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Hummer's Napster bummer: Napster's backers under attack

08/12/2000
The Economist
Copyright (C) 2000 The Economist; Source: World Reporter (TM) - FT McCarthy

THE legal juggernaut set in motion by the recording industry to rid itself of Napster is threatening to take with it more than just the upstart firm whose software enables music fans to share each other's CD collections free on the Internet. If, as seems likely following a hostile ruling a fortnight ago, Napster is fined for music piracy, the way could be open for action against both its investors and the developers of any software that might be used to undermine copyright.

For now, the ruling that Napster must immediately remove all copyrighted material from its site (in effect closing the service down) is stayed until the case reaches the appeal court, from where it will almost certainly move to the Supreme Court. If, as expected, things go badly for Napster in the higher courts, litigious music and film companies will most likely turn their sights on the venture-capital firm that backed Napster, Hummer Winblad, and the programmers who made Napster possible.

At first sight, this looks like a denial of two well-established points of law: the idea that the sins of a corporate entity cannot be visited on its investors; and the traditional defence of people who make things such as guns and cars that they cannot be held responsible for the way others use their products.

But copyright law is not much constrained by such niceties, recognising a concept known as "vicarious infringement". Thanks to this, it does not matter whether Hummer Winblad or individual software developers actually committed copyright piracy themselves; it is enough that they could have influenced the act or benefited from it in some way.

Hummer Winblad is in an especially tricky position because Napster's acting chief executive, Hank Barry, is a partner in the San Francisco-based firm. If Hummer Winblad were to be pursued for its assets (about Dollars 500m), it would be a sad irony. The firm has been notably more risk-averse than most Silicon Valley rivals towards Internet investments, fearing as far back as a couple of years ago that valuations had got out of hand.

But the real threat of an attack on the firm is the chilling effect it could have on investment and innovation. Backers of Napster-like "peer-to-peer" start-ups, which harness the power of millions of linked personal computers to create huge networks, could become vulnerable even if their role in infringing copyright is deemed inadvertent. As for the geeks who love nothing better than writing programs that can turn whole industries upside down, if their favourite Internet discussion board, slashdot.org, is anything to go by, the mood is one of fear and loathing in more or less equal measure.