As Napster faces the music, Israeli high-tech firms seek to avoid copyright woes

But in the air-conditioned Jerusalem office of another start-up company, the phones have been ringing off the hook.

The callers are swamping MusicMarc, a company marketing itself as the Luke Skywalker of the Napster age, the force of good out to guarantee that the legitimate rights of artists will not be totally destroyed.

And this "small group of dedicated programmers who are carrying on the fight for security and justice across the Internet" (in the words of one MusicMarc ad) is getting the attention worthy of any of the four "Star Wars" movies.

"Napster woke everyone up," says Jill Gershon, MusicMarc's chief operating officer of the research and development center, referring to an injunction that would have forced Napster to temporarily halt the music swapping, which was dramatically stayed last week.

Since then, says Gershon, there has been greater interest in MusicMarc's chaffing technology, which superimposes beeps and scratches onto files downloaded by MP3, a digital music format that compresses audio files into a size that can be downloaded easily.

MP3 is the technology used by Napster, which offers members of its online "community" music files for free, once they download the Napster program from the Napster Web site. The program indexes any MP3 music files the user has on his computer, and adds them to the Napster database, which contains hundreds of thousands of files.

The user can then search for any music file on the hard drive of any other user who is currently on-line; this sharing system has become known as "peer-to-peer."

But if MusicMarc's chaff technology is applied to an MP3 file downloaded through Napster, the surfer won't be able to hear the song properly. To hear the music at high fidelity, the Napster user — or the user of any other peer-to-peer swap system — will be directed by the MusicMarc program to a site run by the file's legal distributor for registration.

In this way, MusicMarc gives copyright owners some form of control, as well as a means to collect payment, and thereby circumvents Napster's major legal problem; copyright infringement.

The technology, which is to be formally launched soon, already has a long list of interested customers: Internet-savvy artists who see the potential of exploiting Napster's pool of 20 million music lovers and major U.S. record labels that think MusicMarc may be the way to counter the threat posed by Napster.

MusicMarc, in fact, also sees itself as a solution for Napster: a way the upstart service can operate legally, and the company has already had discussions with the world's leading file sharing network.

"MusicMarc is one of the few protection systems that will work in a peer-to-peer system," says company CEO Bruce Wolman. "The biggest problem Napster has is the copyright issue and we have a system which would allow copyright holders to put their music on Napster as an enhanced MP3 file, with content providers still being able to control their copyright to the extent that they wanted to."

Napster is currently being sued by the Recording Industry Association of America, which says that the Web site is causing "irreparable harm," to the traditional music business. It is this legal action that is threatening to shut Napster down.

"MusicMarc could give Napster a system by which — and we have talked to Napster — it would become acceptable to content providers," says Wolman. "They would have to negotiate with the labels over the right to transfer content, but it would no longer be piracy."

So MusicMarc, whose administrative and sales headquarters are in Beverly Hills, could actually be Napster's way out of the lawsuit. But it won't be that easy, says one knowledgeable source, who notes that at this point, the music industry is refusing to deal with Napster at any level.

Yorik Ben-David, director-general of the Israel Association of Composers and Publisher (ACUM), likens the popular Internet site to a grownup who hands children loaded guns, then shows them the target and invites them to shoot.

"That is what is happening. They are destroying an entire industry and are hurting artists and record producers who don't have the tools to fight back," says Ben-David, noting that Israeli music is also marketed illegally on the Napster site.

If Napster were an Israeli company, it would be off the Net by now, says Haim Ravia, a lawyer who acts as a consultant to ACUM on Internet copyright issues.

In Israel, Ravia notes, copyright laws are very strict and Napster would be considered an accomplice to copyright infringement, a crime punishable under both criminal and civil law; the former carries a jail sentence, the latter stipulates a fine of up to nearly $5,000 per infringement .

Even as it awaits the final ruling in the Napster case in the United States, the Israeli recording industry is fighting back.

The International Federation of the Phonographic Industry, which is affiliated with 16 Israeli record companies and 1,300 companies abroad, has a full-time employee surfing the Net, searching for local sites breaking copyright law by offering free downloads of Israeli music.

In the past six months, 154 Israeli sites have been removed from the Net, says Yohanan Banon, IFPI's director of enforcement.

"In Israel the law is very clear on infringement, not only for the Internet but having to do with any piracy. This makes it much easier to fight here than in the States. We don't have to prove damages, only that there was a copyrighted recording that was being used without having been legally purchased," Banon said.

In addition to looking for ways to eliminate the Net pirates, Israel's record industry is starting to realize that the Internet may actually be a profitable new market for Israeli music.

Hed Artzi, one of the country's major labels, has put some of its catalog on, a site developed by the New York-based EverAd, which allows surfers to download music for free in exchange for agreeing to view ads while playing tracks. The advertising revenue is then shared with the record labels, the artists and the Web sites.

"This is a format that is appropriate — beyond the fact that it is a great idea — for the mentality of the Israeli surfer, and it is a creative way of solving the real problem that now exists on the Internet where royalties are not paid," says Danny Weiss, managing director of Hed Artzi Music. "The site is a win-win situation."

For now, Hed Artzi's Hebrew tracks are piggybacking on an existing English-language site. But negotiations are under way with the Israel Online portal for an original Hebrew site, says Micky Goldin, EverAd's Israeli representative, who believes that her company will outrun Napster because it has the law on its side.

And although the PlayJ site is new to Israeli surfers — the Hebrew tracks were posted during the summer — Hed Artzi is merely following in the footsteps of its American counterparts who, like the Israelis, are contracting third-party providers to post music on the Net, instead of launching their own services to counter Napster's.

As Napster and the American labels argue it out in U.S. courts, Hed Artzi takes the first steps in launching a music download service, and MusicMarc prepares to enter the Internet scene, Israeli artists remain in limbo, says writer, singer and musician Rami Kleinstein.

"Today we are in the Wild West, neither here nor there, and because of what is happening some people are profiting and others are not and here I am talking about the writers, who depend solely on record sales to make money. This new method of downloading songs ensures that the writer gets nothing.

"Napster hurts me as a writer. I am for progress and I am not against the Internet and I do surf, although I do not download with MP3. But right now we are in a twilight zone where artists are in a losing situation."