The Illustrated Story of Copyright

A short note on the Rio and Napster cases

      After the Napster case, there seems to be a perception that "the copyright owner always wins," and that copyright is all about stopping new consumer technologies. But copyright has always involved a balancing of interests between copyright owners and copyright users. The point is well illustrated by comparing the Napster case to the Rio case, decided just eight months earlier by exactly the same court, the Ninth Circuit Court of Appeals.

      In the Rio case, the Recording Industry Association of America sued Diamond Multimedia for manufacturing the Rio, a new device that is capable of storing music MP3 files transferred from home computers. A consumer can "rip" a CD (convert the sound tracks to compact MP3 files for storage on computer disks) or download MP3 files from the Internet, and then transfer them to the Rio so that the music can be transported just about anywhere. The devices are much more stable than even portable CD players, because the Rio stores the music files electronically, with no moving parts whatsoever.

      The suit by the Recording Industry was based upon the Audio Home Recording Act of 1992, which was supposed to be something of a compromise. That act is described at pp. 49 to 51 of my book. It had three major components: (1) home digital audio recorders were supposed to include a "serial copy management chip" that would prevent the making of copies from copies; (2) a royalty fee of up to $8 per device and 3% of the price of the digital audio media would be collected from the manufacturers for ultimate distribution to copyright owners of music and sound recordings; and (3) the recording industry would not otherwise sue for any home recording of music.

      The Rio device clearly allowed for the home recording of copyrighted works, and without the payment of the royalty contemplated by the act. However, the Ninth Circuit read the 1992 act narrowly, so that it did not apply to the copying of music files from a computer hard drive. Although some of us were puzzled at the Court's logic, it was a clear victory in favor of Diamond Multimedia, and against the recording industry.

      That defeat by the recording industry was balanced by its success in the Napster case. In that case, the Ninth Circuit modified the district court's order that would have shut Napster down. Instead, the copyright owners have been put to the burden of identifying those files on the Napster system that infringe their works; and only after notice of the infringement does Napster have to block access to such works. It remains to be seen whether the filtering system that Napster has adopted will prove satisfactory to the district and ultimately the Ninth Circuit court.

      It is now possible to see the balance emerging from the Ninth Circuit's two major decisions in this area. Under the 1992 amendment to the copyright act, consumers are allowed to make copies of music in their own homes, without infringing copyright, since the use of digital audio recording devices results in at least some royalties being paid to copyright owners (though only a fraction of the amount originally contemplated by the industries and Congress). The Rio case has extended the home exemption by allowing manufacturers and importers to sell machines with which consumers can transfer copies of digital music from their computer hard drives to more convenient portable devices. Under the Napster decision, however, copyright owners should be able to stop, or at least severely limit, a distribution system that simply makes unauthorized copying too easy, and threatens the sale of CDs and the ability of the recording industry to make a profit on the creation of new recordings.

      The balance is similar to the balance that has been achieved in other areas of copyright. (Take a look at my book, The Illustrated Story of Copyright, for other examples in the video and computer program contexts.)

Read the full text of the Rio Case (Diamond Multimedia Rio player)
(Ninth Circuit Court of Appeals, June 15, 1999)

Read the full text of the Napster Case
(Ninth Circuit Court of Appeals, February 12, 2001)