Maker of digital-music player sues recording industry group for libel, anti-business practices

Thursday, December 3, 1998

The manufacturers of a portable device capable of downloading and playing CD-quality music from the Internet filed a countersuit on Dec. 1 against the Recording Industry Association of America, accusing the lobbyist group of libel and antitrust practices.

At issue is the Rio, a hand-held digital device developed by Diamond Multimedia that downloads and plays music in a popular compression format called MP3.

RIAA officials contend the player exploits an illegal market that allows computer users to download free music without any compensation to the artists who created it. Although the group doesn't consider the MP3 format itself to be illegal, it claims many people misuse the technology by selling pirated versions of popular songs.

The recording industry group filed a lawsuit against Diamond Multimedia last October to halt sales of the Rio.

But Diamond Multimedia and owners of MP3 sites defend the use of the music player, saying it gives listeners more freedom to enjoy the music they want. They add that most MP3 sites offer legally obtained music.

In its countersuit, Diamond Multimedia contends that RIAA engaged in antitrust and illegal business practices “by conspiring to restrain trade and restrict competition.” The claim accuses RIAA of securing deals from other manufacturers to halt sales of digital-music players.

Diamond Multimedia also sued RIAA for linking the company with illegal uses of the MP3 format.

“RIAA could have sued Diamond for piracy but instead chose to smear Diamond in the court of public opinion,” said Ken Wirt, the company's vice president of corporate marketing, during a press-conference call yesterday.

Among its requests, Diamond Multimedia asked the court to void the Audio Home Recording Act of 1992 on First Amendment grounds. The act requires manufacturers and distributors of recording devices to pay royalties and register their equipment with the U.S. Copyright Office.

“Music is a form of expression and its communication is protected by the free-speech guarantees in the First Amendment,” said Andrew Bridges, attorney for Diamond Multimedia. “The First Amendment protects not only the content of such expression, but also the means used to disseminate and receive it.”

Bridges said many musicians and smaller record companies rely on the Internet for the publication of their work. He said the public, in turn, relies on devices such as the Rio to obtain the work.

In its lawsuit, RIAA officials asked the court to halt sales of the device because it violated the Audio Home Recording Act requirement that recording devices must include a Serial Copy Management System, which limits the number of times users can copy original material.

Developers of Rio and owners of MP3 sites say the device doesn't record music but merely downloads it for replay without the use of a computer.

U.S. District Judge Audrey Collins had initially granted the recording-industry group a 10-day restraining order against Diamond Multimedia. But on Oct. 26, Collins refused to grant a preliminary injunction because RIAA failed to show specifically how the Rio violated the Audio Home Recording Act.

Although it contends it isn't required to do so, Diamond Multimedia says it has placed a Serial Copy Management System into the Rio. Wirt said the company has opened an escrow account from which to make future royalty payments if it loses its case against RIAA.

Wirt said the fact that RIAA continues to sue Diamond despite the company's concessions demonstrates that the recording-industry group's real goal is to stifle a legitimate market.

Specifically Wirt cites an Oct. 12 Wall Street Journal article in which RIAA President Hilary Rosen said that “the only reason for the action against Diamond is that they are jumping the gun to exploit the pirate market instead of waiting and working toward the legitimate market.”

“These statements lead us to believe the RIAA is attempting to impede the growth of the portable MP3 device market and maintain their control over the distribution of music,” Wirt said.

RIAA officials didn't return a call from the First Amendment Center.

Last October, RIAA spokeswoman Alexandra Walsh said that the group's case was about protecting creative material online.

“MP3 has the potential for wonderful uses as well as bad ones,” Walsh said then. “It's great for emerging artists who are unsigned and want to be distributed. But that's not what we're concerned about. We're concerned about the hundreds and hundreds of artists whose work is being stolen.”