Ford Hits Back On Ridiculous Lawsuit Demanding $2,500 Per CD Ripper In Its Cars

from the let-us-explain-to-you-the-law dept

Back in July, we wrote about a ridiculous lawsuit filed by the AARC -- the Alliance of Artists and Recording Companies -- trying to make use of a misreading of the Audio Home Recording Act (AHRA) to pretend that it means that Ford and GM have to pay royalty money for every CD ripping car stereo they install. As we noted, the AHRA is basically a deadletter law. The law itself effectively killed any possible innovation in the area that it was designed to tax for royalties -- machines that make repeated copies of content. The recording industry tried to pretend that basic MP3 players met the definition and sued one of the first such players, the Diamond Rio. The court soundly rejected the argument in that case, and thanks to that, probably 99% of you have MP3 players (or, nowadays, smartphones that play MP3s). In our original post, we went into much greater detail about why the AARC was clearly misreading both the law and the caselaw in a desperate attempt to kick up some royalties from the big automakers.

Ford (along with Clarion) have now responded and do a damn good job explaining why the AARC is simply wrong. The the filing is pretty short and sweet in explaining the problems with the AARC's argument:

Congress enacted the AHRA in 1992 to regulate a then emerging technology that for the first time enabled high quality serial copying of copyrighted musical recordings. “Serial copying” refers to the creation of copies of a musical recording from another copy of that recording as opposed to the creation of copies from the original recording. This activity concerned the music industry, which was a proponent of the AHRA. However, rather than directly prohibit serial copying outright, Congress exempted certain products and devices— specifically including computers and hard drives—from compliance while requiring other specifically defined “devices” to also incorporate technology to prevent serial copying. The automotive navigation systems here are exempted.

Neither Ford nor Clarion is in the business of facilitating the serial copying of music. Ford is one of the largest automobile manufacturers in the world; it builds and sells some of the best-selling cars and trucks, certain models of which include navigation systems. Clarion manufactures and supplies Ford with navigation systems for its vehicles. Each such navigation system is a complex computer and includes a central processing unit that interprets and executes complex instructions and a 40 GB hard drive for storage of an operating system, computer software programs, databases, and other information (“Nav System”).

[....]

By its own Complaint, Plaintiff admits that this feature of Defendants’ Nav System consists of recording CDs to the system’s own hard drive, where the music is stored with various software programs and other data. It alleges nothing about making serial copies of CDs, digital audio tapes and the like. Under a plain reading of the AHRA, these automobiles with a Nav System are not capable of making a “digital audio copied recording” of a “digital musical recording” as defined under the Act. This is because the AHRA states that digital musical recordings do not include (1) material objects in which one or more computer programs are fixed or (2) material objects in which data other than sounds are fixed. Here, the Nav Systems are nothing less than automotive computers with hard drives containing both programs and data other than sounds. They do not reproduce digital music recordings in materials objects addressed by the statute, that is, CDs, LPs, cassettes, or digital audio tapes. The Nav Systems are outside the AHRA’s scope.

Not surprisingly, the filing relies heavily on the ruling in the Diamond case, and I see that one of the lawyers listed on the filing is Andrew Bridges, who handled the Diamond case in the first place. You never know how these kinds of court cases will turn out in the end, but it seems unlikely that the AARC is going to get rich off of this last gasp effort to squeeze money out of automakers.

Filed Under: ahra, audio home recording act, cd rippers, copyright, mp3 players, serial copies
Companies: aarc, clarion, ford, gm

Recording Industry Willfully Misreads The Law In Order To Sue Ford & GM For Having Built-in CD Rippers

from the keep-scroungingn-for-loose-change dept

It's no secret that the legacy recording industry players are constantly searching for new ways to make money. Of course, they don't seem all that keen on actually searching for new business models to make money, but rather they tend to default to new ways to squeeze money out of others through legal changes or lawsuits. That's what happens when you have an industry dominated by lawyers, rather than innovators. It's why so many new music services end up getting sued. It's why ASCAP tried to declare that ringtones were a public performance (ditto for the 30 second previews of songs at iTunes). Basically, these industries just go searching under the couch cushions for spare change to sue for because that's how they operate.

