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Special Event

Napster Hearing: Attorneys for Both Sides, Napster CEO Hold Press Conference

Aired March 2, 2001 - 3:43 p.m. ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

JOIE CHEN, CNN ANCHOR: Back here at CNN Center in Atlanta.

We've been following throughout the day the latest developments, monitoring them in San Francisco regarding the Napster case. A judge in the case is reworking the injunction that might shut down that online music service.

Now speaking before the microphones outside the court in San Francisco's Hillary Rosen, who represents the Recording Industry of America.

(JOINED IN PROGRESS)

HILLARY ROSEN, PRES., RECORDING INDUSTRY ASSOC. OF AMERICA: ... the injunction. And we are grateful for -- for her determination. So we look forward to an effective order soon.

I think it's important for me to give some credit to Napster today. I think they came into court trying to be productive. I still think that they have got a way to go. There are things and affirmative steps they should be taking which they resisted in court today. But they did say that they wanted to the work with something effective. And we will take them at that word.

QUESTION: Hillary, what did Napster say that they never have said before today?

ROSEN: What Napster said today -- which they have been essentially denying for the last year -- was that they actually could filter out unauthorized songs.

You will remember, they argued before this court last year. They argued last September at the 9th Circuit that they couldn't. Today they finally said what we have all known for over a year: that they absolutely can filter out unauthorized works.

QUESTION: Is a settlement still possible?

ROSEN: Well, there are certainly discussions about the injunction that are before the court. Any settlement that Napster's looking for is that they want business licenses going forward. And the place to get licenses are at individual record companies and copyright owners. And I urge them, as I have urged them for months, to go and seek those licenses in the marketplace, not through the court.

(CROSSTALK)

QUESTION: (OFF-MIKE) offered you folks last week (OFF-MIKE) the last two weeks?

ROSEN: Well, the money that Napster offered, they should be offering in individual discussions with individual companies. There's not an industry license that can be granted. And there won't be an industry response to a billion dollar offer.

QUESTION: What exactly is the feeling regarding the screen that they have talked about installing this weekend, and whether or not that is actually going to be in effect in the law?

ROSEN: What Napster said today at the court was that they were intending to move this weekend on software that would create a screen to filter out unauthorized works. We think that that screen has the potential to be effective. But we will see.

We are -- have already supplied them with the names of significant amount of works. And we are prepared to supply them with a lot more. And we think that they have an affirmative obligation not just to the filter out those works, but to make sure that their system remains free of unauthorized works.

QUESTION: What about the fact that they want you to continue to monitor those sites and monitor the works and things like that? What about that?

ROSEN: What -- say the question again.

QUESTION: Monitor the works: like you monitor their sites. Your attorney say that that is ridiculous. They have the power to do that. We shouldn't have to do that.

What about that?

ROSEN: Well, I think Mr. Frackman said it very well in court. What he said was that, it's Napster's systems. They know how it works. They have access to the indexes. And they have the best ability to filter out those works.

QUESTION: (OFF-MIKE) this weekend?

ROSEN: I don't know. But we gave them almost 6,000 tracks. And Metallica and Dr. Dre have given them tracks. The Leiber and Stoller plaintiffs have given them tracks. So they have already got a lot to get started with.

QUESTION: Do you give them names or actual files?

ROSEN: We gave them artists and title -- track title names.

Do you have a sense as to when this injunction might be done? (OFF-MIKE) RUSSELL FRACKMAN, ATTY., RECORDING IND. ASSOC.: No. It's up to the judge. There's no deadline right now. It's up to Judge Patel. I am sure that, given the fact that she was on top of all of the issues this morning that -- that -- at least we hope she'll be able to rule and will rule in pretty short order. But there is no firm deadline.

QUESTION: Do you think you will get it before this mediation (OFF-MIKE)

FRACKMAN: I don't know the answer to that.

QUESTION: Did you sense a different tone from Mr. Boies and the Napster people today? Were they more -- at least more willing to come over to your side than today than ever before?

FRACKMAN: Well, I think, as Hillary said, they started off conceding something that they had never conceded before. It was conceding in their draft preliminary injunction -- their proposed injunction that we received Wednesday night. That was the first inkling that we had that they were going to concede the ability -- at least textually -- to attempt to filter out unauthorized material.

And they had never taken that position before any place. So to that extent, yes. But, obviously as you have heard, there were differences between us as well.

