RIAA v. XM — Hard Cases and Clueless Judges Make for a Dangerous Mix

[Update: I’m aware the Audio Home Recording Act does not apply to video recordings. See my more detailed update here]

It’s an old cliche in Lawland that “hard cases make bad law.” To which I will now add: “and when you throw in clueless judges, the mix becomes positively toxic.”

Case in point, the recent decision by Judge Deborah Batts to deny XM Radio’s motion to dismiss a lawsuit by the RIAA for copyright violation. This case turns on the rather difficult interplay between the sections of the Copyright Act that provide a license for satellite radio, the immunity granted to equipment manufacturers under the 1992 Audio Home Recording Act, and the nature of the service offered by XM. It doesn’t help that, at the “motion to dismiss” phase, we gave the complainant (here the RIAA) the benefit of every doubt. To win, XM Radio would need to persuade Judge Batts that there is no set of provable facts under which the RIAA has a case.

Contrary to some of my colleagues (such as the eloquent and brilliant Art Brodsky in this post on the Public Knowledge website), I don’t think this was a slam dunk for XM. I actually think there is a complicated legal question here that needs to go forward for further analysis. That’s why I’m hiding over here on Sausage Factory for this one (if you check the Technorati rating for PK v. that for TotSF — you’ll understand what I mean by “hiding”).

Unfortunately, the language of Judge Batts opinion has — IMO — really, really, really bollixed things up badly. It calls to mind the awful results driven analysis in Jews for Jesus v. Brodsky when judges didn’t know squat about the internet and domain names, but sure knew they didn’t like these evil “cybersquatters” and boy were they gonna show ’em a lesson! The devil with the actual law or understanding the technology — we got us a heapin’ gavel of JUSTICE to whack you’re ass!

Batts opinion reads rather the same way J4J did. She doesn’t understand the technology and doesn’t feel any need to do so. All that matters is that someone seems to be making money that she thinks should go to the music mafia instead, and by God is she gonna get ’em! So she fixes on the wrong details and creates potential havoc for the likes of Tivo or anyone else making a PVR integrated into a receiver that picks up a subscription video or audio service.

The real issue in the RIAA v. XM case, and where Batts goes horribly, tragically, gut-churningly wrong, below….

O.K., back in 1992, when manufacturers wanted to make digital tapes, Congress passed something called the Audio Home Recording Act (AHRA). In what would become the never ending argument between the music industry and the consumer electronic industry, with the occasional complaint from us real people (aka “consumers”), the music industry complained to Congress that if people could use digital tapes to make perfect digital copies, then no one would buy music recordings anymore and the music industry would go belly up. The CE folks argued that it would be nice to be able to sell people a product they wanted and that had many useful non-infirnging uses. So Congress brokered a deal between the music industry and the ce industry. In exchange for payments into a royalty pool to cover the supposed lost revenue from all that piracy (which the music industry promised to distribute fairly to the right musicians), and certain other types of controls over the ability to make copies (what we now call “DRM”), ce manufacturers got the right to make and sell devices capable of digital recording. A manufacturer or distributor of a device that qualifies under AHRA is immune to a lawsuit for copyright violation.

And, of course, we have never had any problems like this ever again. [giggle]

Sorry, but the idea that the music industry would actually keep its bargain, rather than keep coming back for every new technology, was obvious to everyone except the tech industry (whom, I have noted on more than one occassion, regularly get spanked by the IP mafia every time they try to cut a deal). Anyway, to return to our story . . .

Flash forward to today. We have two satellite radio services, XM Radio and Sirius. (Sirius decided to pay off the IP mafia, so they did not get sued.) The satellite radio guys decide they want to offer users more functionalities as a way of getting more people to subscribe. So they each develop a service that works rather like a PVR and iPod for satellite radio. In the case of XM, they call this “XM+MP3”. Not only can it record songs when you hit “play,” but it can search for specific songs or programs, organize them into play lists, start recording in the middle of a program (because of a buffer feature), and generally provide all the neat functionalities consumers have come to expect froXMm other devices. The user can even combine stuff recorded from sources other than XM. So you can put your MP3 library on and use the XM +MP3 service as your sole music device.

But there are some things that separate this from the standard consumer device. Specificly, the Batts court found that:

1) You need to contact XM to activate the service once you buy the necessary device.

2) XM can turn off the service at any time, in which case you lose access to all the music you put on the XM+MP3 receiver.

