The concerns over possible antitrust are also being examined in Washington. The Justice Department said in October that it started an antitrust investigation into whether the companies have misused their copyrights to dominate the digital market.
The stakes are high. The music business is among the few industries with the potential to thrive in the early days of the Internet. Songs can be easily bought and sold on the Internet because the data files that contain them are sufficiently small to be sent easily by e-mail message, or traded on World Wide Web sites. Tapping into the possibilities, Napster achieved success by distributing software that permitted users to exchange music files that they kept on their home computers.
The song files exchanged on Napster typically were created by "ripping" the music from commercial compact discs. As such, once a song was put onto the system, it could be shared by millions of people who would never need to purchase the music, and, thus, terrifying the record industry, which threatened to lose millions of dollars in lost sales.
In its defense, Napster argued its service was used not just for the exchange of copyrighted files, and that, given its broader applications, should not be shut down.
Record companies have said they intend to address consumer demand and sell music over the Internet, but only once they figure out how to do so profitably. They contend that the industry cannot survive if labels simply give music away. Their initial forays were two joint ventures: Pressplay, owned by Sony Records and Vivendi Universal; and MusicNet, backed by EMI, BMG and AOL Time Warner.
The companies have also said they are negotiating in good faith to license their music to Internet startups.
As Napster continues to build its defenses for trial, the company has asserted that it could not have created a record-company friendly service, even if it wanted to, because the companies have refused to license their music.
In her ruling Friday, Patel did not back off her earlier condemnation of Napster. In fact, she said the evidence suggests Napster activities could have resulted in "millions of acts of unauthorized copying," and that if Napster's actions were "willful" the company's hands are "abundantly dirty."
But, Patel said, given that Napster is now offline, the company appears to no longer be causing public harm. By contrast, she said, the "alleged" conduct of the record companies is ongoing. "The extent of the prospective damage is massive," the judge wrote, noting several sentences later that "the resulting injury affects both Napster and the public interest."
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