By Scott Hervey
XM’s introduction of a new service called XM + MP3 that allows its subscribers to listen to XM’s service on a portable player and record up to fifty hours of programming. In addition, the new service and player (called Inno) allows users to isolate and save perfect digital copies of songs for unlimited replay as long as they maintain their XM subscription. The service also allows XM users to create custom playlists which trigger automatic recording and storage of songs on the playlist when broadcast over one of the many XM stations
The Recording Industry Association of America responded by filing suit against XM for “massive wholesale infringement.” The RIAA claims that the new XM service goes far beyond any type of “radio-like” service for which XM is licensed, and is, instead, distributing sound recordings like iTunes and the new Napster.
Under Section 114 of the Copyright Act, XM is entitled, by statute, to publicly perform sound recordings in a radio-like, non interactive service, via satellite radio. Under this statutory license, XM is not required to seek individual permission to use any sound recordings; but it must pay a statutorily prescribed royalty rate for the digital performance of those recordings. In its federal complaint, the RIAA claims that XM has gone beyond the limited license granted it under Section 114 of the Copyright Act, and is now, through the XM+MP3 service, “distributing” sound recordings without its permission. The RIAA likens XM to other digital distributors of sound recordings, such as Apple’s iTunes, Napster, etc.
The XM+MP3 service shares numerous qualities with other subscription services, such as Napster and Yahoo Music. They both allow users to maintain perfect digital copies of particular sound recordings for unlimited replay for as long as they maintain their subscription. There are some differences, however. The major difference according to XM and the Electronic Frontier Foundation, is that the XM+MP3 service involves the recording by a digital audio recording device.
According to XM, the new players and the XM+MP3 service were designed to follow the Audio Home Recording Act, a federal law passed in 1992 in connection with the settlement of a lawsuit brought by the recording industry against Sony’s DAT recorders. Under the Audio Home Recording Act, digital recording devices are legal as long as they incorporate specific security protocols which prevent serial copying, and the manufacturer of the digital recording device pays a royalty of up to $8 per new digital recording machine and 3% of the price of all digital audio tapes or discs. The royalty payments are made to the Copyright Office which then distributes the money to the copyright owners whose music is presumably being copied. The tradeoff for the royalty payments is that consumers could use the digital audio recorder for the non-commercial home taping of music from digital broadcast sources without engaging in copyright infringement.
The Audio Home Recording Act specifically allows for the non-commercial home taping of music from digital broadcast sources. However, that law was meant to provide clarity on an activity consumers have been engaging in ever since audio recording devices were available – recording songs from a radio broadcast. Back in the analogue days, a cassette tape recording of a song from an FM broadcast was a poor substitute for the actual record. The sound quality was extremely poor and always included DJ banter. In addition, taping from an FM broadcast was never a surefire guarantee – one never knew exactly when a particular song would play; ones fingers were never quick enough to catch the song from its first note.
The first digital audio recorders vastly improved on sound quality. They produced recordings that rivaled the originals. If a user was lucky or skilled enough to record a specific song from a digital audio broadcast, there really would be no need to buy the record. This is the reasoning behind the royalty payments required under the Audio Home Recording Act – it’s meant to compensate the artists whose work is being recorded for lost record sales.
Technologically, the XM+MP3 unit, the Inno, is far more advanced than the DAT recorders circa 1992. Most DAT recorders required manual activation in order to record, and could not automatically record like the Immo. In my opinion, it’s these features that case the XM+MP3 service and the Inno to go well beyond merely recording a song from a digital broadcast. The ability of an Inno user to disaggregate recordings into individual songs, and save them for repeated listening, and to create a “wishlist” which automatically compiles the selected tracks, makes the player and service more akin to a tethered subscription service than a DAT recorder. This distinction is important because it goes to how the record labels and artists should be paid. Artists and record labels are paid depending on the way in which a sound recording is used. If it is merely streamed or digitally broadcast, the artists and labels are paid less than if the sound recording is available for permanent download. Here, the XM+MP3 service functions more like iTunes than a radio receiver. While I applaud the Imnn’s technological innovations and think the XM+MP3 service is a great way for consumers to enjoy content, if XM is going to continue to offer this service, it should pay a rate similar to that paid by iTunes and Napster. XM’s service offers a quality not available with the manually activated DAT recorders. A user of the XM + MP3 service is practically certain to capture their chosen song; not so with fingers and a DAT recorder. It’s this certainty that makes the XM +XMP3 service exactly like Apple’s iTune service, and XM should pay accordingly.
Scott Hervey is a shareholder with Weintraub Genshlea Chediak Tobin & Tobin and practices in the firm’s technology and corporate sections. Scott’s practice primarily involves assisting companies in commercializing and protecting their intellectual property assets. Scott’s clients range from software companies to film production companies to digital content aggregators. For additional articles on IP law, visit www.theiplawblog.com