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Napster Inc., the Internet song-swapping sensation, has a big job ahead if it wants to parlay its latest legal defeat into financial victory. Napster had plans to start charging subscription fees by summer, but major record labels haven’t yet been persuaded to work side-by-side with the Redwood City, Calif.-based company and, as a result, will not willingly part with titles from their coveted artists. It’s not even clear whether the one industry heavyweight that does support Napster, Bertelsmann AG, will continue to finance the Internet upstart in the face of a losing legal battle. Under Monday’s ruling by the 9th U.S. Circuit Court of Appeals, the company must somehow stop the millions of people who use it to swap copyrighted music without charge and without restriction. The court sent the case back to a trial judge, asking her to rewrite an injunction so it allows Napster to survive if it is able to patrol its network for copyright infringement — something its own lawyers have said is virtually impossible. Bertelsmann insists it will continue to support Napster financially. “This is neither the beginning nor the end of Napster,” said Andreas Schmidt, head of Bertelsmann AG’s eCommerce group. “Now it’s really important to move to the future with a membership-based service.” That future is cloudy. Legitimate online music retailers have failed to win over the 50 million fans who download free songs in the MP3 format from Napster. Two other Internet-based companies’ history may be instructive. MP3.com, which has teamed up with a handful of firms in the recording industry, refuses to say how many people have signed up for its subscription-based streaming song service called My.Mp3. That service relaunched only after MP3.com reportedly paid millions to the Big Five record labels — Sony, Universal, BMG, EMI and Warner — to settle a copyright infringement suit of its own. EMusic.com tried a similar route, allowing computer users to buy songs at 99 cents each, or subscribe for music downloads for as low as $9.99 a month. EMusic’s business hasn’t dried up completely, but the company has reported more bad news than good and recently laid off 36 percent of its staff. The true test of Napster’s technology is whether it will offer any reason to exist other than free MP3s. Riffage.com went bust after little more than a year of promoting unknown artists and broadcasting concerts over the Net. The Internet Underground Music Archive, a pioneering online haven for garage bands, was acquired by EMusic and promptly closed its service to new artists after the funding floundered. Though Napster vows to fight the appeals court ruling, and any subsequent new injunction, the company’s music free-for-all may be doomed. “I’m bumming,” said John Nock, 35, of Morgantown, W.Va., who said the ruling could prevent him from mixing more tapes for his June wedding. “We’ll all find a way to get around it,” said Faisal Reza, a student at the Massachusetts Institute of Technology. “People who want music will always be one step ahead of people trying to stop them.” Napster’s service is still up and running and the appeals court did not mention any liability of users who choose to continue downloading the application. But the MP3 trading appears threatened. A three-judge panel of the appeals court said it was apparent that “Napster has knowledge, both actual and constructive, of direct infringement.” In upholding a lower court judge’s injunction that would shut down Napster, the panel said the recording industry “would likely prevail” in its suit against the file-swapping service. The heavy metal group Metallica, the first band to demand its songs be removed from Napster, saw the ruling as vindication. “We are delighted that the court has upheld the rights of all artists to protect and control their creative efforts,” the band said in a statement. “Napster was wrong in taking not only Metallica’s music, but other artists who do not want to be a part of the Napster system.” Copyright 2001 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.

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