A Preliminary Economic Analysis of Napster: Internet Technology, Copyright Liability, and the Possibility of Coasean Bargaining

Abstract

This Article offers a preliminary economic analysis of whether it is desirable to hold Napster, Inc. liable for copyright infringement committed by Napster users. The Article does so because the recording industry's recent lawsuit against Napster, Inc. offers a prominent example of the claim that the efficient production and distribution of copyrightable subject matter require broad injunctive relief against providers of certain Internet technology. If this argument is accepted, profound consequences for the Internet's development may follow because copyright liability against Napster will give the recording industry significant control over Napster and - by application of precedent - other similar technologies. Such control could prove undesirable because the recording industry may not efficiently develop and exploit technology like Napster. This drag on the Internet's development could be warranted if leaving Napster alone would substantially diminish the supply of recorded music. The Article contends that Napster does not significantly threaten the supply of recorded music, and that it may be wise policy to leave Napster alone.

Keywords: Napster, intellectual property, copyright, economics

JEL Classification: K00, K11