The three-judge panel of the 9th Circuit Court of Appeals in San Francisco could take months to rule on whether Napster will have to shut down. In July, Judge Marilyn Hall Patel issued the injunction, ordering that the Napster Web site remove copyrighted material from music labels represented by the Recording Industry Association of America (RIAA), the plaintiffs in the lawsuit.
Napster quickly appealed Patel's ruling and wound up before the appellate court on Monday for another review of the merits regarding the injunction. A trial date in the case has not yet been set.
The RIAA and record labels it represents contend in the copyright infringement lawsuit that Napster is violating copyrights and engaging in piracy.
"We don't think it's piracy because we think it is lawful [use of material]," Napster attorney David Boies argued before the appellate court on Monday.
Boies repeatedly underscored that Napster simply provides users with a means to trade songs and does not, as a company, directly violate copyright. He also urged the court to carefully consider rulings that could drastically affect the growing use of peer-to-peer technology.
"They supply the technology, they supply the software, and they supply the index," Boies said of Napster's service. "That is the extent of their relationship with the user."
While he contends that Napster users are the ones who actually infringe on copyrights, Boies said that non-infringing copyright use remains on the rise. Many titles on the site do not have copyright restrictions, he said.
"The number of non-infringing users is multiplying as we speak," Boies said.
Napster lawyers contend that at least 10 per cent of the songs on Napster are not copyrighted, and 20,000 artists have given the Web site permission to use their music. The peer-to-peer technology offered by Napster is important, and it should be the business of the US Congress to provide legislation regarding its use, not the job of the courts, attorneys argued.
But the issue isn't about technology, said Russell Frackman, an attorney for plaintiff A&M Records. "We're talking about a business and a business plan," he said, adding that Napster was created with the intent of sharing copyrighted material.
When Frackman addressed the court, the appellate panel pushed the attorney to answer questions regarding what effect the injunction against Napster might have on the site's future. The judges pointed out that many contracts between the labels and artists forbid single song titles to be unbundled from an album. As Napster delivers songs one at a time, the court questioned why the RIAA might object to a practice that music companies do not currently employ.
"If I left my car keys in my car, stealing my car would still be a crime," Frackman said, suggesting no matter what form the piracy takes, music labels still are hurt.
Leonard Rubin, head of intellectual property at law firm Gordon and Glickson said that Monday's appellate panel appeared more sympathetic to Napster's side of the case than some judges in previous hearings.
"It seems as though the judges were a lot friendlier to Napster than one might have expected them to be," Rubin said.
He added that at least two of the judges will need to agree on what action to take next. No set timetable exists for when the judges will issue their ruling on the injunction.
Rubin said he ultimately looks for the court to let the injunction go. "I imagine, they will not likely reinstate the injunction," he said.
At a press conference following the hearing, Hilary Rosen, president and chief executive officer of the RIAA, deflected claims that Napster actually managed to increase CD sales for the labels.
"CD sales have been increasing modestly for years," she said. "That is not what this is about."
She did, however, say that emerging artists should weigh their options about entering the music industry. As technology changes, a variety of opportunities may exist for success in the years to come.
"A new artist today has a lot of choices to make," Rosen said.
Hank Barry, interim chief executive officer at Napster, also spoke at the press conference and said that his company made repeated attempts to deal with the RIAA out of court to no avail. He urged the parties involved to work out a deal.
"It's time for some good faith negotiating," Barry said.
"Over a period of many months, Napster has made serious proposals to each of the major record companies and their publishing affiliates that involve payments of substantial percentages of expected company revenues to compensate artists and rights holders -- proposals whose most conservative estimates would result in payments of over $US500 million to the industry in just the first year alone," Barry said in a release issued after the hearing.
"Every one of these proposals has been rejected, and the record companies have made no counterproposals," he said in the statement.