The Availability of the Fair Use Defense in Music Piracy and Internet Technology.

• Author: Das, Sonia

1. INTRODUCTION

   As technology advances, musical artists and the recording industry face new challenges for protecting the copyrights of their works. Much of the new technology is inexpensive and readily available on the Internet, often at the expense of copyright protection. Online stores like Amazon.com or bmgmusicservice.com, musical artist home pages, and unofficial Web sites maintained by fans are some of the newest means through which music aficionados may listen to and purchase music. Unfortunately, despite the large number of legitimate sites over which listeners may listen or purchase music, the majority of Internet music sites are illegitimate, featuring music publicized online without permission from the copyright holder. Moreover, the Internet often leaves the music industry without copyright infringement remedies since Webmasters cannot be located without significant costs and Web users are often too removed from the initial infringement.

   Because the recording industry seeks to protect its copyrights from Internet piracy, it also has encountered adversity dealing with companies that produce devices that encourage or simplify piracy. One such device is the Rio PMP 300 (Rio), a hand-held device manufactured by Diamond Multimedia Systems, Inc., which makes portable MP3 files downloadable from the Internet. Although the Rio has no output capability--it is not able to generate copies--it stores music on removable memory cards, which creates another method enabling people to purchase, trade, or obtain pirated music.(1) Because of the Rio's functioning capacity and its lack of certain copyright protection devices, the Recording Industry Association of America (RIAA)(2) filed a lawsuit against Diamond Multimedia in 1998 seeking to enjoin Diamond from selling and distributing the Rio.

   This Note examines some of the factors that influence portable MP3 technology, and the MP3 impact on copyright protection and fair use. Part II of this Note discusses the case of Recording Industry Association of America v. Diamond Multimedia Systems, Inc. (Rio),(3) where the RIAA opposed a portable music player manufactured by Diamond Multimedia because the device lacked anticopying mechanisms, and Diamond Multimedia refused to pay royalties to the RIAA from the sale and use of copyright-protected music. Although the court decided the case under the Audio Home Recording Act of 1992 (AHRA),(4) the case involved copyright issues concerning unauthorized copying and payment of royalties. Therefore, for the purpose of this Note, Part II reclassifies Rio as a case falling directly under the Copyright Act of 1976. Part III presents the case as a fair use question and discusses the courts' treatment of the four factors of fair use under section 107 of the Copyright Act. Part IV examines the Rio case under a fair use analysis, focusing on whether the Rio user has a fair use defense in an infringement action by copyright holders. Finally, Part V discusses how the fair use argument could affect the music industry.

2. RECORDING INDUSTRYASSOCIATION OF AMERICA V. DIAMOND MULTIMEDIA SYSTEMS, INC.

   Music sound files are readily available online in MPEG 1 Layer 3 (MP3) format, a technology that compresses digital sound files. MP3 has the capability of compressing an audio file by a factor of twelve to one without significantly reducing the sound quality of the music.(5) This is an attractive format for Internet users because it is available for anyone to use, and it permits large amounts of information to be stored on a relatively small amount of computer space. Such ease in locating, distributing, and storing should prompt the music industry to embrace the new technology and expand its sales and marketing methods, but the recording industry has instead been reluctant to market MP3 sales because of the increased potential for music piracy and bootlegging.(6)

   Already, the music industry estimates that it loses over five million dollars each year to music piracy(7) because of number of illegitimate Web sites that feature copyright-protected music without the permission of the copyright owner. Oftentimes, college students or oversea Internet users maintain such Web sites by uploading the audio files from personal CD collections and placed on a personal Web site for friends and others to enjoy. While the RIAA, fights to eliminate illegitimate music sites on the Internet, new sites pop up each day to replace the sites that have been eliminated, and the recording industry is simply unable to police and close down the many illegitimate sites. As a result, despite the fact that legitimate Internet music sales totaled over thirty-six million dollars in 1997, the RIAA still asserts that the Internet distribution of pirate copies will discourage the purchase of legitimate recordings.(8) The RIAA further predicts that revenues lost to Internet piracy will soon surpass money lost through all other forms of piracy combined.(9)

