Written By: Ran Levi

Napster, a revolutionary Peer-to-Peer file sharing software, was launched in 1999 – and forever changed the media world. In this episode, we’ll tell the story of Sean Fanning and Sean Parker, its creators, and talk about the legal battle it fought with the record company – and Metallica.



The fall of Napster has left a vacuum in the world of file sharing – and as the saying goes, the Internet abhors vacuum… Various File Sharing programs such as Gnutella, Kazaa and others quickly filled the void. We’ll describe Grokster’s legal battle against the Record Companies, the sinister poisoning of file sharing networks by OverPeer – and the rise of BitTorrent.

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Part II:

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Part I

File sharing is a phenomenon as old as the World Wide Web. Even when the internet was tiny and only a handful of people were using it – file sharing was already very common. Thousands of users were sharing images, books, and songs.

Edwina and Eddy Hardenburgh

Here’s an example that will give you a sense of how big was file sharing was, even as far back as the 1980s and 90s. In 1994, the FBI raided a house belonging to Edwina and Eddy Hardenburgh in California. From their bedroom, the married couple operated a file sharing service using modems. For those of you who aren’t into “ancient” technology, a modem is a device that allows two computers to communicate with each other through physical phone lines, what we now call land lines. Eddy and Edwina had 124 phone lines. They practically built a mini-empire of file-sharing, serving thousands of users who exchanged gigabytes of games, hacked software, and pornography on a daily basis. The FBI agents confiscated hundreds of computers from their house.

The Discovery Problem

But although many people were already sharing files, there was still one major problem that limited the popularity of file sharing – and that problem was Discovery. That is – if I want to download a file – say, the latest Chuck Norris movie – how do I find it?

Generally speaking, we can say that the internet has two sorts of computers: servers and clients. The clients are domestic computers, personal devices; while the servers (as their name insinuates) provide services like hosting files – music files, for instance. In such case, if a user wants to listen to a certain song, and clicks on a link, his computer communicates with a server and requests the file of the song. If the server has access to the file it sends it to the user’s computer.

This is the standard method of file sharing, the one that was used by the Hardenburghs in California. Their computers were the servers, while the people who phoned in were the clients.

But what happens if a server doesn’t have a certain file – but another user has it? Think of it this way: let’s say you want to read a certain book. There is a chance that your upstairs neighbor has a copy of it, and would be happy to lend it to you – but since you’ve never been in his apartment, how could you know whether or not he has the book?

That is the same basic issue of the file sharing world. If I am one out of millions of anonymous users, how could other users know if I have a file they are interested in? This discovery problem limited the ability of worldwide users to share files with each other. The company responsible for removing this great obstacle launched the era of modern file sharing and was one of the most famous software companies in history – Napster.

Napster

Napster was created by Sean Fanning and Sean Parker, two enthusiastic computer geeks who met on tech forums when they were fifteen years old. In 1999, Sean Fanning was a college student in Boston; since he was known as a person who slept in a lot, his friends started calling him “Napster.” One night, while having a beer with his friends, Fanning listened to them whining about the difficulty of finding MP3 files. Back then, in the late 1990s, there were already a few internet websites that allowed users to download songs – for instance: Audio-Galaxy and HotLine – but many of the links on those sites were “dead.” That is the files behind the links were deleted for some reason or another and so the links led nowhere. One had to try dozens of dead links until finding a “live” one.

This discussion led Fanning to an epiphany: he realized that in addition to the technological ability to send a file from one computer to another, a file sharing software must have two additional characteristics: it must allow users to chat with each other, and easily reveal the files other users have. These two features were easy to implement: all he had to do was create a software that had all three.

He described his idea to his friend, Sean Parker, who found it fascinating. They contacted Sean’s uncle, John Fanning, an entrepreneur and a start-up investor who made his fortune in the field of computerized chess games. John gave Napster its initial funding.

Copyright Law 101

But before they could act on their idea – Fanning and Parker had to consider the legal aspects of what they were about to do. After all, it was clear that many of the songs their users would be sharing among themselves were going to be pirated copies which violated the artists’ copyrights.

Now, copyright law is a very complicated thing – so I’ve enlisted a fellow podcaster, who’s also a lawyer, to help us find our way through this legal labyrinth.

“My name is Brett Bendistis, I’m an attorney barred in Delaware, Pen., New Jersey. I work primarily in the state of Delaware. I worked for a General Practice firm for a very long time, and now I teach primarily. So right now I teach at a few different institutions, and I sort of help people write briefs and motions and all that stuff.

I do a podcast called The Citizen’s Guide to the Supreme Court with my fried Nazim. We take a look once a week at Supreme Court cases and try to give the average person a good idea of one, what are these cases about and two – if these cases affect your life, how do they affect your life. It dovetails into different topics but the point of it is two friends talking about the law and trying to make it easy, accessible, funny if we can, and show our passion for it.”

Brett and his podcast partner Nazim are not your usual lawyers. On their website, they define themselves as “two attorneys who hate being attorneys.” Brett is a particularly good fit for this episode since he is also a musician: he’s been playing the drums since he was seven years old.

“[Ran] I think you’re the first drummer-lawyer I’ve ever heard of…

[Brett] Well that’s the way I go…it’s a weird niche but I do it well!”

So for starters, I asked Brett to explain the various types of protection the law gives to creators.

“There are three different types of intellectual property: Trademarks, Copyright, and Patents. This is like painting with a pretty broad brush, but you can generally classify it like that: Copyright is artistic, Trademark is business and Patents are science for lack of a better term. They all have their levels of protection and the length of them is dependant on the balance between – we want to protect the people who create things, but we also don’t want what you made to not be improved.

