A & M Records, Inc. v. Napster, Inc.
United States Court of Appeals for the Ninth Circuit (California) 239 F.3d 1004 (2001)
Record companies and music publishers sued Napster. Napster is a free online music trading service. The company provides software that facilitates the transmission and retention of digital audio files (called MP3 files) by users. Users download Napster's MusicShare software, which allows them to access the directory and index on a Napster server to locate MP3 files on other users' hard drives. Users download MP3 files from other users' hard drives. Although the MP3 files do not transfer through Napster's servers, users must access Napster's system to get access to file names and routing data.

The plaintiffs sought an injunction against Napster, asking a trial court to prohibit Napster from facilitating the copying, downloading, or distributing of thousands of plaintiffs' copyrighted musical compositions and sound recordings without the plaintiffs' permission. In May and July 2000, Judge Marilyn Hall Patel issued two opinions, both of which supported the injunction the plaintiffs requested. She rejected several of Napster's claims, including claims that its service constituted fair use, that its service constituted valid sampling or space-shifting, and that the First Amendment protected the company's service. In the excerpt that follows, an appellate court decides whether the trial court applied the law correctly when deciding to issue the injunction. The excerpt focuses on direct copyright infringement and selected parts of the court's discussion of fair use

Circuit Judge Beezer
A. Infringement
Plaintiffs must satisfy two requirements to present a prima facie case of direct infringement: (1) they must show ownership of the allegedly infringed material and (2) they must demonstrate that the alleged infringers violate at least one exclusive right granted to copyright holders under 17 U.S.C. § 1 06. . . . Plaintiffs have sufficiently demonstrated ownership. The record supports the district court's determination that "as much as eighty-seven percent of the files available on Napster may be copyrighted and more than seventy percent may be owned or administered by plaintiffs."

The district court further determined that plaintiffs' exclusive rights under § 1 06 were violated: "here the evidence establishes that a majority of Napster users use the service to download and upload copyrighted music. . . . And by doing that, it constitutes-the uses constitute direct infringement of plaintiffs' musical compositions, recordings." . . . The district court also noted that "it is pretty much acknowledged . . . by Napster that this is infringement." We agree that plaintiffs have shown that Napster users infringe at least two of the copyright holders' exclusive rights: the rights of reproduction, § 106(1); and distribution, § 106(3). Napster users who upload file names to search the index for others to copy violate plaintiffs' distribution rights. Napster users who download files containing copyrighted music violate plaintiffs' reproduction rights. Napster asserts an affirmative defense to the charge that its users directly infringe plaintiffs' copyrighted musical compositions and sound recordings.

B. Fair Use
Napster contends that its users do not directly infringe plaintiffs' copyrights because the users are engaged in fair use of the material.... Napster identifies three specific alleged fair uses: sampling, where users make temporary copies of a work before purchasing; space-shifting, where users access a sound recording through the Napster system that they already own in audio CD format; and permissive distribution of recordings by both new and established artists

The district court considered factors listed in 17 U.S.C. § 107, which guide a court's fair use determination. These factors are: (1) the purpose and character of the use; (2) the nature of the copyrighted work; (3) the "amount and substantiality of the portion used" in relation to the work as a whole; and (4) the effect of the use upon the potential market for the work or the value of the work. . . . The district court concluded that Napster users are not fair users. We agree

[The court then agreed with the district court that the first three factors weigh against a finding of fair use.]

C. Effect of Use on Market
Addressing this factor, the district court concluded that Napster harms the market in "at least"two ways: it reduces audio CD sales among college students and it "raises barriers to plaintiffs' entry into the market for the digital downloading of music." The district court relied on evidence plaintiffs submitted to show that Napster use harms the market for their copyrighted musical compositions and sound recordings. . . . Notably, plaintiffs'expert, Dr. E. Deborah Jay, conducted a survey (the "Jay Report") using a random sample of college and university students to track their reasons for using Napster and the impact Napster had on their music purchases. The court recognized that the Jay Report focused on just one segment of the Napster user population and found "evidence of lost sales attributable to college use to be probative of irreparable harm for purposes of the preliminary injunction motion." . . . [The court then discusses additional studies offered by the plaintiffs.]

As for defendant's experts, plaintiffs objected to the report of Dr. Peter S. Fader, in which the expert concluded that Napster is beneficial to the music industry because MP3 music file-sharing stimulates more audio CD sales than it displaces. The district court found problems in Dr. Fader's minimal role in overseeing the administration of the survey and the lack of objective data in his report. . . . [The court then concluded that the district court demonstrated a proper exercise of discretion in using the studies to reject a fair use defense. Then, the court considered Napster's sampling and space-shifting arguments and concluded that the district court did not abuse its discretion in finding that these uses do not constitute a fair use.]

CRITICAL THINKING ABOUT THE LAW
Courts often use ambiguous language when crafting definitions. Case 6-2 gives us an opportunity to take a look at ambiguous language. It also presents a good reminder of the importance of a particular set of facts in determining the outcome of a case.

1. Identify one ambiguous word or phrase in the court's decision in Case 6-2, and show how that ambiguity affects your willingness to accept the court's conclusion.
Clue: Consider Napster's main defense.

2. If you could change one fact in Case 6-2 to make it less likely that the judge would rule against Napster, which fact would you change?
Clue: Look at how the district court responds to reports from experts.