Andrew P. Bridges                                                                        Of Counsel:
        Diane E. Turriff                                                                             Rondal Moore
        Linda G. Alvarez                                                                          Diamond Multimedia Systems, Inc.
        WILSON SONSISNI GOODRICH & ROSATI, P.C.               2880 Junction Avenue
        650 Page Mill Road, Palo Alto, CA  94304                                 San Jose, CA 95134
        (650) 493-9300                                                                           (408) 325-7000

CORPORATE DISCLOSURE STATEMENT i

TABLE OF CONTENTS ii

TABLE OF AUTHORITIES vi

JURISDICTIONAL STATEMENT 1

STATEMENT OF ISSUES 2

STATEMENT OF THE CASE 3
A. Diamond Multimedia and the Rio PMP 300 Portable Music Player 3
B. The Audio Home Recording Act of 1992 6
    l. The Legislative Compromise 6
    2. The "Serial Copy Management System" and Deletion of Its Reference Document from legislation 8
    3. Authorized Serial Copying 10
    4. AHRA Distinguished from Copyright Infringement Statutes 11
C. MP3 and the Emerging Internet Music Market 11
D. Proceedings In The District Court 16

SUMMARY OF ARGUMENT 21

ARGUMENT 23

I. Standard of Review 23
    A. The Standard of Review of Both Law and Facts on a Motion for Preliminary Injunction is
        Abuse of Discretion 23
    B. The Court of Appeals May Affirm on Any Ground That Has Support in the Record 23

II. The District Court Acted Rightly and Within Its Discretion In Denying A
    Preliminary Injunction 25
    A. The District Court Correctly Found Plaintiffs Lacked a Probability of Success on
        the Merits 25
        1. The Rio Player Is Not a "Digital Audio Recording Device" Subject to the AHRA 25
            a. The Rio Player Is Not Capable of Making a Recording From a "Digital Musical Recording"
                Within the Meaning of the AHRA 28
                i. "Digital Musical Recordings" Are Material Objects 29
                ii. Computer Hard Drives Are Not "Digital Musical Recordings." 30
            b. The Rio Player Is Incapable of Recording a Transmission From a Digital Musical Recording
                Within the Meaning of the Act 34
        2. If The Rio Player Is Subject to the AHRA, It Satisfies The Act 36
            a. The "Serial Copy Management System" Under Section 1002(a)(1) 37
            b. The Functional Equivalent of SCMS Under Section 1002(a)(2) 39
            c. Certification Of Other Systems Prohibiting Unauthorized Serial Copying Under
                Section 1002(a)(3) 42
        3. The AHRA Cannot Constitutionally Prohibit Distribution of the Rio Music Player 45
            a. The First and Fifth Amendments Protect The Rio Against An Injunction 45
            b. The AHRA is Unconstitutional as Unauthorized by the Copyright and Commerce Clauses 50
    B. The District Court Acted Within its Discretion In Finding No Harm to Plaintiffs to
        Support a Preliminary Injunction 55
        1. Even if the Rio Player is Subject to the AHRA, and Violates It For Failure To Have A Certification,
            Such a "Technical" Violation Does Not Mandate a Preliminary Injunction 55
        2. Plaintiffs Are Not Entitled to a Presumption of Irreparable Harm Under the AHRA 57
        3. The District Court Rightly Found No Harm From the Alleged Violation of the AHRA 60
    C. Plaintiffs Failed to Demonstrate Harm Sufficient to Outweigh Harm to Defendant
        and The Public 63
    D. Public Interest Favors Distribution of the Rio Player 64

CONCLUSION 67

STATEMENT OF RELATED CASES 68

CERTIFICATE OF COMPLIANCE 69

 ADDENDUM 70

17 USC § 101 (excerpts) 71
17 USC §§ 1001-1010 72
U.S. Const. Art. I, § 8 88
H.R. Rep. 102-780(I) pp. 32-50 (The Technical Reference Document) 89

Apple Computer, Inc. v. Franklin Computer Corp., 714 F.2d 1240 (3d. Cir. 1983)  33

Aronson v. Resolution Trust Corp., 38 F.3d 1110 (9th Cir. 1994)  24

Cadence Design Sys., Inc. v. Avant! Corp., 125 F.3d 824 (9th Cir. 1997), cert. denied, 118 S.Ct. 1795 (1998)  59

California Satellite Sys. v. Seimon, 767 F.2d 1364 (9th Cir. 1985)  48

Cinevision Corp. v. City of Burbank, 745 F.2d 560 (9th Cir. 1984), cert. denied, 471 U.S. 1054, 105 S.Ct. 2115 (1985)  45

Columbia Pictures Indus., Inc. v. Professional Real Estate Investors, Inc., 866 F.2d 278 (9th Cir. 1989)  35

Conlan v. U.S. Dep't of Labor, 76 F.3d 271 (9th Cir.), cert. denied, 519 U.S. 980, 117 S.Ct. 431 (1996)  47

Constitution. Ward v. Rock Against Racism, 491 U.S. 781, 109 S.Ct. 2746 (1989)  45, 48, 49

Country Kids 'N City Clicks, Inc., v. Sheen, 77 F.3d 1280 (10th Cir. 1996)  58

Fogerty v. Fantasy, Inc., 510 U.S. 517, 114 S.Ct. 1023 (1994)  50

Foti v. Menlo Park, 146 F.3d 629 (9th Cir. 1988)  47

Fox Film Corp. v. Doyal, 286 U.S. 123, 52 S.Ct. 546 (1932)  51

Gemtel Corp. v. Community Redevelopment Agency of Los Angeles, 23 F.3d 1542 (9th Cir. 1994)  23

Golden Hill Paugusett Tribe of Indians v. Weicker, 39 F.3d 51 (2d Cir. 1994)  44

Grayned v. Rockford, 408 U.S. 104, 92 S.Ct. 2294 (1972)  47

Hecht Co. v. Bowles, 321 U.S. 321, 64 S.Ct. 587 (1944)  57

In Re Englebrecht, 67 Cal. App. 4th 486 (Cal. App. 4th Dist. 1998)  46

Kev, Inc. v. Kitsap County, 793 F.2d 1053 (9th Cir. 1986)  47

Kruso v. Int'l Tel. & Tel. Corp., 872 F.2d 1416 (9th Cir. 1989), cert. denied, 496 U.S. 937, 110 S.Ct. 3217 (1990)  23

