The RIAA brought suit against Diamond Multimedia Systems, Inc, (Diamond), "alleging that the Rio [a device manufactured by Diamond] does not meet the requirements for digital audio recording devices under the Audio Home Recording Act of 1992, 17 U.S.C. § 1001 et seq. (the "Act"), because it does not employ a Serial Copyright Management System ("SCMS") that sends, receives, and acts upon information about the generation and copyright status of the files that it plays."   The Rio is a portable digital audio device which "allows a user to download MP3 audio files from a computer and to listen to them elsewhere."   The lower court denied the RIAA's request for injunctive relief,  holding that the RIAA had failed to demonstrate a likelihood of success on the merits, and the RIAA appealed.  On appeal, the ninth circuit upheld the lower court's decision to deny injunctive relief but found that the lower court had erred in holding that the Rio was a covered device under the AHRA.  The court noted that in order to be a digital audio recording device, the Rio must be able to reproduce, either "directly" or "from a transmission," a "digital music recording."  17 U.S.C. § 1001(1).

    Under the language of the AHRA, the court proceeded to determine that the hard drive from which the Rio downloaded music files was not a digital music recording, because it contained much more than "only sounds, and material, statements, or instructions incidental to those fixed sounds," thereby falling outside of the definition of a digital music recording under 17 U.S.C. § 1001(5)(A).   Likewise, a digital music recording does not include a material object "in which one or more computer programs are fixed," subject to certain limitations.  17 U.S.C. § 1001(5)(B)(2).  As the computer hard drive from which the Rio made its copies was not a digital music recording, the Rio could not be considered a digital audio recording device under the AHRA, unless it was capable of reproducing a digital music recording indirectly from a transmission.  17 U.S.C. § 1001(1).  According to the court, "a device falls within the Act's provisions if it can indirectly copy a digital music recording by making a copy from a transmission of that recording. Because the Rio cannot make copies from transmissions, but instead, can only make copies from a computer hard drive, it is not a digital audio recording device."

    Computer hard drives cannot be considered digital audio recording devices either, "because their 'primary purpose' is not to make digital audio copied recordings."   17 U.S.C. § 1001(3).  "[B]ecause computers are not digital audio recording devices, they are not required to comply with the SCMS requirement and thus need not send, receive, or act upon information regarding copyright and generation status."   Moreover, MP3 files do not even contain the codes which provide information regarding copyright and generation status.  As there would be no code to prevent the copying of the MP3 file from the hard drive, the SCMS would be of no avail.   In fact, the copy which the Rio made would be labeled under the SCMS as having "original generation status," thereby allowing an additional copy to be made.   Because no additional copies can be made from the Rio, the Rio makes less copies than the SCMS would permit.

    The court also finds that the Rio works in harmony with the main purpose of the statute: "the facilitation of personal use."   Citing the purpose behind the enactment of  17 U.S.C. § 1008,  "[t]he Rio merely makes copies in order to render portable, or 'space-shift,' those files that already reside on a user's hard drive."  Cf., Sony Corp. of America v. Universal City Studios, 464 U.S. 417, 455, 104 S.Ct. 774, 78 L.Ed.2d 574 (1984) (holding that the "time-shifting" of copyrighted television shows using a VCR constitutes fair use under the Copyright Act, and thus is not an infringement). "Such copying is paradigmatic noncommercial personal use entirely consistent with the purposes of the Act."   Thus, the court found that the Rio was not subject to the AHRA, and that the lower court had acted properly in denying an injunction.