The Philippine IT Law Journal

Jurisprudence in CyberLaw
A & M Records, Inc., et al. vs. Napster Inc. 239 F3d 1004 (9th Cir. 2001)
by Jhonelle S. Estrada

(This section will be a regular feature of the journal to highlight significant cases decided in the Philippines and in foreign jurisdictions relating to information technology)

Facts: Plaintiffs are engaged in the commercial recording, distribution and sale of copyrighted musical compositions. It was alleged in the complaint that NAPSTER is a contributory and vicarious copyright infringer. NAPSTER facilitates the transmission of MP3 files between and among its users, through a process called "peer to peer" file sharing. NAPSTER allows its users to: 1) make MP3 music files stored on individual computer hard drives available for copying by other Napster users; 2) search for MP3 music files stored on other user's computers; and 3) transfer exact copies of the contents of other users' MP3 files from one computer to another via the Internet. The NAPSTER's Music Share Software made these functions available without charge from NAPSTER's Internet site. The Plaintiffs claimed that NAPSTERS users were engaged in the wholesale reproduction and distribution of copyrighted works, all constituting Direct Infringement. They also claimed that NAPSTER, is secondarily liable for the Direct Infringement under two doctrines of copyright law: contributory copyright infringer and vicarious copyright infringement. NAPSTER on the other hand contends that its user do not directly infringe plaintiffs' copyrights because the users are engaged in the fair use of the material and that it doe not know of the direct infringement Plaintiffs seek injunctive relief.

Issue: Whether Napster can be held liable for direct infringement?

Held: The evidence showed that majority of Napster users use the service to download and upload copyrighted music; acts that constitutes direct infringement of plaintiffs' musical compositions, recordings. It was also established that Napster users infringe at least two of the copyright exclusive rights; the rights of reproduction and distribution. Its contention that its users do not directly infringe plaintiffs' copyrights because its users are engaged in fair use of the material cannot be given weight. Several factors were considered to determine its defense of fair use of the material. These are 1. the purpose and character of the use, 2. the nature of the copyrighted material, 3. the "amount and substantiality of the portion used" in relation to the work as the whole; and 4. the effect of the use upon the potential market or the value of the work. The "purpose and character" factor focuses on whether and to what extent the new work is 'transformative' this factor also requires the court to determine whether the alleged infringing use is commercial or non-commercial. The court determined that Napster users engage in commercial use of the copyrighted materials. Direct economic benefit is not required to demonstrate a commercial use, but it is the repeated and exploitative copying of copyrighted works. The record shows that repeated and exploitative unauthorized copies of copyrighted works were made to save the expense of purchasing authorized copies. The second factor also exist. Works that are creative in nature are 'closer to the core of intended copyright protection' It was determined by the court that the plaintiffs' 'copyrighted musical compositions and sound recordings are creative in nature', thus cuts against a finding of fair use under the second factor. Under the third factor, records show that Napster users engage in 'wholesome copying' of copyrighted materials because file transferring involves copying the entirety of the copyrighted work. The Effect of Use in Market shows that Napster use harms the market for their copyrighted musical compositions and sound recordings. Its defense of fair use is untenable.

Issue [2]: Whether Napster can be held liable for direct infringement uncle r the doctrine of (a) contributory copyright infringement, or (b) vicarious copyright infringement.

Held [2]: (a) "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" Contributory liability requires that the secondary infringer "know or have reason to know of direct infringement. The records must show that NAPSTER has knowledge, both actual and constructive of direct infringement. Napster was proven to have actual knowledge when: l. a document authored by Napster co-founder mentioned 'the need to remain ignorant of users' real names and IP addresses, since they are exchanging pirated music.; and 2. the Recording Industry Association of America (RIAA) informed Napster of more than 12,000 infringing files, some of which are still available. There is also constructive knowledge because: 1. executives have recording industry; 2. they have enforced intellectual property rights in other instances; 3. Napster executives have downloaded copyrighted songs from the system; and 4. they have promoted the site with "screen shots listing infringing files." Napster provides the 'site and facilities' for direct infringement. Plaintiff's claim that Napster can be held liable for contributory copyright infringement is meritorious.

(b) Vicarious copyright liability is 'an outgrowth' of respondeat superior. It extends beyond an employer/employee relationship to cases in which a defendant has the right and ability to supervise the infringing activity and also has a direct financial interest in such activities.' The court finds Napster's failure to police the system's "premises," combined with a showing that Napster financially benefits from the continuing availability of infringing files on its system, leads to the imposition of vicarious liability.