The instant case involves infringement of intellectual property, with A&M Records and 17 other recording companies as plaintiffs; and Napster, Inc. and other parties as defendants.

The records of the case show that on December 6, 1999, A&M Records and 17 other recording companies filed the complaint of contributory and vicarious infringement, violation of the California Civil Code, and an unjust competition against Napster, Inc., an Internet start-up, for installing its system which enables users to download MP3 music files from the plaintiff companies without payment. The system, which Napster, Inc. made available for the public to register and utilize the services, has been used in massive violation for copying or downloading of music files in MP3 format from different computers, and from different sites. These sites include those that are of the record companies, from where the MP3 music files were copied, downloaded, and redistributed without payment, thus, violating the legislation concerning the permission prior to the acts or commissions of the crime of infringement.

Facts of the Case

The acts or commissions of offenses violating the rights of the intellectual property owners of the record companies were the causes of actions of the instant complaint of this case. Napster, Inc., the defendant, has been doing business with its system that enables users to have access to MP3 music files of other users who are online through its Music Share Software which is free of charge. This technology intrudes the system and files of the record companies. With the facility of the Napster Music Share software, users are able to download and upload MP3 music files they wanted without any authority and permission of the owners. At the same time, everything is copied and distributed for free. The effect of this infringement to the market or sales of the plaintiffs raises many questions since their music files were just taken outright from their music libraries without having been purchased. Millions of music records have been copied without paying the royalties to copyrighted owners.

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This Napster technology enhanced and facilitated music sharing operations which results in copyright infringements and detrimental effect on the market and sales of the original music records. Its program aimed at operating in the online digital music marketing had also been distorted and distracted. The expected sales could not be realized because music listeners were able to have their copies of the MP3 music files downloaded directly to their hard drives through the Napster Music Share software.

When the record companies noticed that it has become a wide-spread activity of the users of the Napster internet site, they took action by charging the defendant with contributory and vicarious infringement. Had it not been for the Napster system which facilitated the copying, downloading, and to the extent of distributing MP3 music files, the record companies would have earned most of their sales from digital music marketing.

The Circuit court found Napster guilty of infringement, contributory and vicarious, by allowing its users to copy, download and distribute MP3 music files belonging to the record companies free of charge.

MP3 Technology was designed by the Moving Picture Experts Group in 1987 to set a standard file format for the storage of audio recordings in the digital format called MPEG-3, abbreviated as MP3. The digital MP3 files are made using a process called ripping. The ripping process software made it easy for a computer user to copy MP3 files to his computer hard drive. MP3 files can even be transferred using any file transfer protocol.

In this case, MP3 music files are the targeted objects of the Napster technology of searching for music, copying, downloading, and distributing these music files to different users through music swapping sharing, which is facilitated by the Napster Music Share software. The activity then resulted in infringing of the intellectual rights of the record companies and that of their artists, as their MP3 music files had been searched, copied and downloaded without their permission.

Napster Music Share software facilitates the transfer of MP3 music files for anyone who is connected online through the Napster website. Anyone who would want to download the Napster Music Share software would just log on to the Napster website and register.

Plaintiffs Business

A&M Records, Inc. and other Record Companies are making their music compositions with their copyrights, and so with that of their recording artists compositions. These music compositions are stored in their system of recordings in a digital MP3 format. The plaintiff recording companies operate for profit by selling musical compositions. Anybody can access the websites of the plaintiff record companies and listen to a sample of their recordings or music, but copying MP3 music files without payment is prohibited. Before an MP3 music file can be downloaded from the sites of the record companies, purchase must first be done. They also have a program of engaging in online digital music sales and marketing which had been distorted by the acts of infringement committed by Napster and its users. With millions of computer users visiting the Napster website, the business of the plaintiff has been adversely affected. Once a computer user could visit the Napster website, the probability of copying and downloading MP3 music files would always be great. As a result, instead of purchasing the music from the record companies, they would have it for free through the Napster Music Share software.

Business Technology of the Plaintiffs

The technology of record companies of the plaintiffs is to produce music through a standard format of digital recordings, such as MP3 music files, where all of these files are also the target of the system that Napster had created. It is the standard technology used by recording companies. The recording companies may have enhanced, developed, improved, and even sophisticated their technology so that it covers all the process from recording to marketing. At this instant, the plaintiffs are already in their online marketing schemes of selling their products. They venture to every possible web marketing system, with their technically designed web marketing tools and strategies. With the internet, all computer related activities, businesses, information sharing and processing, education, could be enhanced to a level which could be considered highly technical.

Business of the Defendants

Napster, Inc. is a start-up company serving the public with its free of charge facilities, especially that of music-swapping, which turned into vast copying and distribution of MP3 music files downloaded by computer owners, who are using the Music Share software distributed by the company to the users of its site. Once a computer owner is registered with the Napster internet site, he may install the Napster Music Share software for free. Music Share software is a facility of Napster services where everyone logged on to the Napster system could have access to all online computers, and enter into their music libraries to select lists of MP3 music files they would want to copy or download directly to their computer hard drive. Instead of having these MP3 music files bought, they could have it for free through Napster internet site. This facility and activity has violated the copyright license of the A&M Records, Inc. and other Record Companies, where Napster and its users could access and were able to access the MP3 music files of these record companies, have them copied or downloaded to their (Napster) system and computers, and that of their users computers without the permission from the record companies. These acts constitute the crime of infringement on the intellectual rights of the record companies and that of their artists. Napster business has been operating without the copyright registration for Napster. With the mechanism of this business, a massive infringement has been the series of misdeeds and offenses the defendants committed by violating the owner’s copyrights or intellectual property. Napster website gained high attendance since its users could have the benefit of having MP3 music files free of charge. The users only incurred network traffic charges.



