December 9, 1999 Web posted at: 10:44 a.m. EST (1544 GMT) by Jack McCarthy

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(IDG) -- The music industry's trade group has sued a small startup company, alleging it is operating as a "haven" for music piracy on the Internet by making illegal copies of MP3 files freely available.

The Recording Industry Association of America (RIAA), in a lawsuit filed this week in the U.S. District Court in Northern California, accused Napster Inc. of violating federal and state laws through "contributory and vicarious copyright infringement," the RIAA said in a statement issued Wednesday.

"Napster is about facilitating piracy, and trying to build a business on the backs of artists and copyright owners," Cary Sherman, senior executive vice president and general counsel for the RIAA, said in the statement.

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Some recording artists and managers also criticized Napster. "It is the single most insidious Web site I've ever seen," Ron Stone, of Gold Mountain Management, which represents Bonnie Raitt and other singers, said in the statement.

Napster software allows users to log onto its servers and make their personal MP3 collections available for download by other users. The services "enable and encourage Napster users to download millions of pirated songs as well as make available their own music library for others to copy," the RIAA said.

MP3, short for the Moving Picture Experts Group Audio Layer 3, is an audio data compression format that allows users to send music files over the Internet.

The RIAA has fought the pirated use of MP3 files and has been active in the establishment of a group to set standards for digital compression that ensures copyright protection.

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"Litigation is never our first choice," Sherman said in the statement. "After a random sampling of thousands of recordings available on Napster revealed the overwhelming majority of recordings Napster was making available were pirated, we contacted the company a number of times, including in writing. But the same recordings we advised Napster were infringing then, are still available today."

However, Napster Chief Executive Officer Eileen Richardson today said there had been recent negotiations. "We spent the last 10 days writing letters back and forth through our lawyers trying to agree on ground rules for settlement negotiations," Richardson said in a phone interview. She declined to discuss details of the lawsuit.

Napster publishes a disclaimer on its Web site that says copying or distributing unauthorized MP3 files may violate U.S. and foreign copyright, adding that compliance with the law is the responsibility of the end-user.

"We index MP3 files, much like Lycos and Yahoo index the Internet," Richardson said. "I'm not sure why they are picking on us. We're still in beta (test stage)."

However, the extent of Napster's involvement in facilitating pirated MP3 files may have to be established in court, said Michael Sobel, an intellectual property lawyer with the firm Graham and James of Palo Alto, California.

"If all they did was make a list of MP3 files that exist, it would be hard to make a claim of copyright infringement," Sobel said. "The question becomes how close they come to allowing other parties to copy files that are copyrighted."

Last year, RIAA sued Diamond Multimedia Systems Inc. and its subsidiary, RioPort Inc., claiming MP3-like devices such as the company's Rio unit facilitated pirating. But the U.S. Court of Appeals for the Ninth Circuit ruled in June of this year that Rio did not violate the Audio Home Recording Act of 1992 that governs digital recording devices.

However, the Napster lawsuit hinges on copyright law rather than a statutory act, Sobel said. "The Napster claim is much broader," he added.

The RIAA is also moving forward with the formation of the Secure Digital Music Initiative (SDMI), a group it established with music companies and manufacturers to set a standard for music compression that ensures copyright protection. The group includes Sony Corp., BMI Music, IBM Corp. and AT&T Corp.