The way copyright works is that it gives you almost exclusive rights to use what you’ve created. The usage that you have is very broad. You have the right to license it, copy it, modify it, destroy it…If you write a song you get to decide who buys it – but you’re also entitled whether you want anyone to buy it. If you write a book of poetry and you copyright it, you can trash the whole thing and nobody can do anything, even if it’s the greatest poetry in the entire world.

There are some caveats to it, like with Public Domain. After some time, when your copyright expires, it goes under Public Domain and anybody can use it. Nazim has this joke where the time length of Public Domain is dependant upon how much Disney lobbying to get the extension going further. Whenever Mickey Mouse goes under Public Domain, Public Domain goes further down the line…

[Ran] It’s a race against Mickey Mouse!

[Brett] Exactly…”

Napster’s’ founders were very much aware of the legal risk they were taking. If record labels – the copyrights’ owners – could prove that Napster had a legal responsibility to the copyright infringements of its users – they could sue the software company. The two friends knew they had to find a solution to the legal problem before they could put any more effort into their enterprise.

The Betamax Defense

The solution they eventually found stemmed from one of the most famous and important verdicts in US history: Sony Corp. of America versus Universal City Studios, Inc., in 1984.

Sony, the famous technology corporation, marketed a video cassette tape based on a technology called “Betamax.” Some of those who purchased the tape used it to record movies and then share them with their friends. Universal City Studios, who owned many of the copyrights for those movies, argued in court that sharing recorded movies is an infringement of its copyrights and that Sony, the maker of the tapes and inventor of the new technology, should be held responsible for those infringements since, without the tapes, there would be no infringement.

But Universal City Studios lost the case. The court concluded that just because a new technology allows copyright infringements by people who purchase it, is not a sufficient cause to prohibit the public from using it. Most of Sony’s customers were using the VCR in a way called ‘Time Shifting’: they were recording TV shows that were aired, for free, at a certain time – and watching them at a later time. The court decided that Time Shifting is a legitimate use for the VCR technology, and so the right of the inventor to invent exceeds the right of the copyright holder to protection.

By the way, Sony won the battle – but ultimately lost the war. Consumers preferred a competing technology known as VHS, and Betamax never took off. But the court’s ruling had significant long-term importance since it allowed inventors to continue innovating without the fear of being prosecuted. If it wasn’t for Betamax, we wouldn’t have MP3 music players, DVD devices and more.

Fanning and Parker decided to use the shelter of the Betamax ruling. John Fanning, their investor, later said:

“I had read every 9th circuit opinion on copyright and felt that Sony Betamax and substantial non-infringing use were certain defenses. Additionally, we had immunity from liability under DMCA… [I] said ok, we need to design our network in such a way that the MP3 files themselves never touch our network. If the files move between users directly we are safe and we can legitimately defend ourselves if they sue.”

In other words, Napster will emulate Sony: it will only supply the underlying technological infrastructure – but it would be the users who would be responsible for any actual copyright infringements.

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The Rise of Napster

And so Sean Fanning locked himself in his uncle’s office for a 60-hours programming marathon. When he finally emerged from the office, he carried with him the first version of Napster.

The initial reactions to the new project weren’t so enthusiastic, to say the least. An experienced programmer told Fanning that he should just forget about the whole thing and concentrate on his studies. He was convinced that there was no way computer users would allow random people to see what was on their computer, not to mention share files with them. Fanning’s parents were also disappointed that he chose Napster over his studies.

But Sean Fanning didn’t have those doubts. The idea had such a strong grip on him that one day he simply got up and left his dorm – and never came back. He left behind his clothes, his books, everything!

Napster’s Technology

Before we move on, let’s talk about Napster on a more technological level, and find out how it allowed one internet user to discover what files another internet user had, and then move those files around.

When a user installed the Napster software on his computer, it read his hard drive and identified the MP3 files stored on it. It then sent a list of those file names to a central server that belonged to Napster itself. Notice this one important fact: the software only sent the file names, not the actual songs themselves. This fact will be significant later on.

Now, let’s assume that I was looking for a song – say, “Born in the USA” by Springsteen. And let’s assume that you, Kelly, use Napster and that you have an MP3 file of that song. My computer, the client, communicates with Napster’s server and asks where one could find the file BornInTheUSA.mp3. Napster’s server searches its repository of file names from all users and soon finds out that you, Kelly, has it. Now the server sends me your internet address, the IP address. Using Napster, my computer communicates with your computer and then you send the file to my computer

The first and most important characteristic of this method is that the actual sharing is done between the two clients, and not between the client and the server. This sort of file sharing is called “Peer to Peer”, noting the fact that the two computers are just equal peers of the same network.

The second important characteristic is the fact that the server – owned by Napster – doesn’t store any MP3 files, at any point of the exchange. It only mediates between “sellers” and “buyers”, so to speak, and eases the communication between them. The fact that the server doesn’t store MP3 files, gave Napster the Betamax protection – at least in theory.

Besides the legal protection, this approach had two other advantages. The first is that the company didn’t have to store millions of files, which is a major technological challenge. The other is the saving on bandwidth. If Napster’s server had to actually send MP3 files to thousands of users at the same time, it would have required a significant communication infrastructure; just like a water pipe that needs to provide water to thousands of homes at the same time would have to be a really thick pipe. But since the files were shared between the clients, the burden of communication was on their shoulders. Or, their modems, I guess.

What Made Napster So Successful?

To say that Napster was a success would be an understatement. The simple software, created by an 18 years old in a marathon of pizza and soda, became a huge hit. The number of users doubled every few weeks, and at its peak – in February 2001 – Napster had about 80 million active users per month. For comparison, “Yahoo!” – one of the biggest websites at that time had only 54 million users. Napster was especially successful among college students. So much so, that the file sharing traffic threatened to overload the universities’ networks, and some institutions had to block the software in stop it from affecting academic work.