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Business Technology of the Defendant

Napster technology was a brainchild of a college student who wanted to have a facility on music swapping with his roommates. The initiative of this idea has become a multi-million user tool of downloading and distribution of MP3 music files from different computers and sites, including those MP3 music files of the plaintiff record companies. This becomes a vital service for millions of computer users who have access and are connected with the Napster system, on its internet website.

To avail of this technology, a user may download the proprietary Music Share software from Napster Internet Website and this software is free of charge for anybody from the public to download. Being free of charge, the registration does not necessarily require a real name in creating an account for registration in the Napster website. Once a name has been registered, the user can log in and log out with his/her password. It is the user who has control of his/her account name and password since Napster does not have control over an individual’s account and it also does not keep the record of users of its Music Share software facility. This facility has gained vast popularity for Napster website, through its features, which have been described above

Effect of Napster Operation on the Market of Copyrighted Works of the Plaintiffs

Since Napster is offering free of charge Music Share software, millions of music listeners avail of the free file copies of music through the Music Share software technology. Thus, it adversely affects the market of the plaintiffs. Just by a simple analysis, the sales of the music recording of the record companies go down because the listeners, who are mostly computer literate, can now download the Napster Music Share software. And with it, they can have free access to any available sites where MP3 music files can be copied and downloaded for free. Instead of buying the music files, they just get them directly through the facility of the Napster Music Share software. The result would be a serious negative impact on the sales of the recording companies. This has been the most critical issue where the instant case has been filed against Napster. The effect that Napster had to distort the market of the plaintiffs is so detrimental on the part of the plaintiffs.

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The current market issue for the plaintiffs needs has to be solved in the court where it has been brought to for its proper disposition. As the law provides protection, the courts must also be vigilant in granting the same; in any event, an aggrieved party has come to its fold to seek shelter therein. There are instances which have to be investigated for further knowledge on the actual situation of the case, or that the facts are not so clear for the court to properly determine the apprehension of facts and the proper application of the law, but this instance merits the diligent and immediate attention of the courts.

Applications of the Law

With a simple judgment of an ordinary mind, what has been done by Napster is an act which violates the rights of others, or those who were adversely affected by the access facilitated by Napster through its technology, without the prior authority or permission of the owners of the rights. There are diverse activities present in the operations of the defendant party but as to those which are directly involved and attributable to the infringement activities, this covers them for subjection.

The intellectual property of the record companies infringed by Napster is protected by law and it cannot be infringed or violated without violation of the laws protecting the same. By accessing the MP3 music files of the record companies using the Napster Music Share software, without the knowledge of the copyright owners, without receiving the authority and permission, the offenses of unfair competition, violation of the owners’ rights, and infringement of the copyrights license were committed by the Napster and its users.

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Legal Standard

Once a crime is committed, the offender has to face the consequence of the offense and should serve the penalty that the law provided for such to compensate the offended party or as a vindication of the offended rights, damages must be imposed.

Direct Infringement

The infringements committed against the intellectual property owners can be categorized in three forms. The third parties, the users of the Music Share software, who directly accessed the MP3 music files of the different sites of the plaintiffs is in the form of direct infringement, which Napster has the obligation to answer for the charges of the same, since it allowed its system to be utilized for the activity of copying and downloading the MP3 music files without the permission of the copyright owners.

Contributory Copyright Infringement

The facility and ease given by Napster in allowing its software to be downloaded by the users of its Music Share software are contributory in nature. The design of the business Napster has established is to enhance and facilitate the exchange or swapping of MP3 music files. The system has been developed into some kind of sophisticated music sharing software used for copying or downloading of the MP3 music files of the record companies to various users in a wide-spread scale of millions of computer shops and owners. While most of the acts of infringement are done by the third parties, the users of the Napster system, the defendant, has contributed and even worsened the situation of infringement because of its facilities – the enhanced system with the Music Share software.

Vicarious Copyright Infringement

The sense of represented infringement could be deemed as vicarious by its nature. The system of Napster technology which is ready-to-use Music Share software has imputed Napster of the vicarious attribute of infringement every time it is used by its users to search for MP3 music files on various websites.

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The arguments of both parties, in this case, were noted and taken by the court for its decision and order. Before reaching the decision and issuing an order, the Circuit court had to evaluate both the evidences and the arguments presented by the parties.

The plaintiffs, in filing their complaint, held its strong case of the infringement committed by Napster. It could even be supported by the evidence of the analogy of the facts of the case. Even by the document of the defendant itself, the case of the plaintiffs gained strength that it would really prosper and succeed. The adduced evidence supported the stand of the plaintiffs against the defendant, and that it really has to be vindicated.

The Court of Its Ruling in the Decision it Had Rendered

This case had been in stages of proceedings in the Circuit court, and going up when it was appealed to the Court of Appeals.

In finding that the defendant committed the offense of infringement against the record companies, the courts agreed to grant the petition of the plaintiffs for the preliminary injunction enjoining the defendant Napster to disable the system actively attached and attributed to the infringement activities of all the parties liable for the offense. They are those committed by the third parties such as direct infringement, the contributory and vicarious infringement committed by Napster, Inc.

Attached to the court rulings are the instructions for both parties to cooperate in the final and ultimate elimination of the facilities and activities of infringement.


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