Because of this and other supposed aspects of the XM + MP3 service, RIAA alleged in their complaint that XM retains complete end-to-end control over the users of XM+MP3 with regard to what they could record and how they could use that recording.

XM replied that none of that mattered, because it qualified as a digital recording device under AHRA and therefore was immune to any suit for copyright infringement that arose out of its distribution of XM+MP3 equipment. They file a motion to dismiss. In legal terms, this means “even accepting everything in the complaint as true, there is still no case, so dismiss this thing and lets go home.” That’s a pretty high standard, and usually only comes into play when you can show that the law in question could never have any impact. Otherwise, you then go on to “discovery.” After discovery, you see if there is enough evidence to resolve the case. That’s called a “motion for sumary judgment.” If there are still disputes about “issues of material facts” (i.e. things that can make a difference in how to apply the law to the case), then you go to trial.

Here, I think there is a very legitimate question about how much control XM can exercise over the recording device before it stops qualifying as a “recording device” under AHRA and becomes a music download service. AHRA immunizes equipment manufacturers in no small part on a theory that the equipment manufacturer has no input into how the user chooses to use the device. The equipment manufacturer makes money primarily from a one time sale, and that’s it. The more control a device manufacturer or distributor exercises over the freedom of a user, the more it makes sense to hold that manufacturer or distributor accountable as offering a service rather than selling a good.

Personally, I like this interpretation because it gives the equipment manufacturer and the distribution platform operator incentive to cut the strings and make money in an honest, competitive way. XM wants it both ways here. OTOH, it wants to pretend it is merely selling the updated version of a combined radio/tape recorder. OTOH, it wants to control my ability to “record” and control my ability to use the content of that “recording” in a way even Apple does not presume to do with my iPod or Tivo presumes to use with the content on my TiVo (although Tivo does a few things that move away from the “pure” one-time sale of a recording device AHRA appears to envision, but not nearly as much as the RIAA allege XM does).

So, if it were me writing the opinion, I’d say “if the RIAA is correct that XM has ”complete end-to-end control“ over the service, then XM is not entitled to protection under the AHRA. However, we need discovery to see how much and to what extent XM really exercises control over subscribers. For example, can someone else make a device that subscribers can attach to the XM receiver without XM’s permission? Can subscribers listen to music ”recorded“ if they unsubscribe from XM? And then we will need to brief how much control over user behavior AHRA permits. So the motion to dismiss is denied.”

Unfortunately, that’s not how Judge Batts chose to write the opinion. Instead, Judge Batts seems obsessed with the fact that XM is a subscriber radio service, as if the critical difference for purposes of analysis under AHRA (or possible for secondary liability for copyright infringement under Sony) is whether the platform is a free broadcasting service or a subscription service. Further, she gets all in a tizzy about the ability of users to structure their programs in playlists, take advantage of buffering services to record a program in the middle, and other functionalities that have nothing whatsoever to do with the question of XM control v. user control.

Instead, Batts seems to think that any substantial difference between a combined terrestrial radio receiver/tape recorder and XM+MP3, regardless of whether it is a difference that confers control to the user or maintains control in XM, transforms XM+MP3 into a download service and voids any immunity under AHRA.

Now that is just nuts, and creates real problems for a very wide variety of services. I can buy any number of pvrs and dvrs — either as integrated devices with set-top boxes or as stand alone devices, to record video content for my personal viewing pleasure later. The device will also — on its own — seek out independent video guides to try to find programing I request. It can even make recommendations based on my past preferences. Most of these devices will also buffer the programming I am watching, so that I can press “record” in the middle of a show and get the whole thing (heck, I can also “pause” or “rewind” live television without recording it for future use).

If Batts’ view of AHRA is affirmed, it will kick off a huge round of litigation for cable companies, satellite companies, and others manufacturing PVR-type technologies. Nor does Batts’ distinction make any sense under AHRA. For example, I have been able to attach my VCR to my subscription cable service since well before AHRA became law. No where in Sony did the question of liability for VCRs turn on the question of whether a user recorded free over-the-air broadcasting as opposed to cable programming. And no one in the years since Sony has ever, t the best of my knowledge, suggested that you could hold Panosonic or other manufacturer of VCRs liable for copyright infringement despite Sony because the user chose to record an HBO program or other “premium” subscriber service as opposed to a broadcast transmission.

