"I was the last resort," says Russell Frackman. He was the lawyer for the record companies who broke Napster.com in federal court ten years ago, forcing it into bankruptcy, intimidating other dot.coms, and driving the music-copying "file-sharing" movement underground.

Where it's remained, thriving, at Frackman's clients' expense. Since 1999, industry sales have slid to $6.3 billion last year, from $14.6 billion, according to Forrester Research, as kids learned to download music from a decentralized, world-circling web of pirate locations.

So what have we learned? Should the record companies, publishers and "artists" have made peace with Napster, agreeing to collect only modest fees per song, as Apple's iPlayer does, in exchange for centralizing and legalizing the download pioneers, instead of suppressing them?

"There was no alternative to litigation," Frackman tells me. "Napster was growing very rapidly. From the belief of the copyright holders, there was nothing else" they could do but go to court. For instance: Record companies couldn't control what Napster clients were doing with music...

The goal of suing Napster, Frackman says, "wasn't trying to put that genie back in the bottle. The piracy genie was out of the bottle the day after Edison invented the phonograph. I started in this business, we were suing people for illegally copying 8-track tapes. There's always some people that want to make a quick dollar. And some people that want something for nothing."

Why sue, if you knew you couldn't stop people from copying? "The goal of litigation was trying to establish, one, what the copyright law was in respect to peer to peer services; and two, to educate the public, what was lawful, and unlawful. We'd been hearing a lot of 'We didn't know it was copyright infringement. We thought it was - quote - "sharing"''. The goal was to minimize piracy. To make people less likely to engage in piracy. But it's never going to be stopped completely...

"One of the byproducts of Napster is the beginnings of filtering and blocking copyrighting material. Not to stop the technology, but to stop it from being used to infringe on copyrights. There are nwo ways to identify sound recordings and images and visual material and keep them from beign used on user-generated content site. That's a very salutary byproduct of the Napster case."

Frackman also questions whether Napster or any other dot.com had the will or capacity to centralize downloads, even if record companies, publishers and artists had been willing. "The record industry had been exploring the use of the Internet. But they had to think about, 'What rights as a record company do I have with my artist? Who do I have to pay? What do I have to pay them? How do I deal with my bricks-and-mortar customers? And how do I protect what I'm putting out from being copied?' And the owner of copyritghted material has the right, not only to make and sell copyrighted mateiral, but the right not to do that. Those are complex decisions."

Where'd we be if the record companies hadn't beaten Napster? "The record industry is still suffering from piracy on the Internet. If Napster had won, I suspect it would be in a lot worse position. Would there be any legitimate (download) services, would there be an iTunes? And this isn't just an issue for music. It's any intellectual property that can be digitized."

Paid good, free bad? "The copyright law is in the Constitution. Creators deserve a reward, for limited times. But, it took me years to realize this: Copyright law is really a consumer protection statute. It's designed to give certain incentives to createors, to induce them to continue to create for the benefit of the public."

"An outsider might wonder if congratulations, or condolences, were more in order" for Bill McDermott, newly promoted, Newtown Square-based co-CEO of software giant SAP AG. SAP shares fell 6 percent on the news, to a six-month low.

But McDermott insists SAP has a solid customer base and plenty of new products "in the pipeline." More in today's PhillyDeals column in the print Inquirer here.

"Will Rendell ask taxpayers to pay more? Or future retirees to accept less?" Or will he put it off for another day? Pennsylvania's state workers' and teachers' pension funds face multi-billion-dollar budget holes. New Jersey's is even worse. More from Sunday's column in the print Inquirer here.

British bank regulators want new banks to enter the stagnant market; US regulators think we have too many banks. How else to explain the apparent variation between Commerce Bank founder Vernon Hill's reception in the UK vs the US for his two ventures, known in each country as Metro Bank?

Shares of Metro Bancorp Inc., Harrisburg, fell below $12 this morning after Janney Montgomery Scott analyst Stephen M. Moss cut his price target to $14, from $20, and dropped his "Buy" rating. Metro last week reported its third straight quarterly loss.

Moss told clients he was disappointed that the bank's planned purchase of Republic First Bank, Philadelphia, "remains in regulatory limbo." Metro,formerly Commerce Bank of Pennsylvania, has run up high expenses by hiring former aides to Hill, who is also Republic's main investor, in anticipation of expanding into the Philadelphia area.

Metro also faces higher commercial and real estate "problem loans" and set aside a "much lower than expected provision" to cover future losses, Sandler O'Neill + Partners managing director Joseph Fenech told clients in his report. "The most positive aspect of the story remains Metro's strong capital position," boosted for the Republic First deal, which has been waiting for federal approval since 2008, Fenech added. As Moss titled his report: "We Got the Hammer, Where Are the Nails?"

