The Napster litigation in the United States has highlighted the ramifications of file-swapping technology that, if left unchecked, will only increase in persuasive use, carrying with it dire consequences for copyright owners. Dr Stanley Lai provides a summary of the case and looks at the potential effects on Singapore law.
Napster Inc is a small internet company based in San Mateo, California, which
makes its software available for internet users to download free of charge.
Users who acquire this software in their systems can proceed to share music
files in MP3 format with others who are logged onto the central Napster Server.
The essence of the Napster system is that it allows users to search for MP3
music titles, which they can download on demand from computers and servers of
other users. Napster itself does not actually reproduce or distribute any music
or MP3 files.
The Action Against Napster
Claiming that Napster essentially ran '… an online bazaar devoted to the pirating of music …', 19 music companies, which are members of the Recording Industry Association of America (RIAA), sued Napster last year. The record companies claimed that countless users on the Napster Server copied music illegally. It was also alleged that Napster was liable for 'contributory' and 'vicarious' copyright infringement, because it was aware of the making of illicit copies and materially contributed to such copying, and did not prevent or stop it.
By way of an opening salvo, Napster sought summary adjudication of the question of whether it was entitled to rely on the defences under section 512 of the Digital Millennium Copyright Act ('DMCA'), which provides that internet service providers are not liable for infringements if they are acting merely as a conduit for actions carried out by persons receiving transmissions, nor for intermediate and temporary storage such as system caching, nor system storage and information location tools. These are otherwise known as 'safe harbours', some of which will only apply if a service provider complies with the 'notice and take down' provisions of the DMCA. 'Notice and Take Down' provisions allow copyright owners to notify an online service provider of allegedly infringing material on the service provider's system and require the provider to remove or block access to such material after such notice is received.
Napster sought, inter alia, to rely on section 512(a) of the DMCA, claiming that it negates any liability for copyright infringement by reason of the service provider transmitting, routing or providing connections for material through a system or network controlled or operated by or for the service provider, or by reason of intermediate and transient storage of that material in the course of such transmitting, routing or providing connections. For section 512(a) to apply, the following conditions have to be satisfied:
Napster claimed to be a 'service provider' for the purposes of claiming protection under the 'safe harbour' provisions of the DMCA. First, it claimed to offer the 'transmission, routing or providing of connections for digital online communications' by enabling the connection of users' hard drives and the transmission of MP3 files directly from the host hard drive and Napster browser through the internet to the user's Napster browser and hard drive. Secondly, users chose the online communication points and MP3 files were consequently transmitted with no direction from Napster. Thirdly, Napster did not modify the content of the transferred files. Further, Napster maintained that the section 512(a) safe harbour protects its core function - transmitting, routing and providing connections for the sharing of the files chosen by its users. It argued, inter alia, that:
The RIAA's principal argument against Napster's application for summary adjudication was that Napster did not perform the passive conduit function as claimed. The court agreed in finding that Napster did not provide connections 'through' its system. Even though the Napster system conveyed address information to establish a connection between the requesting and host users, the connection itself occured through the internet and not strictly through the Napster system. As such, it could not be said that Napster qualified for protection under the safe harbour provisions since it did not transmit, route or provide connections for allegedly infringing material through its system.
The Court's Ruling
On 26 July 2000, Judge Patel of the Northern California District Court granted a preliminary injunction against Napster (see C00-0074 Opinion dated 10 August 2000). Whilst Napster could not be said to have committed direct copyright infringement since no actual copies of MP3 files were stored or reproduced on its own servers, the court concluded that the RIAA had established a reasonable likelihood of success in relation to contributory and vicarious infringement to warrant a preliminary injunction.
In the first instance, the plaintiffs had established that Napster enabled its users to commit direct copyright infringement. This was a necessary pre-condition to establishing vicarious and contributory infringement by Napster. The court heard evidence that virtually all Napster users engaged in the unauthorised downloading or uploading of copyrighted music - as much as 80% of the files available on Napster may be copyrighted and more than 70% of the files available were owned or administered by member companies of the RIAA.
