infringing activity of its users and had a direct financial interest in such activity.^1702 Napster
argued that it did not have the ability to supervise the allegedly infringing activity because it was
impossible to police the activity of each of its individual users. Napster argued that it could
never know the use to which a particular file was put on its system, and thus could not control
whether a use was fair or not. Napster also pointed to Section 512(m) of the DMCA,^1703 which
provides that a service provider has no affirmative duty to police its users, and cannot be
expected to monitor individual users until put on notice by the copyright holder of particular
alleged infringing materials. Napster argued that, were service providers required affirmatively
to identify and exclude all copyrighted materials, there could be no file sharing or, indeed, even a
World Wide Web.^1704 Napster also argued that it received no direct financial benefit from the
infringing activity, but at most only a generalized financial benefit, since the many noninfringing
uses of the Napster system drew many users to its system.^1705
The district court rejected these arguments and ruled that Napster was vicariously liable.
The court found that Napster’s ability to block users about whom rights holders complain was
“tantamount to an admission that defendant can, and sometimes does, police its service.”^1706 The
court ruled that a defendant need not exercise its supervisory powers to be deemed capable of
doing so. The district court also held that the plaintiffs had shown a reasonable likelihood that
Napster had a direct financial interest in the infringing activity, citing documents stating that
Napster would derive revenues directly from increases in its user base and deposition testimony
by Napster’s former President that the Napster service attracted more and more users by offering
an increasing amount of quality music for free. The court found this to be similar to the type of
direct financial interest that the Ninth Circuit found sufficient for vicarious liability in the
Fonovisa case. Accordingly, the district court ruled that the plaintiffs had shown a reasonable
likelihood of success on their vicarious infringement claims.^1707
The Ninth Circuit’s rulings on appeal in Napster I with respect to the vicarious liability
issue are some of the most significant holdings in the case. In a very important initial ruling, the
Ninth Circuit held that the “staple article of commerce” doctrine of Sony has no applicability to
vicarious liability. This ruling seems a bit odd, since the Sony opinion uses the phrase “vicarious
liability” several times. The Ninth Circuit acknowledged as much, but concluded that “when the
Sony Court used the term ‘vicarious liability,’ it did so broadly and outside of a technical
analysis of the doctrine of vicarious copyright infringement.” Under this holding, it appears that
the Sony doctrine will not afford any immunity to service providers from vicarious liability.
(^1702) Napster, 114 F. Supp. 2d at 920.
(^1703) That section provides as follows: “Nothing in this section shall be construed to condition the applicability of
subsections (a) through (d) [the safe harbors] on – (1) a service provider monitoring its service or affirmatively
seeking facts indicating infringing activity, except to the extent consistent with a standard technical measure
complying with the provisions of subsection (i).” 17 U.S.C. § 512(m)(1).
(^1704) Napster’s PI Opp. Brief, supra note 1631, at 20-21.
(^1705) Id. at 21.
(^1706) Napster, 114 F. Supp. 2d at 921.
(^1707) Id. at 921-22.