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Recording Industry Association of America, Inc., et al. v. Diamond Multimedia Systems, Inc.

Defendant manufactures the Rio PMP 300 (the "Rio"), a portable handheld device capable of receiving, storing and replaying digital audio files. To operate the Rio, a user down loads digital audio files from a personal computer to the Rio's hard drive. These files can then be "played back" and heard through headphones connected to the Rio. Utilizing MP3 sound compression technology, the Rio can store approximately 60 minutes of music in its hard drive at any one time. The hard drive's memory card can be removed and reinstalled in other Rios, permitting downloaded audio files to be exchanged among Rio owners. The Rio does not possess any digital audio output capability, however, and therefore cannot be used to create additional copies of downloaded files.

Plaintiffs, two trade organizations representing creators, manufacturers and distributors of sound recordings, claimed that defendant's marketing of the Rio violated the Audio Home Recording Act of 1992, 17 U.S.C. Sections 1001 et seq. ("AHRA") and sought a preliminary injunction prohibiting defendant from selling its product. The AHRA regulates the sale of "digital audio recording devices" as defined in section 1001 of the Act. The statute requires such devices to be equipped with the Serial Copy Management System ("SCMS") or its equivalent to control second generation copying of sound recordings. In addition, a royalty payment must be made to the Copyright Office for every U.S. sale or importation of such devices. At the time the suit was commenced, the Rio was not equipped with SCMS, nor was defendant making any royalty payments when it sold the product.

The Ninth Circuit held that the Rio was not a "digital audio recording device" subject to the structures of the AHRA, and accordingly denied plaintiffs' application for injunctive relief. In reaching this conclusion, the Ninth Circuit overturned a contrary holding by the District Court, which had determined that the Rio was a digital audio recording device.

"To be a digital audio recording device, the Rio must be able to reproduce, either 'directly' or 'from a transmission' a 'digital music recording.'" The Court of Appeals held that the Rio did neither.

The Ninth Circuit determined that the Rio did not directly reproduce a "digital music recording". As set forth above, the Rio operates by downloading a digital audio file from a computers' hard drive. As such, a computer hard drive is the source of the digital audio files on the Rio. The court concluded that this source is not a "digital music recording" within the meaning of the AHRA and accordingly determined that the Rio does not directly reproduce the requisite digital music recording necessary to subject it to the AHRA. In reaching this conclusion, the court relied on section 1001(5)(b) of the AHRA which provides that the term digital musical recording does not include:

a material object --

*        *        *

(ii) in which one or more computer programs are fixed, except that a digital recording may contain statements or instructions constituting the fixed sounds and incidental material, and statements or instructions to be used directly or indirectly in order to bring about the perception, reproduction, or communication of the fixed sounds and incidental material.

The Court further held that a computer hard drive does not fit within the definition of "digital musical recording" contained in section 1001(5)(A) of the AHRA which provides that a digital musical recording is:

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 sounds and material can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device.

Because a computer hard drive typically contains numerous programs and databases in addition to any audio files it does not fall within section 1001(5)(A)'s definition of a "digital music recording" as a material object in which are fixed "only sounds" and other items "incidental to those fixed sounds." Concluded the court, "there are simply no grounds in either the plain language of the definition or in the legislative history for interpreting the term "digital musical recording" to include songs fixed on computer hard drives."

Nor was the Rio capable of reproducing a digital musical recording "indirectly" within the meaning of the AHRA. The AHRA provides that a "digital audio recording device" is a device capable of making "a reproduction in a digital recording format of a digital musical recording, whether that reproduction is made directly from another digital musical recording or indirectly from a transmission." The plaintiffs argued that because the Rio was capable of reproducing a digital audio file which itself contained a recording of a live music event such as a radio broadcast, the Rio was indirectly capable of reproducing that transmission. This in turn, plaintiffs argued, made the Rio a digital audio recording device subject to the Act.

The Ninth Circuit rejected this argument, holding that for a device to be within the ambit of the AHRA, it had to itself be capable of making a copy of the broadcasted transmission as the transmission was occurring. Because this was something the Rio could not do, it was not subject to the AHRA. Said the court:

[A] device falls within the Act's provisions 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.

The determination that the AHRA did not restrict the marketing of the Rio was entirely consistent with the purposes of the Act, held the court.

In fact, the Rio's operation is entirely consistent with the Act's main purpose -- the facilitation of personal use. As the Senate Report explains, "[t]he purpose of the [Act] is to ensure the right of consumers to make analog or digital audio recordings of copyrighted music for their private, noncommercial use." ... The Rio merely makes copies in order to render portable, or "space shift", those files that already reside on a user's hard drive. ... Such copying is paradigmatic non-commercial personal use entirely consistent with the purposes of the Act.

Accordingly, the Ninth Circuit ruled that plaintiffs were not entitled to the injunctive relief they sought.

The full text of the court's decision can be found on a web site maintained by Findlaw.