Companies warned by Napster verdict

At first glance, the US court ruling against Napster last week might seem far removed from your everyday tribulations, but don't be complacent.

Combined with the European Parliament's new copyright directive, the Napster model contains important lessons for anyone doing business online.

While the battle between the music industry and the file swapping service still rages, industry analysts warn corporate users of or peer-to-peer (P2P) technology to beware breaking intellectual property laws.

"Napster and other P2P sites have argued that they only permit people to swap files online and that they are not responsible for what they do. The courts in the US seem to be sending a clear message that there is no merit in this argument," said Jonathan Armstrong, an IT lawyer at Eversheds.

Companies are starting to use P2P technology similar to Napster's, to support collaborative and research work by sharing files on the network.

Lotus Notes creator Ray Ozzie came up with a corporate P2P platform last year. His Grooveworks product lets users share information and hold meetings across the internet without the use of a central server.

Content shared by business partners, such as images, messages and files, is synchronised and stored on desktop hard drives rather than on a central server. Several large US firms, including Wal-Mart, are currently piloting Grooveworks.

Armstrong said that this kind of use is unlikely to encourage a Napster-scale copyright infringement. But users must still be aware of their liability for illegal actions by employees who use the network.

"Many companies operate P2P exchanges for their customers, subscribers or even for employees on the company's intranet system. Cases like [Napster] show us that P2P facilities still need to be policed with the same diligence as if the company was offering the goods for sale or exchange itself," he explained.

The other issue is for companies wanting to protect the copyright of their material on the internet. The European Parliament's decision outlaws all but private and non-commercial copying of rights-protected digital content. But the record industry is fighting an uphill battle, as enforcement will become increasingly difficult.

"Given the court's ruling and the pace at which P2P technology advances, the music industry has months, not years, to develop a credible internet distribution strategy," said Robert Batchelder, research director of web strategies at analyst Gartner.

"Unfortunately, the music industry does not seem to realise how quickly it will lose the P2P war, even though it won the Napster battle," he added.

Napster has announced that it will appeal against the decision.

See also:

Napster: A musical revolution online

Napster, the website, was built as a central host for users wishing to swap MP3 music files. It has sparked an almighty legal battle over its legitamacy and has changed the way people obtain music.  01 May 2001

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