Early History of Napster

by Moya K. Mason

While finishing his freshman year at Northeastern University, Shawn Fanning decided to create a piece of software that would allow people to search for and share MP3 files they had trouble finding. He then founded a company, Napster, Inc. in May of 1999, dropped out of school, and moved to northern California. Napster quickly became the world's largest community for sharing music files because it allowed easy searching, had a user-friendly interface, let users communicate with each other in various ways (i.e. chat), and to share each others' bookmarks.

Due to the recording industry's efforts to close Napster down, many of the music sharing enthusiasts who had made it such a popular phenomenon moved on to use other services, such as Gnutella, AudioGalaxy, and Freenet. This was even more problematic for those concerned with copyright issues because these new services didn't have centralized servers or organizational structures to shut down.

Legal Timeline

In August 1999, the Recording Industry Association of America (RIAA) contacted the management of the then new company, Napster. The RIAA told them that although they thought Napster had an interesting technology, its business model was a violation of their member's copyrights. At the time, Napster only had a few thousand users. The RIAA suggested that they stop offering the music-sharing service and go through the proper channels to get permission to use copyrighted materials. When Napster did not respond favorably a lawsuit was filed against it in December 1999.

• Dec. 7, 1999: Napster's legal battles began on December 7 of 1999 with a suit filed by the Recording Industry Association of America (RIAA) for infringing upon copyright.
• April 13, 2000: Metallica, a heavy-metal band, having learned that their music was being shared using the platform without their endorsement, filed their own suit against the company. They alleged that it was violating the Racketeering Influenced & Corrupt Organizations Act (RICO). In addition, they went after some of the universities whose students were sharing the files, suing the University of Southern California, Indiana University, and Yale for not banning their students from using the software. Rap star Dr. Dre filed suit two weeks later.
• May 3, 2000: Metallica, having collected the names of over 300,000 participants which had downloaded the band's material, presented them to Napster with the demand that the users be removed from the system.
• May 5, 2000: U.S. District Judge Marilyn Hall Patel ruled that Napster was not entitled to safe harbor under the provisions of the Digital Millennium Copyright Act (DMCA).
• July 26, 2000: Patel granted a preliminary injunction on the RIAA's behalf, which ordered Napster shut down. Usage spiked 71% the next day as users tried to download as much material as possible before this happened.
• July 28, 2000: The 9th U.S. Circuit Court of Appeals accepted Napster's appeal and stayed the lower court injunction, saying "substantial questions" were raised about the merits of the injunction.
• Oct. 2, 2000: Oral arguments were made to the Appeals court.
• Oct. 31, 2000: Napster announced a partnership with Bertelsmann AG to develop a membership-based distribution system that would guarantee payments to the artists. Bertelsmann agreed to drop its lawsuit against Napster and make its music catalog available to Napster, while gaining the right to buy into the service.
• Feb. 12, 2001: The 9th U.S. Circuit Court of Appeals ruled that Napster had to stop allowing the trade of copyrighted material.
• Feb. 20, 2001: Napster announced a $1 billion settlement offer to the record companies to drop their copyright suits. The offer was mockingly rejected two days later.
• March 2, 2001: Napster's lawyers told a federal district court that it would begin to implement a plan to prevent songs from being traded, wiping one million copyrighted files from the system.
• June 25, 2001: Napster signed a worldwide licensing agreement with the United Kingdom's Association of Independent Music and the Independent Music Companies Association to provide music for its new subscription service.
• July 12, 2001: Judge Patel ordered that Napster remain offline until it had shown that it could effectively block the trading of any copyrighted work. Metallica and Dr. Dre settled their legal disputes with Napster, ending all legal actions between the parties. Both of the suits were settled, with the artists having final say over which of their songs could be shared on the platform, with the provision that they agreed "to make certain of material available from time to time".
• September 2001: A proposed settlement is announced between Napster and the National Music Publishers' Association (NMPA), in which Napster will turn into a fee-based service with music licensed by the publishers. Napster also agreed to pay 26 million dollars for all previously traded music, plus 10 million as down payment for future royalties. Napster was unable to begin operations until several other lawsuits involving performing rights, rather than publishing rights, were settled.

"We've won the revolution. It's all over but the litigation. While that drags on, it's time to start building the new economic models that will replace what came before. We don't know exactly what they'll look like, but we do know that we have a profound responsibility to be better ancestors: What we do now will likely determine the productivity and freedom of 20 generations of artists yet unborn. So it's time to stop speculating about when the new economy of ideas will arrive. It's here. Now comes the hard part, which also happens to be the fun part: making it work

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