Marino v. Vasquez, 812 F.2d 499 (9th Cir. 1987)  24

McCollum v. CBS, Inc., 249 Cal. Rptr. 187 (Cal. Ct. App. 1988)  45

Miller v. Cal. Pac. Bell Med. Ctr., 19 F.3d 449 (9th Cir. 1994)  56

N.A.A.C.P. v. Button, 371 U.S. 415, 83 S.Ct. 328 (1963)  47

Nader v. Allegheny Airlines, Inc., 426 U.S. 290, 96 S.Ct. 1978 (1976)  44

Perry v. Los Angeles Police Dept., 121 F.3d 1365 (9th Cir. 1997), cert. denied, 118 S.Ct. 1362 (1998)  48

Roche Prods, Inc. v. Bolar  Pharm. Co., Inc., 733 F.2d 858 (Fed. Cir.), cert. denied, 469 U.S. 856, 105 S.Ct. 183 (1984)  56, 57

Rodriguez v. Herman, 121 F.3d 1352 (9th Cir. 1997)  24

Roe v. Anderson, 134 F.3d 1400 (9th Cir. 1998), cert. granted, 119 S.Ct. 31 (1998)  23

S.O.C., Inc. v. Clark, 152 F.3d 1136 (9th Cir. 1998);  48

Sony Corp. v. Universal City Studios, 464 U.S. 417, 104 S.Ct. 774 (1983)  50, 51, 52, 53, 64, 65, 66

Stanley v. University of So. Calif., 13 F.3d 1313 ) (9th Cir. 1994)  60

Trade-Mark Cases, 100 U.S. 82 (1879)  53, 54

Triad Systems Corp. v. Southeastern Express Co., 64 F.3d 1330 (9th Cir. 1995)  58

Tucker v. California Dep't of Ed., 97 F.3d 1204 (9th Cir. 1996)  46

Twentieth Century Music Corp. v. Aiken, 422 U.S. 151, 95 S.Ct. 2040 (1975)  50

United States v. General Dynamics Corp., 828 F.2d 1356 (9th Cir. 1987)  43

United States v. Wunsch, 84 F.3d 1110 (9th Cir. 1996)  47

Virginia State Bd. of Pharmacy v. Virginia Citizens Consumer Council, Inc., 425 U.S. 748, 96 S.Ct. 1817 (1976)  45

Weaver v. Jordan, 411 P.2d 289 (Cal.), cert. denied, 385 U.S. 844, 87 S.Ct. 49 (1966)  46

Wollam v. Palm  Springs, 379 P.2d 481 (Cal. 1963)  45

Young v. American Mini Theatres, Inc., 427 U.S. 50, 96 S.Ct. 2440 (1976)  45

CONSTITUTION AND STATUTES

U.S. Const., Art. I, § 8, cl. 3  50, 53, 54
U.S. Const., Art. I, § 8, cl. 8  22, 50, 51, 52, 53
U.S. Const., Amend. I  45, 46, 47
U.S. Const,. Amend. V  45, 47
17 U.S.C. § 101  3, 28, 30, 33, 35
17 U.S.C. § 1001 et seq  6
17 U.S.C. § 1001(1) (emphasis added)  27, 34
17 U.S.C. § 1001(3)  27
17 U.S.C. §§ 1001(3)(A), 1002(d)(2)  10
17 U.S.C. § 1001(5)(B)(ii) (emphasis added)  30, 35
17 U.S.C. § 1001(6) 54
17 U.S.C. § 1001(8)  54
17 U.S.C.§§1001-1002  26
17 USC §§ 1001-1010  3
17 U.S.C. § 1002 et. seq  8, 54
17 U.S.C. § 1002(a)  10, 26
17 U.S.C. § 1002(a)(2)  39, 48
17 U.S.C. § 1002(a)(3)  48
17 U.S.C. §§ 1003-7  8
17 U.S.C. § 1008  7, 11, 26, 58
17 U.S.C. § 1009 (a) and (b)  25
17 U.S.C. § 1009(c)(1) 55
35 U.S.C. § 271(a)  56

LEGISLATIVE MATERIALS
H.R. Rep. 102-780(I) at 18 (1992)  6
H.R. Rep. 102-780(I) at 18  3, 7, 8, 31, 37, 40, 61
H.R. Rep. 102-873(I) at 14  9, 26, 37, 38, 56
S. Rep. 102-294 at 33 (1992)  6
S. Rep. 102-294 at 51  6, 10, 26, 28, 29, 30, 32
S. Rep. 102-780(I) at 18  65
 

MISCELLANEOUS
Melville B. Nimmer and David Nimmer, Nimmer on Copyright §8B.02[A][1] n. 17 (1997) 29
Paul Goldstein, Copyright's Highway, 158-163 (1994)  8, 15
Webster's New World Dictionary of Computer Terms 196 (6th ed. 1997)  34
 

STATEMENT OF ISSUES
1. Whether the district court acted within its discretion in denying Plaintiffs' motion for preliminary injunction.

2. Whether the district court acted within its discretion in finding that Plaintiffs had not demonstrated any irreparable harm and the balance of harms required denial of a preliminary injunction.

3. Whether the district court acted within its discretion in finding the Rio PMP 300 Portable Music Player does not violate the Audio Home Recording Act.

4. Whether the district court's decision should be affirmed on the ground that the Rio player is not a "digital audio recording device" as defined by the Audio Home Recording Act.

5. Whether the district court's decision should be affirmed because the Audio Home Recording Act cannot be constitutionally applied to ban manufacture, import, or distribution of the Rio player.

 STATEMENT OF THE CASE:

A. Diamond Multimedia and the Rio PMP 300 Portable Music Player.
Diamond Multimedia manufactures and sells computer peripheral products used for multimedia and connectivity applications.  Supplemental Excerpts of Record ("SER") at 51 (Supplemental Declaration of Kenneth Wirt ("Wirt Supp")  2-3).  Examples of its products include modems and circuit boards that accelerate video graphics.  Id.

 This case concerns Diamond Multimedia's introduction of a small computer peripheral device, the Rio PMP 300 Portable Music Player.  The Rio player is the first widely available computer peripheral product that plays MP3  formatted audio files.  Excerpts of Record ("ER") 15 (Wirt  6).  The MP3 format is especially popular for the delivery and enjoyment of music by computer because it compresses digital audio by approximately a 10:1 ratio.  This means that music can be stored with less memory and be transferred more quickly, while retaining nearly the original quality of the sound during playback.  SER 46 (Spencer  2); SER 2, 4-11 (Bridges  2, and Exh A).