QUESTION: Explain to me this whole issue about free release. It's like prior restraint, I would think.

(CROSSTALK)

FRACKMAN: No, no, no, no, no.

QUESTION: Well, that is what they would argue.

ROSEN: Well, this is the way I saw it. The issue of Mr. Boies not wanting to have Napster be able to take the names of tracks that are going to be coming out next week was sort of like saying that you are a CD manufacturing plant, and you get to manufacture whatever we want, and when we catch you, you have three days to shut down the presses.

That's not acceptable. We need to be able to make sure that if we give them names of tracks and artists, regardless of whether they're in store today or in store next week that Napster is going to be looking for it.

QUESTION: (OFF-MIKE)

ROSEN: I don't see that.

FRACKMAN: It would be so minuscule compared to the tens and hundreds of millions of other material, other files that they are going to have to filter out and say they are prepared to filter out that that really doesn't make any sense.

(CROSSTALK)

QUESTION: (OFF-MIKE) so badly?

FRACKMAN: Because, very simply put, in the record in this case, we have several instances, including Madonna's most recent album, where it actually was on Napster and available weeks before it was released to the public.

If we had have to wait until it's on Napster, find it, give them notice and give them three days to take it down, what I told the judges, you can understand how many copies of those recordings will be out and in the public. And it will not be an injunction. It will be an attempt to cure a harm that could have been prevented in the first place.

ROSEN: Let me sort of talk...

QUESTION: (OFF-MIKE)

ROSEN: No, not necessarily, because there are a lot of people who have legitimate access to prereleased material prior to its sale at a retail store. But there is...

QUESTION: Are you...

ROSEN: Let me just say on the broader issue -- and probably most important -- this hearing today, obviously, got very technical about what should happen and shouldn't happen, and what the wording of an injunction order should be.

We still think that, since Napster has consistently said they now want to be a legitimate company, they don't have to wait for a judge's order. They don't have to wait for paragraph four or paragraph five. They can immediately take steps to do everything that is necessary to filter out unauthorized music and go to the legitimate market place and get licenses. That is where this issue is going to be resolved. We all know that is where it's going to be resolved and not in a courtroom.

(CROSSTALK)

ROSEN: Sorry?

QUESTION: (OFF-MIKE)

ROSEN: Napster had already had meetings with individual member companies. And I expect that they are going to continue to have those meetings. But that's where this issue going forward gets resolved. But they can take immediate and direct steps to make their system more legitimate today.

Matt?

(CROSSTALK)

ROSEN: Sorry, let me just get Matt. QUESTION: (OFF-MIKE)

ROSEN: There are songs that we think have already been on the system.

QUESTION: (OFF-MIKE)

ROSEN: Yes.

QUESTION: (OFF-MIKE) working around the clock (OFF-MIKE) Can you respond to that?

ROSEN: I am going to give Napster the benefit of the doubt of what they said in court today: that they are starting to work on implementing an injunction.

QUESTION: Why is it such a burden to have to check the files? And why do you think Napster is asking you do to it: to identify this particular file?

ROSEN: I don't know. You will have to ask them that.

QUESTION: But you said...

(CROSSTALK)

QUESTION: ... to be a weak filter. They were looking for the worst way possible to do this.

FRACKMAN: Well...

ROSEN: Well...

FRACKMAN: Go ahead, Hillary.

ROSEN: Well, we think that essentially what they are trying to do is have technical compliance with a court order, but not necessarily have to change the current user experience. They're making that very clear. So I think that they're looking for every possible way to limit the affirmative steps that they are going to have to take to comply with an injunction.

QUESTION: (OFF-MIKE)

FRACKMAN: Well, there may be -- the numbers that I gave the judge: If you assume that are there 60 million users and each one averages 200 files, when you are talking about separate files, you are talking about 1.2 billion separate files.

Now, those are not all different recordings or songs. So if you are going to go file by file, you are talking about a virtually impossible task. And as soon as you identify them, there will be others up there. If you are going to go recording or -- or artists, you will get more of them.

If you are going to further still take into account different name changes or different variations, you will get more. And if you do it in a technological basis, you will get even more.

(CROSSTALK)

UNIDENTIFIED FEMALE: OK, That's it.

ROSEN: Thank you very much.

UNIDENTIFIED FEMALE: You might want to talk to Napster. They set up already.