   1. Ninth Circuit Case Interpretation

      In October 1998, the RIAA filed a lawsuit in California seeking to enjoin Diamond Multimedia from the distribution and sale of a portable device--the Rio--capable of storing and replaying digital audio files transferred from the hard drive of a personal computer.(10) Specifically, the RIAA alleged that the Rio violated the AHRA,(11) which requires all digital audio recording devices to be equipped with certain copyright protection devices, including a system that monitors and manages the copying ability of the device and a royalties provision.

      The Rio, a small hand-held device, functions like a walkman or portable CD player. Users can play music through the Rio and listen to it using headphones. Prior to the Rio, listeners of MP3 audio files listened to the music though headphones or speakers at their computers.(12) The Rio, however, makes listening to MP3 files portable.

      A user of the Rio downloads MP3 files from the Internet or from his or her personal computer where CDs have been transferred. The MP3 files can then be transferred onto a flash memory card playable in the Rio.(13) These cards can hold about sixty minutes of music or sixteen hours of spoken material.(14) Users can add a flash memory card to store up to an additional hour of music,(15) or they can purchase additional flash memory cards to hold a different sixty-minute set of music to play in the user's Rio or another Rio.

      Like the walkman and CD player, the Rio has no audio output capability;(16) the device can play back music but it cannot record music. Still, the Rio surpasses the older devices in various respects. Unlike the walkman, which allows a user only to play analog audio tapes, the Rio plays digital music. The result is a crisper, cleaner recording more true to the original recording sound than an analog copy. In addition, unlike the portable CD player, which also plays digital music, the Rio has no moving parts. This means that the listener will enjoy music free of any skips, repeats, or other interruptions caused by any shock to a normal portable CD player.

      In the lawsuit against Diamond Multimedia, the RIAA alleged that the Rio did not meet the requirements for a digital audio recording device under the AHRA.(17) Specifically, the RIAA alleged that the Rio did not employ the required Serial Copyright Management System (SCMS),(18) and that Diamond Multimedia owed royalties under the Act as the manufacturer and distributor of a digital audio recording device.(19)

      To determine whether the Rio violated the AHRA, the court had to decide whether the Rio was a digital audio recording device. The AHRA defines a "digital audio recording device" as:

      [A]ny machine or device of a type commonly distributed to individuals for use by individuals, whether or not included with or as part of some other machine or device, the digital recording function of which is designed or marketed for the primary purpose of, and that is capable of, making a digital audio copied recording for private use.(20) A "digital audio copied recording" is defined by the AHRA as "a reproduction in a digital recording format of a digital music recording, whether that reproduction is made directly from another digital music recording or indirectly from a transmission."(21) A "digital musical 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 sounds and material can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device.(22) The Ninth Circuit Court of Appeals held that the Rio was not a digital audio recording device because it recorded from a computer hard drive, which Congress exempted from the AHRA since the hard drives contain more than "only sounds, and material, statements, or instructions incidental to those fixed sounds."(23) Moreover, the Act excluded from the term "digital musical recording" a material object "in which one or more computer programs are fixed."(24) Although this holding appeared to create a loophole by simply passing the music through a computer and allowing the file to reside momentarily on the hard drive, the court determined that the AHRA made this evasion permissible by design.(25) Finally, the Rio was not a digital audio recording device because it could not reproduce a digital music recording from a transmission.

   2. The Rio Case as a Fair Use Issue

      Having determined that the Rio was not a digital audio recording device, the court did not subject the Rio to the AHRA's requirements and had no need for further examination. The court stated, however, that the Rio "merely makes copies in order to render portable, or space-shift those files that already reside on a user's hard drive,"(26) thereby analogizing the use of the Rio for space-shifting purposes to Sony Corp. of America v. Universal City...