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David Boies, the litigator who headed the Department of Justice’s efforts in the Microsoft antitrust trial, has been on the Napster legal team only a few short weeks, but he has already made his mark on A&M Records v. Napster Inc. The opposition brief filed July 3 aggressively challenged the claims of copyright infringement and contributory copyright infringement that Recording Industry Association of America (RIAA) had made in its case against the Internet company ( A&M Records v. Napster Inc., N.D. Calif., No. C99-05183 MH, response brief filed 7/3/00). Napster Inc. is an Internet startup — recently capitalized by venture capitalists Hummer, Winblad Venture Partners to the tune of $15 million, that is built around the Napster system of one-to-one file sharing and a related Internet directory service. The Napster directory service makes software available that allows users to search a directory that lists the names of files available to be shared by other users who are online on the Internet at the same time. The service also allows its users to choose whether or not to create a folder on their disk drive where files they wish to share are available to others. If users make such a folder available, each file in the folder is listed by the Napster directory service and that list becomes part of the Napster directory while the user remains online. The most prominent use of Napster currently is the trading of “MP3 files”– music files that are encoded the MPEG-3 compression scheme to an average size — in the case of pop music — of three megabytes per song. To create an MP3 file, a music consumer may copy an original music CD data file to his computer’s hard disk, then compress that file into the MP3 format. Napster does not come into play until the user makes the resulting MP3 file available to the Napster directory service from a computer connected to the Internet. Although Napster and its directory servers do not themselves create or store copies of MP3 files, they do make it easier for users to find and copy these files from one another’s computer hard disks over the Internet. Plaintiffs in the lawsuit — nearly a dozen record companies, including the five major record labels — claim that Napster, by facilitating the unauthorized copying of MP3 files, has engaged in contributory or vicarious copyright infringement, and sought a preliminary injunction against the Internet company’s continued listings of songs from plaintiffs’ catalogs. Napster responded to their request for an injunction by seeking a summary judgment, claiming it was protected under Section 512(a) of the Digital Millennium Copyright Act, which provides a “safe harbor” from liability for qualifying online service providers. Napster lost that motion in May when Judge Marilyn Hall Patel ruled that Napster does not qualify as such a provider. But while the beleaguered Internet company — which also faces other copyright lawsuits launched by recording artists Metallica and Dr. Dre — is down, it was far from out to judge from [the brief it filed in opposition to the motion for preliminary injunction], which some courtwatchers say reflects the no-holds-barred approach of its new chief litigator, David Boies. SIX DEFENSE THEORIES The Napster brief laid out six separate theories as to why a preliminary injunction should not issue and as to why the plaintiffs should not succeed on the merits. According to the brief, the theories are that: � Under the decision in RIAA v. Diamond Multimedia Sys. Inc., 180 F. 3d 1072 (9th Cir. 1999), and under the American Home Recording Act, music consumers have “an absolute right to create and transfer digital music for noncommercial purposes.” Because of this “absolute right,” the brief argues, Napster cannot be liable for contributory infringement. � Napster’s directory service is capable of “numerous and substantial non-infringing uses.” Because the presence of substantial non-infringing uses, or of the potential for such uses, was judged by the U.S. Supreme Court in Sony Corp. of Am. v. Universal Studios, 464 U.S. 417 (1984), to be a defense against the claim that a new a technology has given rise to contributory infringement liability, Napster cannot be held liable for making its technology available. � Because Napster’s users are engaging in “fair use,” and thus are not infringers, there is no infringement predicate for a contributory or vicarious infringement case. � For equitable reasons — specifically, a claim that plaintiffs have engaged in “copyright misuse” — the plaintiffs are barred from enforcing their copyrights against Napster. � No injunction can issue “because it would violate the First Amendment rights to free speech of Napster and its users.” � No injunction can issue “because to do so would irrevocably alter the status quo, result in permanent injury to Napster, and ultimately not benefit Plaintiffs.” The first three arguments — traditional defenses in copyright cases — could have been predicted on the basis of the facts of the case, as, perhaps, could the First Amendment defense, since many Internet-related intellectual-property cases implicate free-speech considerations. But the “copyright misuse” defense was more unexpected; in that part of the brief, the Napster legal team characterizes