Napster made large scale music piracy as easy as using a telephone. In addition, Napster defined the future of music distribution on an international level by eliminating the need for fancy packaging, shipping, and retail stores, the cost of which is passed on to consumers. Perhaps best of all, online music distribution allows consumers to choose individual songs instead of forcing them to buy an entire album at an exorbitant price in order to obtain a desired song. Unfortunately for the RIAA, the Napster system not only allowed users to bypass the traditional distribution chain, but also paid nothing to the copyright owners of songs downloaded by its users.

As Napster's user base began to grow exponentially, record company executives realized the new kid at the table was not bluffing. Being no stranger to the game, the RIAA decided to ask the courts for a new hand, and in December of 1999 filed suit in the Northern District of California against Napster, Inc. for contributory and vicarious copyright infringement.⁹ In its defense, Napster claimed its activity does not rise to the level of contributory or vicarious infringement. In the alternative, Napster claimed that it was exempt from liability because it qualified for the "safe harbor" for information location tools contained in the Digital Millennium Copyright Act of 1998 (DMCA).¹⁰

Naturally, the publicity surrounding the case piqued the curiosity of Internet users world wide and Napster's membership increased astronomically.¹¹ Worried that the increased numbers of Napster Page 645 users could cause irreparable damage by the time the suit actually went to trial, the RIAA requested a hearing for preliminary injunction to enjoin the Napster service from operating until trial. On July 26, only one day after the hearing, Judge Patel of the Northern District of California granted the injunction to the plaintiffs.¹² This seemed to sound the death knell for Napster. However, two days later the Ninth Circuit stayed the injunction because it felt that Judge Patel, in her haste, had failed to adequately consider the relevant legal issues.¹³While most of the plaintiffs saw this merely as a minor setback, Bertelsmann Music Group (BMG) felt it was a harbinger as to how the Ninth Circuit might ultimately rule on appeal after a trial on the merits. BMG reasoned that a loss would subject them to a slow and inevitable death while a win would merely be a temporary solution to a permanent problem. In an impressive and unanticipated move, BMG decided to take advantage of Napster's technology and established user-base by dropping out of the suit and forming an alliance with Napster. In return, Napster agreed to work with BMG to transform Napster into a fee-based music distribution system.

After considering the issue for six months, on February 12, 2001 the Ninth Circuit finally ruled on the preliminary injunction which it had previously stayed.¹⁴ In its decision, the court affirmed the granting of a modified version of the preliminary injunction in favor of the plaintiffs. The court felt that the injunction was warranted but that the original order by Judge Patel was overbroad.¹⁵ Importantly, in issuing its opinion the Ninth Circuit refused to discuss the merits of whether Napster may be able to take advantage of the liability exemptions contained in the DMCA.¹⁶

More recently, on September 24, 2001 Napster settled with songwriters and publishers for $26 million and agreed to make royalty payments once it started a fee-based distribution system. Napster has not reached a settlement with the record companies.

Although the upholding of the injunction and Napster's settlement with the songwriters and publishers are clearly victories Page 646 for the plaintiffs and their colleagues, they in no way negatively affect the positions taken in this paper. Also, it is important to note that while this paper focuses on whether Napster itself could take advantage of the liability exemptions contained in the DMCA, it is meant to have much broader implications. That is, the analysis contained herein is applicable not only to Napster, but also to any music sharing system which employs the Napster-type technology.

Section I of this paper will give an overview of the Napster technology. Section II will provide an explanation of the traditional theories of copyright infringement in the United States. Section III will set out the requirements which are necessary for a service provider to take advantage of the liability exemption for information location tools contained in the Digital Millennium Copyright Act. Section IV will discuss the liability of Napster under traditional theories of copyright infringement. Section V will examine Napster under the DMCA and make the argument that Napster's coverage under the DMCA is a highly likely possibility. Section VI will present the argument that, although not intended by Congress, a court deciding the issue should follow the wording of the DMCA and leave it up to Congress to close the loophole in the exemptions. This section will also detail some of the problems Congress might face in fashioning a remedy to this situation and suggest some possible solutions. Section VII will offer a brief conclusion.

I Napster, INC

Napster, Inc. maintains a website and central server which operates a "virtual community."¹⁷ It is a free service that allows music listeners to "share" their favorite music in MP3 format with millions of other Internet users. To date, Napster receives no revenue from its users, advertising, or any other source.¹⁸ To get started, users may download Napster's MusicShare software free of charge. After supplying a user name and choosing a password, users can use the software to access the Napster computer network.¹⁹ When a user is logged on, the MusicShare software reads the names of all the MP3 files stored in the Napster folder on his computer. Then, these names are added to a directory on the Napster server which contains a list of all other MP3 files contained in the hard drives of all other users Page 647 which are logged on at the same time.²⁰ To locate a song, the user enters the title of the specific song or name of the artist and clicks the "Find It" button on the program.²¹ The Napster program searches its compiled directory of all logged on users and creates a list of the available files. The user then clicks on the file he wishes to download. The program communicates with the host user, i.e. the user whose computer contains the desired file, and connects the two computers.²² If the file is available, it is then transferred from the host users hard drive to that of the requesting user via the Internet. It is important to note that, although the transfer would not be possible without the Napster software, the file itself is transferred across the Internet through point-to-point communication between Napster users and is not routed through the Napster server.²³

To say that Napster users "share" MP3 files is somewhat of an understatement. In the traditional sense, when we think of sharing music, we think of copying tapes from our friends. Because the size of our friend pool is necessarily limited, the amount of copying that can take place is small compared to the number...