AARC Files Federal Class Action Lawsuit – Frequently Asked Questions

Frequently Asked Questions on AARC/Auto Litigation

What is the Alliance of Artists and Recording Companies?
The Alliance of Artists and Recording Companies, Inc. (AARC) is a nonprofit organization that collects and distributes Audio Home Recording Act royalties to featured recording artists and sound recording copyright owners (usually record companies). Linda R. Bocchi, Esq., is the Executive Director of AARC.

What is the Audio Home Recording Act?
The Audio Home Recording Act (AHRA) is a federal law that passed the House and Senate unanimously and was signed into law by President George H.W. Bush in 1992. It represents a consensus between the consumer electronics industry and music creators designed to eliminate legal uncertainty about the sale and marketing of innovative digital devices, protect consumers who make personal copies of their music, and ensure fair compensation to music creators.

The AHRA requires manufacturers, importers, and distributors of covered digital music recording devices and media (like blank CDs) to pay royalties into the U.S. Copyright Office. The U.S. Copyright Royalty Board then distributes these royalties to artists, songwriters, and copyright owners. The AHRA also requires these devices to prevent “serial” copying (making copies of copies). In exchange, AHRA protects consumers, manufacturers, importers, and distributors from liability for copyright infringement and eliminates the need for case-by-case litigation of how any particular devices are used or the specific harm caused by any illegal copying or infringement.

What is the purpose of this lawsuit?
Many automobiles feature music entertainment systems that allow owners to copy (or “rip”) music from CDs or other sources onto in-car hard drives. These devices are covered by the AHRA and companies that manufacture, import, or distribute them must pay AHRA royalties to the U.S. Copyright Office, which are then distributed to artists, songwriters, and copyright owners. GM, Ford, Denso, and Clarion manufacture, import, or distribute covered music recorders, but they have failed to pay the royalties they owe. AARC is bringing this federal class action on behalf of all music creators with rights under the AHRA to compel these companies to pay overdue royalties and damages they owe under the law.

How much is at stake? Who ultimately gets the money?
The total amount of royalties and damages owed will depend on the number of non-complying devices manufactured, imported, or distributed by the defendants, which will be established during the course of the litigation. The royalty amount for each covered device is relatively small, limited to between $1 and $12, although the number of devices involved may be large. The court may also award additional and far more substantial damages for devices that do not include technology to prevent serial copying.

You are only suing two auto manufacturers and two electronics companies – do the others pay royalties for their entertainment systems?
Other manufacturers, importers, and distributors of comparable music recorders pay the required royalties without controversy and we continue to monitor the market and research which companies are meeting their obligations and which are not. Hopefully, this action will educate others in the industry about their obligations under the AHRA and there will be no need for further litigation.

The auto companies say the recording functions of their devices are not “primarily” designed or marketed for recording music, as the AHRA requires. Why isn’t that a successful defense?
Ultimately, the defendants claim that the recording function of devices marketed as a “10GB digital Jukebox that can hold up to 2,400 songs” or an “Infotainment” system in which “music from CDs can be recorded and stored on the hard drive” are not primarily designed or marketed for recording music. We do not believe that argument will be persuasive in court.

Who is really hurt when someone copies a CD onto a car recorder? Why should anyone pay royalties for that?
With its fundamental give and take of royalties for music creators and copyright owners in exchange for legal certainty for consumers who make personal copies of their music and companies that manufacture, import, and distribute digital music recording devices, the AHRA has helped create a new world of convenience and innovation and a vast digital electronics economy. The statute thus created a fair and simple royalty scheme in lieu of case-by-case litigation of how any particular devices are used or the specific harm caused by any illegal copying or infringement.

We now take for granted how a scratched record, unwound tape, or etched CD no longer automatically results in the need to buy another physical copy. That benefit is certainly true in the case of the devices central to this litigation – auto entertainment systems that substitute hard drive recordings for more fragile and bulky original media on the road.

However, after reaping the benefits of this landmark law, defendants may not back out of their end of the bargain.