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Napster is guilty of copyright infringement, and that makes some people happy, others mad.

The Ninth Circuit of the U.S. Court of Appeals ruled Monday that Napster infringes on record company copyrights through the operation of its music file-trading service. Nonetheless, the ruling also directs that Napster be allowed to continue operations until the original injunction is modified to comply with the appeals court's decision.

Like Napster's confused fate, the mixed reaction to today's ruling raises questions of the legality of file sharing and the questionable future of myriad Napster clones.

For or Against

Reactions depend upon which side of the Napster fence you sit. Opponents of Napster, such as the Recording Industry Association of America (RIAA), which has already requested Napster remove 12,000 copyrighted songs from the service, issued a statement suggesting it is pleased with the federal appeals court decision: "We're confident that the Ninth Circuit understands the severity of our claim and will uphold the decision of the U.S. Federal Court. Monday's decision may finally clear the way for the legitimate online marketplace to thrive in an environment that encourages both creativity and a respect for copyright."

Others in the music industry have reached agreements with Napster, including Bertelsmann AG, the parent company of BMG. It says it will drop its lawsuit against Napster and has announced plans to invest a reported $50 million in the company once it creates a pay service that affords artists' royalties. Napster's subscription service will become available in June or July, a Bertelsmann executive said recently.

The Consumer Electronics Association is "greatly disappointed" in the ruling, which impacts the "development of new technologies," says Jeff Joseph, vice president, communications for CEA.

"If consumers have to pay for every download, it could have a chilling effect on current technology such as MP3 players and digital recorders," Joseph says.

Larger questions loom for the music industry that has seen Napster knockoffs prosper on the coattails of Napster's success. Peer-to-peer services such as Gnutella and Freenet have been gaining mainstream momentum.

Guilty as Charged

The court upheld the findings of the lower court almost universally, holding that Napster's service is not protected by fair use. The court also said the service is guilty of two kinds of copyright infringement, has failed to police its system in an attempt to stop the spread of copyrighted works, and does substantial harm to record companies.

"Napster, by its conduct, knowingly encourages and assists the infringement of [record company] copyrights," the court wrote in its decision.

The ruling is the result of a lawsuit brought by the RIAA on behalf of the five major record labels--BMG Entertainment, Warner Bros. Music Group, EMI Group, Sony Music Entertainment, and Universal Music Group--in December 1999.

The RIAA had asked the court to find the company guilty of both contributory and vicarious copyright infringement and to shut down the service because it was causing its member companies irreparable harm. The trading of MP3 files, it said, amounts to stealing because it lets users who have not purchased songs download, play, and store them. The RIAA charged that Napster executives knew infringement was taking place and were contributing to it by providing the service.

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