Recording Indust. of America v. Diamond Multimedia

• Citation: 29 F.Supp.2d 624
• Decision Date: 26 October 1998
• Docket Number: No. CV 98-8247 ABC (RZx).,CV 98-8247 ABC (RZx).
• Court: U.S. District Court — Central District of California
• Parties: RECORDING INDUSTRY ASSOCIATION OF AMERICA, INC. and Alliance of Artists and Recording Companies, Plaintiffs, v. DIAMOND MULTIMEDIA SYSTEMS, INC., Defendant.

29 F.Supp.2d 624

RECORDING INDUSTRY ASSOCIATION OF AMERICA, INC. and Alliance of Artists and Recording Companies, Plaintiffs, v. DIAMOND MULTIMEDIA SYSTEMS, INC., Defendant.

No. CV 98-8247 ABC (RZx).

United States District Court, C.D. California.

October 26, 1998.

Laurence J. Hutt, Brian K. Condon, Arnold & Porter, Los Angeles, CA, Hadrian R. Katz, Helene T. Krasnoff, Arnold & Porter, Steven B. Fabrizio, Washington, DC, for Plaintiffs.

Andrew P. Bridges, Diane E. Turrif, Wilson, Sonsini, Goodrich & Rosati, Palo Alto, CA, for Defendant.

ORDER RE: Plaintiff's Motion for Preliminary Injunction

COLLINS, District Judge.

Plaintiffs Motion for a Preliminary Injunction came on for hearing on October 26, 1998. After reviewing the materials submitted by the parties, the arguments of counsel, and the case file, the Court hereby DENIES Plaintiffs' Motion for Preliminary Injunction.

I. Factual Background

This action arises from the efforts of Plaintiffs RECORDING INDUSTRY ASSOCIATION OF AMERICA, INC. and ALLIANCE OF ARTISTS AND RECORDING COMPANIES ("Plaintiffs") to preliminarily enjoin alleged violations of the Audio Home Recording Act of 1992, 17 U.S.C. §§ 1001 et seq. ("AHRA") by Defendant DIAMOND MULTIMEDIA SYSTEMS, INC. ("Defendant").

The material facts of this case are undisputed. Plaintiffs are trade organizations representing the creators, manufacturers, and distributers of over ninety percent of all legitimate sound recordings. Defendant is a leading manufacturer of computer products, specializing in products to improve multimedia, audio, graphics, video, and communications uses of personal computers. Defendant is currently manufacturing—and intends to distribute—a device it calls the Rio PMP 300 (the "Rio"). The Rio is a lightweight, hand-held device, capable of receiving, storing, and re-playing digital audio file stored on the hard drive of a personal computer. After the Rio receives a digital audio file, the Rio user can detach the Rio from the computer and play back the audio file separately through headphones while away from the computer. Notably, the Rio has no digital audio output capability, and therefore is incapable of passing on digital musical files to other Rio devices, or to other manufacturers' devices.

The Rio relies upon a relatively new technology for compressing sound files: MPEG 1 Layer 3 ("MP3"). MP3 compresses by a 10:1 ratio, allowing approximately 60 minutes of music to be compressed to 32 megabytes of memory. The Rio itself contains 32 megabytes of memory, but this can be doubled by the purchase of a removable memory "card." Because the card is removable, a Rio user could record music on the memory card, and then give that card to any other Rio user.

II. Procedural Background

On October 9, 1998, Plaintiffs filed a Complaint and Ex Parte Application for Temporary Restraining Order and Order to Show Cause Re Preliminary Injunction. The Complaint alleged a single cause of action for violation of the AHRA. On October 13, 1998, Defendant filed an Opposition to the Ex Parte Application for TRO. On October 14, 1998, Plaintiffs filed their Reply.

On October 16, 1998, this Court heard oral argument on the merits, and issued a TRO enjoining Defendant from manufacturing or distributing the Rio. The TRO was contingent on Plaintiffs posting a bond in the amount of $500,000.

On October 20, 1998, Defendant filed its Opposition to the application for a preliminary injunction. On October 22, 1998, Plaintiffs filed their Reply.

III. Discussion

A. Preliminary Injunction Standard

Traditionally, a court may issue a preliminary injunction if it determines: (1) the moving party will suffer irreparable injury if the relief is denied; (2) the moving party will probably prevail on the merits; (3) the balance of potential harm favors the moving party; and, depending on the nature of the case, (4) the public interest favors granting relief. International Jensen v. Metrosound U.S.A., 4 F.3d 819, 822 (9th Cir.1993).

Under the "alternative standard," a party may obtain a preliminary injunction, by demonstrating either: (1) a combination of probable success on the merits and the possibility of irreparable injury if relief is not granted; or (2) the existence of serious questions going to the merits and that the balance of hardships tips sharply in its favor. Id. "The alternative standards are not separate tests but the outer reaches of a single continuum." Id. (quotation omitted). Essentially, the trial court must balance the competing claims of injury and must consider the effect on each party of the granting or withholding of the requested relief. Schwarzer & Tashima, Federal Civil Procedure Before Trial, at 13:39.

