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A&M Records, Inc. v. Napster, Inc.

,
Equivalent Citation- 239 F.3d 1004 (2001)

By,
Shashank J
14040142112
BBA LLB A
Facts:
The appellant, Napster Inc., was an independent peer-to-peer file sharing service company
started in 1999 by Shawn Fanning and Sean Parker. It provided a platform for users to upload
and download music files in a compressed digital format (MP3). It provided a Music share
software freely for internet users to download. Users who obtained Napster's software could
then share MP3 music files with others who had logged-on to the Napsters system. Napster
allowed users to exchange MP3 files stored on their own computer hard-drives directly,
without payment. The Music share software interacted with Napster's server-side software
when the user logged on, automatically connecting their computer to the servers that Napster
operated. The Music share software showed the list of names of MP3 files that the users had
elected to be made available. This list was then added to a directory and index, on the Napster
server, of MP3 files that users who were logged-on wish to share. If the user wanted to locate
a song, they had to enter its name or the name of the recording artist on the search page of the
Music share program and click the "Find It" button. The Napster software then searched the
current directory and generated a list of files responsive to the search request. To download a
desired file, the user had to highlight it on the list and click the "Get Selected Songs" button.
The user could also view a list of files that existed on another user's hard drive and select a
file from that list. When the requesting user clicked on that file, the Napster server
communicated with the requesting user's and host user's Music share browser software to
facilitate a connection between the two users and initiated the downloading of the file without
any further action on either user's part.

The Defendants were major record companies who saw the potential for this technology to
impact their sales. These reproduction and distributions gave rise to copyright violations and
the defendant quickly filed suit against Napster as a contributory and vicarious copyright
infringer.

The United States District Court (District Court of Northern District of California) found
that Napster had contributed to the infringement of copyrights owned by the defendant and
issued an injunction to which Napster appealed. On appeal, the Ninth Circuit ordered a stay
of the District Court's injunction, pending resolution

Issues Involved:
A. Whether the appellants were in fact engaging in fair use under the Copyright Act
or does it amount to contributory infringement on the part of Napster?
B. Whether the appellant qualified to be an online service provider to attract exemptions
under the Digital Millennium Copyright Act (DMCA) from copyright infringement?
C. Whether the appellant qualified to attract exemptions under Audio Home Recording
Act (AHRA) from contributory or vicarious copyright infringement?
Arguments Advanced:

A. Whether the appellants were in fact engaging in fair use under the Copyright Act
or does it amount to contributory infringement on the part of Napster?

For the determination of whether or not an activity is within fair use, the Defence stated the
application and balancing of four factors outlined in Section 107 of the Copyright Act:

1. the purpose of the use


2. the nature of the work being used
3. the amount of the work used
4. the effect of the use on the market for or value of the original work.

The Appellant were of the view that they did not sell or distribute the works themselves and
that as there were no sale of the copyrighted musical works, there was no commercial benefit
accruing to the appellant. So, it was a completely fair use and hence are not liable for
copyright infringement.

To determine the purpose and character of the use, the court referred to two questions. First,
is the work replacing the object of the original creation or is it transformative, i.e., does it
adds further purpose or different character. Secondly, is the use commercial or non-
commercial?

Rejecting the arguments put forwarded by the appellant, the Court held that the appellants
Music share software allowed for repeated and exploitative copying. The court held that
downloading MP3s does not transform the work and make available the same work to a same
degree of similarity. The Court also held that the use was commercial even though no sales
were taking place. The court asserted that a host user sending a file cannot be said to engage
in a personal use when distributing that file to an anonymous requester and further the
appellants users get for free something they would ordinarily have to buy. In addition, songs
were found to be similar to the types of creative works intended to be protected by copyright
and lastly, the effect of the downloads were found to harm possible album sales. Taking into
consideration all the above factors, the Ninth Circuit Court dismissed the first averment of the
Appellant.

After rejecting Napsters fair use claim, the court determined whether Napster, the appellant
is liable for contributory copyright infringement. The court asserted that, "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. Here, the
appellant engaged in personal conduct that encouraged or assisted infringement because it
had both actual and constructive knowledge of direct infringement. Furthermore, the
appellant materially contributed to the infringing activity. Without its support, Napster users
would not be able to find and download the music they wanted. Hence, the court held that
appellants lack of effort to reduce infringement, combined with the fact that the company
financially benefited therefrom, made it vicariously liable for copyright infringement under
U.S.C Title 17 Section 501 of the Copyright Act.

