When the latest court ruling in the Napster case went the way of the record companies last week, no-one was surprised.

Copyright law prohibits the unauthorised reproduction of copyright works such as music recordings. Sure, the operators of the Napster site don't actually copy anything themselves, but they do enable some 50 million users to do so. Although the latest court decision runs to some 50 odd pages, it still makes it quite clear that Napster is liable for contributory copyright infringement based on the infringing activities of users of its site.

The founder of Napster, Shawn Fanning (still only 20), has vowed to fight on through further appeals. However, most legal analysts consider that this is merely delaying the inevitable and that the record companies will prevail in the end.

With the legal case against Napster seemingly so clear cut, is it time to predict the death of Napster leaving the record companies to clean up? The record companies don't seem to think so with, for example, AOL Time Warner reported to be interested in providing content to a subscription-based Napster service.

The problem for the record companies is that although they may not like Napster, it's whole lot better than some of the alternatives. Consider for example, gnutella and freenet which don't work through a central server. The only way for record companies to protect their copyright from infringement by individual users of such software would be to sue the individuals. With usage on the scale of the Internet this would be mission impossible.

Also, consider a Napster equivalent which is run offshore, out of reach of the US courts. Unless the record companies could somehow force ISPs to block access to such a site, they would be powerless to act.

The other thing in Napster's favour is the fact that it has been so successful. Its phenomenal user base not only makes it commercially very attractive in its own right, but it also serves to keep alternatives which the record industry considers to be less attractive from breaking into the market.

The difficulty with any settlement is how to balance the record companies' demand for royalties with the for-free nature of Napster. This conflict hasn't, however, prevented BMG reaching a settlement with Napster or a settlement being reached between the major record labels and MP3.com.

Whether a licensing deal can now be struck between the major record labels and Napster remains to be seen. However, success in the court room for the record companies should be viewed in context. The commercial reality is that far from signalling the end of Napster this may prove to be merely a development phase for the company during which it acquires something which it hasn't had to date, legal legitimacy.

First published in SCMP Technology Post on 20 February 2001.