So what made Napster so successful compared to other software and file sharing websites? The first element has to do with the fact that the software focused on MP3 files only, and allowed sharing music but not movies, games, and other software. If you remember our earlier episode with Dr. KarlHeinz Brandenburg, the inventor of the MP3, you’ll know that although MP3 files are rather small – they still maintain a high quality of audio.

Another element has to do with a few smart defaults that Fanning and Parker implemented in their software: for example, a user that wanted to download a file had to allow others to download files from his computer. So you couldn’t just take and take without giving back. No free lunch!

The third element of Napster’s success and perhaps the most meaningful is how easily users could find the files they wanted. With the click of the button, a user could scan millions of computers and even locate songs that traditionally were hard to find, like old recordings, bootleg versions, and rare concerts. Discovering new music became as easy as using a microwave: open the software, click and wait. There was no reason to spend time at music stores…

Metallica Vs. Napster

Well, record labels sure noticed that people were buying less music, and it is no surprise that they considered Napster to be a real threat. The phenomenon of file sharing on the internet had been a problem for them for a while, but now, with Napster, file sharing became almost “industrial” in scale – and of course almost all the files exchanged by users were protected by copyrights, owned by record labels.

So in December 1999, only six months after Napster was launched, the major record companies – Universal City Studios, Sony Corp., EMI, and others – filed suit against Napster. While this was a predictable move that Fanning and Parker anticipated, it was a second lawsuit that caught them by surprise.

In 2000, Metallica – one of the world’s most renowned heavy metal bands – recorded a new song for the movie “Mission Impossible.” The song’s name was “I disappear.” One day, Lars Ulrich, the band’s drummer, heard the song playing on a local radio station. Ulrich was astounded – the song wasn’t yet released! It hadn’t even had a final recording! how did a radio station get a hold of a draft version?

After looking into it, he discovered that someone had shared the song on Napster. In fact, all of Metallica’s records were available for download on the web. Shocked, Ulrich shared his discovery with his bandmates and they were livid! Not only was their right to choose when and how to release their songs denied, but it was obvious that they wouldn’t make a dime on records that could be copied so easily. And if there is one thing we can safely say about heavy metal bands, it is that they don’t tend to keep their grudges pent up…

In April of 2000 Metallica decided, in an unprecedented move, to file a lawsuit against Napster, demanding tens of millions of dollars due to their responsibility for the copyright infringement. As we said, Napster expected the record companies to sue – but the fact that Metallica chose to side with the record labels despite being a band that represented an anti-establishment sentiment, was a classic case of “man bites dog,” or in this case – “guitar breaks person.” The media delighted at the news.

The Artists and Napster

Lars Ulrich testified in front of the Senate’s special committee on file sharing, and the band even provided Napster with a 60,000-page long document – printed – that contained the IP addresses of 300,000 users who shared Metallica songs. Napster agreed to block the accounts of all three hundred thousand users, a move which motivated another famous artist, the rapper Dr. Dre, to file a similar lawsuit against Napster. Even Madonna wasn’t happy, to say the least, to discover that her new single was already shared by users. This fascinating case received worldwide coverage, and the media followed the story closely.

While Metallica, Dr. Dre, and Madonna were against Napster, some artists supported the young company. Dave Grohl, the former Nirvana drummer, said in an interview:

“I think that music should be available to anyone who wants to listen to it. There shouldn’t be a price tag on music. Maybe there should be a price tag on the package – you pay thirty bucks and get the artwork, the photos, the stickers – but I don’t want to open the radio and put a nickel, every time I want to listen to Metallica… I can understand why some people say ‘Napster is taking money away from me’… but you know what? When it’s someone who sold fifty million copies, and made fifty million f***ng dollars and then he bitches about nickels… go f*** yourself, man…”

In most cases the division was obvious: known and successful artists were against file sharing, while young and unknown ones were in favor of it. Those who had nothing to lose supported Napster and considered it a way to help people discover their music. For example Radiohead, a band that wasn’t that successful yet, had its new record leaked to the web three months before its official debut. At the time, none of Radiohead’s previous songs made it to the billboard top twenty list, and records weren’t selling. The new album, “Kid A”, was an experimental album, so no one expected it to be any different. But when it was finally aired, “Kid A” was a top seller – without even being played on the radio that much! All due to its success on Napster. Other artists, such as Limp Bizkit and The Offspring also used Napster in order to promote their tours.

Bertelsmann AG

Despite the harshness towards Napster, record labels did see the positive potential behind the new technology. Richard Menta, an American Journalist, wrote the following in one of his columns:

“Big Music is not stupid. Many in the ranks see the promotional benefits Napster is having on them. At the very least, rising CD sales show it hasn’t done anything to harm them. But what they don’t like is an entity with such power that they don’t control. Such an entity, they fear, can eventually undermine the profits that come with an oligopoly.”

There’s evidence to the fact that at least some of the record labels saw “where the wind was blowing,” is the attempt to purchase Napster just before the court case closed. The German media giant, Bertelsmann AG, which was actually one of the prosecutors in the lawsuit, surprised the music world when it announced that it planned to acquire the small company. In fact, Napster’s CEO at that point was actually a former executive at Bertelsmann AG – and he was the one who put the deal together. According to other media reports, Napster had discussed similar deals with other record companies, but those did not work out due to disagreements regarding dollar amounts.

