Statement by Sen. Orrin Hatch (R-UT).
Re: Opinion of the U.S. Court of Appeals in A&M Records v. Napster.
Date: February 14, 2001.
Source: E-mail from the Senate Judiciary Committee.

Mr. President, I would like to take a few moments while we are on the subject of copyright law to address the Ninth Circuit Court of Appeals' long-awaited decision in the Napster case. I have been considering the opinion for the last few days, and it may be some time before all of us grasp its full implications. I believe the Judiciary Committee will need to hold hearings on the decision's possible implications and to get an update on developments in the online music market. I will consult with my Ranking Member and other interested parties, and will likely look into the matter in the coming weeks.

As I have considered the case over the last couple of days, I have been troubled by the possible practical problems that may arise from this decision. I am troubled as a strong supporter and prime author of much of our copyright law and intellectual property rights.

Mr. President, by ordering the lower court to impose a preliminary injunction -- before a trial on the merits, mind you -- on this service that had developed a community of over 50 million music fans, it could have the effect of shutting down Napster entirely, depriving more than 50 million consumers access to a music service they have enjoyed. The Napster community represents a huge consumer demand for the kind of online music services Napster, rightly or wrongly, has offered and, to date, the major record labels have been unable to satisfy. Now, I understand that the labels have been working hard to get offerings online, and I have seen some projects beginning recently. I have been promised consumer roll-outs this year. But these offerings have been slow in coming and have not been broadly deployed as of yet. I hope deployment will be speeded up to meet the unsatisfied demand that may be caused by interruptions in Napster service as the litigation continues through trial on the merits and appeals.

Now Mr. President, I am a longtime advocate of strong intellectual property laws. There is something in our legal system called copyright, and the principle underlying copyright is a sound one. I believe that artists must be compensated for their creativity. And I believe that Napster as it currently operates, threatens this principle. I authored the Digital Millennium Copyright Act, which has ensured that, as a general matter, copyright law should apply to the Internet. I am proud of my work in furtherance of that Act.

Yet, I also believe that the compensation principle underlying copyright can co-exist -- and has in fact co-existed -- with society's evolving technologies for generations. And, in each case this coexistence has benefitted both the copyright owner and the consumer, in what you might call an expansion of the pie, in other words.

So let's turn to the present controversy. It might be helpful to review some facts. In the span of about one and a half years, Napster has seen its client software downloaded more than 62 million times. Over 8 million people a day log onto the Napster service. At any one time there may be as many as 1.7 million people simultaneously using the service. It is, quite simply, a virtual community of unprecedented reach and scale. It is the most popular application in the history of the Internet.

It is also free and, unfortunately, according to the Court, it is probably facilitating copyright infringement. The major record labels, which account for over 80 percent of the CDs sold in this country, is rightly shaken by the Napster phenomenon. Although the industry saw its sales increase by 4.4 percent in the year 2000, it believes it would have sold more CDs had it not been for Napster. And the District Court and Court of Appeals agreed with them. The labels have, as is their right under the laws -- many of which I have authored -- pursued legal redress through our judicial system. Were I in their shoes, I question whether I would have taken a different course of action. Now the parties have brought their dispute to the point where the erosion of the copyright laws might be the frightening outcome.

I am particularly troubled because if the popular Napster service, which has a relationship with one of the major record companies, Bertelsmann, is shut down, and no licensed online services exist to fill this consumer demand, I fear that this consumer demand will be filled by Napster clones, particularly ones like Gnutella or Freenet, which have no central server, and no central business office with which to negotiate a marketplace licensing arrangement. Such a development would further undermine the position of copyright law online, and the position of artists in the new digital world that the Internet is developing.

Furthermore, if past experience is any indication, I would expect that my colleagues, like me, will be contacted by the over 50 million Napster fans who oppose the injunction and fear the demise of Napster. This may prompt a legislative response. I know that people in Congress are weighing various legislative solutions, some intriguing, some troubling and counter to the public interest. Some of these responses could strike the important intellectual property rights of artists and copyright owners online entirely, undoing the carefully balanced development I have tried to foster over the years, and possibly harming consumers as well as creators in the long run.

Mr. President, I guess my feeling about this Ninth Circuit decision is a gnawing concern that this legal victory for the record labels may prove pyrrhic or short-sighted from a policy perspective. Some have suggested that the labels merely wished to establish a legal precedent and then would be willing to work on negotiating licenses. Well, it seems to me that now might be a good time to get those deals done, for the good of music fans, and for the good of the copyright industries and the artists they represent.

Mr. President, I have long been an advocate for strong intellectual property rights protection and enforcement. I have urged the labels and composers and publishers working out synergistic arrangements with online music distributors and Internet technologists that will serve the artists and their audience. Such synergy is possible. I was pleased when Bertelsmann took the initiative in harnessing the consumer demand evidenced by Napster and decided to work cooperatively together to develop a service that would benefit both of them and those they seek to serve, the artists and music fans. I again urge the other major music industry players to take significant steps toward this end, and again, I think now is a good time to do it. I have recently discussed my views with some of the interested parties, and I believe there is some interest in working this out for the benefit of all parties, including consumers and creators.

Last July, the Committee held its first of two hearings on the subject. At this hearing, I was joined by my colleague and friend, the distinguished Ranking Member and former Chairman of the Judiciary Committee, Senator Leahy. The two of us encouraged a marketplace resolution to the Napster, and the other, digital music controversies.

I think working together in the marketplace cooperatively will lead to the best result for all parties, the record labels, the online music services, the artists and the music fans. I hope the focus will be on the latter two. After all, without artists, there is nothing to convey, and without the fans, there is no one to convey it to. I think keeping the focus on the artists and the audience can help the technologists and the copyright industries find a way for all to flourish. And I hope this opportunity is taken before it is lost.