A federal judge today (Jan. 19) denied XM Satellite Radio's attempt to dismiss the lawsuit brought by major labels over the XM players which record, library and retain music broadcast by the service.

In a 23-page opinion, U.S. District Court judge Deborah Batts in New York held that the Audio Home Recording Act does not protect XM from copyright infringement claims in this case.

Under the AHRA and a 1999 Court of Appeals decision in connection with the
Rio player, distributors of digital audio recording devices (DARDs), which do not transmit and cannot record without use of a computer, are protected from liability for copyright infringement. XM argued that it is merely a distributor of a DARD.

The court essentially held that XM may be sued for its services rather than
as a distributor.

"The question presented here is plain: whether the conduct alleged in the
record companies' complaint falls within the ambit of conduct protected by
the AHRA," the opinion states. "The court finds that because of the unique
circumstances of XM being both a broadcaster and a DARD distributor and its
access to the copyrighted music results from its license to broadcast only,
that the alleged conduct of XM in making that music available for consumers
to record well beyond the time when broadcast, in violation of its broadcast
license, is the basis of the complaint, and being a distributor of a DARD is
not."

The court concluded, "The AHRA provides no protection to XM merely because
they are distributors of a DARD."

An XM spokesman on Friday insisted that the basis of the court's ruling was "the false characterizations set forth in the plaintiff's complaint."

"XM remains confident that the lawsuit filed by the record industry is without merit and that we will prevail," the spokesman said. "The real facts strongly support our view that the lawsuit is barred by the Audio Home Recording Act."

"We're pleased that the court has rejected XM's attempt to misuse the Audio
Home Recording Act as a legal loophole for distributing sound recordings to
its subscribers," says Steven Marks, RIAA executive VP/general counsel. "The
AHRA was never intended to allow a service offering distributions of music
to duck paying creators what they are due."

XM and the labels continue to negotiate toward a possible settlement.