The Betamax Defense Fails

while legal actions against Napster continued, in July of 2000, the company had to face yet another disaster. The judge who discussed their case in the inferior court ordered Napster to remove all the songs protected by copyrights within 72 hours, otherwise, he would shut Napster down. Napster appealed to the Supreme Court, claiming that it was unable to technically execute the court’s order. Six months later, in February of 2001, the appeal was rejected, and Napster found itself facing two bad options: either find a way to filter all the songs that are protected by copyrights and prevent users from sharing them on its network or shut down.

But why was Napster’s appeal rejected? After all, Parker and Fanning did their best to take advantage of the Betamax defense: they designed the software so that it would emulate Sony’s position – Napster’s servers weren’t storing MP3 files themselves. It was the users who were doing all the copyright infringement, right?

Well, as Brett – our drummer/lawyer – will explain, there were two crucial differences between the Napster case and the Sony Betamax case.

“There’s a bit of contradictory language in that decision which makes it hard to read, but the overall holding of it is that they say – this case is distinguished from Sony because unlike Sony, the VCR company that didn’t really know what the people were doing with it – Napster knows that the primary usage of the software is Copyright infringement. So the court is really saying – you don’t apply under Sony because you are permitting and fully aware of what you’re doing. The Betamax defense is predicated upon this idea that if we’re going to hold someone liable for copyright infringement, we need to make sure that they are purposefully engaged in copyright infringement.

One of the big differences, technologically, between the VCR and Napster, is that after you sell someone a VCR you cannot control what they are using it for. So a decision there is really inhibiting the usage of the product – whereas Napster always had full control over how its users are using it. Because they have constant control over the software, I think the court looks at it and says – because you can control what is going on there, we’re not going to give you the same benefit of the doubt we gave to Sony. “

In other words, Napster’s server held the file names of all those MP3’s – and so Napster did actually know when its users were sharing copyright-protected files. Sony, on the other hand, didn’t. Also, the main usage for the VCR was ‘Time Shifting’, like we said earlier – recording a TV show so you could watch it later. Napster’s usage, on the other hand, was very different.

“The primary usage of Time Shifting is that you are enjoying a free product that you are allowed to use – just at a later time. You’re not getting something for free because you were always allowed to get it. That had a huge amount of sway in that Sony decision because there’s not a lot of harm there – the person would have enjoyed it anyway. Napster does not have the same defense because of how it was used.

They created three things that were similar to Time Shifting, but are very flimsy arguments. The arguments are that there’s Sampling – the person is using Napster so they can sample a product and then buy it, Space Shifting – you’re getting a product on Napster that you’ve already bought so that you can have it on different mediums, and then there’s something called ‘Permissive Distribution’, where Napster is allowed to use copyrighted material if the copyright holder allows that material to be used.

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The problem with all of those arguments is that at the end of the day, people who are taking things on Napster are taking them without paying for them. There’s an assumption there that you’re using it because you’ve already bought it or with the future intention to buy it – but I don’t remember anyone buying a CD they downloaded for free. No one used Napster with an honor system, like – ‘I’m going to buy the CD.’ Nobody ever did that, and I’m sure nobody does that now. So they were flimsy arguments that didn’t have the same effect.

On a factual level, the big difference between Napster and Sony is there was greater hard to the copyright holders then there was in Sony. As a copyright holder in Napster, you’re actually losing monetary value. This is not specifically stated: there’s a big dance when it comes to damages and what needs to be proven, but if you read between the lines it seems as though because there’s less damage with the VCR, the court is saying – we don’t need to get involved in that, whereas in Napster the balance is way out of whack and it takes too much money from the copyright holder.”

So the bottom line is, Napster wasn’t able to use the Betamax defense after all. The company had no choice but to turn off the lights and cease all activity in order to fulfill the court order.

The Fall of Napster

Napster’s executives searched for a solution that would allow the company to survive. It was obvious that blocking copyright-protected songs would make users abandon the software. The only possible solution they had was to try and launch a paid service that would allow legal access to music files. Napster’s programmers wrote a new version, Napster 3.0 – but the company wasn’t able to close any deals with the record labels regarding purchasing copyrights.

The last option for Napster was to merge with Bertelsmann AG. The deal was supposed to provide some cash flow and allow it to sell songs legally. In May of 2002, Napster announced that it reached an agreement with the German company, according to which it would be sold for the amount of 85 million dollars. But several record labels petitioned the court regarding the legality of the deal, and three months later the court ordered to cancel the deal arguing that there is a conflict of interests with the CEO of Napster being a former executive at Bertelsmann.

dismissing the deal was the end of Napster : the company was never profitable and no source of income was in sight. A few days after the judge’s ruling, all forty Napster employees were let go, and on the company’s home page, the famous logo of a cat wearing earphones was replaced by an illustration of a grave with the caption: “Napster Was Here.” All the company’s properties, including its logo, were sold to a different company. Officially, Napster still exists today – but it’s very different from its original image. The real Napster died.

The Founders Move On

The three founders moved on. John Fanning, the investor, went back to invest in computerized chess games. Sean Fanning became an entrepreneur and founded a few other start-up companies; his personal wealth is estimated at a few million dollars.

Sean Parker said that the first few years after Napster shut down were extremely difficult: he was dealing with personal debts and ended up crashing on friends’ couches. He was afraid that if he was ever to make money again, record labels would take him back to court; therefore, he made an effort to avoid the media. Don’t worry, there is no need to feel sorry for him. Eventually, he got lucky – he was one of the first investors in a small company, you may have heard of … FaceBook? Today, his personal wealth is estimated at more than a billion dollars!