The Rio player is a small, handheld device that plays music and other audio through attached headphones that are provided with the player.  ER 13-14 (Wirt  2).  The Rio player also comes with separate computer software, called Rio Manager, which is stored on the computer hard drive and is used by the computer to store the MP3 audio files on the Rio player. ER 13-14  (Wirt  2); SER 75 (Spencer  5).  A parallel port cable, provided with the Rio, is used to plug the Rio player into the personal computer.  ER 13-14 (Wirt  2).

The Rio player is entirely dependent on a personal computer in order to receive files containing music.  SER 75 (Spencer  5-6).  The computer stores MP3 audio files on its hard drive.  Id.  The computer obtains MP3 files from the Internet, and it can also convert audio from other sources, such as a compact disk ("CD") in the computer's CD-ROM drive, into an MP3 file.   Id.

 To activate a Rio player, a user must connect the Rio to a personal computer and, using proprietary Rio Manager software located on the computer, store onto the Rio player MP3 audio files from the computer's hard drive.  Id.  The Rio can store approximately one hour of music or eight hours of spoken word.  SER 76 (Spencer  7).  Flash memory cards for an additional half-hour or hour of music are available to expand the base memory and playback capacity.  SER 76 (Spencer  7-8).

An advantage of the Rio player as a computer peripheral is its portability.  Small and light, about the size and weight of a pager, the Rio can be detached from the computer for playback but not for recording.  SER 51-52, 54-59 (Wirt Supp  5-6, Exhibit A).  It replays audio files only by sending an analog audio signal to headphones.  SER 76 (Spencer  10).  The Rio is smaller, lighter, more versatile, and less expensive than other high-quality portable music devices.

Apart from the headphones, the Rio has no output.  SER 76 (Spencer  11).   Neither the Rio player nor the associated Rio Manager software that resides on the personal computer can store the MP3 audio files onto a computer's hard drive.
SER 75-76 (Spencer  5-6, 12).  Nor can the Rio transfer or create duplicates of any audio files it stores.  Id.

 At the time of the preliminary injunction, the Rio did not contain a serial copy management system.  Since the preliminary injunction, Diamond Multimedia has incorporated such a system, through alteration of the associated Rio Manager software
that runs on a personal computer.  The system makes no practical difference.

B. The Audio Home Recording Act of 1992.

l. The Legislative Compromise.
Enacted to resolve a controversy between the recording industry and electronics manufacturers over the advent of digital audio tape, the Audio Home Recording Act of 1992, 17 U.S.C. § 1001 et seq. (the "Act" or the  "AHRA"), is the embodiment of a "historic compromise [which] was reached by all of the parties to the audio home taping dispute."  S. Rep. 102-294 at 33 (1992).  The stated purpose of the legislation "is to insure the right of consumers to make analog or digital audio recordings of copyrighted music for their private use."  S. Rep. 102-294 at 51.

 The legislation arose from the emergence of a new technology.  In the mid-eighties, consumer-electronics manufacturers were preparing to market digital audio tape recorders to American consumers.  H.R. Rep. 102-780(I) at 18 (1992).  Plaintiff Recording Industry Association of America ("RIAA") threatened lawsuits for contributory copyright infringement against manufacturers that decided to do so.  Id.  This adversarial climate had a chilling effect on the consumer-electronics manufacturers and introduction of the technology was halted.  Id.

RIAA acted out of a particular concern about digital copying of recorded music.  The new digital technology could allow an endless series of exact copies, made from earlier copies, without loss of sound quality.  With analog devices such as ordinary cassette tape recorders, every successive generation of copies suffers degradation of the sound, limiting the practical utility of multigenerational copying.  Digital copying did not suffer that constraint.  H.R. Rep. 102-780(I) at 18.

 The compromise in the AHRA included an express immunity from copyright infringement liability for consumers to use devices covered by the Act to make copies of audio recordings for personal use.  There is no limit to the number of copies for which the immunity applies.  See 17 U.S.C. § 1008.  The Act also afforded immunity to manufacturers of devices covered by the Act.  Id.  In return for the recognition of immunity for home recording of copyrighted works, and for manufacturers of devices covered by the Act, the Act has two components favoring the recording industry.  It directs that recording devices governed by the Act contain a system, called the "Serial Copy Management System" ("SCMS"), to limit the number of consecutive copies that a series of the recording devices can make.  See 17 U.S.C. § 1002 et. seq.  The Act also establishes a royalty system for the recording devices and for their recording media.    See 17 U.S.C. §§ 1003-7.

2. The "Serial Copy Management System" and Deletion of Its Reference Document from The Legislation.
Congress has described the origin of the "Serial Copy Management System."  "In June 1989, the recording industry and the consumer-electronics industry signed a Memorandum of Understanding in Athens, Greece.  The parties agreed to make joint recommendations to governmental entities that the Serial Copy Management System ("SCMS") be required to regulate the serial copying of digital audio recordings."  H.R. Rep. 102-780(I) at 18.  Following this agreement, legislation was introduced in the 101st Congress to require the implementation of the SCMS in digital audio tape recorders.  Id. at 19.  This legislation eventually became the Audio Home Recording Act.  See generally, Paul Goldstein, Copyright's Highway, 158-163 (1994).

Congress originally considered defining SCMS by a "Technical Reference Document": The definition of "Serial Copy Management System" in the bill as introduced referred to the system for regulating serial copying by digital audio recording devices as set forth in the "Technical Reference Document" . . . . SCMS will allow copying but only in a limited circumstance.  The system places limitations on 'serial' copying . . . . The SCMS limits copying to one copy, or no copies, or permits unlimited copies.  H.R. Rep. 102-873(I) at 14.  Originally the SCMS Technical Reference Document  was part of the draft legislation, but it was deleted because Congress determined that "any incorporation of the entire Technical Reference Document directly into legislation or indirectly through an agency regulation is inconsistent with Congress's responsibility to make the policy decisions implied by the document."  H.R. Rep. 102-873(I) at 14.  Although the AHRA requires that devices governed by the Act conform to either the SCMS or a functional equivalent, as a result of the deletion of the Technical Reference Document the Act does not authoritatively identify a specific system or standards which must be employed.