On contributory infringement, the court held that the plaintiffs had demonstrated that Napster had actual or constructive knowledge of its users' illegal conduct. Furthermore, by supplying proprietary software, a search engine, servers and the means of establishing a connection between users' computers, Napster was found to have materially contributed to the infringing activity. The evidence was compelling; for example, Napster executives downloaded infringing material to their own computers using Napster and promoted the defendant's website with screen shots listing infringing files.
Under US law, a copyright defendant incurs vicarious liability if he has the right and ability to supervise the infringing activity in question and also to gain a financial interest in such activity. The court found that Napster could actually 'police' its own services. Direct financial benefit was also not required, since liability could be founded on Napster receiving some form of economic incentive for tolerating unlawful conduct. It was established that Napster could derive revenue directly from increases in its user base, through various revenue models. Hence, a reasonable likelihood of success of a cause of action in vicarious liability was established for an injunction to be issued.
Napster's defences
Napster unsuccessfully argued and pleaded various defences, including fair use and 'substantial non-infringing use'. The latter doctrine is also known as the 'staple article of commerce' doctrine, which provides that a manufacturer is not liable for selling a staple article of commerce that is capable of commercially significant non-infringing uses (see Sony v Universal Studios (1984) 464 US 417 at page 442). The court concluded that any potential non-infringing use of the Napster service is minimal or connected to the infringing activity or both. It was held that a substantial or commercially significant use of the service was, and continues to be, the unauthorised downloading and uploading of popular music, most of which were protected by copyright.
Napster unsuccessfully relied on the defence of 'fair use' under section 107 of the US Copyright Act, which provides that the following factors are to be taken into account:
Under the first fair use factor, the court held that the Napster service was not promoting a private use of MP3 files. A host user sending a file could not be said to be engaging in a personal use when distributing that file to an anonymous requester. The court held that copying to save users the expense of purchasing authorised copies is a commercial purpose and thus weighed against fair use. The nature of the copyrighted works in this case (music recordings in MP3) was also by definition creative (as opposed to functional), and this was a feature counting against a finding of fair use under the second factor.
As for the third factor, the making of entire copies of musical works and sound recordings - which was the technical consequence of using Napster - was a factor which counted against the finding of fair use under section 107 US Copyright Act. The plaintiffs also successfully argued that Napster use also harmed the market for copyrighted compositions and sound recordings in two manifested ways:
Napster also tried to argue that the activities of its users constituted 'space-shifting', involving a transfer of format for sound files. An analogy was attempted between space shifting and 'time shifting' in the case of VCRs: the activity of recording television programmes for later viewing which, under US (and Singapore) laws, is permitted. The court was unimpressed by this argument, stating that the most credible explanation for the exponential growth of traffic to the Napster website was the vast array of free MP3 files that were offered by others, not the ability of each individual user to space-shift files which he also legitimately owned.
Responses to the Judgment
The issues raised by the Napster litigation are ultimately matters for consideration before the US Supreme Court, particularly in relation to the defence of fair use, given the mercurial nature of this doctrine and its current application in the American courts.
Indeed, renowned critics of the District Court's opinion have commented that the judge erroneously applied too narrow an approach towards fair use, which ultimately curbs the development of other peer-to-peer file sharing regimes (eg Gnutella and FreeNet). Napster's file sharing system has been hailed as promising technology, which gives individual consumers enhanced control over the information that is found, saved and transmitted over the internet. File sharing involves many instances of non-commercial personal use, which should be considered 'fair'.
