Advertising Law Blog

The recording industry, in its never-ending quest to halt technological advances that enable the transfer or copy of music, filed suit last week against XM Satellite Radio over a new device that allows listeners to store digital copies of their favorite songs in their XM radio players. The lawsuit, filed in the Southern District of New York by a group of major record labels, accuses XM with "massive wholesale infringement" and seeks to recover $150,000 dollars for every song copied by XM subscribers. Critics, noting that traditional radio stations are currently sticking to narrow formats and short play lists, say the record labels are cutting off their noses to spite their faces because XM is one of the best ways for the labels to have their product heard by millions of potential purchasers.

XM recently introduced the Inno, a new product that basically combines the best features of satellite radio and the iPod: when listeners hear a song they like, a press of a button records the song digitally. The gist of the lawsuit is that XM obtained an inexpensive performance license like those obtained by radio stations, whereas the recording industry wants XM to pay a much more expensive distribution fee along the lines of what iTunes pays. The legal issue will come down to whether the technology behind the Inno is akin to a VCR or Tivo, which of course are legal, or whether it permits "serial copying," which is illegal under federal legislation known as the Audio Home Recording Act. The case has been assigned to Judge Deborah Batts, a Clinton appointee known as a liberal.

Shortly after the suit was announced, XM responded by press release, saying, "The music industry wants to stop your ability to choose when and where you can listen. Their lawyers have filed a meritless lawsuit to try and stop you from enjoying these radios. They don't get it. These devices are clearly legal. Consumers have enjoyed the right to tape off the air for their personal use for decades, from reel-to-reel and the cassette to the VCR and TiVo." In case you were wondering why XM's chief competitor, Sirius, hasn't been mentioned so far, it's because Sirius reached a settlement with the recording industry and thus was not named in the complaint.

As for the recording industry's likelihood of success, it appears to face an uphill battle because music stored on the Inno cannot be moved to other devices, uploaded to the Internet or even retained after a customer ceases subscribing to XM. These facts are significant because, in copyright terms, the Supreme Court held in the Betamax case (Sony Corp. v. Universal City Studios, Inc., 464 U.S. 417 (1984)) that the taping of television shows for purposes watching them at a more convenient time (known as "time-shifting") does not constitute infringement. Instead, time shifting was deemed to be a fair use and therefore the manufacturers of home video recording devices like the Betamax and VCRs were not liable for infringement. Certainly, XM will make the same argument, i.e. that the Inno's chief purpose is to enable time shifting, to Judge Batts. Unless the recording industry can convince her otherwise, this lawsuit will amount to nothing more than a ton of free publicity for XM's newest product at the recording industry's expense.