Case Study: A&M Records, Inc. v. Napster, Inc.

In A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004 (2001), the Court of Appeals for the Ninth Circuit held that a peer-to-peer file sharing service could indeed be held liable for contributory and vicarious infringement of copyright. This landmark intellectual property case put an end to any speculation that such services could facilitate copyright infringement, but still shield themselves from any liability due to the fact that it was the users that chose to share illegal copies of protected works.

Case Background

Napster was an early peer-to-peer file sharing network which could be used for transmitting various files, but which attained massive popularity as a way to share music through .mp3s. Unsurprisingly, major record companies took issue with large-scale distribution of their music for free, and sued Napster for direct, contributory, and vicarious infringement of copyright in order to protect their intellectual property.

The Holding

As stated above, the Court ruled against Napster.

The first issue the court dealt with was “fair use.” Fair use is a defense to infringement codified at 17 U.S.C. § 107, which states that otherwise infringing activities are permitted if pursued, “[F]or purposes such as criticism, comment, news reporting, teaching … scholarship, or research.” In order to determine whether the defense is met in a particular case, the statute directs Courts to consider the following four factors:

  1. The purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;
  2. The nature of the copyrighted work;
  3. The amount and substantiality of the portion used in relation to the copyrighted work as a whole; and
  4. The effect of the use upon the potential market for or value of the copyrighted work.

In Napster’s case, their platform allowed for “repeated and exploitative” copying, which met the meaning of the first factor, even though no sales were taking place. In addition, songs were found to be “close to the core” of the types of creative works intended to be protected by copyright, and entire songs were downloaded, setting the second and third factors against Napster. Finally, the effect of the downloads was found to harm possible album sales, which was the final nail in the coffin of Napster’s argument in favor of a fair use defense.

As for the contributory infringement claim, Napster knew of widespread infringement taking place on its system, and its policing efforts were quite thin. Moreover, Napster materially contributed to the infringement, making success on this claim likely for the appellants. Similarly, the court found that Napster’s lack of effort to reduce infringement, combined with the fact that the company financially benefited therefrom, made success on the vicarious infringement claim likely as well.

As a result, the court ordered the creation of an appropriate injunction consistent with its opinion against any of Napster’s future infringing activities.

Issues related to peer-to-peer file sharing were again litigated a few years later when a successor company to Napster, Grokster, was sued by MGM Studios in MGM Studios, Inc. v. Grokster, Ltd., 545 U.S. 913 (2005). Currently, services such as BitTorrent and The Pirate Bay are continuing to battle holders of protected works over the future of Internet file sharing.

If you are interested in learning more, the @WashULaw online LL.M. in U.S. Law program offers a course entitled “Intellectual Property,” that can help expand your understanding of certain issues that may be relevant to cases like these.