Universal Music Drops Innovative Lawsuit Against XM's Inno

A closely-watched case that promised to clarify one of the most uncertain areas of copyright law could be indefinitely paused.

Yesterday, XM Satellite Radio and Universal Music Group announced a multiyear deal that allows XM to continue selling "all XM radios with advanced recording functionality, including both those currently available as well as future product releases." As part of the deal, Universal has dropped out of a lawsuit against XM.

In May, 2006, in New York federal court, UMG, Warner Music Group, EMI Group and Sony BMG sued XM, alleging that its XM2go service and portable "Inno" device constituted "massive infringement." At the time, many in the copyright community salivated at the prospect of getting a court's take on the legality of the "Inno" player, a device that allows users to digitally record songs and save them in searchable archives.

It was hoped that the outcome of the case could become a major legal reference point in the development of time-shifting media devices. In the lawsuit, the recording industry argued that XM needed to negotiate separate license agreements, whereas XM argued in response that it was shielded by the Audio Home Recording Act that protected equipment makers and consumers who make digital music copies for private use.

Yesterday's deal will surely disappoint many who had hoped to watch a huge legal brawl between two well-heeled sides. Unfortunately, neither company has revealed what sort of financial arrangement would prompt a struggling record major to agree to relinquish its copyright claims against the Inno, not to mention all future XM product releases. Reuters is also reporting that XM and WMG are also talking settlement, potentially spelling the end of the Inno case.

If the case is deleted from the docket, will anyone challenge time-shifting and place-shifting devices? Hollywood and the advertising community seem to have warmed to Tivo. Maybe Major League Baseball or some other company will take on Slingbox. Stay tuned. Or set your recorders to do them for you.