Even though Napster’s tale ended badly, it is not the end of our story. In fact, Napster’s defeat was the incentive for a new, more sophisticated generation of file sharing networks – eMule, eDonkey, Gnutella, Kazaa, and many others. File sharing technology itself changed in order to prevent any legal action similar to the one that destroyed Napster, and now not only MP3 files were shared, but also movies and hacked games.

And as you might have expected, record labels weren’t idle. To supplement the judicial battle, they also tried some shady tactics – like “poisoning” the file sharing network with fake files.

and then came BitTorrent, which shuffled all the cards.

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Part II

Napster’s disappearance left a void in the world of file sharing. To paraphrase one of Aristotle’s most famous quotes: The internet abhors a Vacuum. Dozens of young programmers were inspired by Napster’s success and began working on technological developments in order to fill the void that Napster left behind.

Gnutella

Two of those developers were Justin Frankel and Tom Pepper, two programmers who – much like Napster’s founders -were hardly out of their teens before making history on the web; their successful product was none other than the media player “Winamp.”

Winamp had millions of users. This success made Frankel and Pepper celebrities in the world of software developers and allowed them to found a company called ”NullSoft” which was soon purchased by the giant American corporation AOL.

The two developers were inspired by Napster’s meteoric success and followed in its footsteps. In 1999 they decided to develop their own file sharing software. They planned on distributing the software as “open source” – meaning, available for all, and they called it Gnutella (with a silent G), a pun referring to the famous hazelnut spread, and to GNU, the open source movement, it was a recursive acronym.

But Frankel and Pepper made one, very big, mistake. They were talented programmers, no doubt about that – but perhaps due to their young age and lack of experience in handling themselves inside large bureaucratic organizations, or maybe due to a natural rebellious instinct, they decided not to tell their new managers at AOL about their new project. In fact, the first time AOL’s executives heard of Gnutella was on March 14th, 2000, when the first version of the new file sharing software debuted on NullSoft’s website.

In order to appreciate what went through those executives’ minds, we should remember that at the time a series of very well-covered court cases were being held against Napster. Napster was accused of being responsible for the copyright infringement of its users who’d copied millions of songs from each other on a daily basis. Even Metallica and Dr. Dre joined the record companies and added lawsuits of their own! The media was covering the story day in and day out. It is no wonder why AOL didn’t want to sully its healthy corporate reputation by getting involved in the legal quagmire of file sharing. On top of that, AOL did some business with the record labels, and it made no sense to destabilize those connections in favor of distributing an open source software that had no financial potential.

So a few hours after Gnutella went live, the phone rang at Justin Frankel and Tom Pepper’s office. The order was clear: Take Gnutella OFF the website, NOW!

AOL Misses The Train

But AOL missed the train… Even though Gnutella was removed from NullSoft’s site within less than a day, a few thousand users had already downloaded the software. In a few months, people had hacked and “reverse engineered” it in order to see how it worked. Copies of the original software quickly spread all over the internet, and Gnutella’s network grew bigger.

Rumors about the new software made their way to reporters who started knocking on NullSoft’s door, but Frankel and Pepper were ordered to stay silent on the matter. The gag order was so strict that around Silicon Valley rumors began spreading about how AOL was holding Frankel and Pepper under home detention in order to keep them away from the media. That wasn’t true, of course: employees at Nullsoft said they saw Frankel making his way to work as usual, but the rumors and the complete silence demonstrate how at the beginning of the millennium, file sharing was a sensitive and complicated matter: an explosive interaction between advanced technology, an unclear judicial system, and money – tons of money.

FastTrack

the monetary temptation was the one that attracted two other entrepreneurs, Niklas Zennstrom from Sweden and Janus Friis from Denmark, to dip their toes in the swamp of file sharing. Since they weren’t software programmers themselves, they hired an Estonian company, BlueMoon, to develop a protocol of a new file-sharing network called FastTrack, and a software called Kazaa. Zennstrom and Friis planned to sell this technology to European companies as a fast and convenient way to transfer files between the US and Europe. And in order to test their product and see what worked or didn’t work, they released a free version of Kazaa.

Kazaa launched in March of 2001. Four months later, In July, Napster shut down – and millions of frustrated users found Kazaa to be the perfect alternative. Three months later, Kazaa had one million and three hundred thousand users!

Protocol Vs. Implementation

Now is the time to say something about the distinction between “protocol” and “software” (or implementation in general) – which could be confusing. When we spoke about Napster, this distinction wasn’t necessary since practically speaking there was no great difference between the two. But in the case of Kazaa and FastTrack, this distinction has a lot of significance.

Morse code is a great example of the distinction between Protocol and its implementation: in Morse code, every letter consists of a defined sequence of short and long ‘beeps’. The letter A is di-dah, the letter B is dah-di-di-dit and so on. The definition of each sequence is the “protocol” – a sequence agreed upon by all Morse code users. Therefore, if I invent a new sequence of signals for letters of the alphabet, others won’t be able to understand my intention.

But the beeps themselves could be transmitted in different ways. I could build a flashlight that transmits Morse code by flashing light signals; I could build a telegraph that would transmit the signals as electric pulses, or even create small and large clouds of smoke over a bonfire. In other words, there are many ways a protocol could be implemented.

FastTrack was the protocol that defined the “language” that two computers would use in order to communicate and share files, and Kazaa was the software that implemented the language, just as a telegraph implements a Morse code.

It is important to remember that the same way in which a telegraph could be replaced with a flashlight in order to use Morse code, Kazaa could have been replaced with other software that would implement the FastTrack protocol, and in fact – that is what actually happened. Dozens of other software programs, all implementing FastTrack protocol, appeared within a relatively short time: eDonkey, Limewire, BearShare, KLite, iMesh and more. This abundance of software allowed each user to find the software that suited them the most–this was the most significant advantage of FastTrack over Napster. Furthermore, it had another advantage over the previous generation of file sharing: FastTrack allowed sharing not only MP3 files but all sorts of files, including movies and software.