The latest such example is the AARC -- the Alliance of Artists and Recording Companies -- deciding to file a lawsuit demanding $2,500 for every car in which Ford and GM have installed CD devices that will automatically rip CDs into MP3s to store on a local hard drive. The AARC is a smaller and little known collection society. It was created solely to collect fees from the Audio Home Recording Act (AHRA), one of the many (many) laws that the RIAA foisted upon the world in fear over the rise of digital music. It was designed as something of a "compromise" between the RIAA and the computing and consumer electronics industry. The focus was supposedly to better enable personal, non-commercial home copies of music, while putting royalties on devices used to make serial (repeated) copies.

The problem is that the AHRA is basically a deadletter act, with little real standing in the world today, partly because the act itself killed the market for such devices. The RIAA had tried to use it in the late 1990s to ban the mp3 player (or, well, to tax them to death). But, thankfully, a court in RIAA v. Diamond rejected that interpretation of the law, making mp3 players perfectly legal (without the corresponding royalty tax). That ruling, which destroyed the RIAA's (wrong) interpretation of the law, also opened up the wonderful digital music world we have today, where you can store thousands of songs in your pocket. Without the RIAA v. Diamond ruling, it's unlikely that we'd ever have the iPod.

There are still a very small number of things that are supposedly covered by the AHRA, but AARC collects a tiny, tiny amount of money. The Copyright Office's data shows a total of $748,277.72 in 2013. That's down from previous years, but at it's very highest AARC collected $5.3 million, and most years it was closer to $2 million. Oh, and in case you're wondering, almost none of that money actually gets paid out. The last year that the Copyright Office has published details concerning these fees, 2010, it notes that AARC collected $1.75 million... and paid out just $7,894.84. Yes, you read that right. AARC collected nearly $2 million, but gave less than $8,000 to copyright holders (likely the major labels, who probably didn't give any of that money to actual artists). The previous year, it paid out a whopping $16,564.63.

However, suddenly AARC seems to think that these CD-to-mp3 devices violate the law, and the auto companies and the electronics firms that make the devices, Denso and Clarion, must pay. The AARC is pulling out all the stops to explain why the lawsuit makes sense, focusing on claims by GM (in its marketing material) that "the hard drive will not accept photos or other sorts of data" but just music. This is in part because of the Diamond ruling noted (correctly) that a general purpose hard drive doesn't apply. But the AARC appears to be totally ignoring other key parts of the ruling.

For example, the court focused on the fact that the AHRA was targeted towards devices that are making more copies of works, and not on attempts to make recordings for private, non-commercial use. Here's what the court said about Diamond's Rio mp3 player (SCMS is the DRM the AHRA required device manufacturers install -- the Rio didn't have it, because they noted you can't copy works off the device, so it wasn't needed):

the Rio does not permit such further copies to be made because it simply cannot download or transmit the files that it stores to any other device. Thus, the Rio without SCMS inherently allows less copying than SCMS permits.

In fact, the Rio's operation is entirely consistent with the Act's main purpose - the facilitation of personal use. As the Senate Report explains, "[t]he purpose of [the Act] is to ensure the right of consumers to make analog or digital audio recordings of copyrighted music for their private, noncommercial use."... The Act does so through its home taping exemption, ... which "protects all noncommercial copying by consumers of digital and analog musical recordings," ... The Rio merely makes copies in order to render portable, or "space-shift," those files that already reside on a user's hard drive. Cf. Sony Corp. of America v. Universal City Studios, 464 U.S. 417, 455 (1984) (holding that "time-shifting" of copyrighted television shows with VCR's constitutes fair use under the Copyright Act, and thus is not an infringement). Such copying is paradigmatic noncommercial personal use entirely consistent with the purposes of the Act.

In other words, the court recognized that devices that are just recording for home and personal use (and not allowing further copies) fit nicely into the purpose of the act and aren't subject to the royalty rates. It seems likely that the same argument applies to Ford and GM in this case. The AARC coyly claims that "other manufacturers, importers and distributors of comparable music recorders pay the required royalties without controversy," but it doesn't name who actually pays or for what.

Of course, these days, even CD ripping is well on its way to the technological graveyard. If the AARC magically succeeds with this lawsuit, I would imagine it would receive a one-time payout (how much do you think artists will see?), followed by Ford and GM ditching CD rippers from their vehicles, and moving straight to built-in streaming setups via things like Pandora and Spotify. But, you know, these days, the legacy record labels are searching under every damn legal cushion, never once thinking that maybe not trying to demand cash, but rather earning it from willing buyers might make more sense.

Filed Under: ahra, audio home recording act, cars, cd rippers, mp3 players, recording industry, royalties
Companies: aarc, clarion, denso, diamond, ford, gm, riaa