1. Injunctive Relief Authorized By Federal Statute

Plaintiffs advance two arguments in support of a departure from the traditional equitable considerations governing injunctive relief. First, Plaintiffs cite Trailer Train Co. v. State Board of Equalization, 697 F.2d 860, 869 (9th Cir.1983) for the proposition that "traditional proof of irreparable harm is not required ... [w]here a federal statute grants authority to enjoin violations." Pf.'s Reply at 19:24-26. Although Plaintiffs are correct that irreparable harm is not mandatory when a federal statute authorizes injunctive relief, the existence of an authorizing statute does not per se preclude consideration of traditional equitable factors, including irreparable harm. Miller v. California Pacific Medical Center, 19 F.3d 449, 457-58 (9th Cir.1994)(provision of National Labor Relations Act authorizing injunctive relief "as deemed just and proper" requires consideration of traditional equitable factors). As noted in Miller,

[the] commonplace considerations applicable to cases in which injunctions are sought in the federal courts reflect a "practice with background of several hundred years of history," a practice of which Congress is assuredly well aware. Of course, Congress may intervene and guide or control the exercise of the courts' discretion, but we do not lightly assume that Congress has intended to depart from established principles.... Unless a statute in so many words, or by a necessary and inescapable inference, restricts the court's jurisdiction in equity, the full scope of that jurisdiction is to be recognized.

Id. at 458 (quoting Weinberger v. Romero-Barcelo, 456 U.S. 305, 313, 102 S.Ct. 1798, 72 L.Ed.2d 91 (1982); see Flynn v. United States, 786 F.2d 586, 591 (3d. Cir.1986)(unless federal statute requires mandatory injunction, traditional equitable considerations apply).

In the instant action, the AHRA states that "the court — may grant temporary and permanent injunctions on such terms as it deems reasonable to prevent or restrain such violation[s]." AHRA § 1009(c)(1). In light of this discretion, the Court declines to depart from traditional equitable considerations in assessing the propriety of injunctive relief.

2. Presumption of Irreparable Harm

Second, Plaintiffs argue that "[t]he AHRA is inextricably related to the rights provided under the Copyright Act," and that therefore Plaintiffs are "entitled to [the] presumption of irreparable harm that arises" in copyright actions. Plfs.' Reply at 18:10-24.¹

The Court disagrees. It is undisputed that "[a] copyright plaintiff who makes out a prima facie case of infringement is entitled to a preliminary injunction without a detailed showing of irreparable harm." Triad Systems Corp. v. Southeastern Express Co., 64 F.3d 1330, 1335 n. 9 (9th Cir.1995)(emphasis added)(quoting Apple Computer, Inc. v. Franklin Computer Corp., 714 F.2d 1240, 1254 (3d Cir.1983)). In the instant action, however, Plaintiffs are not asserting a copyright claim. If, as Plaintiffs contend, the Rio is subject to the AHRA, then copyright infringement is impossible as a matter of law. See AHRA § 1008 (prohibiting copyright infringement actions). Even if the Rio is not subject to the AHRA — and therefore governed by the Copyright Act — Defendant has a potential "fair use" defense that might defeat any prima facie showing of infringement. See Sony Corp. v. Universal City Studios, Inc., 464 U.S. 417, 439-40, 104 S.Ct. 774, 78 L.Ed.2d 574 (1984).

Moreover, the relatively few copyright cases that actually explain the rationale for the presumption confirm its inapplicability to the instant action. For example, Plaintiffs quote from Fisher-Price, Inc. v. Well-Made Toy Mfg. Corp., 25 F.3d 119, 124 (2d Cir. 1994) for the proposition that copyright infringement "will damage the copyright holder in incalculable and incurable ways." Plfs.' Reply at 18:16-18. Adding context to the Fisher-Price quotation, the full paragraph reads:

Normally, when a copyright is infringed, irreparable harm is presumed; this is because the confusion created in the market-place will damage the copyright holder in incalculable and incurable ways. [Citations omitted]. "[C]onfusion may cause purchasers to refrain from buying either product and to turn to those of other competitors.... Furthermore, if an infringer's product is of poor quality, ... a more lasting but not readily measurable injury may be inflicted on the plaintiff's reputation in the market." [Quotation omitted].

Id.; see also Country Kids `N City Slicks, Inc. v. Sheen, 77 F.3d 1280, 1288-89 (10th Cir.1996)(presumption appropriate "[b]ecause the financial impact of copyright infringement is hard to measure and often involves intangible qualities such as customer goodwill"); Marcy Playground, Inc. v. Capitol Records, Inc., 6 F.Supp.2d 277, 281 (S.D.N.Y. 1998)("the theory underlying the presumption rests on the difficulty of remedying confusion in the market place by an award of damages").

The instant action, however, does not raise issues of "reputation," "quality of goods," or consumer "confusion." Moreover, although a copyright action might "normally" entail "incalculable and incurable" injuries, the instant action does not. The only potentially "incalculable" injury...