Grokster Vs. the Record Industry

It was clear to everyone that with such success it was just a matter of time until the record labels and movie studios would drag FastTrack to court and try to take the technology down just as they did to Napster.

In 2005,28 record labels filed a lawsuit against the distributors of a software named “Grokster” – a software that implemented the FastTrack protocol. Even though Grokster was just one of many similar programs, this case was especially interesting since it was seen as a test of the legality of the entire FastTrack protocol. If the record labels could prove that Grokster could be held responsible for the infringements of its users, its fate would be identical to the one of Napster, four years earlier. And if Grokster falls, the other software companies would probably follow.

So, how did Zennstrom and Friis hope to avoid the same fate suffered by Napster?

well, the answer to this question is a perfect example of how legal considerations affect the development of technology, no less than engineering considerations.

Napster’s protocol had two roles: the users – the personal devices at home and Napster’s server. The server hosted a list of all the songs that different users stored on their computers. User A that was interested in a particular song sent a query to the server including the song’s title. And if the server located the song on its list It sent user A the contact information of user B who had the song. Now user A communicated directly with user B, and the two exchanged files.

Remember, the fact that Napster hosted the list that contained all the songs, turned out to be their downfall since the court ruled that Napster had the theoretical and practical capability to prevent infringement.

Zennstrom and Friis, like anyone who followed Napster’s case, made sure not to repeat Napster’s error. That is why FastTrack protocol did not include a central server at all! With no central server to hold any sort of information, there was no single party to blame – at least in theory – for the user’s copyright infringements.

But having said that, an obvious question arises. If there is no central list of files, how would users know which files exist on each other’s computers? How could file searchers and file holders find each other?

The FastTrack Protocol

FastTrack’s solution was to replace the central server with a network of thousands of interim computers, known as “supernodes.” How does it work? Well, Napster’s protocol had two roles: the user and the server. FastTrack also had two roles: regular users, and users who were “upgraded” and became supernodes.

The supernodes received their distinguished title if they had a fast internet connection. Imagine a crowd at a football stadium, where some of the people that happen to be tall and strong receive yellow vests and hats and now they are both watching the game, and ushering. In other words, the supernodes are both sharing files just like any other user, but, in addition, they are responsible for creating connections between users.

Let’s assume, for example, that user A, a regular user, is searching for a certain file. It contacts the nearest supernode and sends a query with the name of the song. The supernode hosts a list of files, but only the files of users near it. So it knows what is happening only on its side of the stadium, but has no idea what is happening on the other side. It scans the list and searches for the song, but cannot find it. It then refers the query to another supernode. The second supernode scans its list, and if the file cannot be found, this supernode too refers the query to the next supernode, and so on…

Eventually, a supernode will locate the song on its list – but he doesn’t know user A, who sits on the other side of the stadium, so he answers to the supernode that sent him the query, and that supernode sends the query back to the supernode that sent it, and so on – until the answer finds its way back to the first supernode, and it communicates with user A. Now, knowing the IP address of the user that holds the desired file, user A contacts user B and they exchange the file.

This elegant solution removed any direct responsibility from the operators of Kazaa and the other software companies since they had no control over the supernodes. The supernodes usher on their own, completely independently; they communicate with each other and their users. There is no “main server” that knows what happens with the network at any given moment. Users could exchange, for example, a copyright protected file of a Metallica song or a perfectly legal copy of the bible – and no one would know any better.

The Betamax Defence Fails Again

this was Grokster’s lawyers’ main argument when they were served a suit by record labels. Since FastTrack doesn’t have a main server, but an amorphous and independent network of supernodes, no one – not even Grokster’s employees – was able to tell which files were being shared and when they were shared. Imagine a new highway – does anybody at police station know which vehicles drive on it? Are the people who built the highway responsible for the drivers’ behavior, for example – like driving drunk?

This was the analogy that Grokster’s lawyers used in court. And this is exactly the Betamax protection we mentioned in the last episode– Grokster supplies the technology but has no control over the actions of its users. The judge agreed with this argument and ruled in favor of Grokster. The record labels appealed, and lost that as well.

But then the case was brought in front of the Supreme Court – and there the outcome was completely different.

To help us navigate the murky waters of the copyright law, we asked a friend of the podcast – Brett Bendistos, of the Citizen’s Guide to the Supreme Court Podcast, to walk us through the legal decision.

“Grokster won at the initial two levels, and they won on summary judgment – meaning the court didn’t have a full record, they didn’t have a full trial. They were just saying – ‘based on the law, you win, and that’s it…’

It gets to the Supreme Court – and it’s overturned 9:0, meaning that every single Justice agreed that this decision should be overruled. If you look at it outcome-dependant, all they are really saying is that Grokster should not have won, we need a fuller record to determine what is actually happening here.

In other words, they are sending the case back down to the lower court, saying it should investigate the lawsuit deeper, and find out all the facts. But the Supreme Court does more than that.

“The primary decision that the court holds, and what they are dictating in the future, is that a person who distributes a device that allows infringement is liable for the acts of a third party. This court is saying it’s impractical to go after every individual. The background here is that most people were using this product to infringe on copyright. They are saying that by being the person who creates the device, you actually have a liability. The majority opinion says that if you create a device – you’re liable to how people use it. They don’t make a big knowledge analysis, but they are saying you are not entitled to win right off the bat, and we’re sending it back down with the direction that says Grokster should be liable because their product is being used to infringe on copyrights. It’s not a matter of them making a new test, but saying that the threshold for knowledge here is a lot lower than it was in Napster and even in Sony.

