In A Case Of First Impression, The Southern District Of New York Follows A Strict Interpretation Of The Audio Home Recording Act
April, 2007
On February 19, 2007, the only two satellite radio providers, XM Satellite Radio and Sirius Satellite Radio, announced, after months of speculation, that they entered into a definitive agreement to merge. However, this highly-publicized deal will face tough hurdles to get the required approval by the Department of Justice and the Federal Communications Commission. In fact, many antitrust experts predict that the merger will fail. The uncertainty surrounding the XM-Sirius tie-up is not the only problem facing XM satellite radio. On January 19, 2007, the Southern District of New York, in Atlantic Records Corp. v. XM Satellite Radio, Inc., 2007 U.S. Dist. LEXIS 4290 (S.D.N.Y. 2007), denied XM Satellite Radio’s motion to dismiss a copyright infringement action brought by major record companies. This denial opens the door for a potentially groundbreaking copyright decision that could be extremely detrimental to XM’s business.
In Atlantic Records, the world’s leading record companies brought a lawsuit against XM alleging violations of federal and New York copyright and unfair competition laws. Specifically, the record companies asserted that XM’s “XM + MP3” players illegally “permit subscribers to record, retain and library individually disaggregated and indexed audio files from XM broadcast performances.” Id. at 6. XM moved to dismiss the Plaintiffs’ federal claims on the theory that they are immune from infringement actions by the provisions of the Audio Home Recording Act (“AHRA”). XM also asked the court to decline to exercise supplemental jurisdiction, and to dismiss the remaining state causes of action. Id. at 4.
The AHRA, in pertinent part, provides as follows:
No action may be brought under this title alleging infringement of copyright based on the manufacture, importation, or distribution of a digital audio recording device… or based on the noncommercial use by a consumer of such a device for making digital music recordings or analog musical recordings.
Id. at 15 (emphasis added). Pursuant to this statute, XM argued that the plain language of the AHRA required the court to dismiss Plaintiffs’ lawsuit because the causes of action are based on XM’s distribution of a digital audio recording device (“DARD”). Id. It was XM’s contention that as long as the “XM + MP3” player meets the requirements of the AHRA (that the “XM + MP3” player is determined to be a DARD), “there is no limit to the infringing conduct in which they may engage.” Id. This argument presented the court with an issue of first impression, because, although the courts have denied shelter of the AHRA when the devices at issue are not DARDs, within the meaning of the AHRA, there is no precedent case to guide the court’s interpretation where, as here, there is a purported distributor of a DARD. Id. at 16.
In response to XM’s argument, the court strictly interpreted the AHRA and held that it does not provide absolute protection for any and all conduct; the statute only protects actions where liability is premised on the conduct of manufacturing, importing, or distributing of a DARD. Id. at 17-18. Accordingly, the court held that XM is not protected from this suit by the AHRA because it “is not being sued for actions taken in its capacity as a DARD distributor.” Id. at 18. Rather, XM is being sued for allowing its subscribers to make permanent digital copies of sound recordings without permission from the copyright owners. Id. at 18. Therefore, the court denied XM’s motion to dismiss.
Learning Point: In denying XM’s motion, the court refused to consider the legislative history of the AHRA, because “resort to the legislative history is only justified where the face of the Act is inescapably ambiguous.” Id. at 24, quoting Garcia v. United States, 469 U.S. 70, 76 n.3 (1984). Where the meaning of a statute is unequivocal, as was held by the court in Atlantic Records, the courts will decline to consider its legislative history.
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