US Report: Judge halts Diamond's MP3 player

The Recording Industry Association of America (RIAA) Friday won an initial skirmish to prevent a company from bringing a digital music player -- a device that plays so-called MP3 files downloaded from the Internet -- to market.But bigger battles are ahead in the case that could shape how a new industry forms around the distribution of music through the Internet.

The Recording Industry Association of America (RIAA) Friday won an initial skirmish to prevent a company from bringing a digital music player -- a device that plays so-called MP3 files downloaded from the Internet -- to market.

But bigger battles are ahead in the case that could shape how a new industry forms around the distribution of music through the Internet. Los Angeles U.S. District Court Judge Audrey Collins granted a 10-day restraining order that prevents PC multimedia hardware maker Diamond Multimedia Inc. from manufacturing its digital music player, the Rio, until a preliminary injunction hearing can be held Oct. 26.

The RIAA hopes to stop Diamond -- and by extension other manufacturers -- from marketing a handheld audio player that plays compressed music files, known as MP3 files, that can be downloaded from the Internet. The RIAA, which represents half a dozen music giants that account for 90 percent of the music business in the U.S., claims the player violates the Audio Home Recording Act of 1992 (AHRA).

Others disagree. "While the judge granted the order," said Bob Kohn, chairman and founder of Internet music distributor GoodNoise Corp., "she was troubled by the fact that the Rio seems outside of the Audio Home Recording Act." Kohn appeared at the hearing on Friday to speak against the RIAA's suit and deliver a declaration to the court condemning the action as "merely an attempt to hamper the market for legitimate, commercial, downloadable music." His company, which offers MP3-format music for sale on the Internet, supports the Diamond's Rio player.

The RIAA claims to be striking pre-emptively to head off online music piracy -- the Internet is rife with illegal MP3 copies of the industry's A-class recordings. The MP3 format allows almost perfect copies of recordings to be transmitted over the Internet. "While we are gratified by the courts action today, it is unfortunate that we had to resort to legal action on this issue," said the organisation's president and CEO Hilary Rosen, in a statement. "Our preference has always been to work together with the many computer and consumer electronics companies to arrive at solution to legitimise the commercial market place for digitally distribution music in a manner that protects the rights of artists."

But Diamond executives said the association was just trying to protect its own interests. "They're worried about becoming obsolete," said Robert Schroeder, chairman of Diamond. "They position themselves as middlemen, but -- guess what -- the Internet gets rid of middlemen."

At the heart of the matter is a digital audio format that compresses music so small that one minute only requires around 1 MB of computer storage space. That's only one-tenth the size that music takes up on a CD, yet the quality is almost as good. Called MPEG-1, Layer 3 -- or MP3 for short -- the format is one of the first digital "products" that is small enough to download from the Net, yet valuable enough to get consumers to pay for it. "MP3 has 10 million users worldwide, it is unstoppable -- VHS won and so has MP3," said GoodNoise's Kohn.

Consumers with PCs can create a library of their favourite songs from audio CDs -- or buy music off the Internet -- and download their own mix into the Walkman-like MP3 player. Despite the efforts of Kohn and others, the commercial side of MP3 is still a nascent industry. By far, the majority of music on the Internet is illegal copies. The RIAA claims that, in one day of searching, it identified over 80 illegal sites with over 20,000 MP3 files -- most illegal. Kohn admits that piracy is a problem, but said the industry can't rest the blame at the feet of MP3.

"There is no principled reason for the suggestion that illegal copying of music on the Internet -- which has been undisputedly a serious phenomenon -- will accelerate because of the Rio," he wrote in the declaration. As an attorney-at-law in his own right and the author of "The Art of Music Licensing", a 1,500-page manual on music copyright management, Kohn is no newbie to the problems of copyright.

In his opinion, the Rio player -- what the RIAA calls a "portable MP3 recording device" -- does not violate the AHRA. First of all, the Rio is a playback-only device. Sure, a user can create MP3 files from audio CDs on their computer and then download those files into the MP3 player, but that makes the computer the recording device. And the AHRA explicitly states that computers are exempt from the law.

And even if the Rio could record music, it would not violate the AHRA, according to Kohn. Section 1008 of the AHRA states that "no action may be brought under this title [for dealing in devices or media] or based on the non-commercial use of such a device or medium for making digital music recordings or analogue musical recordings."

If the courts agree with the RIAA that the Rio is a recording device, however, the AHRA only requires that Diamond pay a set fee per device to cover the cost of illegal copies.

Still, Diamond is not a large company. With the original product launch only a month away, an extended suit could be troublesome. And, judging from the initial court decision, the battle may be drawn out.

"In a sense, this is David vs. Goliath," said Diamond's Schroeder. "We see this as a very good business opportunity, but we don't have the money to fight an extended battle.