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Court Rebuffs Napster Request For Rehearing

Embattled online music giant Napster has been handed another legal defeat, as a federal appeals court on Monday rejected the song-swap company’s request for a rehearing in the music industry’s landmark copyright lawsuit that resulted in a crippling injunction against the service.

“This decision puts to rest any questions that Napster has raised regarding the earlier decision and affirms the rights of copyrighted holders on the Internet,” said Cary Sherman, senior vice president and general counsel for the Recording Industry Association of America (RIAA).

Napster had first requested the rehearing after the U.S. Court of Appeals ruled in February that the company was infringing on copyrights. U.S. District Court Judge Marilyn Hall Patel then issued an injunction against the company on March 5, demanding that Napster prevent the trade of copyrighted songs on its service. The injunction has severely curtailed activity on the once hugely popular service.

“Napster’s next option is to just let it go to a full trial and take its chances there or to appeal to the U.S. Supreme Court on the injunction,” said Ric Dube, an analyst with Webnoize who closely follows digital music issues. According to Webnoize, the average number of files shared by a user on Napster dropped from 220 in February to just 21 by the end of May. The cambridge, Mass.-based research firm also estimated that just 360 million files were traded through the service in May, versus 2.79 billion in February.

Napster still faces a full trial in the suit brought against it by the record companies. Dube maintains that should the record labels win the case at trial, they could collect substantial damages, which are likely to exceed the value of the company. “The major [record labels] could come out of this owning Napster,” he said.

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