SAN FRANCISCO — Napster Inc. can't let users of its music-swapping software trade songs protected by copyright, a federal appeals court said in a decision that threatens the survival of the fast-growing Internet program.
The ruling by the 9th U.S. Circuit Court of Appeals bolsters the record industry's bid to control digital distribution of music. The appeals court substantially upheld a judge's decision barring the Web site from distributing its free song-sharing software pending trial of a suit by the music industry.
Napster can be held legally responsible when "it fails to use its ability to patrol its system and preclude access to potentially infringing files," the three-judge court ruled unanimously in a 58-page opinion.
The case now goes back to U.S. District Judge Marilyn Patel with instructions to modify her injunction so that Napster is barred only from distributing music it knows infringes material protected by copyright.
Patel, in issuing the temporary injunction on July 26, concluded Napster contributes to an unprecedented level of music piracy. She stayed her order to permit review by the appeals court.
Napster, which has 61 million registered users, has said the judge's order would force it to shut down.
Napster users were busy downloading music in anticipation of the ruling. Users downloaded more than 250 million files over the weekend, according to Webnoize, which reports on the online music business. An average of 1.5 million users were logged on to the Napster system at a time, Webnoize said.
Record companies view the software as the ultimate threat to the future profitability of the industry. Music companies could lose $3.1 billion in potential profit by 2005 through online piracy and digital distribution systems, Forrester Research Inc. said in a report last year.
Regardless of whether Napster stays in business, it has already changed the way the record industry looks at online distribution of music, analysts say.
"I don't believe what happens to Napster the company matters much at all," Larry Miller, president of the digital management company Reciprocal Entertainment, said prior to the ruling. "Napster the idea has proven to be a very, very powerful force in the industry."