Because the majority decision is dictating that this 3rd party should be liable, it’s very strongly inferred that they are probably going to lose once the case goes back down to the lower level.”

In essence, the Supreme Court is saying to Grokster – you’re not Sony, and this is not Betamax. You know your users infringe on copyrights and cause real damage – and if that’s proven in court, you are liable for that damage.

As Brett says, Grokster realized that it was probably going to lose the next legal battle – and it folded. In 2005 the company ceased all activity.

But unlike Napster’s case – Grokster’s fate had hardly any effect on the world of file sharing. In 2001, when Napster disappeared, its frustrated users had to find other solutions and other technologies for file sharing. But in 2005, Grokster was just one of many file sharing alternatives!

It is just like the difference between hunting an elephant or destroying an ant hill: an elephant is a giant animal that can be taken down with a few bullets. It is a lot harder to get rid of many, many ants that quickly spread in many directions. Similarly, Napster was shot once – a lawsuit took down the software. But getting rid of FastTrack and all its various software implementations was a much harder task.

Poisoning The File Sharing Networks

Many in the music industry felt that these sort of lawsuits were becoming irrelevant: despite the efforts to block file sharing, every year more and more users joined file sharing networks. So record labels decided to “take off the gloves” and adopt a much dirtier fighting strategy, a strategy that used a critical security weakness of FastTrack.

Imagine that you are at a store and shopping for a certain item. When you get home, excited to open the box, you realize that the item is missing! Instead of the toaster or television you just bought, inside the box, there is a small dumbbell. It’s likely that you would be upset, and most probably would not return to the same store for future shopping trips. This is exactly what record labels decided to do to FastTrack.

In 2002 record labels hired a company named “OverPeer”. OverPeer developed a technology that allowed spamming file sharing networks with fake and corrupted files. For example, a user downloaded a copy of the movie “Mission Impossible”, but when he opened the file he realized that it was, in fact, a copy of “Snow White”, or worse – a version of the animated movie where Snow White is… how should we put it… not so innocent. And fake music files turned out to be a collection of static noises or music fragments repeating themselves in a loop every thirty seconds.

OverPeer’s spamming was massive. According to media reports, OverPeer flooded file sharing networks with hundreds of millions of files, and at a certain point, about half (!) of all FastTrack files were corrupted!

File Sharing was rapidly becoming an unpleasant experience for users. But did the record labels ultimately succeed? Well, you be the judge: in 2002, when OverPeer was established, there were three million active users in FastTrack. In 2005, three years later, there were ten million. It is no wonder that in 2006 record labels decided to abandon this strategy.

Bram Cohen

During all this time, since Napster’s disappearance in 2001, the media and technology world continued growing and developing. Each year millions of new users joined the internet, the bandwidth improved, and data storage technologies got better, too. These technological improvements made the process of file sharing more effective and efficient, and the record labels’ struggle more irrelevant. It was this new technological world that welcomed the birth of a technology that took file sharing to new heights: BitTorrent.

BitTorrent’s founder was a young programmer named Bram Cohen, who in 2001 worked for Mojo Nation a – a company involved in developing a new file sharing technology for customers who required high levels of security.

Cohen was inspired by his work at Mojo Nation and came up with a new file-sharing protocol that was less secure than the one developed at Mojo Nation but allowed downloading files or uploading them at a high speed. Cohen left his job in order to develop his ideas independently and In July 2001 he released the first version of BitTorrent.

BitTorrent’s Innovations

BitTorrent had two new innovations over Napster and FastTrack, and it’s due to these ideas that BitTorrent is considered to be the “the third generation” of file sharing.

The first innovation is a built-in separation between the mechanism of file discovery and file transfer. In the previous technologies, we described there wasn’t any distinction between the way users searched for files or discovered them, and the way the files were being shared from one computer to another – all was done using the same network. Imagine a highway used by all types of vehicles including sports cars, big trucks, horses, bikes, and so on. Slow vehicles block faster ones, so fast cars are still forced to drive slowly. When it comes to file sharing, queries and other messages related to the mechanism of file discovery – slow down the traffic related to the actual transfer of movies, songs and so on.

BitTorrent was built differently. Searching for files took place on the regular internet, using ordinary websites: it is not a part of the file sharing network itself. All the bandwidth available to the file sharing network is used for purely file transfer. Following our previous analogy, slow moving vehicles are forced to use side streets – while fast moving ones are allowed to use the highway.

Another significant innovation was in the way files were being shared. In all the other networks we mentioned, file sharing took place between one user and another: User A transferred a file to user B . But the transfer speed between those two users was dictated by the side who had the lowest bandwidth. It is like asking your neighbor to fill a bucket of water for you: it doesn’t matter how big your bucket is – If the neighbor has a trickling hose, you’ll both be standing by the bucket for several long minutes until it’s full.

In BitTorrent, a file is being shared by several sources at the same time. If a hundred users have copies of the same file – BitTorrent “breaks” the file to small pieces so that each one of them sends a different piece. The impact on the file download speed is dramatic! Instead of one trickling hose – now several hoses are pouring water into the bucket at the same time . With all faucets open, the bucket fills more quickly, or in other words – the file downloads faster. This shared download is the reason why file sharing using BitTorrent is faster than anything we described before, especially in cases where the file is a popular one, like a recent film or music album.

Bram Cohen used any trick he had in order to convince users to adopt his new technology, including the distribution of his porn collection. It was a slow process that took several years, but eventually, BitTorrent became the dominant file-sharing protocol, with more than a billion users. in 2004, Bram Cohen established “BitTorrent Inc.“, a company that develops software and offers services related to the file-sharing network he invented.

