Napster Investors Still Pursued by Recording Industry

With today's Supreme Court revival of the Grokster case against Grokster and StreamCast, it is interesting to note that the recording industry continues to pursue investors in the Napster case. This month, a Northern District Judge denied investors' motions for summary judgment on claims of secondary copyright infringement. In re Napster, Inc. Copyright Litigation, No. C MDL-00-1369 MHP (N.D. Cal. 6/1/05).



District Court of California Holdings:

• As held in its earlier ruling on defendants' motion to dismiss, plaintiffs' allegations that the investors (a media conglomerate and a private equity partnership) exercised essentially full operational control over Napster state claims for contributory and vicarious copyright infringement.
• Even in the absence of an employment relationship, vicarious copyright liability can arise where one has the right and ability to supervise the infringing activity and has a direct financial interest in such activities.
• The elements of contributory infringement are: 1) direct infringement by a third party, 2) actual or constructive knowledge, and 3) a material contribution to the infringing activities.
• Plaintiffs provided sufficient evidence that the uploading and downloading of copies of copyrighted songs by Napster users constituted direct infringement by Napster. The court rejected defendants' arguments that there was not enough evidence to prove that plaintiffs' specific copyrighted works were in fact uploaded or downloaded, citing the evidence showing that almost 15 billion files were downloaded in less than a year and that at least some of those files contained plaintiffs' copyrighted works.
• Plaintiffs could not establish direct infringement by Napster based on the mere fact that the names of copyrighted musical compositions and sound recordings appeared in Napster's index of available files. The ART Act (Artists' Rights and Theft Prevention Act of 2005) did not amend the Copyright Act to include a distribution right broad enough to include making a work available without proof of actual distribution.