The Noise (Noise) is a new wave musical group composed of five musicians, all of whom were born and raised, and continue to live, in Los Angeles, California. Noise recorded its first album, “Beautiful Music”, in a recording studio in New York City on January 1, 2001. The recording was distributed by Capitol Records, Inc., pursuant to a contract giving Capitol exclusive rights toproduce, market and distribute all of Noise’s recordings from 1999 until 2009. Capitol is incorporated under Delaware law and has its corporate headquarters, production and distribution facilities in Los Angeles,California. Capitol recordings are sold in music stores throughout the country. Capitol generates $35 million inannual sales of its recordings, with 20% of all salesoccurring in California and 25% of all sales occurring in New York.
In order to provide this local band (they have never performed outside of the southern California area) withsome national visibility and thereby promote record sales,the band’s agent chose to aggressively market Noise overthe Internet. To that end, he created a web page at”www.thenoise.com” where fans and other interested consumers could learn more about the band members and sample short excerpts from each of the songs on the new album. On the other hand, the band was anxious to protect their stream of royalty payments by preventing individuals from distributing pirated version of the album or otherwisefreely distributing electronic versions of their music.
Iggy Poop, a sixteen-year-old computer devotee from San Diego, California was one of Noise’s biggest fans. Iggy purchased a copy of the “Beautiful Music” CD on the daythat it was released and immediately converted all of the individual selections on the CD to a digital (mp3) format on his computer. He then joined a file-sharing network that allowed all network participants to access and retrieve (i.e.,download to their computers’ hard drives), at no charge, mp3 files contained on the hard drives of all other network participants. This network was created and is maintained by Nerdster, Inc., a Delaware-incorporated business with its headquarters located in San Francisco, California. Nerdster has over 3 million users, including individuals from each ofthe fifty (50) states within the U.S. Within a month after joining Nerdster, Iggy had downloaded 150 songs via Nerdster and over 500 individuals from around the countryhad retrieved his copy of “Beautiful Music” through the Nerdster network.