Atlantic v. XM Satellite Radio

Citation: Atlantic Recording Corp. v. XM Satellite Radio, Inc., 2007 U.S. Dist. LEXIS 4290, 81 U.S.P.Q.2D (BNA) 1407 (S.D.N.Y. 2007).

Factual Background:
XM Satellite Radio, Inc., (XM), has a license from the plaintiffs to broadcast copyrighted work on a subscription basis. Plaintifs brought nine (9) causes of action against XM alleging copyright infringement and unfair competition based on XM's marketing of "XM+MP3" players which allow users to "store MP3 files, which he or she already owned or acquired from outside sources", to record and catelogue programming broadcast over the subscription service as long as the user pays the subscription fee, and to use the "ArtistSelect" and "TuneSelect" function to receive notices when artists and songs they have requested are being played on any XM channel.


 * Count 1 - direct infringement of plaintiffs' distribution rights
 * Count 2 - unauthorized digital phonorecord delivery
 * Count 3 - infringement of exclusive reproduction rights
 * Count 4 - violation of the granted license
 * Count 5 - inducing copyright infringement
 * Count 6 - contributory copyright infringement
 * Count 7 - vicarious copyright infringement
 * Count 8 - violation of New York State common-law for pre-1972 sound recordings
 * Count 9 - violation of New York's common-law bar on unfair competition

XM filed a motion to dismiss claiming immunity under the Audio Home Recording Act of 1992 (AHRA), 17 U.S.C. Sections 1001-1010.

District Court
The District Court denied the motion to dismiss finding that the distribution of a "digital audio recording device" (DARD) does not shield XM from liability when XM is not being sued for its actions as a DARD distributor.

Under Section 1008 of the AHRA, Prohibition in Certain Infringement Actions, "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"

XM argued that AHRA provides immunity from law suits as long as their "XM+MP3" player meets the requirement of a DARD. The court determined that the Plaintiffs' Complaint did not directly claim that XM was a distributor of "XM+MP3" players and held that "[t]he protected use of a consumer to record music for noncommercial use does not contemplate the commercial recording by a broadcaster to be "leased" to the consumer for only as long as she pays the subscription fee to that broadcaster." The court agreed with the Plaintiffs' reading of the AHRA that "[a] claim is 'based on' manufacture, importation or distribution of a [DARD] only where the acts of manufacturing, importing, or distributing the device is the conduct on which liability is premised."

The Claim was, however, based on allegations that XM was acting outside the scope of their license and that the XM+MP3 players were in direct competition for a known market for digital music download services.

Distinguishing this case from cases involving radio and cassette players (due to the subscription fee charged by XM to retain downloaded content) the court held that a finding that XM was not protected with AHRA was "consistent with the funamental tenet of copyright law that 'all who derive value from a copyrighted work should pay for that use.'"

The District Court denied XM's motion to dismiss.