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Wednesday, Nov 25, 2009
Fending off a life-threatening court injunction, file-swapping phenom Napster insists it has done nothing wrong.
Jul 7, 2000 | So much for David vs. Goliath.
Any lingering notion that the battle between Napster and the Recording Industry Association of America is the legal equivalent of a powerless Internet start-up fighting off a monstrous industry tool was dashed on Monday when Napster filed its rebuttal in a San Francisco U.S. District Court.
Napster, which was rebutting a RIAA request that the music-swapping company be shut down for rampant copyright infringements, has proved, among other things, that the once-tiny concern has become Big Business.
Napster recently secured $13 million in funding from one of Silicon Valley's largest venture capital firms. Meanwhile, its legal brief's cover page boasted three law firms on two coasts, led by attorney David Boies, who may be the most sought after white-shoe lawyer in the nation. (Boies is coming off the successful prosecution of the Justice Department's antitrust case against Microsoft.)
Thirty-four pages later, the Napster lawyers note that if Judge Marilyn Patel shuts down the company, a bond will have to be posted "to cover all potential injury pending trial" -- which means that if Napster wins on appeal, it can recover money lost during the injunction downtime.
The amount of the bond? First consider recent press reports that Napster, despite zero revenue and profits, is worth between $60 million and $80 million. Instead, company lawyers argue, "when comparing Napster to Internet companies with comparable numbers of active users, Napster's market value is between $1.5 and $2 billion." That's right, billion.
The revelation is just one of many intriguing passages in the no-stone-unturned filing, which argues strenuously that Napster's file swapping is perfectly legal.
The skirmish centers around RIAA's June 12 request that Napster be shut down on the grounds that the company is guilty of "contributory and vicarious copyright infringement." In other words, Napster knowingly allows -- and abets -- 10 million users to swap unauthorized MP3 music files. The argument has been going on for some time: Napster tried to get an earlier RIAA lawsuit dismissed by suggesting that its actions were covered by the Digital Millennium Copyright Act (which provides immunity, or "safe harbor," for online portals that merely connect individual users). Judge Patel essentially denied that request. Patel will hold a hearing on July 26 to decide the injunction issue.
Taking its cue from the judge, Napster in its latest brief basically ditches the DMCA defense (although there is a halfhearted attempt to revive it), and instead focuses on the broader question of whether Napster even needs immunity from copyright infringements. Boies and company insist it does not.
