BY:
Michael I. Rudell(Originally published in the Entertainment Law column in the New York Law Journal, June 25, 1999.)
A federal appeals court has upheld the denial of injunctive relief against the manufacture and distribution of the Rio portable music player.1 In doing so, the Court undertakes to explain in some detail “the brave new world of Internet music distribution.”
The introduction of digital audio recording in the 1980’s represented a significant technological advance over analog recording that results in increasingly pronounced degradation in sound quality as successive generations of copies are made. With digital recording there is no appreciable degradation in sound quality no matter how many generations of copies are made. Because digital copying allows thousands of nearly perfect copies (and copies of copies) to be made from a single original recording, music pirates have been using this technology to make and distribute copies of commercially prepared recordings for which they did not obtain a copyright license.
Until recently, the Internet was not of particular value for the distribution of music because of the size of the average music computer file; to store digital information on a single compact disc of music required hundreds of computer floppy discs, and to download even a single song from the Internet took hours. However, as compression techniques limiting the audio bandwidth were developed, digital audio files could be transferred and stored more efficiently. The most popular digital audio compression format in use on the Internet, commonly known as “MP3,” makes an audio file “smaller” by a factor of twelve to one without significantly reducing sound quality. Unlike various proprietary and copyright secure formats, MP3 is non-proprietary and freely available for use by anyone. When combined with the use of cable modems, compression techniques such as MP3 soon may allow a consumer to download an hour of music from the Internet to a personal computer in just a few minutes.
The so-called “killer application”2 for MP3 is special hardware that enables listeners to play music away from the computer. The most popular of these devices, the palm-sized Rio, manufactured and distributed by Diamond Multimedia Systems (“Diamond”), costs less than $200.
Once an audio file has been downloaded onto a computer hard drive from the Internet or another source such as a compact disc player or digital audio tape machine, separate computer software provided with the Rio (called “Rio Manager”) allows the user further to download the file to the Rio itself via a parallel port cable that plugs the Rio into the computer. The Rio is not able either to affect such a transfer or to receive audio files from anything other than a personal computer equipped with Rio Manager.
Generally, the Rio can store approximately one hour of music and, with the addition of flash memory cards, an additional thirty to sixty minutes more. The sole output for the Rio is an analog audio signal sent to the user by headphones; it cannot make duplicates of any digital audio file it stores, nor can it transfer or upload such a file to a computer, to another device or to the Internet. A flash memory card to which a digital audio file has been downloaded, however, can be removed from one Rio and played back in another.
The Recording Industry of America (“RIAA”), which represents the major record companies that control approximately ninety percent of the distribution of recorded music in the United States, asserts that the distribution by means of the Internet of serial digital copies of pirated copyright material will discourage the purchase of legitimate recordings and soon will result in more than three hundred million dollars of annual losses. It seeks to enjoin the manufacture and distribution of the Rio, alleging that the device does not meet the requirements for digital audio recording devices under the Audio Home Recording Act of 1992 (the “Act”) because it does not employ a serial copyright management system (“SCMS”) that sends, receives and acts upon information about the generation and copyright status of the files it plays. RIAA also seeks payment of the royalties owed by Diamond as the manufacturer and distributor of a digital audio recording device.
The district court denied the motion of RIAA, holding that the likelihood of success on the merits was mixed and the balance of hardships did not tip in its favor. RIAA appealed.
The Court indicates that the initial question is whether the Rio falls within the ambit of the Act, which provides that “[no] person shall import, manufacture or distribute any digital recording device … that does not conform to the Serial Copy Management System … [or] a system that has the same functional characteristics.” It further provides that “no person shall import into and distribute, or manufacture and distribute, any digital audio recording device … unless such person records the notice specified by the section and subsequently deposits the statements of account and applicable royalty payments.” Thus, to fall within the SCMS and royalty requirements of the Act, the Rio must be a digital audio recording device.
After reviewing a set of “nested definitions” contained in the Act, the Court states that to be a digital audio recording device, the Rio must be able to reproduce a digital music recording, either directly or from a transmission. Such a recording is defined as a material object (i) in which are fixed, in a digital recording format, only sounds, and material, statements, or instructions incidental to those fixed sounds, if any, and (ii) from which the sound and material can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device.
The first consideration is whether the Rio is able directly to reproduce a digital music recording, which is a specific type of material object in which only sounds are fixed (or material and instructions incidental to these sounds). The typical computer hard drive from which a Rio directly records is a material object, but hard drives ordinarily contain much more than a “only sounds, and material, statements, or instructions incidental to those fixed sounds.” Almost all hard drives contain numerous programs such as for word processing or scheduling appointments and data bases that are not incidental to any sound files that may be stored on the hard drive. Because the Rio does not appear to make copies from digital music recordings, it would not be a digital audio recording device under the definition contained in the Act unless it makes copies from transmissions.
