For those who don't know, Napster is an Internet program that enables its users to easily download digital copies of music, usually in the MP3 format. In July 2000, a Federal District Court granted the music industry's request for a preliminary injunction against Napster, forcing Napster to pull the plug on its music sharing community on the basis of contributory copyright infringement. Two days later, however, a panel of judges from the Ninth Circuit issued an emergency stay, pending an appellate hearing. Following that hearing, on February 12th of this year, the three-judge panel for the Ninth Circuit ruled that "a preliminary injunction against Napster's participation in copyright infringement is not only warranted, but required." The case will now return to the lower court for a final ruling. In the meantime, Napster has begun exploring agreements with music publishers (most notably Bertelsmann which was one of the plaintiffs in the current case).
Napster will undoubtedly appeal and the case is likely to head to the United States Supreme Court. But in the interim, Napster has meaning beyond the music industry. These rulings are a clear warning sign that courts continue to deal with new technology in much the same way that they have for old. In doing so, this case underscores the need for companies doing business on the Internet to understand that they should not ignore existing Intellectual Property laws. This includes businesses that have active web sites as well as those who provide Internet access to their employees as part of their employment.
Direct Copyright Infringement.
The Ninth Circuit judges ruled that not only did the evidence show that Napster abets copyright infringement but that individual Napster users are infringing copyrights. "Repeated and exploitative unauthorized copies of copyrighted works were made to save the expense of purchasing authorized copies," the panel said. Specifically, the court found that that Napster users infringe at least two of the copyright holders' exclusive rights: the rights of reproduction and the rights of distribution. Napster users, the court further held, who upload file names to the search index for others to copy violate plaintiffs' distribution rights and users who download files containing copyrighted music violate plaintiffs' reproduction rights.
Despite the enormity of the Napster community (on average, 1.5 million users were logged on to the system at any one time) the court sent a clear message that a company which maintains an anonymous and non-commercial relationship with its user can still be liable of their illegal acts. The message is of particular importance not only to employers whose employees may be uploading or downloading files on Napster but that any violation of copyright laws by employees may put the employer at legal risk as well.
Contributory Infringement.
The finding of direct infringement of the Napster users was necessary before the court could address claims that Napster itself was engaged in contributory infringement.
Traditionally, "one who, with knowledge of the infringing activity, induces, causes or materially contributes to the infringing conduct of another, may be held liable as a 'contributory' infringer." In other words, liability exists if the defendant engages in "personal conduct that encourages or assists the infringement." Napster, the court concluded, by its conduct, knowingly encouraged and assisted the infringement of artist's and music owner's copyrights.
For employers who provide Internet access to their employees, the message is similarly clear.
Vicarious Liability.
Vicarious copyright liability extends beyond an employer/employee relationship to cases in which a defendant "has the right and ability to supervise the infringing activity and also has a direct financial interest in such activities." The fact that Napster had no involvement with the actual copying of copyrighted works an insufficient defense. "Napster's failure to police the system's 'premises,' combined with a showing that Napster financially benefits from the continuing availability of infringing files on its system, leads to the imposition of vicarious liability."
Lessons to be Learned.
- Review the content of your company's site including any links and metatags which may infringe the Intellectual Property rights of others.
- If your businesses site permits others to post to it, be sure that your terms of use agreement provides warranties that such postings are not violating any such rights.
- Review your business's acceptable use policy and periodically re-circulate it to ensure your employee's are familiar with it.
- Take appropriate steps to end any infringing activity as soon as you become aware of it.
Reprinted with permission by SBN magazine