Napster Wins New Life With 11th-Hour Stay

The record industry better not pop the cork on that champagne: Napster Inc. is still alive.

The San Mateo firm was granted a surprising last-minute reprieve late Friday afternoon by a federal appeals court, reversing a judge’s order that would have shut the service down by midnight. Now, Napster will be allowed to stay up and running at least until mid-September, when a three-judge panel is scheduled to hear oral arguments in the appeal.

“We’re thrilled about this decision,” Napster CEO Hank Barry said in an interview. “And we are extremely grateful to the Napster community for all of their support throughout this ordeal. We don’t believe they are infringing copyrights and we didn’t believe the preliminary injunction was fair.”

“The individual user has an absolute right to share music,” lead Napster attorney David Boies said on CNNfn.

But Boies, famed for spearheading the Justice Department’s antitrust case against Microsoft Corp., said he would like to see settlement talks resume.

“I don’t believe that consumers of music are well served by this litigation. I think this is the kind of case that should be resolved,” Boies said. “The problem is the RIAA [Recording Industry Assn. of America] seems determined to kill this new medium. If that’s so, we’re not going to go quietly into that night. We’re going to fight.”

The RIAA, which has been bombarded with thousands of angry e-mails from Napster users over the last two days, issued a statement from President and CEO Hilary Rosen saying, “It is frustrating, of course, that the tens of millions of daily infringements occurring on Napster will be able to continue, at least temporarily. We look forward to the day when the infringements finally cease.”

The ruling came just two days after U.S. District Judge Marilyn Hall Patel rebuked Napster for facilitating piracy. She ordered the firm to pull the plug on an Internet service that allows 22 million users to swap songs. Patel gave Napster just 48 hours to block the transmission of all copyrighted material owned by the nation’s five largest record conglomerates, which had sued Napster alleging copyright infringement.

Patel’s decision to grant the industry’s request for a preliminary injunction against the firm was widely perceived as a major victory for the music industry and seemed to set a legal precedent in its battle against Internet piracy. Such a move would have put other purported pirates on notice by nixing the service until the matter was resolved in court later this year.

But Napster filed a request Thursday for an emergency stay of Patel’s order, complaining that such an action would force the firm to fire more than three dozen employees and would drive it out of business. On Friday, two appellate judges stayed the preliminary injunction, noting that Napster’s lawyers had raised “substantial questions to both the merit and the form” of the injunction. The judges gave little indication of their basis for issuing the stay.

Friday’s decision was greeted with screams of joy at Napster’s headquarters and exuberance around the world by users of the wildly popular online music service. “Long Live Napster!” one user nicknamed “Nytryx” typed in an Internet chat room devoted to the service.

An estimated 22 million people have downloaded Napster’s free proprietary software, which allows users to access one another’s computers in search of digital music files. Napster’s technology acts as a means for users to find and exchange music, but does not actually store copies of the audio files on its own corporate computer system.

Napster was sued for copyright infringement last year in U.S. District Court by the RIAA, the National Music Publishers Assn. and recording acts Metallica and Dr. Dre.

Napster defended its service, saying its members were not violating copyright law because they traded songs for personal, noncommercial use as defined by the Audio Home Recording Act of 1992.

In her decision Wednesday, Patel vehemently disagreed, saying that Napster was clearly set up to enable users to steal copyrighted material. “[Napster] did what it purported to do, to facilitate the downloading and uploading of music,” Patel said. “ ‘Piracy be damned’ was the sense one gets from reading [the evidence].”

Friday’s stay by the appellate court raises questions once again about whether traditional copyright law can be applied to the Internet.

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Reuters contributed to this story.

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