 3. Authorized Serial Copying.
The AHRA does not prohibit all serial copying.  It requires that serial copying be limited by either (1) the "Serial Copy Management System" ("SCMS"), (2) a functionally equivalent system that respects SCMS coding, or (3) any system certified by the Secretary of Commerce that "prohibit[s] unauthorized serial copying."  17 U.S.C. § 1002(a) (emphasis added).  SCMS in certain circumstances "permits unlimited copies."  S. Rep. 102-294 at 36.  A type of serial copying that is authorized under the statute is serial copying of sound recordings that lack information regarding copyright status.  17 U.S.C. §§ 1001(3)(A), 1002(d)(2).

It is undisputed that personal computers are not governed by the AHRA and do not act on SCMS codes that carry information regarding copyright status.  The parties also agree that MP3 formatted files do not carry SCMS codes.  Plaintiffs do not quarrel with the district court's factual finding that "MP3 files on the computer's hard drive do not contain this [copyright and generation status] information."  ER 128:11-15 (Order Re: Plaintiff's Motion for Preliminary Injunction ("Order re PI")).

 4. AHRA Distinguished from Copyright Infringement Statutes.
The AHRA occupies a distinct chapter of the Copyright Act that was added in 1992.  The AHRA does not regulate copyright infringement.  Indeed, the AHRA provides certian immunities from copyright infringement liability.  17 U.S.C. § 1008.  Plaintiffs do not allege copyright infringement.  Plaintiffs' case consists solely of one cause of action alleging violation of the AHRA.

C. MP3 and the Emerging Internet Music Market.
 The Internet has opened significant new opportunities for the distribution of recorded music, as it has for computer software and other types of commerce.  SER 25 (Declaration of Robert H. Kohn ("Kohn")  17).  With traditional means of record distribution controlled by a few dominant companies,  independent recording companies and artists struggle for retail shelf space and radio air time. SER 24-25 (Kohn  12, 15-16).   Independent artists outside the mainstream find record companies' control over music distribution to be a significant career-limiting roadblock.  SER 20 (Declaration of Gian Caterine ("Caterine")  4-6).  The Internet allows widespread distribution of recorded music by artists directly and by Internet recording companies, bypassing record stores and commercial radio.  SER 25 (Kohn  17).  For discussions of the advent of Internet music distribution, see generally Nikki Goth Itoi, Hard Day's Night, Red Herring, Jan. 1999, at 60; Jon Pareles, With A Click, An New Era of Music Dawns, N.Y. Times, Nov. 15, 1998, at sec.2 p.1 (nat'l. ed.).

MP3 music distribution has been embraced by musicians and Internet record companies as the first practical means of competing with the dominant companies. SER 20-21(Caterine  6), SER 22 (Kohn  1), SER 31-32 (Declaration of Dennis Mudd ("Mudd")  7).  CD manufacturing and physical distribution costs, and limited access to shelf space in record stores, are substantial barriers to entry for new record labels and artists.  Internet music distribution reduces those barriers.  SER 25 (Kohn  17).

 MP3 is emerging as the format preferred by Internet record companies, such as GoodNoise, MusicMatch, and MP3.com.  GoodNoise, founded in January 1998, was the first record company to focus on the Internet as a platform for sale and electronic delivery of music.  SER 22 (Kohn  1).  GoodNoise has licenses to distribute thousands of musical recordings to customers via the Internet. SER 22 (Kohn  2)  MP3.com takes another approach to Internet music distribution.  MP3.com allows artists to market and sell their compositions via the Internet using MP3.  Artists can transfer songs from their own computers to MP3.com's computer which visitors to www.mp3.com can download to their own computers.  SER 36 (Declaration of Michael Robertson ("Robertson")  2-3).  Over 4 million songs were legally copied from MP3.com in less than one year since the service began.  Id.

 At its Web site, MusicMatch offers one of the largest collections of MP3 music files, all legal.  SER 31 (Mudd  6).  For MusicMatch, MP3 provides an excellent way to market artists who would otherwise languish outside the notice of big recording companies.  MusicMatch customers can listen to free MP3 formatted songs, which introduce customers to new, little known artists, whose CDs then can be purchased through the Web site. SER 31-32 (Mudd  7).  Songs.com similarly uses MP3 format as a promotional vehicle to provide exposure to music that customers can buy on CD over the Internet.  SER 42 (Declaration of Paul Schatzkin ("Schatzkin")  15).  Even popular groups with major recording contracts have chosen to use MP3 Internet distribution for promotional releases to stimulate interest in their CD recordings.  See SER 2, 16-18 (Bridges  5, Exh.D).  See also Alex Gove, Beastie Bandwidth, Red Herring, Jan. 1999, at 56 (interview with popular band "Beastie Boys" regarding Web music delivery). The intense interest in MP3 by the recording industry is generated by the fact that MP3 is an open standard that opens up new channels of distribution not influenced by the major labels.  SER 33 (Mudd  11). The major labels, who control Plaintiffs in this case, fear their loss of control over distribution.  SER 24-25 (Kohn  10-12).

Plaintiffs improperly equate MP3 technology with Internet "piracy." Undoubtedly copyright infringers have posted illegal music copies on the Internet in the MP3 format.  Plaintiffs have presented only speculation, not any actual proof, however, that so-called "pirate" Internet distribution of music has reduced the market for legitimately recorded music.  A neutral study commissioned by Congress in 1987 to study the effects of home recording on record sales "acknowledged that the factual assessment of home taping's effect on sales of pre-recorded music was far from clear."  Goldstein, Copyright's Highway 160.  Software publishers and retailers now regularly distribute far more expensive products by the Internet and have found it preferable to traditional distribution.   See S. Rupley, Shop Till You Download, PC Magazine, Apr. 22, 1997, at 28.

RIAA's own Web site praises its efforts at combating copyright infringement of recorded music and notes how minimal the problem is in comparison with recorded music sales.  SER 2, 12-13 (Bridges  3 and Exh. B); see also SER 33 (Mudd  12).  News reports reflect the fact that alleged "pirate" MP3 sites are hard to find.  One reporter describes spending several fruitless hours trying to locate illegal MP3 files on the Internet only to find that most of the illicit sites she identified had already been taken down.  Janelle Brown, Is Rio Grand?, Salon Magazine (Dec. 8, 1998) <www.salonmagazine.com/2lst/reviews/1998/12/09review.html>  ("After several hours of fruitless searching for a good illegal MP3 song, I simply gave up.").  On the other hand, as discussed above, Diamond Multimedia has furnished proof of substantial legitimate distribution of music in MP3 format over the Internet.