the plaintiffs as an industry that hopes to use copyright law to suppress a competitive threat. According to Boies, who was interviewed by reporters in a conference call the day the response brief was filed, the RIAA which is the architect of the record companies’ lawsuit, “sees Napster as a threat, not because it is going to reduce record sales or music sales but because it is going to reduce the RIAA’s control over music sales.” But the RIAA sees things differently: “Individual music publishers and record companies are the plaintiffs, all of whom have partnerships with multiple legitimate technology companies,” said the association’s executive vice president and chief counsel, Cary Sherman in a prepared statement. “Furthermore, Napster has never even sought licenses for their activities,” Sherman said. “They are engaged in wholesale piracy.” NO INFRINGEMENT = NO CONTRIBUTORY INFRINGEMENT The copyright-law-centered components of the Napster brief all focus on the argument that there is no contributory infringement if there is no underlying infringement. Arguing that “as a matter of law” the creation of an MP3 file and the sharing of such a file “in a noncommercial way” does not constitute copyright infringement, the brief looks first at a leading case interpreting the Audio Home Recording Act of 1992. In RIAA v. Diamond Multimedia Sys. Inc., the Ninth Circuit held that the “main purpose” of the AHRA was to “protect all noncommercial copying by consumers of digital and analog musical recordings.” The Diamond case also involved the MP3 music-file technology — the RIAA in that case argued that the Diamond Rio MP3 player, a portable music player to which users can move MP3s from their computers, violated the AHRA’s copyright-management system and royalty provisions. According to the Napster brief, “[T]here is nothing in the language of the AHRA, or any precedent under it, suggesting that consumers’ noncommercial copying is permissible only if a few consumers do it. To the contrary, as discussed below, Congress expressly intended to shield all noncommercial music copying resulting from any technology that might later develop.” The brief goes on to say that the courts have consistently refused to extend copyright prohibitions to new technologies, opting instead to let Congress change or extend the law. Moreover, the brief states, “Congress fully understood that consumers would share music with family, friends, and others.” The brief cites a report from the Office of Technology Assessment that Congress relied upon when enacting AHRA. That report shows that as early as 1989 consumers’ copying music for personal use and sharing was widespread. “Congress knowingly legislated a very broad form of immunity for all of this conduct,” the brief states. A central concept in the Napster brief is that of “space-shifting” — consumers’ use of digital recording technology to make the music of which they own lawful copies at home available in other places, such as their computers at work. In the Diamond case, the brief argues, the Ninth Circuit expressly found that “space-shifting” qualified as a “paradigmatic noncommercial personal use entirely consistent with the purposes” of the AHRA’s immunity provisions. In addition to the AHRA defense, the brief claims that under the Sony case’s doctrine of “substantial non-infringing uses,” Napster has an “absolute defense.” Under the Sony case, in which the plaintiffs against Sony sought to enjoin the distribution of VCRs because they enable consumers to make copies of copyrighted TV broadcast programming and other content, the U.S. Supreme Court held that the offering of such technology does not constitute contributory infringement because the VCR is widely used for legitimate, unobjectionable purposes. According to the Supreme Court, such a technology “need merely be capable of substantial noninfringing uses.” The brief argues that because the Napster technology is capable of substantial noninfringing uses, and because there is in fact substantial noninfringing use of Napster, the Internet company cannot be held liable for contributory infringement. Here the brief adduces not only the AHRA’s flat protection for personal copying but also the evidence that “a multitude of artists” has authorized the sharing of their music through use of Napster’s tools and services. These artists include the new bands “Of a Revolution” and “Pancho’s Lament,” which, the brief says, have successfully promoted themselves through Napster. FAIR USE DEFENSE In response to the plaintiffs’ argument that Sony is distinguishable because it deals only with the theory of contributory infringement and not with the theory of vicarious infringement, the brief states that “the Sony decision speaks in broader terms, discussing throughout all theories of �vicarious liability’ and immunizing all �third-party conduct’ liability, not merely based on a theory of contributory infringement.” Apart from the AHRA and Sony defenses, the brief also employs a straightforward fair-use analysis and argues that Napster’s users engage “predominantly” in fair uses of the copyrighted songs in question. Applying the four standard criteria for determining fair use — (1) the purpose and character of the use, (2) the nature of the work, (3) the amount and substantiality of the