These are troubled times for free-for-all music following last week's US Federal Court of Appeal ruling in favour of the Recording Industry Association of America.
The ruling stated that if Napster fails to act to prevent the distribution of files it knows infringe copyright, then it becomes liable for damages.
A particular threat to Napster is the possibility that an award of damages would ultimately be made against it. Since some three billion music tracks are thought to have been transferred through Napster in the last month alone, this award could be enormous. In a similar case involving Universal records and mp3.com, the former argued that the latter should pay damages of $450 million. mp3.com's own lawyers and the trial judge suggested $117.5 million. Similar awards against Napster could force it into bankruptcy.
Ironically, these developments take place as Napster is becoming part of the music establishment following its deal last year with music publisher Bertelsmann. The German music publisher hopes to use the Napster site to provide a subscription-based music service some time this year.
The problem with charging Internet users for listening to music is that recent successes in the US courts do not guarantee that free music will disappear from the Web. Sites similar to Napster are already available outside the US, beyond the reach of American court injunctions. It is inevitable that these sites will be pursued in their national courts, but legal action is much more difficult against programs such as Gnutella and Freenet, which allow individuals to swap music directly between each other.
Unlike Napster, there is no central server or site involved, so there is no central figure that can be sued. Research into Gnutella has suggested that although a myriad of individuals use the program to copy musical tracks, very few actually provide them. About 70 per cent of people offered no music, 20 per cent provided 98 per cent of the music available and 1 per cent of users provided almost 20 per cent of it.
Copyright law such as the new Irish Copyright and Related Rights Act, 2000, will provide record companies with harsh remedies against anyone who made such tracks available.
First, gratuitously making a copyrighted work available to the public, to such an extent as to prejudice the interests of the owner of copyright, is an offence punishable by a fine of up to £100,000 and a prison term of up to five years. Second, a person who transmits a work over the Internet knowing or believing it will be used to make an infringing copy will infringe copyright, and may be ordered by the courts to cease this activity, in addition to being sued for damages.
So if the music industry wanted to fight Internet music distribution through the courts, they might expect more successes. In spite of this strong legal support for the industry both nationally and internationally, Universal Records recently settled its action with mp3.com for some $400 million less than it had originally asked for and agreed to take a stake in the company.
At first glance it appears that supporting a service such as my.mp3.com is hardly in the best interests of major record labels. Although mp3.com will start charging, its cost will probably undercut the cost of a shop-bought CD. This is unlikely to benefit the record industry's existing distribution network of CD pressing plants, warehouses and record stores. But the record industry may be unsure of ultimate success in the courts. Although the industry might be effective in preventing piracy, it could not prevent the growth of independent online labels.
These labels might legitimately distribute their own music online, which could compete with the record industries own offerings. Furthermore, an online system that was engaged in the large scale distribution of legitimate and pirated music would be much harder to shut down than Napster and mp3.com. Once a system or device gains this sort of "dual-use", its distribution is much harder to prevent.
The music industry's legislative success may also be short-lived as Internet music distribution has proven to be extraordinarily popular with the public - mp3.com gets around 730,000 users a day. If sites such as Napster are able to mobilise the tens of millions who have used their service to lobby for a change in the law, then it is possible that free music distribution could remain an online reality.
This will make listening to online music very attractive, but it is hard to see why anyone should create or promote such material if they are not going to get paid.
Denis Kelleher is a practising barrister and co-author of Information Technology Law in Ireland.
deniskelleher@ireland.com