B. Whether the appellant qualified to be an online service provider to attract exemptions


under the Digital Millennium Copyright Act (DMCA) from copyright infringement?

Napster argued that its liability for contributory and vicarious infringement is limited by the
Digital Millennium Copyright Act, 17 U.S.C. 512 by interposing a statutory limitation on
liability by asserting the protections of the "safe harbour" from copyright infringement suits
for "Internet service providers" contained in the Digital Millennium Copyright Act.

According to Napster, Section 512 (a) of the DMCA limits liability "for infringement of
copyright by reason of the service provider's transmitting, routing, or providing connections
for, material through a system or network controlled or operated by or for the service
provider, or by reason of the intermediate and transient storage of that material in the course
of such transmitting, routing, or providing connections," if five conditions are satisfied:

1. the transmission of the material was initiated by or at the direction of a person


other than the service provider;
2. the transmission, routing, provision of connections, or storage was carried out
through an automatic technical process without selection of the material by the
service provider;
3. the service provider did not select the recipients of the material except as an
automatic response to the request of another person;
4. no copy of the material made by the service provider in the course of such
intermediate or transient storage was maintained on the system or network in a
manner ordinarily accessible to anyone other than the anticipated recipients,
and no such copy was maintained on the system or network in a manner
ordinarily accessible to such anticipated recipients for a longer period than
was reasonably necessary for the transmission, routing, or provision of
connections; and
5. the material is transmitted through the system or network without modification
of its content.

The defendants argued that the appellant was not a service provider within the meaning of
the Section 512 (a) of DMCA and hence are not eligible for safe harbour defence. According
to the defendant, the alleged infringing material did not pass through appellant's server to its
users, but rather from one user to another, as required by Section 512(a). Thus, the additional
requirement that transmitting, routing, or providing connections must occur "through the
system or network was not fulfilled. The defendant also claimed that the appellant did not
meet the eligibility criteria of service provider under Section 512 (a) (i) because it required a
service provider to adopt, reasonably implement, and inform its users of a policy for
terminating repeat infringers. The defendant established that appellant never adopted
copyright compliance policy prior to the litigation and even after the institution of the suit, it
could not discipline infringers in any meaningful way. Accordingly, the Ninth Circuit Court
of Appeal found that the appellant does not qualify to be a service provider as mentioned in
Section 512 (a) of the Digital Millennium Copyright Act and hence cannot claim exemptions
from copyright infringement.

C. Whether the appellant qualified to attract exemptions under Audio Home Recording
Act (AHRA) from contributory or vicarious copyright infringement?

Napster, the appellant, asserted that Section 1008 of the Audio Home Recording Act
provided its users with immunity from liability for copyright infringement and, in so doing,
relieves Napster itself from any derivative liability for contributory or vicarious infringement.
Section 1008 granted immunity for the use of four specific kinds of actions for copyright
infringement. Those products were a digital audio recording device, a digital audio recording
medium, an analogue recording device, or an analogue recording medium. Section 1008
prohibited actions for copyright infringement based on the manufacture, importation, or
distribution of these four types of devices and media. Section 1008 also prohibits actions for
copyright infringement based on the non-commercial use by a consumer of such a device or
medium for making digital or analogue musical recordings.

The Court rejected the defence taken by the appellant considering the defendants' copyright
claims were not based on the use of any of the devices or media covered by the terms of
Section 1008. According to it, the appellant's users exchanged music by using personal
computers to locate and transfer files from one computer hard disk to another. Neither a
personal computer nor its hard disk constitutes "a digital audio recording device, a digital
audio recording medium, an analogue recording device, or an analogue recording medium."
The Court held that if an action for infringement does not involve the specified devices or
media, it falls outside the scope of Section 1008 altogether. The Ninth Circuit Court also
upheld the decision of the district court and rejected the defence taken up by the appellant on
the ground that Section 1008 was inconsistent with the terms of the statute and the legislative
policies that underlie the AHRA. Accordingly, it held that if the appellant was otherwise
liable under the copyright laws, Section 1008 cannot not relieve the appellant from
contributory or vicarious copyright infringement.