 The specter of "Internet piracy" allegedly facilitated by MP3 is nothing more than an emotionally charged side show in this case.  Plaintiffs made no claim of "Internet piracy" or contributory copyright infringement against Diamond Multimedia.  See Clerk's Record ("CR") 1 (Complaint).  Neither the Rio player nor its Rio Manager software can connect with the Internet.  SER 75-76 (Spencer  10-12).  Neither can facilitate downloading of music from the Internet onto the computer (where it must reside before it can be stored on a Rio player).  Neither can upload music to the Internet.  Id.  The Rio player is not even capable of converting digital files into the MP3 format.  SER 75 (Spencer  5-6).

Plaintiffs' concern -- that the Rio will make MP3 files more popular -- rests upon the false assumption that MP3 is inherently evil.  Plaintiffs ignore substantial legitimate uses of MP3 compression, and the legitimate MP3 music market, which the Rio is designed to promote.

D. Proceedings In The District Court.
 Plaintiffs Recording Industry Association of America, Inc. (RIAA) and Alliance of Artists and Recording Companies (AARC) filed their complaint initiating this action and their Application for Temporary Restraining Order (TRO) and accompanying papers on October 8, 1998.  Defendant Diamond Multimedia Systems, Inc. received copies of these documents on Friday, October 9.  The district court ordered Defendant to file its written opposition to the Application for TRO by Tuesday, October 13.  The district court held the hearing on the TRO on Friday, October 16.

The district court heard lengthy oral argument at the October 16 hearing.  Before argument, the district court had distributed a memorandum to the parties outlining the court's preliminary thoughts and questions it wished to be addressed at the hearing.  ER 6-12 (Memorandum to The Parties From Judge Collins).  Indicating that it had much to consider in the upcoming ten days, the court nevertheless entered a TRO halting Defendant's manufacture, import and distribution of its Rio player.  CR 48 (Temporary Restraining Order).  The court's order did not incorporate any of its preliminary thoughts set out in its memorandum to the parties, and the memorandum to the parties was never made part of the court's record below.

 The court set a hearing on the preliminary injunction for ten days after the TRO hearing, Monday, October 26.  The court ordered Defendant to file an opposition on Tuesday, October 20;  Plaintiffs' reply papers were due October 24.  Because of the short time schedule for preparing opposition papers to both the TRO and preliminary injunction and preparing for both hearings, Defendant had not filed its answer and counterclaim (originally due November 2) before the preliminary injunction hearing.

The court took oral argument on the order to show cause on a preliminary injunction on Monday, October 26, just seventeen days after Defendant first received the complaint and TRO papers.   The court denied the request for a preliminary injunction at the hearing, which it confirmed in a written order filed on October 26 and entered October 28.

 The court found that Plaintiffs had not demonstrated a probability of success on the merits, describing Plaintiffs' showing as merely "mixed."  ER 129:8-130:1 (Order re PI).  The court found that the Rio player does not engage in unauthorized serial copying prohibited by the AHRA. ER 129:3-5 (Order re PI).  The court held that incorporating the Serial Copy Management System ("SCMS") into the Rio player, which Plaintiffs maintained the Rio was required to do by the AHRA, would be useless:

Incorporating SCMS into the Rio . . . accomplishes nothing.  The Rio could not "act[] upon copyright and generation status information" because the MP3 files on the computer's hard drive do not contain this information.  Similarly, it is undisputed that the Rio does not permit downstream copying because the Rio device itself has no digital output capability, and the removable flash memory cards cannot be copied by another Rio device.  Therefore, it is nonsensical to suggest that the Rio must "sen[d] . . . copyright and generation status information."  In summary, incorporating SCMS into the Rio appears an exercise in futility.  ER 128:10-19:1 (Order re PI) (footnotes omitted).

 In contrast, the court found that both Diamond Multimedia and the public stood to suffer if the Rio player was not made available.  The court specifically made the factual finding that  "because the Rio is capable of recording legitimate digital music, an injunction would deprive the public of a device with significant beneficial uses."  Id.  Plaintiffs filed a notice of appeal of the preliminary injunction ruling on October 27, 1998.

 SUMMARY OF ARGUMENT
The district court acted rightly and within its discretion in denying Plaintiffs' motion for preliminary injunction.  The district
court rightly found as a factual matter that a Rio without SCMS is the functional equivalent of a Rio with SCMS, that presence or absence of SCMS in the Rio makes no practical difference, and that, as a result, there can be no realistic harm or substantive violation of the AHRA resulting from the absence of SCMS in the Rio.

This court should also affirm the district court's decision on the ground that the Rio is not a "digital audio recording device" within the meaning of the AHRA.  This conclusion flows from the district court's factual finding that the Rio receives audio files solely from the hard drive of a personal computer.  To be a "digital audio recording device," under the AHRA, the Rio must copy from a material object that meets the definition of a "digital musical recording." Under the AHRA, the hard drive is not a "digital musical recording."   Therefore, the Rio is not a "digital audio recording device" because it receives its files only from a computer hard drive.

 This court should also affirm on the further ground that the AHRA cannot be constitutionally applied to ban distribution of the Rio.  The Constitution prohibits the enforcement of a vague statute, with an undefined standard, to ban a new technology for substantial lawful dissemination and enjoyment of expression.  The Constitution also does not allow Congress to enact a statute under the Copyright Clause that not merely fails to support, but undermines, the constitutional purposes of copyright law.

 ARGUMENT

I. Standard of Review

A. The Standard of Review of Both Law and Facts on a Motion for Preliminary Injunction is Abuse of Discretion.
A district court's order regarding preliminary injunctive relief is reviewed for abuse of discretion. Roe v. Anderson, 134 F.3d 1400, 1402 (9th Cir. 1998), cert. granted, 119 S.Ct. 31 (1998).  This court will review "only the district court's consideration of the likelihood of success on the merits at one end of the scale, and the possibility of irreparable harm at the other end of the scale."  Id.  Issues of law underlying the district court's decision on the preliminary injunction are not reviewed under a separate standard.  See id. n.1.

