A federal appeals court ruled today (Feb. 12) that the music-swapping service Napster must stop trading in copyrighted material and may be held liable for "vicarious copyright infringement."

A federal appeals court ruled today (Feb. 12) that the music-swapping service Napster must stop trading in copyrighted material and may be held liable for "vicarious copyright infringement." Napster must prevent users from gaining access to copyrighted content through its lists of songs archived by the service's users, the 9th U.S. Circuit Court of Appeals said. Napster officials have said such a ruling could force them to shut down the service.

In a 58-page opinion, a three-judge panel told a lower court judge to rewrite her injunction to focus more narrowly on the copyrighted material. The panel also directed the Redwood City-based company to remove links to users trading copyrighted songs stored as MP3 files.

"This is a clear victory. The court of appeals found that the injunction is not only warranted, but required. And it ruled in our favor on every legal issue presented," said Hilary Rosen, president and chief executive of the Recording Industry Association Of America.

Napster can stay in business until U.S. District Judge Marilyn Hall Patel retools her injunction, which the appellate court called overly broad. The company is vowing to "pursue every legal avenue" to keep its service open.

"We are disappointed in today's ruling," Napster CEO Hank Berry said in a statement. "Under this decision Napster could be shut down -- even before a trial on the merits. The Court today ruled on the basis of what it recognized was an incomplete record before it. We look forward to getting more facts into the record. While we respect the Court's decision, we believe, contrary to the Court's ruling today, that Napster users are not copyright infringers."

Referring to recent alliances with Bertelsmann and indie labels TVT and Edel, Berry said Napster intends to continue working on solutions with the other major record companies. "We have been saying all along that we seek an industry-supported solution that makes payments to artists, songwriters, and other rightsholders while preserving the Napster file sharing community experience," he said.

Napster creator Shawn Fanning echoed Berry's sentiments about the company's continuing evolution into a legitimate music delivery system.

"We've been developing a Napster service that offers additional benefits to members of the community and, importantly, makes payments to artists," he said. "I'm focused on building this better service and I still hope to have it in place this year. The new technologies we are developing are amazing; I hope that, by further court review or by agreement with the record companies, we can find a way to share them with the community."

Berry urged Napster's users -- who number some 50 million, according to the company -- to "contact their representatives to let Congress how much Napster means to them." Added Fanning, "We'll all find a way to keep this community growing."

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