Also, the Act expressly provides that the term “digital musical recording” does not include a material object in which one or more computer programs are fixed (subject to certain exceptions). In discussing this provision, the Senate Report states that “if the material object contains computer programs or data bases that are not incidental to the fixed sounds, then the material object would not qualify” under the basic definition of a digital music recording. The Report further indicates that the definition is intended to cover those objects commonly understood to embody sound recordings and their underlying works. A footnote explicitly indicates that this definition extends only to the material objects in which songs are normally fixed: compact discs, digital audio tapes, audio cassettes, long-playing albums, digital compact cassettes and mini-discs. Accordingly, no grounds exist in either the plain language of the Act or the legislative history to interpret the term “digital musical recording” to include songs fixed on computer hard drives.
In rejecting the assertion by RIAA that the Rio does not fall within the specific exemption from the digital musical recording definition of “a material object in which one or more computer programs are fixed,” the decision supports defendant’s contention that a computer program is not a material object, but rather, a literary work that can be fixed in a variety of material objects. Thus, the language of the exemption does not exclude the copying of programs from coverage by the Act, but instead, excludes copying from various types of material objects such as hard drives, that indirectly achieve the desired result of excluding copying of programs. By its plain language, the exemption is not limited to the copying of programs, but instead extends to any copying from a computer hard drive.
The plain meaning of the Act and legislative history also lead the Court to conclude that computers are not digital audio recording devices. Under the Act, computers are not such devices because their primary purpose is not to make digital audio copied recordings. By indicating that the typical personal computer would not fall within the definition of digital audio recording device because the recording function of a personal computer is designed and marketed primarily for the recording of data and computer programs, the legislative history is consistent with this interpretation.
The Court notes that the Rio’s operation is entirely consistent with the main purpose of the Act, which is the facilitation of personal use. The Senate Report states that the purpose of the Act is to ensure the right of consumers to make analog or digital audio recordings of copyrighted music for their private, non-commercial use. It does so through its home taping exemption that protects all non-commercial copying by consumers of digital and analog musical recordings.
The Rio merely makes copies in order to render portable those files that already reside on a user’s hard drive. This “space-shifting” is compatible with the “time-shifting” of copyrighted television shows held to be fair use in Sony v. Universal.3 Even if the Rio were not able to directly reproduce a digital music recording, it nevertheless would be a digital audio recording device if it could reproduce a digital music recording “from a transmission.” Although not defined in the Act, the term “transmission” as used in the Act implies that it is a communication to the public. The parties do not really dispute the definition of transmission, but rather, whether indirect reproduction of a transmission of a digital music recording is covered by the Act. RIAA asserts that indirect reproduction of a transmission is sufficient for the Rio to fall within the ambit of the Act as a digital audio recording device; Diamond asserts that the adverb “indirectly” modifies the recording of the underlying “digital music recording” rather than the recording “from the transmission.” The Court agrees with Diamond’s assertion that the statute should be read to cover devices that are capable of making a reproduction of a digital musical recording whether that reproduction is made directly from another digital music recording or indirectly from a transmission.
In concluding that the Rio can indirectly reproduce a transmission, the Court indicates that if a radio broadcast of a digital audio recording were recorded on a digital audio tape machine or compact disc recorder and then uploaded to a computer hard drive, the Rio could indirectly reproduce the transmission by downloading a copy from the hard drive. Thus, if indirect reproduction of a transmission falls within the statutory definition, the Rio would be a digital audio recording device.
The decision takes note of the arguable ambiguity in the statutory language, but concludes that the most logical reading of the Act extends protection to direct copying of digital music recordings, and to indirect copying of digital music recordings from transmissions of those recordings. This conclusion is supported by the legislative history which confirms the most logical reading of the statute: “indirectly” modifies the verb “is made” — in other words, modifies the making of the reproduction of the underlying digital music recording. Thus, a device falls within the provisions of the Act if it can indirectly copy a digital music recording by making a copy from a transmission of that recording. Because the Rio cannot make copies from transmissions, but instead, can only make copies from a computer hard drive, it is not a digital audio recording device.
Accordingly, the Court holds that Rio is not a device subject to the restrictions of the Audio Home Recording Act of 1992 and the district court properly denied the motion for a preliminary injunction.
The RIAA has been working to develop a Secure Digital Music Initiative standard which, among other things, will create specifications to protect against illegal copying in various formats. The decision in this case can only galvanize efforts to move quickly on that front.
1 Recording Industry Association of America, et al. v. Diamond Multimedia Systems, U.S. 9th Circuit Court of Appeals 9856727 (June 15, 1999).
2 New York Times, Page 7, Section G, June 17, 1999.
3 Sony Corp. of America v. Universal City Studios, 464 U.S. 417 (1984).