B. The Court of Appeals May Affirm on Any Ground That Has Support in the Record.
 The court of appeals may affirm on any ground that has support in the record.  Gemtel Corp. v. Community Redevelopment Agency of Los Angeles, 23 F.3d 1542, 1546 (9th Cir. 1994); Kruso v. Int'l Tel. & Tel. Corp., 872 F.2d 1416, 1421 (9th Cir. 1989), cert. denied, 496 U.S. 937, 110 S.Ct. 3217 (1990).  So long as the decision below is correct on any theory, the court of appeals may affirm even if the lower court relied on wrong grounds or faulty reasoning.  Aronson v. Resolution Trust Corp., 38 F.3d 1110, 1114 (9th Cir. 1994) (emphasizing that the court is not limited either by defenses offered by the appellee or by the grounds relied upon by the district court); Marino v. Vasquez, 812 F.2d 499, 508 (9th Cir. 1987).  "The appellee may, without taking a cross-appeal, urge in support of a decree any matter appearing in the record, although his argument may involve an attack upon the reasoning of the lower court or an insistence upon matter overlooked or ignored by it."  Rodriguez v. Herman, 121 F.3d 1352, 1355 n. 2 (9th Cir. 1997) (quoting Massachusetts Mut. Life Ins. Co. v. Ludwig, 426 U.S. 479, 481, 96 S.Ct. 2158, 2159, (1976)).

In addition to the district court's correct determination that Plaintiffs have not demonstrated a violation of the AHRA or sufficient harm, and that the balance of equities tips against an injunction, the district court's denial of a preliminary injunction should be upheld on the grounds that AHRA does not apply to the Rio player and cannot be constitutionally applied to ban the Rio.

 II. The District Court Acted Rightly and Within Its Discretion In Denying A Preliminary Injunction.

A. The District Court Correctly Found Plaintiffs Lacked a Probability of Success on the Merits.
The district court denied the preliminary injunction having determined that Plaintiffs had not established a probability of success on the merits. ER 129-130 (Order re PI).   If Plaintiffs ultimately were able to establish that the Rio is a "digital audio recording device," the district court predicted that they would fail to establish any injury resulting from a violation of the AHRA.  ER 130-131 (Order re PI).  Without injury resulting from a violation of the AHRA, there is no cause of action.  17 U.S.C. § 1009 (a) and (b).  Thus, although the district court found that Plaintiffs had only a "mixed" probability of success with respect to different elements of the cause of action, the failure of any one element will cause the entire action to fail.

1. The Rio Player Is Not a "Digital Audio Recording Device" Subject to the AHRA.
 Congress passed the Audio Home Recording Act to ensure the right of consumers to make analog or digital copies of sound recordings for personal use.  See S. Rep. 102-294 at 51.  The AHRA expressly immunizes that activity in 17 U.S.C. § 1008.

Congress also sought to combat a very specific problem implicated by the advent of digital technology: serial copying, or the ability to make unlimited generations of perfect copies from a single musical recording.  Congress solved the problem of serial copying by designating a category of devices capable of serial recording and imposing upon manufacturers of those devices a requirement that they include a "Serial Copy Management System."  See 17 U.S.C.§§1001-1002.   The Act was not intended to inhibit the listening of digital music, or even the making of multiple copies of a recording - only multiple generations of serial copying of digital music, in other words making copies of copies.

 The AHRA mandates that "[n]o person shall import, manufacture, or distribute any digital audio recording device" unless the device incorporates certain specified copying controls.  17 U.S.C. § 1002(a) (emphasis added).  Plaintiffs base their lawsuit on the single claim that the Rio player is a "digital audio recording device" within the meaning of the AHRA and that the device violates Section 1002(a) because it lacks the Serial Copy Management System.  The plain language of the statute discloses, however, that the Rio is not a device covered by the AHRA.  The result flows from a series of related definitions.

The Act defines a "digital audio recording device" in pertinent part as:

any machine or device of a type commonly distributed to individuals for use by individuals, whether or not included with or as part of some other machine or device, the digital recording function of which is designed or marketed for the primary purpose of, and that is capable of, making a "digital audio copied recording" for private use . . .  17 U.S.C. § 1001(3).

 Thus, a device cannot be considered a digital audio recording device within the meaning of the Act unless it is capable of either: (1) digital reproduction directly from a digital musical recording, or (2) the digital reproduction of a digital musical recording from a transmission.  In either case, the focus of the Act is on reproduction from "digital musical recordings."

a. The Rio Player Is Not Capable of Making a Recording From a "Digital Musical Recording"
   Within the Meaning of the AHRA.
The definition of "digital musical recording" is the key to the question of applicability of the AHRA to the Rio player.  If the hard drive from which the Rio gets its digital audio files does not qualify as a "digital music recording," the Rio is not a "digital audio recording device" under the Act.

 A great deal of thought and controversy underlay the definition of "digital musical recordings" and especially its exclusions.  See S. Rep. 102-294 at 35-36, 45-47; see also SER 67-70 (Declaration of James M. Burger ("Burger")  15-16, 18-20).  The concept of "digital musical recording" had its roots in the concept of "phonorecords," which was well established in copyright law.  A phonorecord is a physical medium, a "material object" on which certain sounds are fixed.  See 17 U.S.C. §101 (definitions).  In the AHRA, Congress embraced the concept but did not want all of the legal associations that had grown around "phonorecords" in the Copyright Act.  For the AHRA, therefore, Congress used the term "audiogram," which became the term "digital musical recording" at the time of enactment.  See S. Rep. 102-294 at 35 (stating that the term 'phonorecord' was used in S1623 because the term is used elsewhere in the Copyright Act; and adding that the bill's sponsor expressed concerns that "the bill as introduced may inadvertently encompass some form of technology that was not intended.  After consultation with the computer and telecommunications industries it became apparent that the term 'phonorecord' and its attendant definitions might be overly broad"); see also SER 62, 64 (Burger  6, 9) ("[T]he legislation's original language was extremely broad and could have been interpreted to subject computers and computer peripherals to various technical requirements"); cf. Melville B. Nimmer and David Nimmer, Nimmer on Copyright §8B.02[A][1] n. 17 (1997) (opining that the term "audiogram" is a "more evocative term than the ponderous one [digital musical recording] ultimately adopted").

i. "Digital Musical Recordings" Are Material Objects.
 "Digital musical recording" is defined by the statute as a type of material object.  The term "material object" is used elsewhere in the Copyright Act in definitions of "audiovisual works," "copies," "literary works,""phonorecords," and "sound recordings." "Material object" can include a wide variety of products.  See 17 U.S.C. § 101.  The definition of "sound recordings" is particularly instructive:
"Sound recordings" are works that result from the fixation of a series of musical, spoken, or other sounds . . . regardless of the nature of the material objects, such as disks, tapes, or other phonorecords, in which they are embodied.  17 U.S.C. § 101 (unnumbered paragraph defining "sound recordings") (emphasis added).  "Disks" encompasses hard drives.  SER 77 (Spencer Supp.  14).

ii. Computer Hard Drives Are Not "Digital Musical Recordings."
The AHRA excludes from the definition of "digital musical recordings" certain types of material objects, namely those:  in which one or more computer programs are fixed, except that a digital musical recording may contain statements or instructions constituting the fixed sounds and incidental material, and statements or instructions to be used directly or indirectly in order to bring about the perception, reproduction, or communication of the fixed sounds and incidental material.  17 U.S.C. § 1001(5)(B)(ii) (emphasis added); see S. Rep. 102-294 at 46 ("[I]f the material object contains computer programs or databases that are not incidental to the fixed sounds, then the material object would not qualify as an "audiogram").

