RIAA loses bid for injunction to stop sale of Diamond Multimedia RIO MP3 Player; appeal pending

Emedia Professional, Jan, 1999 by Robert A. Starrett

The Recording Industry Association of America (RIAA) has sued Diamond Multimedia over the company's portable MP3 player, the Rio, resulting in some rapidfire headlines, a battle of press releases, some hastily called news conferences, and an interesting, yet puzzling, court ruling.

In an effort to "protect the creative content of the music industry," the RIAA charged in its suit that Diamond's Rio player violated the Audio Home Recording Act (AHRA). The RIAA also alleged that the Rio "encourages consumers to infringe the rights of artists by trafficking in unlicensed music recordings on the Internet." Claiming that it supports new technology that broadens the choices for music consumers, the RIAA at the same time cited the proliferation of illegal MP3 sites and said the Rio would only add to the number of illegal MP3 files on the Internet.

The Rio PMP300 is a portable, lightweight digital music player that can be used for mixing and storing up to 60 minutes of digital-quality music or up to eight hours of voice-based audio. Audio can be downloaded from the Internet, or from CDs, to a personal computer. The Rio includes a simple interface for transferring MP3 files from the user's PC, as well as MusicMatch's Jukebox software for converting CD tracks to the MP3 format. The device is smaller than an audio cassette and has no moving parts; it consequently can't skip, so it's ideal for applications where high-quality audio needs to be made available in extreme environments.

On Diamond's side, the battle seemed more about the rights of musicians to distribute their materials to the public than the device itself. Diamond immediately fired back, accusing the RIAA of monopolistic practices instigated by members from the United States' five biggest record labels. Said Diamond's Ken Wirt: "Clearly, it appears that the RIAA's lawsuit against Diamond is being driven by the interests of its largest members, the `big five' record labels, who are seeking to maintain their control of music distribution and prevent the unfettered freedom of musicians without recording contracts at their member companies to distribute their music to a broad audience. Upcoming musicians, numbering in the thousands, are using the Internet to their advantage to create awareness in a cost-effective manner, which is clearly a threat to the major record labels' current distribution model."

The RIAA, however, stated in press materials that "it seems doubtful that there would be a market for MP3 recording devices but for the thousands and thousands of illicit songs on the Internet." Diamond termed this "grossly false," citing statistics from Michael Robertson, president and CEO of Z Company and owner of the popular MP3.com Web site. According to Robertson, "MP3 is an excellent format for artists. Nearly 800 artists have signed up to use MP3, including larger artists like the Beastie Boys who currently have a Top Ten CD hit, and larger labels such has Hollywood Records who have also released hit songs in the MP3 format. Directly counter to the RIAA's position, the majority of traffic in MP3 is legal. Over 4 million legal songs have been downloaded from the MP3.com site alone."

Internet music distribution companies--such as GoodNoise, which plans to make available more than 15,000 licensed commercial downloadable MP3 tracks from well-known artists by the end of 1998--took a similar view. According to Bob Kohn, founder and chairman of GoodNoise, "Clearly, the claims made by the RIAA are a smoke screen to slow down the digital distribution of music until the major record labels are ready to capitalize on the revenues to be gained by the great momentum being created by the Internet."

The RIAA filed its application for a Temporary Restraining Order to prevent the sale of the Rio player on October 8, 1998, in the Central District Court of California. Judge Andrea Collins issued the temporary order on October 16, but required the RIAA to post a $500,000 bond that would be used to compensate Diamond for damages incurred in the delay if Diamond eventually prevailed in court. Diamond then announced that it would temporarily delay shipment of the Rio.

On October 26, Judge Collins denied the RIAA's application. Diamond then announced plans to move forward with its plans to ship Rio during November in time for the holiday season.

While Diamond contended that the Rio was not a serial copying device, and therefore not subject to the Serial Copy Management System (SCMS) and royalty requirements of the Audio Home Recording Act (AHRA), Judge Collins found that it was likely subject to the provisions of the AHRA and therefore would be subject to its royalty structure. She also found, however, that the implementation of a SCMS would be "an exercise in futility" and that the violation of the AHRA was technical in nature, merely involving the failure of Diamond to obtain certification from the Secretary of Commerce that the Rio used a system that prohibited unauthorized serial copying. Judge Collins found that the incorporation of SCMS into the Rio would accomplish nothing since SCMS produces copyright and generation status information, and MP3 files have no such information embedded in them.