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The D.C. Circuit Rejects Sweeping Interpretation of Audio Home Recording Act

Today, January 28, the U.S. Court of Appeals for the District of Columbia rejected an expansive interpretation of the Audio Home Recording Act (“AHRA”) that would have resulted in the imposition of burdensome fees and technology mandates on a wide range of products, including laptop computers and smartphones. CCIA filed an amicus brief urging the interpretation adopted by the court. DisCo reviewed the brief’s arguments in detail here.

The AHRA targets what the music industry in 1992 considered to be an existential threat: digital audio tape (“DAT”) technology. The music industry believed that DAT recorders’ ability to make perfect copies of sound recordings without degradation would result in a drastic drop in sales of recorded music. To prevent this, the AHRA required manufacturers of DAT recorders to include a serial copy management system that permitted recorders to make first generation copies, but prevented them from making second generation copies. Additionally, the AHRA required manufacturers to pay a levy on each recorder and blank storage medium (e.g., CD-R) to the Copyright Office, which would turn over this revenue to the collective management organization for distribution to the record labels, music publishers, and performing artists. 

The AHRA’s complex definitions were the result of extensive negotiations among stakeholders expressly intended to target the DAT technology. In order to reach agreement, the negotiators specifically excluded computers from the kind of recording device that fell within the AHRA’s scope. In simplified terms, the AHRA does not apply to a device that records music onto a hard drive that also stores computer programs. Because a computer’s hard drive stores the computer programs that run on the computer, including its operating system, a computer cannot fall within the scope of the AHRA.

This case concerns multifunction entertainment and navigation systems installed in automobiles. These systems are onboard computers with the ability to record a CD onto the system’s hard drive. Notwithstanding the AHRA’s carefully drafted exclusion of computers, in 2014 the Alliance of Artists and Record Companies (“AARC”)—the collective management organization responsible for distributing the AHRA levies—sued the manufacturers of the onboard computers, as well as the automobile manufacturers, for failure to pay an AHRA levy. The district court rejected the claim, finding that onboard computers fell outside the scope of the AHRA. AARC appealed to the D.C. Circuit.

On appeal, AARC argued that the AHRA’s definitions are sufficiently elastic that a computer could fall within its scope because the hard drive could be partitioned into distinct sections, some of which contain only musical recordings and no computer programs. The manufacturers in their opposition brief explained why AARC’s “partition theory” was inconsistent with both the plain language and legislative history of the AHRA. 

The D.C. Circuit agreed with the manufacturers in a unanimous decision. It found that the devices at issue in this case fell outside the scope of the AHRA because their hard drives did not contain only sounds, but also material such as computer programs. Moreover, the court rejected the AARC’s partition theory. When 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 AHRA’s definitions. The D.C. Circuit recognized that “AARC’s proposed alternative has no clear limiting principle.” Under it, every device that could store music would potentially need to comply with the AHRA’s serial copy management requirements or be subject to significant statutory damages. Fortunately, the D.C. Circuit avoided this result by rejecting AARC’s partition theory.

Intellectual Property

The Internet enables the free exchange of ideas and content that, in turn, promote creativity, commerce, and innovation. However, a balanced approach to copyright, trademarks, and patents is critical to this creative and entrepreneurial spirit the Internet has fostered. Consequently, it is our belief that the intellectual property system should encourage innovation, while not impeding new business models and open-source developments.