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Tuesday, 26 June, 2001, 06:28 GMT 07:28 UK
New court setback for Napster

Online song-swapping service Napster has failed in a last ditch effort to win a reversal of the copyright clampdown which has prompted a sharp decline in its user numbers.

A federal appeals court has rejected Napster's plea for a rehearing in the landmark lawsuit which ended with the service being barred in March from facilitating trade in copyrighted songs.

Observers said they were not surprised by the court decision, which, while published on Monday, was made on Friday.

And they also warned over the fallout from a full trial being brought by the music industry giants which have spent 18 months on Napster's trail.

Napster fights on

If the recording firms win the case at trial, they could come out of it being owed more in damages than Napster is worth, said Ric Dube, an analyst with research firm WebNoize.

His comments came despite a deal three weeks ago in which Napster signed a deal with BMG, EMI and AOL Time Warner - three of the record companies behind the legal action.

"The major companies can come out of this owning Napster," he said.

Napster, however, has not ruled out a further appeal, to the US Supreme Court over the March injunction.

"We will review our legal options going forward," said Jonathan Schwartz, Napster's general counsel.

And Mr Schwartz was unsurprised by the court decision. "We recognized going in that rehearing petitions are infrequently granted," he said.

And the launch of a new secure membership service later this summer will bring to an end many of the record industry's outstanding legal issues, according to Mr Schwartz.

Long battle

Monday's statement marks the latest in a long fight by Napster to defend its service, which allows users to swap music files online.

Record companies, fearing the service would cost them billions of dollars in lost music sales, in December 1999 opened legal action against Napster

A US appeals court in February found the firm was infringing on the copyrights held by the music giants, and ordered the issuing of the March injunction.

Napster, which has since introduced new software in an effort to block swapping of copyrighted music, has seen its user figures plummet.

About 360 million files were traded through Napster in May, compared with 2.79 billion in February, WebNoize said.

Napster on Friday introduced new software to ensure that users can still share songs not covered by the injunction.

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See also:

30 Apr 01 | Business
Online music bonanza
26 Apr 01 | Business
Napster use slumps after court order
11 Apr 01 | Business
Judge threatens to close Napster
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