 This exclusion of certain material objects such as hard disks from the governance of the AHRA was designed to exempt objects containing general purpose computer programs.  This was done in direct response to concerns expressed by the computer industry that the sweep of the AHRA was too broad. [C]ertain members of the computer industry have expressed concerns that the language of [the legislation] does not make sufficiently clear that material objects containing general purpose computer programs are not included within the definition of "audiogram."  In order to further clarify this point, the definition of the term "audiogram" has been amended to expressly exclude material objects in which one or more computer programs are fixed, except for certain specialized statements or instructions that may be contained in CD's, digital audio tapes, and similar objects covered by the legislation.   138 Cong. Rec. S8409, S8422 (June 17, 1992) (statement by Sen. DeConcini, sponsor of the legislation)  SER 64-70 (Burger  9, 11, 14-19) ("The negotiated language of Section 5(B)(ii) was the basis for the [Computer and Business Equipment Manufacturers Association's] withdrawal of our opposition to the legislation").

The definition of "audiogram" was later edited to add the sub-section embodying the exemption for computer storage media to which Senator DeConcini alluded.  See H.R. Rep. 102-780(I) at 2  (reporting on August 4, 1992, the revised definition of "audiogram").  Congress' intent in creating this exception was to exclude the personal computer products industry from the AHRA: In crafting this legislation, the committee intends to address the longstanding issue of audio recording, and only audio recording. . . . The committee has been careful to make clear that this legislation is limited to this issue and to avoid affecting other technologies or other interests even by implication. S. Rep. 102-294 at 52; SER 63-64 (Burger  7,8) ("The rapid advance of information technology is exactly the reason the computer industry opposes government regulation of technology.

Accordingly, in 1992, we thought it ill advised to trap any technology affecting computers in statutory amber.").  Representative Collins, a principal sponsor of the Act, explained as the legislation was being passed in the House that "the legislation does not cover products primarily marketed by the computer industry . . . ."  138 Cong. Rec. H9029, H9036 (Sept. 22, 1992).

As shown above, the statutory language, by its express terms and as supported by legislative history, excludes the hard drive of a personal computer from the definition of "material objects" that are "digital musical recordings."

 Plaintiffs contended below that this exclusion was designed for "computer programs" but not for computer hard drives.  The Plaintiffs err by failing to distinguish between material objects and works.  A computer program is a work; it is not a material object, although it can be embodied in a material object.  See 17 U.S.C. §101 ("A 'computer program' is a set of statements or instructions to be used directly or indirectly in a computer in order to bring about a certain result"); see also Apple Computer, Inc. v. Franklin Computer Corp., 714 F.2d 1240, 1249 (3d. Cir. 1983) cf. SER 66-67 (Burger  14-15) ("The statute does not propose to directly exempt a computer program -- which is not a material object.").

 Computer programs are considered "literary works" under the Copyright Act.  Apple Computer, 714 F.2d at 1249.  "'Literary works' are works, other than audiovisual works, expressed in words, numbers, or other verbal or numerical symbols or indicia, regardless of the nature of the material objects, such as books, periodicals, manuscripts, phonorecords, film, tapes, disks, or cards, in which they are embodied."  17 U.S.C. §101 (emphasis added).  As a consequence, computer programs themselves cannot be considered the "material objects" that are excluded from the definition of "digital musical recordings" under the AHRA.  The exclusion applies, instead, to hard drives.

b. The Rio Player Is Incapable of Recording a Transmission From a Digital Musical Recording
    Within the Meaning of the Act.
As stated above, under the AHRA, a digital audio recording device must be capable of making a digital reproduction either from a digital musical recording, as when a copy is made from a CD or digital audio tape, or from a transmission from a digital musical recording, as when a digital audio tape deck records the transmission of a CD or digital tape through a digital radio signal.  See 17 U.S.C. § 1001(1).  Plaintiffs also attempt to bring the Rio under the AHRA on the ground that it receives a transmission from a digital musical recording.  Their argument is rebutted by the AHRA's statutory language.

 Any transmission from the hard drive of a remote computer server  via the Internet to a personal computer would not be a transmission from a "digital musical recording" within the meaning of the Act.  The server from which the Internet transmission occurs is not a "digital musical recording" because it would contain general purpose programs.  17 U.S.C. § 1001(5)(B)(ii).

Even if the downloading of MP3 files over the Internet from a remote server to a computer's hard drive were to fall under the AHRA's definition of a "transmission" of a digital musical recording, the Rio player, however, is not involved in receiving any transmissions from the Internet.  The Rio does nothing more than store the MP3 files that were transmitted to the computer's hard drive.  SER 75 (Spencer  5).

Moreover, the downloading of an MP3 file from a user's local hard drive into the Rio is not a transmission for the purposes of the Act.  Although the AHRA does not contain a definition of "transmission," the term "transmit" is defined in Section 101 of the Copyright Act.  17 U.S.C. § 101.  "To 'transmit' a performance or display is to communicate it by any device or process whereby images or sounds are received beyond the place from which they are sent."  Id.   "The 'place' or 'places' are perforce 'beyond the place from which' the performances originate."  Columbia Pictures Indus., Inc. v. Professional Real Estate Investors, Inc., 866 F.2d 278, 282 n. 6 (9th Cir. 1989).

 Under the definition of "transmit" supplied by the Copyright Act, the downloading of an MP3 file from a computer to a peripheral device which, like the Rio player, is connected to that same computer, is not a transmission.  The Rio player is connected to the computer by a short cable and does not receive files at a different location.  SER 53 (Wirt  11).  The Rio player is just like a printer, a keyboard, or other peripheral device that is connected locally to the computer.  SER 51-52 (Wirt  5).  Communicating at the same location is not a transmission within the meaning of the copyright laws.  Because the Rio does not receive audio from a digital musical recording either directly from a digital musical recording or indirectly from a transmission, it is not a digital audio recording device and is not subject to the AHRA.