Yet Batts appears clueless to the point of recklessness. She is so intent on nailing XM to the wall for what she beleives is its unmitigated acts of wholesale copyright violation that she never pauses to consider the potentially disastrous impact of her sweeping language. Her refusal to even look at the legislative history, because the plain language of AHRA is “so obvious” is a profoundly worrisome signal that Batts had her mind made up from the get go that XM was acting as a distributor and therefore shouldn’t be allowed to “steal” from the RIAA and its members.

Fortunately, this is only the opinion of a district court on a motion to dismiss. If nothing else, one can hope that some amicus curiae will come charging to the rescue to focus Judge Batts on the (IMO) proper inquiry of what level of control XM insists on retaining over users. Because it would prove a rather difficult and expensive muddle of Batts’ opinion — as written now — became binding precedent.

Makes me glad I already own a Tivo.

Stay tuned . . . .

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One Comment

  1. Kevin Dious says:

    Great analysis of the ruling on XM’s Motion to Dismiss. I totally concur with the vast majority of the points you raised and I also believe that Judge Batts made some clearly erroneous findings.

    First of all, as you stated, the plain language of the AHRA is not “obvious” and unambiguous. The Diamond Multimedia case illustrated this fact. In Diamond, the litigation of whether the old Rio player was a “digital audio recording device” (DARD), both the district court and the 9th Circuit came out completely differently on the issue of whether the RIO was a DARD after reviewing the statutory language and the legislative history of the AHRA. See Recording Indus. Ass’n of Am. v. Diamond Multimedia Sys., 180 F.3d 1072 (9th Cir. 1999). In Diamond, the district court held the Rio was a DARD, but the 9th Circuit ruled that the Rio was not a DARD because it was incapable of making copies without the aid of a computer. Completely contrary to the findings of the district court, the 9th Circuit held that any device that copies recordings from a computer is not a DARD. The district court, however, felt that this interpretation would effectively “eviscerate the AHRA.” No matter whether you feel that the district court was correct or the 9th Circuit, the fact is that that the AHRA is not a clear and unambiguous piece of litigation.

    Secondly, I disagree with her holding that the Inno, is in fact a DARD. She makes a rather conclusive assumption that just because the Inno can make a recordings from a transmission, and therefore does not meet to be attached to a computer to make recordings, this simple distinction makes the Inno a DARD. However, at least in my opinion, the legislative history of the AHRA supports the idea that a DARD is a device that can make physical copies of sound recordings (i.e. a CD Burner, DAT tape recorder, Mini-disc recorder, etc.). Batts’s refusal to consider the legislative history of the AHRA, which was extensively briefed by both parties for this motion, caused her to make the wrong conclusion that the Inno and other “XM + MP3” players are DARDs.

    Thirdly, I also agree with your statement that Batts’s holding that “XM + MP3” is service that XM has “end-to-end” control was overly broad. Although this was a motion to dismiss, and therefore she was required to accept the plaintiff’s allegations as true, she seems to focus so much on the alleged control XM has over the Inno and corresponding “service.” While discovery will ultimately reveal more information, after reviewing the Inno user guide, I do not think XM is providing any “service” whatsoever. However, after reading this opinion, it just seems as if Batts has already made up her mind that the Inno and its corresponding functionality is either a music distribution or leasing service.

    Finally, I too think that the Inno’s functionality has many analogous features to PVRs and home recording of videos that Batts simply neglects, and this case could lead to future challenges on home recording rights. While there are some differences regarding the rules for broadcasting music, the Inno essentially is no different that an audio PVR. In fact, the Inno and other “XM + MP3” devices give the consumer fewer home recording rights than PVRs and other analog tape recorders since the recorded files on the Inno can be deactivated. Contrary to Batts’s reasoning, traditional radio/cassette players do threaten the market for copyrighted works because users are able to record the songs off the air for FREE. Although these recordings are not as high quality and not conveniently copied in individual songs, the fact is that consumers are able to make permanent copies of sound recordings for free. At least with the Inno and other “XM + MP3” devices, the copies are not permanent, and the Record Companies are getting some form of compensation from consumers through the license fees that are charged to XM subscribers.

    All in all, I just wanted to say that I thought your analysis was excellent and I agree that Batts has made some major errors in her interpretation of the AHRA and her application of the AHRA to this litigation.

    FYI: I am a second year law student and am currently authoring a student note on certain aspects of this case. Again, I enjoyed reading your post as it helped provide me with some additional information.

    Kevin

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