Meanwhile, Hill's other Metro Bank, in the UK, could open branches in London's Holborn and Earls Court neighborhoods "some time around Valentine's Day," writes The Guardian. As with Hill's former Commerce Bank (now part of TD Bank), Metro Bank UK will feature seven-day, 12-hour banking, plus coin-counting and safety-deposit machines. It will also require "at least a 25% cash deposit" on home mortgages, the Times reports.

Hill and friends hired former Royal Bank of Scotland retail banking director Craig Donaldson as CEO; HBOS regional director Paul Marriott-Clarke, to head retail banking; HBOS's Darren Schindler, to hear corporate lending; Aisling Kane from Anglo Isirh Bank, chief investment officer; Mike Brierley of Capital One Corp., CFO; Linda Hargreaves, also ex-Capital One, to head compliance, reports The Times of London. "It plans to open four branches this year... Metro is understood to be confident that hte Financial Services Authority is close to giving it the go-ahead."

 

Graham Packaging Corp., the York company that helped fund the Wayne-based Graham family investment firms when heir Donald C. Graham and his siblings sold a stake to Blackstone Group in the late 1990s, hopes to raise up to $429 million tomorrow by selling up to 26.8 million shares at around $15 each in an initial public stock offering. Blackstone, the Grahams and other insiders would share in the proceeds, some of which would also be used to pay down the company's debt.

Graham says it earned $61 million in the first nine months of last year, after losing money in each of the three previous years, on sales of around $2.5 billion. Besides major plants in York and Hazleton, Graham has bought or built plants in Levittown, Bordentown, and more than 80 other U.S. and foreign towns. Major clients include PepsiCo and its subsidiaries, and Procter & Gamble, among others. Underwriters are led by Citi, Goldman Sachs and Deutsche Bank. Read Graham's latest offering statement to the SEC here.

For more on Graham and other pending deals, see Bloomberg story here.

The article also lays out the latest initial public offering by former Internet banker Frank Quattrone, who's trying to take Internet advertiser QuinStreet Inc. public. Quattrone, native of South Philly's Stella Maris parish and a graduate of St. Joe's Prep before he made his fortune out on the left coast, is a brilliant tech student and a natural salesman; as WSJ reporter Randall Smith's recent bio, The Prince of Silicon Valley, points out, Quattrone's used those gifts in the service of what turned out to be some real turkey companies during the Internet bubble.

William R. McDermott, who led SAP's field staff and formerly ran its Americas division from Newtown Square, is the company's new co-CEO after the big Germany-based business software company's boss Leo Apotheker unexpectedly left. SAP statement here.

"As a powerful storm moved up the U.S. East Coast... in the New England Power Pool, electricity for today surged $5.37, or 9.2 percent, to $63.61 a megawatt-hour. Power in the PJM Interconnection, a benchmark for the mid-Atlantic region, jumped $3.68, or 8 percent, to $49.46 a megawatt-hour," reports Bloomberg News here. Natural gas up a bit, too.

Wells Fargo & Co., the giant San Francisco bank that owns Wachovia Bank, largest in Philadelphia and some other East Coast markets, will hire around 1,000 investment advisers from other firms and train 400 new ones for offices across the country this year, reports Reuters here. (Reuters says "poach"; Wells says that's not how they'd characterize their hires.)

The firm employs 15,000 brokers, rivaling giants Bank of America/Merrill Lynch and Morgan Stanley, the industry leader.

Peter McCausland, chairman of Radnor-based Airgas, tells John McGlade, chairman of Bethlehem-based Air Products, that the industrial-gasmaker's $60 a share, $5 billion-plus takeover offer "grossly undervalues" Airgas, and his board is "not interested" in doing a deal at that price.

McCausland's reply follows McGlade's decision yesterday to go over the Airgas boss's head and appeal directly to shareholders after months of talks that the Air Products boss called "deeply disappointing." McGlade wrote that he wants Airgas so he can combine its US bottled-gas business, which McCausland built in a series of acquisitions, with Air Products' similar international business.

McCausland is Airgas's biggest shareholder with 7.7 million shares, so he's personally turning aside nearly half a billion dollars. Airgas stock closed yesterday at $43.53; it was worth over $60 at its peak in the summer of 2008.

QUESTION: Would an Air Products-Airgas merger pass Justice Department merger scrutiny? Who'd be left to compete? German-owned Linde; anyone else?

Air Products boss McGlade's letter to Airgas here

Airgas boss McCausland dismisses McGlade's previous offer for Airgas here.