DOWN AT THE DIGITAL CROSSROADS

Napster CEO Hank Barry and his team at the polarizing, revolutionary file-sharing netco stand at a crossroads. On Wednesday (7/26), the RIAA's litigation against Napster will reach some sort of resolution, and Judge Marilyn Patel holds the company's future in her hands. The result of Wednesday's argument could be a milestone in the development of the online music space. Attorney and Hummer Winblad venture capitalist Barry remains hopeful that a rapprochement with the record business is possible, even as he defends Napster's service as predicated on fair use rather than infringement—and insists it helps rather than hurts sales. But Barry never knew the meaning of being infringed upon until he undertook this epic chatterfest with hitsdailydouble.com's scrambled egghead, Simon "Sapster" Glickman.

What I find is that people who use it think of it in a different way than people who haven't tried it. And it's universally the case that the more people use it, the more they think, "Hey, this feels like the right thing to be doing—and I do find myself buying more records." This is kind of a net benefit. Someone on a talk show yesterday said, "It's just super radio." I'm going with that—I like that!

It goes back to [Napster co-inventor] Shawn [Fanning]. When he wrote it, I don't think he was thinking about how to make money. So we haven't really changed much at all since the beginning.

Well, yes, we have, but we won't do anything to wreck the consumer experience. That's really the challenge we have right now. To figure out a way to retain the convenience of it, which is tremendous, while at the same time figuring out a way to [bring in] some revenue.

If the judge orders the service shut down, we will comply with her order, and I think that will effectively end the service.

Yeah. Napster has some fundamental technology; we've got a couple of patents. But the power of Napster is in the fact that 20 million people are sharing files. And if 20 million people are prevented from sharing files, then that's the end of Napster as we know it. We'll just accept the judgment of the court and move forward.

What we've said consistently is that we think copyright is always about a balance, that copyright has limitations—it's not absolute. And the question in this case is, how do you draw the line, with respect to fair use and with respect to Audio Home Recording Act?

We think when the judge looks at the arguments that we made in our brief, it's going to be difficult to say that [the RIAA has] met the burden, which they have to meet in this extraordinary action. Remember, they're asking for extraordinary relief—a preliminary injunction. So the burden is that they have [to prove] a high likelihood of success on the merits, and that they've suffered irreparable harm. In a copyright case, there's a presumption of irreparable harm, but it's a rebuttable presumption [in this case]. And [since] record sales are up, we think that we have rebutted that presumption of irreparable harm, and we think it's not likely that they'll succeed on the merits [regarding] fair use and balance.

We're very hopeful that after she has a chance to have a hearing, our arguments will prevail. I think that it's a very important issue. I don't think there's any reason to squash this technology. But our fundamental argument has been that copyright is a balance between giving an incentive to creators and giving the public access to their works. It's always been that balance, and this is another case in a long line of cases as to whether you should stamp out a technology just because it may have the potential to be used for infringing purposes. The Supreme Court said, and I think it's the right approach, that if a technology is "capable of substantial non-infringing uses," we ought not to get rid of the technology. We ought to deal with the infringements on an individual basis.

Our users are not infringing. The fundamental premise of the case is not that Napster is guilty of direct infringement. No one is saying that Napster is infringing. What they're saying is that our users are infringing and that we are contributing to that. We disagree with their premise that our users are infringing.

Right. And that the Napster service contributes to that infringement, so the premise is that all those people are infringing. We think that 20 million people who are using the service are not infringing those rights, and we'll find out how it goes.

I think the best place to start is to go back and look at the AHRA, Section 1008. This is an act that was passed after about 15 years of debate about [tape] sharing. Eventually, Congress passed a statute that says non-commercial sharing/copying for purposes of audio—that includes both sound recordings and musical compositions—is immunized from liability.

The reason it's that broad was twofold. One is that the record industry and Congress together realized that continuing to call the millions of people who at that time were making tapes and passing tapes around "infringers" was really hurting the best customers of the record industry. Secondly, Congress and the record industry realized that the activity did not hurt record sales—it helped record sales.

So they passed this act that just applies to sound recordings and musical compositions. It says non-commercial copying is going to be immunized from liability. So our first argument, whether you characterize that as a fair-use argument or something separate, is [Napster users'] activity ought to be immunized from a claim. That people who are engaged in [file-sharing] aren't guilty of infringement.

I have at least three responses. First, the sharing that goes on via the Napster system is all one-to-one. In other words, you can say it's widespread, but every single time a file is transferred, it is transferred from one person to another person. There are no multiple file transfers.

Second, these people are doing this for no money and with no expectation of anything in return. In the strictest sense, this is a non-commercial activity. The language of the statute is broad, and if the answer is [to] change the law, obviously, the record industry has the ability to address Congress with respect to that issue. But that's not the state of the law as it exists today.

Third, the Congress expressly said that it did not want to have to revisit this issue every time a new technology came along. You could say that this activity is widespread, but remember, there were lots of congressional reports at the time [of AHRA] that said that the sharing of tapes was widespread. Millions of times a day, people were passing tapes over the backyard fence. There were sharing clubs. The point is, Congress knew that this was a widespread activity even then.

It is always that response. The claim is always the sky is falling, we are about to go out of business and you need to fix this right away, either Mr. Judge or Mr. Congressperson. That is always the claim. The Betamax came out when the whole controversy over the AHRA was going on—the RIAA and the MPAA, respectively [with regard to video], made exactly the same arguments as they're making now. And I would put it to you that each one of those technological developments ended up benefiting that industry. Now, you can argue whether it did or not, but someone told me that over 80% of motion-picture revenues last year were from videocassette sales. So I think we're in a mode where this is beneficial to the industry. It is a net positive, not a net negative, and what we need to do is work out a way that everybody can share in this and really benefit from it, and that's what I'm trying to do.