By MATT RICHTEL The New York Times
A federal judge has granted a request by four of the five major record companies to suspend their three- year-old lawsuit against Napster.
SAN FRANCISCO, Jan. 23 A federal judge has granted a request by four of the five major record companies to suspend their three- year-old lawsuit against Napster, the Internet music service that exploded in popularity by allowing users to freely exchange songs and was deemed by the record companies a threat to their existence.
The order, by Judge Marilyn Patel of Federal District Court in San Francisco, released today to parties in the lawsuit, grants only a 30-day suspension, but it underscores a turnabout in the strategy by the music companies and a possible shift in momentum in their case.
People close to the lawsuit said the industry might have requested the suspension because of fears that some aspects of the case were going against it.
The record companies won a major victory in the case about a year ago, when Judge Patel sided with industry interests and found that Napster had abetted wholesale copyright infringement by its users. After several subsequent orders and appeals, Napster shut its service last July, having by that time drawn more than 70 million users, it said.
Napster, based in Redwood City, Calif., has vowed to start a new service that charges users and reimburses record companies and artists. It recently introduced a test version, offering users access to a limited amount of music from independent record labels. But Napster said it hoped to offer content from the major labels; to do so, it would need to settle the lawsuit and sign licensing deals.
As the case has evolved, so too have efforts to move the sale of music from record stores to the Internet. Napster, other online start-ups and the record companies themselves have developed online subscription services. But the record companies have been accused of moving slowly to license their content to competitors so as to preserve their dominance, through the sale of CD's or their own online services.
Last week, Napster joined four record companies AOL Time Warner, BMG, Vivendi Universal and Sony in the request to Judge Patel that she suspend the litigation.
After the judge's order, Konrad Hilbers, the chief executive of Napster, said today that he was optimistic that the litigation would "come to a swift conclusion over the next several weeks."
Hilary Rosen, the president of the Recording Industry Association of America, which filed the lawsuit on behalf of the record companies, said the companies had requested the suspension to "resolve the litigation."
"Since re-launching a few weeks ago, we understand they have limited their repertory to licensed music," Ms. Rosen said of Napster. "Resolving the lawsuit may now be feasible."
Cary Sherman, general counsel for the recording association, said another reason that the companies requested the stay was that Judge Patel was set to issue orders that would have made the litigation "more burdensome." Mr. Sherman declined to elaborate, except to say that the orders pertained to discovery of evidence and would "get the parties more enmeshed in litigation and less focused on resolution."
Several people close to the case said, however, that the record companies' real motivation in asking for a suspension was that Judge Patel had threatened to issue an order that would have hurt their own case. Specifically, these people said, Judge Patel may have been planning to look more closely at whether the labels had negotiated in good faith in their licensing discussions with Napster.
Napster has said all along that the labels have put it in an impossible position: asserting that Napster should charge for music but, according to Napster, not negotiating in good faith to make their music available for subscription service. The labels have countered that they have negotiated in good faith but that Napster has not offered fair terms.
Napster has not been alone in questioning the record companies' behavior.
The Justice Department said in October that it had begun an antitrust investigation into whether the companies were involved in anticompetitive behavior in the online market, including, people within the industry said, seeking documents pertaining to the licensing of music over the Internet.
Judge Patel's decision also underscores a possible rift in the record industry.
EMI, the fifth major record company, declined to go along with the request for suspension and is pressing ahead. A spokeswoman for EMI said the company was actively pursuing settlement talks and declined to comment further.