Last Updated on August 11, 2025 by Dave Farquhar
On December 6, 1999, A&M Records sued Napster. Although the trial’s goal was to stop Napster, initially it had the opposite effect, with millions of users signing up for the service while the getting was still good. But given Napster’s business model, it was pretty clear what the effect of the lawsuit ultimately would be. This was the first major case to address the application of copyright laws to peer-to-peer file sharing.
A&M Records was the lead plantiff, along with 17 other record companies, all of which were members of the Recording Industry Association of America (RIAA).
What was Napster?
Napster was the first dedicated peer-to-peer file sharing service. It specialized in sharing MP3 files, mostly digital music. Before dedicated file sharing, people shared MP3 and other binary files over other means, including Usenet and other message boards and IRC and other chat protocols. The first known warez-style MP3 piracy happened over IRC.
But retrieving and decoding the files took some skills, or at least a lot of determination to learn those skills if you didn’t previously have them. The files were encoded in a message, which you then had write to a text file and then decode into a valid MP3 file. Frequently it involved text mode command line tools. It took time for GUI-based front ends to appear that would make saving a file attachment as easy as saving an e-mail attachment is today.
Napster brought this activity from the deep recesses of the Internet into something mainstream. Anyone could fire up its proprietary app, search for an artist name or song title, and it gave you a list of matches. As long as someone was online and was sharing the song you were looking for, you could download it. It made pirating MP3 files about as easy as buying one today.
And it brought the topic of piracy to a far larger audience than computer software piracy ever had. By February 2001, Napster had more than 26 million users.
The case was decided February 12, 2001 against Napster and in favor of A&M Records. Napster appealed unsuccessfully.
A&M Records’ successful shutdown and liquidation of Napster
The court issued an injunction March 5, 2001, ordering Napster to prevent the trading of copyrighted music on its network. When Napster told the district court that it had developed a technology to block the transfer of 99.4 percent of identified infringing material, the district court said 99.4 percent was not good enough. Napster had to push the infringements ‘down to zero.’
On July 11, 2001, Napster shut down its entire network to comply with the injunction.
A little over two months later, on September 24, 2001, they partially settled. Napster agreed to pay music creators and copyright owners a $26 million settlement and pay future licensing royalties of $10 million.
But Napster didn’t have that kind of money. It tried to shift from a free service into a subscription system, but that didn’t go well partly because it had significant trouble obtaining licenses to distribute major-label music.
On May 17, 2002, Napster announced that its assets would be acquired by German media firm Bertelsmann for $85 million. As part of the agreement, on June 3,2002, Napster filed for Chapter 11 bankruptcy protection. On September 3, 2002, an American bankruptcy judge blocked the sale to Bertelsmann and forced Napster to liquidate its assets.
David Farquhar is a computer security professional, entrepreneur, and author. He has written professionally about computers since 1991, so he was writing about retro computers when they were still new. He has been working in IT professionally since 1994 and has specialized in vulnerability management since 2013. He holds Security+ and CISSP certifications. Today he blogs five times a week, mostly about retro computers and retro gaming covering the time period from 1975 to 2000.