IP Law Daily In-vehicle CD-copying devices not subject to digital home recording royalty provisions
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Wednesday, January 29, 2020

In-vehicle CD-copying devices not subject to digital home recording royalty provisions

By Thomas Long, J.D.

Because hard drives used in audio recording devices in cars sold by Ford, GM, and Chrysler did not contain "only sounds," they were not covered by the Audio Home Recording Act of 1992.

The Alliance of Artists and Recording Companies (AARC)—a nonprofit organization formed to collect and distribute royalties under the Audio Home Recording Act of 1992 to featured recording artists and sound recording copyright owners—cannot go forward with an action against Ford, General Motors, Chrysler, and manufacturers of in-vehicle audio recording devices for failing to pay royalties required under the statute, the U.S. Court of Appeals for the District of Columbia Circuit has held. According to the court, because the hard drives in the in-car CD-copying devices at issue did not contain "only sounds"—a limitation in the text of the statute—the copies on them did not qualify as "digital musical recordings," and the devices therefore did not qualify as "digital audio recording devices" subject to the law. A district court’s grant of summary judgment in favor of the defendants was affirmed (Alliance of Artists and Recording Companies, Inc. v. DENSO International America, Inc., January 28, 2020, Edwards, H.).

AHRA—general provisions. The development of digital audio recording devices for the consumer market in the mid-1980s created conflicts between the electronics industry and copyright owners because the devices allowed users to make high-quality copies of digital recordings, therefore harming the market for authorized recordings. A compromise agreement between the stakeholders led to the enactment of the Audio Home Recording Act of 1992 (AHRA). AHRA added a new chapter to Title 17 of the U.S. Code requiring digital audio recorders to contain copying controls and creating a system under which royalties are paid on each audio recording device and digital audio media imported into and distributed in the United States. Royalties are received by the Copyright Office, and their distribution must be authorized by the Library of Congress. In exchange for the royalty requirements, the AHRA exempts the manufacture and use of certain digital audio recorders from copyright infringement actions. Copyright owners injured by violations of the copy-control and royalties provisions may bring a civil action in federal district court for injunctive relief, actual or statutory damages, and reasonable attorney fees.

AHRA—applicability to computers. According to the D.C. Circuit, Congress also took note of the interests of the computer industry when it fashioned the AHRA. The court said that the legislative history of the AHRA indicates that at least two features of the enacted legislation were meant to ensure that personal computers and computer storage media generally would not be subject to the statute. First, the definition of "digital audio recording device" includes a "primary purpose" requirement. Therefore, although personal computers, are often capable of functioning as digital audio recorders, they generally are not subject to the AHRA because their "recording function is designed and marketed primarily for the recording of data and computer program[s]." Second, Congress replaced the term "phonorecord" in several key provisions because it "might be overly broad" and might "inadvertently encompass some form of technology that was not intended." Instead, Congress used the narrower term "digital musical recording," defined as a "material object ... in which are fixed, in a digital recording format, only sounds" and not "computer programs."

AARC’s claims. In two lawsuits that were consolidated by the district court, AARC asserted that in-vehicle audio recording devices that copy music from CDs onto hard drives within the devices, allowing the music to be played back inside the vehicle even without the CDs, are "digital audio recording devices" under the AHRA. It alleged that the three suppliers of the devices (DENSO International America, Inc., Clarion Corporation of America, and Mitsubishi Electric Automotive America, Inc.), along with the three automobile manufacturers that sold vehicles containing the recording devices (General Motors LLC, Ford Motor Company, and FCA US LLC) ("the defendants") violated the AHRA by failing to pay royalties and adopt the required copying control technology with respect to the devices. AARC contended that the AHRA covered all consumer devices that (1) are capable of digitally reproducing recorded music and (2) the recording functions of which are designed or marketed for the primary purpose of doing so.

Arguments on appeal. The district court granted summary judgment in favor of the defendants after it determined that the output of the defendants’ recording devices must contain "only sounds" and material "incidental" to such sounds to be subject to the proscriptions of the AHRA. On appeal, AARC argued that this holding was erroneous. In addition, AARC argued that, in any event, the defendants’ devices met the district court’s test because they stored music to hard drive partitions, which function essentially as separate hard drives. This, according to AARC, met the "only sounds" requirement. The appellate court rejected AARC’s arguments and affirmed the district court.

Covered recording devices. First, the appellate court held that a digital audio recorder is covered by the AHRA only if it can make a "digital audio copied recording" that is also a "digital musical recording" as that term is defined by the Act. The court explained that its reading of the AHRA was compelled by the word "another" in the definition of "digital audio copied recording." A digital audio copied recording is a "reproduction ... of a digital musical recording, whether that reproduction is made directly from another digital musical recording or indirectly from a transmission" (emphasis added). In the court’s view, the most plausible reason Congress would say that a reproduction "made directly" would be from another digital musical recording is if the reproduction itself is also a digital musical recording.

"Only sounds" requirement. Second, the D.C. Circuit held that, because it was undisputed that the hard drives in the devices at issue did not contain "only sounds," they did not qualify as "digital musical recordings" and therefore did not qualify as "digital audio recording devices" subject to the AHRA. The undisputed evidence showed that the hard drives to which the challenged devices reproduced audio CDs were not themselves digital musical recordings under the AHRA. It was well-established that typical computer hard drives were not "digital musical recordings" under the AHRA because they fell under the explicit exception for objects that contained "one or more computer programs." The question arose during discovery whether the hard disk drives in the defendants’ CD-copying devices were "typical computer hard drives," and the undisputed answer was "yes," the court noted. Each of the hard drives included computer programs, data, or other material that were not incidental to the fixed sounds, such as navigation software, DVD players, displays of album art and information, and AM/FM and satellite radio functions. The appellate court concluded that the defendants’ recording devices were not capable of making reproductions of digital musical recordings that were themselves digital musical recordings, and, as a result, the defendants were entitled to judgment as a matter of law because their devices are not "digital audio recording devices" subject to the AHRA.

"Partition" argument. Finally, the court rejected AARC’s partition theory. The appellate panel held that, at least where a device fixes a reproduction of a digital musical recording in a single, multi-purpose hard drive, the entire disk, and not any logical partition of that disk, is the "material object" that must satisfy the definition of a "digital musical recording" for the recording device to qualify under the AHRA. Even assuming that the defendants’ devices contained hard drive partitions dedicated to music storage, and taking it for granted that in some contexts they functioned as "material objects," the partitions did not meet the definition of that term for purposes of the AHRA. According to the court, "Congress had a particular kind of ‘material object’ in mind, exemplified by the objects involved in digital audio recording at the time, like digital audio tapes, compact discs, and mini-discs." The problem with AARC’s argument, the court said, was that it risked collapsing the distinction between "phonorecords" and "digital musical recordings." The appellate court took the view a partition was not an object that was subject to the AHRA when (as here) a device made digital copies on a typical single-disk hard drive.

Accordingly, the appellate court affirmed the district court’s grant of summary judgment in favor of the defendants.

This case is No. 18-7141.

Attorneys: Richard B. Dagen (Axinn, Veltrop & Harkrider LLP) for Alliance of Artists and Recording Co., Inc. Scott A. Keller (Baker Botts LLP) for DENSO International America, Inc.

Companies: Alliance of Artists and Recording Co., Inc.; DENSO International America, Inc.

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