Judgement:
As to the provision involving fair use, the Court found that the act of Napster in
distributing copies of the copyrighted works in music files fell outside the provision of fair
use. The Court held Napster contributively and vicariously liable as it did not affirmatively
use its ability to patrol its system and preclude access to potentially infringing files listed in
its search index. Further, the Court held that Section 512 (a) of the Digital Millennium
Copyright Act and Section 1008 of the Audio Home Recording Act does not protect Napster
from the plaintiffs' claims of copyright infringement. The court remanded the case back to the
district court to serve an injunction that requires Napster to remove infringing copyrighted
material from its program.

Analysis of the Case:


The case discussed very important key points as to what is fair use, how to evaluate
whether the intended use was a fair use and on what basis a network service provider can
claim exemption from copyright infringement. This case also dealt with Audio Home
Recording Act where the court made distinction between digital and analogue recording
devices and media for making digital musical recordings or analogue musical recordings.
Here the Court made distinctions as to how a computer, especially a hard disk falls within the
purview of the Act

Firstly, the balancing factor used in this case to determine what constitutes a fair use was
very appropriate as it looked from all the corners of a use. Copyright Act protects the right of
the owners from being violated exclusively in terms of the sale, reproduction, distribution,
preparing derivative works and any adaption and modification to the copyright content so that
the owners of the copyrighted works benefit from it. The Act provides exceptions to these
rights in the nature of fair use which were so intended that it did not interfere with the
exclusive right of the owners of copyright to earn monetary gain from their product. Thus, the
fair use granted to individuals had been deliberately made limited only to non-commercial
use of it and basically for private purpose only. The use should not be such as it would
negatively affect the sale of the product or diminish its value in the market. As in this case,
although Napster had not been dealing with the sale of the copyright content, yet it
contributed to distribute the copyrighted works freely across users which ultimately affected
the sale of the product. The Court made it very clear in its decision that even if the activity
did not involve sale of a copyrighted work, but it would infringe copyright law if the contents
are distributed publically and freely without authorization because such distribution hampers
the public sale of the product and the public would have to buy the product had it not been
circulated freely. The Court categorized this as sale and thus widened the scope of the Act.

Secondly, in this case the Court determined the requirements of service provider under the
Digital Millennium Copyright Act. Here the Court took into account every factors which need
to be satisfied for being a service provider and what duties it is required to comply under the
Act to qualify exemption from copyright infringement. This case pointed out that an online
service provider is one which transmits, routes, or provides connections for, material through
a system or network controlled or operated by the service provider. If the service provided is
such that facilitates in connecting two users not by its own system, then he cannot be a
service provide. However, the Court highlighted by this case that being a service provider
alone cannot grant immunity from copyright infringement if he had the means to adopt,
reasonably implement, and inform its users of a policy for terminating repeat infringers if
they violated copyright f a work.
Thirdly, the Court highlighted that the non-commercial consumer use of digital and
analogue recording devices and media for making digital musical recordings or analogue
musical recordings are only protected by Audio Home Recording Act. However, the Court
held that hard drives of a computer store data of all kinds, from word processing files to
multimedia files, and they ordinarily store computer programs as well. As a result, hard
drives fall outside the statutory definition of digital musical recording because they are not
objects in which only sounds are fixed, and second, they are objects in which one or more
computer programs are fixed. Moreover, the Court made it clear by this decision that if an
action for infringement does not involve the specified devices or media as specified in the
Act, it falls outside the scope of the Act and one cannot not relieve them from contributory or
vicarious copyright infringement.

Suggestions:
In many ways, Napster had become a useful and beneficial tool for both consumers and the
record companies. The aforementioned points should have been considered before placing the
blame of the waning music industry on Napster and its users. Some would argue that Napster
actually saved the music industry by regenerating interest in recorded music. However,
neither the district court nor the appeals court seemed to have any sympathy for Napsters
legal position, and consequently neither court seemed to perceive a need to explore and
explain the subtleties of the rulings. The Napster ruling also gives only vague clues about the
meaning of fair use. Unfortunately, the rulings from both courts suggest strongly that the
judges had little inclination to find in favour of Napster, and their analysis of fair use
therefore seems to hurry toward an inevitable conclusion without much elaboration.

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