UNIDENTIFIED FEMALE: Thank you.

CHEN: All right, following up on what our viewers have been watching there, you have been seeing some representatives of the Recording Industry of America speaking with reporters outside of the courthouse in San Francisco.

Let's bring you up to date on what has been going on through this day. We've been watching for developments in the Napster case. It has been before a judge in the San Francisco court. And it is currently in adjournment. We are waiting for a ruling at any time on the case. The judge in this case is reworking an order that she issued last July. It would effectively shut down Napster. And Napster, of course, is the online music service that many -- particularly young -- people use to download music from the online systems for free -- at least for free up until this -- up until this point.

The recording industry is trying to create a change in that. And the recording industry presented its arguments today, as did the Napster folks. And, in fact, for the Napster organization, the lawyer David Boies is now appearing before reporters outside of that San Francisco court. We are standing by waiting to hear what he has to say. We understand that the judge could rule at any point in this.

Let's listen now to what David Boies has to say.

QUESTION: ... could not block copyrighted the materials from their service. (OFF-MIKE) There seemed to be a change of heart today. Why?

DAVID BOIES, NAPSTER ATTORNEY: I think that what Napster has said -- and it continues to be the case -- that Napster cannot go through and go into the files and determine what is allegedly a copyright infringement and what is not.

What the Court of Appeals has said is that a way of approaching that is to look at the file name and to block by file name. And that is what we have said that we could do and that we are in the process of doing. We have believed from the beginning that what Napster was engaged in -- and what Napster users were engaged in -- was lawful activity. However, the Court of Appeals has ruled. We accept the judgment of the Court of Appeals as binding.

We need to comply with it while we continue to fight the issue in court. And so we have attempted to do is to adapt the Napster operation to the Court of Appeals opinion in such a way so that Napster screens out the file names that the plaintiffs have identified by artists and by title and by infringing file, and, nevertheless, allow the Napster system to continue to operate.

QUESTION: What the files that are going to screened out this weekend? How do did you determine which ones (OFF-MIKE)

BOIES: What we did was, we took the file designations that the plaintiffs themselves had given us, and wherever they have given us a artist and a composition that they have demonstrated is on the system, we have said we're going to screen that out.

QUESTION: How many is that?

BOIES: And that -- and somebody just asked how many that is. And that is well over a million files.

QUESTION: Why should they have to wait until their product is on the system if, at any point it's traded, it's copyrighted infringement? Why can't

(CROSSTALK)

BOIES: Well, it's not copyright infringement. What is at issue here is whether or not Napster is engaged in contributory or vicarious infringement -- that is, whether or not Napster is facilitating other people's infringement. You don't facilitate anybody's infringement until such infringement exists.

(CROSSTALK)

BOIES: That is why the Court of Appeals, in its decision, said they place on the plaintiffs the burden of first coming forward and identifying a work that they had a copyright in, and second, demonstrating that it was listed on the Napster index that is available through Napster.

And because the Court of Appeals -- we think properly -- put that burden on the plaintiffs, we have begun by dealing with those files where the plaintiffs have met that burden.

QUESTION: (OFF-MIKE) How many files (OFF-MIKE) now?

BOIES: It's over a million.

QUESTION: And are some of them -- are you going to block out entire artists that are, you know, industry artists? And will you block out everything, like, by Bruce Springsteen, everything by...

BOIES: No, no. The Court of Appeals is very clear that what needs to be blocked is where you have a file that is identified by artists and by composition. You couldn't block out everything by Bruce Springsteen, because not everything is claimed to be an infringement. You wouldn't block out every song, every version of a particular song, because some of them might be authorized. What you need -- and this is what the Court of Appeals dealt with -- is, you need to have a artist. And you need to have a composition. You need to have a certification or a claim that that is subject to copyright protection. And you need to have a demonstration that it's on the system.

QUESTION: Can you understand their worry that the three-day waiting period, by identifying and by the time it's removed, worries them that so many could be sold by that time?

BOIES: I don't believe that that is a legitimate concern. For one thing, they have an ability to act very promptly. They are monitoring these systems a lot closer than anybody else is. And if they -- if they get up and say they don't know what is on the system, I don't think that's accurate.

(CROSSTALK)

UNIDENTIFIED FEMALE: Last question.

QUESTION: ... after you start screening this weekend, how...

