Manufacturer Files Countersuit Against RIAA In MP3 Battle

Maker of controversial digital player alleges anti-trust and unfair business practices on part of trade group.

The makers of a new, portable digital-music player filed a countersuit against the Recording Industry Association of America on Tuesday (Dec. 1) in U.S. District Court in Los Angeles, denying all claims against it and alleging anti-trust and unfair business practices.

The countersuit will seek to clear the path for the manufacturer of the high-tech device known as the Rio to market the controversial player.

Diamond Multimedia filed the lawsuit in response to an Oct. 9 suit filed by the RIAA, a music trade-group, against Diamond. That initial suit sought an injunction prohibiting the sale or distribution of the Rio -- a portable digital-music device that plays the controversial MP3 file format -- which Diamond Multimedia began shipping to stores Nov. 23.

In its suit, the RIAA claimed that the Rio is a recording device that invites users to distribute copyright-protected music free of charge without authorization.

The countersuit is part of the latest go-round between the RIAA and Diamond Multimedia in a dispute that has been in limbo since U.S. District Judge Audrey Collins declined Oct. 26 to grant the RIAA a temporary injunction against the Rio player.

At that time, Cary Sherman, senior executive vice president and general counsel for the RIAA, said the recording industry trade-group planned to appeal.

"I think we're going to appeal the judge's ruling," Sherman said. "We certainly think the judge made an error of law as well as an error of practical matter."

Ken Wirt, vice president of corporate marketing at Diamond Multimedia, hailed Collins' decision as a victory for the Rio player and for digital music.

"The ruling is an important step toward establishing the Rio player and the market for MP3 as a popular format for artists to distribute their music over the Internet," Wirt said in a press release issued after the ruling. "We have always been confident that the Rio is a lawful device. Rio has no recording capability and does not permit serial copying."

The MP3 digital format, which itself is not illegal, allows songs to be transferred across the Internet in near-CD-quality. During the past year, MP3s have become increasingly popular with mainstream computer users.

The Rio player, which is about the size of a deck of cards, has no moving parts. Users transfer MP3s to the device's memory by plugging it into a computer.

Last summer, punk-rappers the Beastie Boys gave the format a high-profile boost by posting their single "Intergalactic" (RealAudio excerpt) in the MP3 format on their official website. They later posted MP3s of live performances by the group as well.

Diamond Multimedia will issue a press release Wednesday (Dec. 2) to address the lawsuit and Wirt will hold a conference call to field any additional questions regarding the suit.