July 11, 2001

This morning, we appeared before the District Court with evidence that our new file identification architecture has achieved over 99% effectiveness in identifying and screening out noticed works. We told the judge that we were ready to resume file transfers.

The Judge issued an order prohibiting Napster from enabling file transfers unless Napster reaches 100% success. The Court delegated to the technical expert further examination and testing of the Napster system.

The Court's ruling today that Napster must block all file transfers threatens all peer-to-peer file sharing over the Internet and is at direct odds with the 9th Circuit's ruling. While we are disappointed by this ruling, we will work with the technical expert to enable file transfers as soon as possible and we are continuing full steam ahead toward the launch of our new service later this summer.

On June 27, at the direction of the Court and the Court-appointed technical expert on a court-ordered deadline, Napster switched its entire service over to a new file identification architecture. This state-of-the-art technology is brand-new and has never been attempted on such a broad scale. It is important not just for compliance efforts, but for our new system that will make payments to artists when their works are transferred over the Napster service. I am extremely proud of what Napster's team has accomplished in developing this technology.

Our initial testing showed that a limited number of noticed works were not being caught in the new screens. When we ascertained the need to fine-tune the database underpinning the new system, on July 1 we voluntarily suspended file transfers on a temporary basis in order to remain scrupulously compliant with the court's order. After further testing, our results improved to a level of near-perfection, with only a very limited number of works that had incorrect identifying information or had been noticed incorrectly.

Napster will obey this order, as we have every order that the court has issued. We believe the Judge's order is inconsistent with the 9th Circuit's decision and wrong on a variety of other grounds. We will appeal to the 9th Circuit on an expedited basis. We will continue to work with the technical expert and explore other options for resuming transfers as soon as possible.

We continue to believe in the future of file sharing and we are hard at work on our new membership-based service, which will launch later this summer. We are encouraged by the response of the Napster community and the many rightsholders who wish our work to go forward, and we very much appreciate their support.