Another substantial criticism is the District Court's emphasis on the initial and most popular use of Napster technology, in a manner that forecloses and is detrimental to subsequently developed non-infringing uses. At least one 'Amicus Brief' that was recently filed before the Ninth Circuit critiques that by finding Napster liable as a contributory copyright infringer of the plaintiffs' works, in the course of conferring overreaching copyright protection in respect of a new swapping technology, the District Court has disregarded the US Supreme Court's much heeded caution in Sony v Universal City Studios (1984) 464 US 417 at page 431:
The judiciary's reluctance to expand the protection afforded by the copyright (sic) without explicit legislative guidance is a recurring theme … Sound policy, as well as history, supports our consistent deference to Congress when major technological innovations alter the market for copyrighted materials. Congress has the constitutional authority and the institutional ability to accommodate fully the varied permutations of competing interests that are inevitably implicated by such new technology.
The Singapore Context
Although the Napster case is currently on appeal before the US Ninth Circuit, it
is expected that cases like Napster will increase over time and may even
venture into litigation in Singapore or elsewhere. If a similar action should be
brought against Napster (or another entity offering a similar service to net
surfers), several provisions of the Singapore Copyright Act ('SCA') are also
potentially applicable.
For example, users who obtain and download illicit MP3 files (or any other audio-visual storage format) may potentially rely on a 'private and domestic use' defence under section 114(2) of the SCA, which provides:
The copyright in a sound broadcast, a television broadcast or a cable programme, or in a literary, dramatic or musical work, a sound recording or a cinematograph film included in the broadcast or programme, insofar as it consists of sounds, is not infringed by the making of a sound recording of the broadcast or the cable programme for the private and domestic use of the person by whom the sound recording is made.
It should be noted that the successful reliance upon this provision depends on the extent to which the courts would be willing to classify the internet as a 'cable programme' as defined under the SCA.
Section 114 of the SCA is essentially a 'time-shifting' provision, applicable to both sound and film recordings. The resolution of the time-shift/space-shift conundrum in the Napster case would also prove very influential to the applicability of section 114.
Another possible defence for the Napster user in Singapore is the 'user caching' provision of section 193E of the SCA, which provides:
Copyright in any material is not infringed by the making of a transient or incidental electronic copy of the material from an electronic copy of the material made available on a network, if the making of the first-mentioned copy is required for the viewing, listening or utilisation of the material by a user of this or another network.
Whether such a defence would succeed is arguably more suspect. It would be manifestly obvious that an MP3 file obtained through Napster is not a 'transient or incidental' electronic copy, but will reside in the user's hard disk for posterity unless erased.
Napster (or entities providing a service with Napster attributes) may also seek to benefit from Singapore's very own 'safe harbour' provisions (subject to 'notice and take down' as under the DMCA) in section 193B to D of the SCA. Section 193C(1) in particular provides that:
A network service provider does not infringe the copyright in any material by doing any act in relation to an electronic copy of the material made available on a 'primary network' if:
- the act is done in the course of storing, transmitting, routing or otherwise providing connections to the copy on the primary or another network;
- such storage, transmission, routing or provision of connections (as the case may be) is done at the express or implied direction of a user of a network; and
- the copy is stored, transmitted or routed without any deliberate modification by the NSP to its contents.
The US District Court's earlier opinion that Napster did not provide any connections through its system could prove influential in persuading a Singapore court to reach the view that given this important distinction, Napster could not qualify as a 'network service provider' under Part IXA of the SCA. Equally compelling arguments could be made by Napster under Singapore's more restricted fair dealing provisions (for the limited purposes of research or private study, criticism, review and the reporting of current events), but which also contain factors akin to those measuring fair use under section 107 of the US Copyright Act (section 35(2) of the SCA).
Latest Development
It has been recently announced that Napster is currently in settlement talks with one of the plaintiffs, BMG. What is contemplated by the parties is to secure a legitimate channel of distribution using Napster technology, albeit with a royalty payment mechanism in place to effect proper rights clearance. If this litigation is ultimately settled, the rest of the copyright world would be deprived of the historic opportunity of appellate clarification in respect of all issues raised.
Dr Stanley Lai
Lee & Lee