BOIES: I think Napster will still be the best music service out there. It will not be the same. There is no doubt that complying with the Court of Appeals opinion is going to change the Napster service. On the other hand, what we have tried to do is, we have tried to abide by the Court of Appeals decision, and at the same time preserve Napster so it can continue to function and continue to serve the users while we continue to fight for the right to do so in court.

Thank you.

(CROSSTALK)

HANK BARRY, CEO, NAPSTER: Yes, I'm Hank Barry, Napster's CEO. I've got a short statement. And then we'll take some questions.

We continue to say that this is the case that should be settled. We are fighting to keep the Napster community together. Clearly, the hearing -- at the hearing, Sony, America Online, Vivendi Universal, EMI, evidenced again they want to shut Napster down. The way they're doing that if to insist on an injunction that is impossible to comply with, so that the only way we can comply is to shut the system down.

We've proposed a workable injunction that keeps the Napster community together and complies with the 9th Circuit's decision. We are working to settle this case, as I said before, and transition to a new membership-based service, for which we have demonstrated a viable technology model and a viable business model.

We have to both work together. And I mean Napster and the record companies -- to come up with solution that works for consumers and -- and pays the artists. We are going to continue to press forward with our proposal to share our revenues and the proposal for the $1 billion guaranteed to the record industry over the next five years, and we're working hard and fast to implement that service. Let's never lose sight of the fact that the people who use Napster are the music industry's best consumers, and they are music's biggest fans.

QUESTION: What will I see if I downloaded the songs (OFF-MIKE)

BARRY: What will you see -- the question was, what will you see if you try to transfer the (OFF-MIKE) You will not see them, because they will not appear on the index.

QUESTION: It will say "block song?"

BARRY: It just won't appear on the index, because we are going to block it before it gets on the index.

QUESTION: Will you provide a list to users so they don't try to download songs...

BARRY: We don't have plans to do that right now.

QUESTION: Will Napster be sort of a shell of what it is now?

BARRY: As David says, it's going to be different. We need to comply with the order that was entered by the 9th Circuit, and that's what we're going to do.

QUESTION: Why would we use (OFF-MIKE) if they're gone?

BARRY: Well, people will make their own choices about what they do, and we've got to comply with the court's order, so that's what we're going to do.

QUESTION: Did the industry give you actual files, as you're asking them to do under the injunction, or did they just give you the names?

BARRY: No, they did not give us actual file names, nor did they give us any indication that things are actually available on the system, and there was a lot of discussion in the hearing about who would have the burden of doing that.

And we'll see. But what we've had to date are just, you know, stacks of paper with lists of songs and lists of artists, but nothing at the level of a file name.

We have -- let me just say one thing, we have file name information from -- principally the Metallica plaintiffs, who actually went out and did searches, and came up with file names. So they've shown that it can be done in an automated way, and as I've said, we've agreed to go forward and screen those.

QUESTION: Why do that? I mean, why not just put in all the names and run the filter?

BARRY: As the 9th Circuit said, the burden falls on both us and the plaintiffs to identify those materials. (CROSSTALK)

BARRY: We do one more question.

QUESTION: Have you had any progress in the negotiation with the record labels?

BARRY: The question was -- have we had any progress on the negotiation with the record labels, I think the answer is generally no.

Everyone's been very civil, and I continue to hope that we will be able to work something out. I think you've got very reasonable people on both sides of this.

Reasonable people can disagree, and it's time for people to come together and have a settlement. So thank you.

CHEN: A very complex case that brings together names like Madonna, Dr. Dre -- Napster, of course, with things like legal precepts, rulings -- one which we are waiting for -- and the technology of the Web.

Watching the courthouse in San Francisco, waiting the judge's ruling out there, one which could effectively shut down the online music service, where downloaders receive their music for free, that is called Napster.

The judge's ruling will be a reworking of something that she actually issued last July, but the appeals court demanded she make some changes. Both the recording industry and Napster making its cases today.

Napster, very significantly saying that they intend to begin screening out some copyrighted material, beginning as soon as this weekend. They both presented their case, the Napster and -- as well the recording industry of America. Both presenting case before judge Patel in court in San Francisco today.

The court is in adjournment for the day, but a ruling could come at any time. CNN will be standing by for a decision, and bring it to you as soon as we hear it. Stand by now, "CNN TODAY" after this.

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