Ten Years Later, Napster Loses In Court Again

Back in the stone age, there was this little company called Napster that completely upended the way that people consumed music. The company was sued into oblivion by the music industry -- well, almost. Ownership changed hands several times, and now Napster is deemed to be a legitimate if somewhat unbuzzworthy music subscription service.

But Napster is still settling its legal tab from those wild times. Unfortunately for its new owners, the company is still not finding much success in court. New York District Court Judge Paul Crotty issued a ruling on Tuesday that dismissed an attempt by Napster to force a record label to turn over $1.3 million in legal costs stemming from the defense of a years-old copyright infringement case.

As Napster was making its transition from industry transgressor to industry comrade, it started making deals with record labels for access to songs it could provide on its service. One of those deals was made with Rounder Records Corp., one of the larger indies whose roster includes Alison Krauss, Cowboy Junkies, Loudon Wainwright III, and Philip Glass. Napster inked a deal with Rounder in 2001 and then another agreement in 2006.

The 2001 deal seems to have had a shortcoming. Napster got rights to sound recordings from these artists but left a hole when it came to mechanical or publishing rights. The later 2006 agreement made it Rounder's obligation to secure those mechanical rights and indemnify Napster for any liability for failure to do so.

In 2006, MSC Music America, a copyright administration company, and the owners of various copyrighted musical compositions, sued Napster for infringing 344 copyrighted musical compositions. Among those, 172 were allegedly embodied in sound recordings provided by Rounder to Napster.

The case was settled two years later, but Napster was left with a $1.3 million legal bill. Napster went after Rounder to recover its costs.

Now Napster has just come up short.

After a close reading of the contracts, Judge Crotty has concluded that the 2006 agreement superseded the 2001 agreement, and that the indemnification in the 2006 agreement was conditioned on Napster obtaining Rounder's prior "written consent" for payments on claims. That didn't happen, so Napster has lost in court to a record company yet again.