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Northern District of California Chief Judge Marilyn Hall Patel on Friday granted Napster Inc.’s request to pursue whether the major record labels have violated antitrust rules — a move that adds a new twist to the recording industry’s two-year copyright infringement suit against the music-swapping service. Patel said Redwood City, Calif.-based Napster could continue discovery into whether the labels had used their copyrights to unfairly boost their own online music subscription services. The judge’s move could eventually lead to new law in applying copyright misuse as a defense against infringement liability. Napster shut its service down last summer and since then has been trying to reach an accord with the record labels. The labels filed a motion for summary judgment on Napster’s liability for infringement in July, and Patel heard oral arguments on the matter in October. At that hearing Napster raised the copyright misuse defense and ownership questions. Napster has argued that the major record labels misused their copyrights by imposing restrictive licensing terms and acting in an anti-competitive way in violation of antitrust laws. Napster had signed a licensing agreement with MusicNet, a joint venture between three of the five major record labels. The other two major labels have a separate music subscription service. Patel, in her order Friday, cast a suspicious glance at the MusicNet agreement, saying it prevented Napster from gaining full access to music not owned by the three labels that are part of the joint venture. And though the labels might argue MusicNet is a separate entity, Patel wasn’t buying it. “The court views with great suspicion plaintiffs’ claims of ignorance as to MusicNet’s activities,” Patel wrote. “Surely the three parties discussed their joint venture before embarking upon it.” Patel told the parties at a hearing last month that she was going to grant Napster’s request to pursue further discovery. The following day the recording industry, joined by Napster, requested that the judge issue a 30-day stay of the case while they tried to work out a settlement. Patel issued a stay, which expired Feb. 17 without the two parties coming to an agreement. In her order Friday, Patel said the record labels argue that Napster’s unclean hands bar it from using copyright misuse as a defense. “While both parties appear to have ‘dirty mitts,’ the court cannot deny the public interest in allowing Napster’s misuse defense,” Patel wrote. “If Napster is correct, plaintiffs are attempting the near monopolization of the digital distribution market.” Patel also granted Napster’s request for further discovery as to whether the labels own all the music that they claim. “Napster admits that plaintiffs control 85 percent of all music sales, and the court finds it highly unlikely that plaintiffs have failed to secure ownership interests in the works that are the foundation of their business,” Patel wrote. “However, the court is equally reticent to allow plaintiffs, merely because of the quantity of the music they control, to railroad Napster into potentially billions of dollars in statutory damages without adequately proving ownership.”

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