BitTorrent And The Law

But despite its greatness, even BitTorrent isn’t immune from the law. BitTorrent’s Achilles heel is its discovery mechanism, which relies on internet websites that store .torrent files, and use special servers called Trackers to facilitate shared downloading among the users. Over the years record labels and motion picture companies have filed lawsuits against websites and trackers and were able to shut some of them down.

Yet BitTorrent’s fate is very different from that of Napster and Grokster. BitTorrent Inc. was never attacked by the media industry. Why is that? Why is BitTorrent treated differently than Napster and FastTrack? Here’s Brett.

“I think that there are a few different things that you can bring up here. One, there’s a greater influx of federal laws touching on the topic. I think the parties are more interested in getting this resolved in federal statutory level than maybe through litigation. There’s the Digital Millennium Copyright Act (DMCA) which has been passed, which criminalized the production and dissemination of copyrighted material. There were SOPA and OPEN. So for one thing, there’s greater insistence on law enforcement resolving the issue. You have to think whether or not this is a part of it.

Another big thing is that Napster and maybe Grokster had this approach of having the knowledge and not trying to pull away from it in any way, it seems as if Bittorrent is at least trying to resolve the copyright infringements caused by its software. You have to wonder if because it’s being proactive about stopping that stuff. I think they are learning from the old cases. That’s the point of precedence. If Grokster is a company that didn’t know and allow it to happen, and Napster knew and allowed to happen – it seems to me the way to beat the initial threshold is to be proactive about stopping copyright infringement by using your product. That gives it more credence under the argument that there are more non-infringing uses.”

So it might be that the combination of federal laws that more clearly define ‘the rules of the game’ with BitTorrent Inc.’s proactive approach to copyright protection – both lessen the need for lawsuits and court battles.

Another possible factor is the growing realization that internet censorship is almost impossible. The website “The Pirate Bay” is probably the most notable example – the website, which hosts countless movies, TV shows and music albums – was shut down by the Swedish authorities several times already, unsuccessfully. “The Pirate Bay”’s operators are playing cat and mouse with the police… In 2012, for example, they announced that they intend to place the website’s servers on drones. This way anyone who wants to “take down the website” would have to do so literally…

Another reason for BitTorrent’s different fate has to do with the current social and technological climate – which differs greatly from the early 2000s. Back then, file sharing was used solely for music and movie pirating. Nowadays, many companies have discovered other useful uses for that technology, like distributing software updates to their users. Twitter and FaceBook, for example, both use BitTorrent as a part of their internal communication structure between servers.

Piracy and The Artists

Even the artists and creators themselves learned to recognize the advantages of distributing content using file sharing networks – even when the content is protected by copyrights. For example, Breaking Bad’s creator, Vince Gilligan, fully admits that the show’s success is partly due to online piracy. It allowed many viewers to enjoy the series, even though they didn’t have access to it as a part of their cable package. An executive at “Warner Bros.” said that the company uses pirating statistics to identify what the public likes and decisions are being made accordingly.

Despite everything we’ve just talking about, it’s essential to note that the argument about the damage caused by file sharing networks is far from being over. Here we only spoke about file sharing technology, but we cannot ignore the debate over piracy on the internet in general. Many in the industry claim that piracy causes tremendous damage to artists and those who represent them – billions of dollars of sales income going down the drain. Some even say that file sharing will destroy the music industry altogether and future artists won’t be able to make a living off of their art. Others claim that the opposite is true: file sharing increases the velocity of exposure to new audiences, and that the one who downloads an album today, will purchase a concert ticket tomorrow. The argument of pros and cons that infringement causes is a complicated one and deserves its own episode.

BitTorrent Users Under Attack

One thing is certain – media companies didn’t give up lawsuits against file sharing. They may not attack BitTorrent Inc. directly, but they certainly continue to attack users who share copyright protected files.

One of the weaknesses of the BitTorrent protocol is that it is fairly easy to find the IP address of a user, and if you know an IP address – you can also find out his or her’s real life identity. According to Wikipedia, since 2010 about two hundred thousand lawsuits were filed against BitTorrent users around the world. As Brett Bendistos of the Citizen’s Guide to the Supreme Court Podcast says, even though this might be just a drop in the ocean of hundreds of millions of BitTorrent users, it still plays an important role in countering the rise of file sharing.

“I don’t totally know that suing tens of thousands of people is, one, economical. Because lawsuits cost money and they probably cost more money than what you’re preventing. I think there’s a law of diminishing returns there, where the goal is to sue people to get the message out – ‘hey, we can sue you if we want to!’ but is it practical that they are going to sue every single person that has torrented Game Of Thrones? My guess is no, but in the same token – if you’re the one doing it, you’re running the risk that one day you might get sued.

I don’t think that suing individual users is going to stop file sharing, but what I think it can do is prevent the widespread explosion of something, because if you know you can get in trouble for it there’s going to be a certain sect of society that’s not going to do it and prevent it from happening. In the same token, there are going to be people who don’t care and are going to run that risk. I think it brings up a balance to the Force, for a lack of a better term.”

Time Will Tell

To sum up, we saw how a relatively tiny technological improvement, developed in a weekend by a teenager, launched a universe of file sharing and rocked the media world to its core. Record companies, the first to feel its impact, tried to block file sharing – first with lawsuits, then by spamming the file sharing networks. Still, file sharing is going as strong as ever, with BitTorrent leading the so-called ‘Third Generation’ of file sharing networks – and the technology is being adopted by mainstream companies as well.

What does the future hold for file sharing? Will each generation be more sophisticated, more successful, and more threatening than before? Only time will tell.