On Oct. 7, 2000, A&M Records (along with all of the members of the RIAA) sued Napster for contributory and vicarious copyright infringement. They also filed a motion for preliminary injunction.
Napster was a file-sharing website started in 1999 by Shawn Fanning. It had a central server, which had made it very popular.
Judge Marilyn Hall Patel of the United States District Court for the Northern District of California granted the preliminary injunction. Napster then appealed to the United States Court of Appeals for the Ninth Circuit. The Ninth Circuit ordered a stay of the injunction
On the question of fair use, the court agreed with the District Court that downloading an MP3 is not transformative, and even though Napster didn’t benefit financially from the downloads, "repeated and exploitative copying of copyrighted works, even if the copies are not offered for sale" is considered commercial. The court also agreed that creative works like the songs are more of what copyright was meant to protect than non creative-works. Also, the court also agreed that the transfer of the music negatively affected CD sales.
The court ruled that Napster had knowledge of direct infringement and affirmed the district court’s finding of vicarious infringement.