portion of the work as a whole that is used, and (4) the effect of the use upon the potential market or value of the copyrighted work — the brief argues with regard to (1) that the noncommercial use by Napster’s users “weighs strongly in favor” of a finding of fair use. With regard to (2) and (3), the brief concedes that the works being copied are “undoubtedly creative in nature” but that the amount of the work copied is “certainly reasonable in relation to the purposes of space-shifting and [sampling music before buying it],” which the brief says qualifies as “fair use.” With regard to market harm, the brief argues that plaintiffs have “failed to carry their burden of establishing that every substantial use of Napster will harm their markets. With regard to the plaintiffs’ central claims of contributory infringement and vicarious liability, the brief states that plaintiffs “can prove neither” — at least not for the purposes of a preliminary injunction. The brief states, inter alia, that Napster cannot be liable for contributory infringement because the company has no knowledge of specific direct infringements, which the brief says is a predicate for contributory-infringement liability. Unlike the flea-market operator in Fonovisia, Inc. v. Cherry Auction Inc., 76 F.3d 259 (9th Cir. 1996), Napster does not monitor or supervise those who use its services; ergo, the brief argues, no constructive knowledge of specific infringement can be imputed to the company. Contributory infringement also requires “substantial participation” in a specific direct infringement, the brief argues, challenging the plaintiffs’ argument that this element is met because “but for” Napster’s directory functions, sharing of MP3s would be more difficult. “Substantial participation might exist if Napster were given actual notice and failed to take remedial action,” the brief states. “But every time Napster has received actual notice of infringement at a specified location, Napster has blocked the conduct by terminating the user account.” With regard to the argument that Napster is vicariously liable for the purportedly infringing copying done by Napster users, the brief challenges the plaintiffs’ argument that Napster has the “right and ability to control” the errant agent that is required for vicarious liability. “It is undisputed that Napster could pull the plug, shut down its system, and thereby eliminate any claimed infringement,” the brief states, adding that “ Sony could have stopped selling the Betamax. �” But this, the brief states, is not “the legal standard for control” for vicarious liability purposes. Instead, the brief states, “[t]he control issue turns on whether Napster can identify and prevent particular instances of infringement in its service. The answer is clearly no.” MISUSE OF COPYRIGHT The argument that the plaintiffs are barred in equity, on misuse-of-copyright grounds, is based on the fact that the plaintiff record companies have known “for years” about MP3 files and about their trading over the Internet and yet the plaintiffs “have failed to take any actions to stop or even slow its widespread proliferation,” according to the brief. It states further that the plaintiffs have actively promoted the MP3 standard by forming partnerships with companies that promote the standard. The brief claims that the reason for the plaintiffs’ promotion of the standard lies, in part, in the industry’s belief, based on a 1998 study by Warner, that MP3 distribution has had “no impact on sales,” and that MP3 copying seems to represent a shift to a new technology by those who used to copy music on cassettes. After arguing that the record-company plaintiffs are not truly worried about MP3s themselves, the brief advances the argument that plaintiffs’ concern is about an upstart company’s moving into a market that the record companies hoped to dominate themselves. “The Ninth Circuit has held that attempts such as plaintiffs’ to use the limited monopoly rights bestowed on a copyright holder to control competition in an area outside the scope of the copyright constitutes copyright misuse — an affirmative defense that bars the copyright holder from enforcing its copyright unless and until its misuse is �cured,’” the brief states. According to the brief, the plaintiffs’ “legal maneuvering against Napster” in this case “is less for enforcing intellectual property rights than to control (1) the flow of competing unsigned artists’ music into the electronic marketplace, and (2) the means of and business model for distributing music over the Internet.” In support of this claim, the brief cites documents from the plaintiffs that express “fear of entities like Napster who are �downstream players � positioning themselves to dominate the contact with the customer’ — especially because Plaintiffs know that, with the growth of the Internet, the �majors’ share of the music market is likely to decline.’” Moreover, the brief states, the plaintiffs have developed their own plans for Napster-like distribution of music to consumers. The brief says that the music industry stands in opposition to a royalty-based system of Napster-like music distribution because, while every CD sale results in a 12-to-18-percent royalty to the artist, for licensing fees — which a system like Napster would rely on, the