Record Group Sues Maker of Internet Device

Taking a stand against the theft of digitally distributed music, the nation’s largest record conglomerates sued the maker of a hand-held device that can download and play back pirated songs from the Internet.

The Recording Assn. of America, a Washington trade group representing the music industry’s six major companies, filed suit Friday in federal court in Los Angeles against Diamond Multimedia Systems Inc., accusing the San Jose-based manufacturer of violating the 1992 Digital Audio Home Recording Act.

Diamond’s Rio portable MP3 player, which is scheduled to be released this month, can download and store up to an hour of CD-quality music. The unit, expected to retail for less than $200, weighs about two ounces and fits into the palm of a hand.

“We believe that this product exacerbates and exploits the pirate market,” said Hilary Rosen, chairwoman of the recording association.

The lawsuit contends that the overwhelming majority of MP3 music files posted daily in chat rooms and on Web sites are unauthorized and illegal. Computer users avoid paying for music, in violation of the law, by downloading these files onto the hard drives of their personal computers and listening to the recordings at home.

The association contends that Diamond--by introducing a cheap portable unit capable of producing CD-quality music--is “promoting the illicit use of MP3 files” and attempting to capitalize on their prevalence on the Internet.

The suit underscores the problem that electronic transmission of music poses for the giant record conglomerates, which until recently have held a virtual lock on distribution of recordings to fans.

Diamond general counsel Ron Moore called the suit’s allegations unfounded, contending that the Digital Audio Home Recording Act does not apply to the Rio because it is technically not a recording device.

“The Rio is a playback-only device, and does not record,” Moore said. “It simply holds content that is already stored on a computer’s hard drive and plays back content.”

The Digital Audio Home Recording Act requires manufacturers of digital audio recording devices to pay a royalty to artists, composers, publishers and record companies. Manufacturers must also incorporate a “serial copyright management system” into their product to prevent the unauthorized making of second-generation copies.

The suit says Diamond also plans to sell a software package that will enable Rio users to “rip” copyrighted sound recordings from their home CD collections and create a custom digital music database on their personal computers. Diamond also intends to sell removable flash memory cards that will allow users to make duplicate digital copies, the suit says.

According to the suit, Diamond has not registered its device with the Register of Copyrights nor attempted to comply with any of the requirements of the Digital Audio Home Recording Act. The suit seeks a temporary restraining order forcing Diamond to stop release of the product until it complies with the law.

“It appears that the lawsuit against Diamond is being driven by the interests of [the association’s] largest members, the major record labels, who are seeking to maintain their control of music distribution to a broad audience,” said Ken Wirt, vice president of corporate marketing at Diamond.

“Upcoming musicians, numbering in the thousands, are using the Internet to their advantage to create awareness in a cost-effective manner, which is clearly a threat to the major record label’s current distribution model,” he said.