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Created by Shawn Fanning, Napster was a music and file sharing service that made a major impact on the Internet scene during the year 2000. Its technology allowed music fans to easily share MP3 format song files with each other, thus leading to massive copyright violations. The service was named Napster after Fanning's nickname (he used to take a lot of naps, according to Peter van der Linden[?]).

Napster was first released in the fall of 1999. It was the first of the massively popular peer-to-peer file sharing systems, although it was not perfectly peer-to-peer since it used central servers to maintain the lists of connected systems and the files they provided, while actual transactions were conducted directly between machines. This is in fact very similar to how instant messaging systems work. Almost immediately - in December 1999 - several major recording companies filed a class-action suit against Napster. This gave Napster a great deal of publicity, and millions of users flocked to the service. Napster use peaked with 13.6 million users in February 2001 (source: comScore Media Metrix).

In July 2001, a Judge issued an injunction ordering Napster's servers shut down to prevent further copyright violations. On September 24th, 2001, the case was partially settled. Napster agreed to pay music creators and copyright owners $26 million in settlement of damages for past, unauthorized uses of music, as well as an advance against future licensing royalties of $10 million. In order to pay those fees, Napster attempted to convert their free service to a subscription system. A prototype solution was tested in the spring of 2002, but was never made publicly available.

On 17 May 2002, Napster announced that its assets would be acquired by German media firm Bertelsmann AG for $8 million.

Pursuant to terms of that agreement, on June 3 Napster filed for Chapter 11 protection under U.S. bankruptcy laws. On September 2 2002, an American bankruptcy judge blocked the sale to Bertelsman and forced Napster to liquidate its assets according to Chapter 7 of the U.S. bankruptcy laws. Most of the Napster staff was laid off, and the website changed to display "Napster was here".

In the time since Napster was shut down, several other peer-to-peer file sharing programs such as Morpheus and KaZaA have been released. These programs have overtaken Napster as the primary source for MP3 sharing fans to obtain the music they want. It is very likely that the death of Napster will only cause a temporary slowdown in the growth of file sharing.

The central servers used by Napster made it a convenient legal target (although a program known as Napigator allows the Napster software to connect to any unofficial Napster server), as these clearly indicated the presence of illegal activity, thus making Napster guilty of negligence for not attempting to control the illegal activity. Other hybrid systems such as KaZaA and Audiogalaxy have also been hit by the industry, whereas true peer-to-peer systems such as Gnutella-based Morpheus and Limewire have proven much harder for the music industry to shut down.

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