royalty arrangement gives the artist 50 percent. ” Thus,” the brief states, “ the fundamental purpose of the Plaintiffs’ attempt to use its copyright monopolies to eliminate the file sharing model for distribution is simple: If they can control the method of distribution, they can control the business model for that distribution. Their business model has one powerful purpose: to reduce the amounts otherwise payable to artists for those types of users.” The brief continues, “In sum, Plaintiffs’ use of anticompetitive litigation against new technologies and emerging artists, cloaked as an effort to preserve copyrights, attempts to restrain the breadth of useful arts by limiting the distribution of artistic works that Plaintiffs do not control.” The brief also argues in equity that the plaintiffs have waived any right to claim direct infringement because of their encouragement of the MP3 standard for purposes of marketing digital players and by encouraging the creation and playing of MP3 files. FIRST AMENDMENT, IRREPARABLE HARM Granting a preliminary injunction that would have the effect of shutting down Napster’s directory service, the brief states, would violate the First Amendment rights not only of Napster Inc., but also of its software’s users. According to the brief, the injunction sought by the plaintiffs would prohibit users of Napster from “providing on its Service (by hyperlink or other means) or directing or referring users of its Service, to an index listing or identifying Copyrighted Music made available by other users of the Service for copying, downloading, uploading, transmission or distribution.” Such an injunction, the brief states, “would prevent the listing of the name and location of virtually any MP3 file and would silence the entire Napster community, violating not only Napster’s free speech rights, but those of its users as well.” The brief adds, “Plaintiffs do not have the right to exclude the 98 percent of artists who are unsigned from using Napster to exercise their First Amendment rights.” The brief also states that granting a preliminary injunction “in advance of any ruling by the Court confirming that Napster’s directory is protected by the First Amendment” would be “particularly egregious.” With regard to the “irreparable harm” predicate for a preliminary injunction, the brief states that available data, including independent studies, show that audio CD sales have been rising rather than falling since Napster’s appearance. The few studies to the contrary, the brief says, are methodologically flawed. Moreover, the brief argues, the data can be interpreted to show that Napster has actually led to increased sales of audio CDs. The evidence shows that in the months before a trial of this case on the merits, Napster will even have a beneficial effect on plaintiffs’ entry into the digital music-download market, the brief concludes. In addition to reasoning that the balance of hardships disfavors the granting of a preliminary injunction, the brief also revives the argument that Napster qualifies for the “safe harbor” provisions of the Digital Millennium Copyright Act: “The Court previously found an issue of fact precluding summary adjudication as to Napster’s compliance with �512(i) [of the DMCA]. Napster respectfully submits that the facts now support a finding for present purposes that Napster complies with �512(i).” Specifically, the brief notes that Napster complies with the DMCA safe harbor requirements that a service provider adopt, reasonably implement, and inform account holders of a policy to terminate the accounts of repeat infringers. That policy is “publicly posted on its website,” the brief states, and furthermore has been implemented in practice by the company. On a more technical front, the brief makes two final arguments: (1) that the plaintiffs’ failure to adduce proof of registration of particular infringed-upon copyrighted works renders the claim “fatally defective,” and (2) that no preliminary injunction should issue against Napster without the posting of an appropriate bond “sufficient to compensate Napster for all damages it may suffer if the injunction were later reversed or vacated.” Such a bond, the brief argues, “would be at least $500 million and possibly as much as $1.5 billion.” MIXED RESPONSE Attorney reaction was mixed on the merits of the brief, although most regarded it as a singularly aggressive response to the plaintiffs’ motion. Copyright attorneys were generally in agreement that Napster is smart to look to the Sony precedent as the key to its defense. But they also noted that it may seem incongruous to the court to stress how noncommercial the underlying copying is when Napster itself is clearly a commercial enterprise — and characterizes itself as one in its argument about the bond requirement. There is also some question as to whether a court will rule that the Audio Home Recording Act should reasonably be interpreted to cover a potential unlimited degree of unlicensed copying. One last aspect of the brief that won wide agreement is that the battle over Napster has been joined in a way that is certain to give rise to clarifications of existing law in an arena that Internet businesses and the content industry are watching closely.

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