The court then turned to Napster’s need for discovery on its allegations of copyright
misuse by the plaintiffs. The court first noted that, although both itself and the Ninth Circuit had
dismissed Napster’s misuse defense at the preliminary injunction stage, “[s]ince those rulings,
the factual and procedural landscape has changed significantly. ... The evidence now shows that
plaintiffs have licensed their catalogs of works for digital distribution in what could be an
overreaching manner. The evidence also suggests that plaintiffs’ entry into the digital
distribution market may run afoul of the antitrust laws.”^1786
Napster based its allegations of misuse on unduly restrictive licensing requirements of the
plaintiffs’ online music venture, MusicNet, with which Napster had entered into a license
agreement. That agreement prevented Napster from entering into any licensing agreement with
any individual plaintiffs until March 1, 2002 and provided that even after March 2002, if Napster
entered into any individual license with any of the plaintiffs, MusicNet could terminate the
agreement upon 90 days notice. Additionally, the license set up a pricing structure under which
Napster would be charged higher fees if it failed to use MusicNet as its exclusive licensor for
content.^1787 The court held that these provisions effectively granted MusicNet control over
which content Napster licensed. “The result is an expansion of the powers of the three MusicNet
plaintiffs’ copyrights to cover the catalogs of the two non-MusicNet plaintiffs.”^1788 The court
noted that further inquiry into the actions of MusicNet, and whether those actions should be
imputed to the plaintiffs, was warranted.^1789
The court also found that Napster had raised substantial issues of whether the plaintiffs’
entry into the digital distribution market constituted antitrust violations. “[E]ven a naïf must
realize that in forming and operating a joint venture, plaintiffs’ representatives must necessarily
meet and discuss pricing and licensing, raising the specter of possible antitrust violations. These
joint ventures bear the indicia of entities designed to allow plaintiffs to use their copyrights and
extensive market power to dominate the market for digital music distribution. Even on the
undeveloped record before the court, these joint ventures look bad, sound bad and smell bad.”^1790
Accordingly, the court granted Napster’s Rule 56(f) motion for further discovery into the
(^1786) Id. at 1102 (citations omitted).
(^1787) Id. at 1105-06.
(^1788) Id. at 1106.
(^1789) Id. at 1107. The court further noted that, if the plaintiffs were engaged in misuse, they could not bring suit
based on their rights until the misuse ended, although the misuse would not ultimately preclude recovery for
infringement: “The doctrine [of misuse] does not prevent plaintiffs from ultimately recovering for acts of
infringement that occur during the period of misuse. The issue focuses on when plaintiffs can bring or pursue
an action for infringement, not for which acts of infringement they can recover.” Id. at 1108.
The court also rejected the plaintiffs’ argument that Napster should not be allowed to assert a misuse defense
because of its own unclean hands. Because the plaintiffs had themselves sought equitable relief from the court,
Napster should not be barred from bringing an equitable defense. Id. at 1110-11. In any event, upon a
balancing of equities, the court concluded that “the potential for public injury and the fact that Napster has shut
its doors to infringement justifies allowing Napster to assert a misuse defense to obtain additional discovery.”
Id. at 1113.
(^1790) Id. at 1109 (citations omitted).