2. If The Rio Player Is Subject to the AHRA, It Satisfies The Act.

Section 1002(a) states the SCMS-related requirements of digital audio recording devices that are subject to AHRA.  There are three means of satisfying the requirements.

 a. The "Serial Copy Management System" Under Section 1002(a)(1).
Section 1002(a)(1) provides for conformance with the "Serial Copy Management System."  That system is wholly undefined by statute or regulation.  Congress originally included in the legislation a definition of SCMS and provisions for enacting the "Technical Reference Document," a detailed description of the SCMS functional and technical characteristics.  H.R. Rep. 102-873(I) at 13. "These definitions were deleted in light of the alternative forms for preventing serial copying . . . and the Committee's policy decision to avoid any inappropriate delegation of Congressional responsibility to private parties."  Id. at 13-14 (emphasis added).  The private parties appear to be those who, in connection with the Athens Agreement, crafted the proposed Technical Reference Document that was deleted from the Act.

 The draft legislation also had authorized the Secretary of Commerce to issue orders approving changes to the SCMS and setting standards for new devices as new technological capabilities developed.  H.R. Rep. 102-780(I) at 20-21.  Congress reserved for itself this type of policy-making by deleting several sections of the legislation before enactment.  H.R. Rep. 102-873(I) at 14.

No evidence of the substance of the system was actually presented to the district court.  The most Plaintiffs could offer was a declaration of a faculty member of University of Miami School of Music, who stated:  "SCMS is defined more particularly by certain technical standards and specifications that draw in part on an international digital audio interface standard known as IEC 958."  ER 79 (Supplemental Declaration of Kenneth C. Pohlmann) (emphasis added).  Plaintiffs never furnished to the district court the content of any of those standards and specifications.  "IEC" refers to "International Electrotechnical Commission," a Swiss-based standard-setting membership organization composed of private committees.

 Plaintiffs themselves stress that "the AHRA is not a codification of common law or a restatement of preexisting obligations.  It is a new, comprehensive statutory scheme enacted to balance conflicting interests."  Appellants' Brief  28.  Defendant agrees.  The AHRA, not being a codification of common law, cannot depend upon the private, unenacted Athens Agreement or a collection of unidentified private standards as common-law-like sources of law.  Being a "comprehensive statutory scheme," it cannot properly impose a requirement that lacks content because Congress deleted it.  For this reason, Section 1002(a)(1) cannot apply to any device.

b. The Functional Equivalent of SCMS Under Section 1002(a)(2).

More directly applicable in the absence of an explicit SCMS definition, The AHRA provides that a digital audio recording device may conform to--

a system that has the same functional characteristics as the Serial Copy Management System and requires that copyright and generation status information be accurately sent, received, and acted upon between devices using the system's method of serial copying regulation and devices using the Serial Copy Management System.  17 U.S.C. § 1002(a)(2).

 Based upon the description of the proposed Serial Copy Management System in the legislative history -- to the extent it is appropriate to look at the legislative history of a provision specifically withdrawn from the legislation -- the intended but unexpressed functional characteristics can be stated simply.  An SCMS-compliant device will accept a file with codes indicating "copyright claimed - original generation."  Upon receipt it changes the codes in the file to "copyright claimed - first generation."  This change prevents other SCMS-compliant devices from making further copies of the file.  Accepting only files with certain codes, and preventing copying by other SCMS-compliant devices of files with certain codes, are the characteristics which satisfy Section 1002(a)(2).  H. R. Rep. 102-780(I) at 42-43 ("General Principles for SCMS Implementation in DAR Devices").

 The Rio meets these characteristics.  It cannot receive files from an SCMS-compliant device, so it will never improperly accept a "copyright claimed - first generation" file.  It prevents other devices from receiving "copyright claimed - first generation" files because it sends no files to any device whatsoever. Section 1002(a)(2) also requires accurate sending of, receipt of, and action upon SCMS codes passed between a device and other devices using SCMS.  The Rio receives its files only from a personal computer -- which is unambiguously excluded from the AHRA -- and does not deliver any digital output at all.  Because the Rio does not receive or pass files from or to another device using SCMS, there is no requirement to carry out SCMS coding activities.  As a consequence the Rio does everything Section 1002(a)(2) requires of it.   Indeed, the Rio goes beyond the restrictions on copying that SCMS imposes.  The district court recognized that the Rio receives no files with SCMS codes that prohibit copies, and the Rio allows no downstream copying at all, even of files coded "original" as to which the Technical Reference Document authorizes further copying.  ER 128:11-18  (Order re PI).

 c. Certification Of Other Systems Prohibiting Unauthorized Serial Copying Under Section 1002(a)(3).

Section 1002(a)(3) provides that a device shall comply if it conforms to "any other system certified by the Secretary of Commerce as prohibiting unauthorized serial copying."  The Commerce Department has established no procedure or regulations for certifications required under Section 1002(a)(3), just as it has failed to establish any verification procedure mandated by Section 1002(b).
The district court equitably and properly found that the Rio, if assessed by the Secretary of Commerce, would obtain certification under Section 1002(a)(3).  ER 128:19-130:1  (Order re PI).

Plaintiffs challenge the district court's equitable discretion to make that finding.  Instead, they argue for an inflexible, mandatory statutory requirement to impose an injunction for the "technical violation" of failure to have a certification, even though there is no procedure or regulation for obtaining such a certification.  Plaintiffs misjudge the equitable nature of the relief they have requested, and they cannot prove harm from the "technical violation" that they argue.

 Plaintiffs also object to the finding by invoking the doctrine of primary jurisdiction, arguing that the district court cannot consider the likelihood of the Secretary of Commerce's certification of the Rio's system of prohibiting unauthorized serial copying.  Neither established case law construing the primary jurisdiction doctrine, including the cases cited by Plaintiffs, nor the provisions of the AHRA support Plaintiff's argument.

Plaintiffs initiated this proceeding in the court below without raising the question of primary jurisdiction.  Now they question the lower court's ability to evaluate the issues and render a decision in proceedings they instigated.  They offer no precedent for objection by a plaintiff to a court's decision-making authority on the basis of the primary jurisdiction doctrine.

 As cited by Plaintiffs' brief, the Ninth Circuit has held that "[t]he primary jurisdiction doctrine is . . . essentially concerned with ensuring that administrative bodies possessed of both expertise and authority delegated by Congress pass on issues within their regulatory authority before consideration by the courts."  United States v. General Dynamics Corp., 828 F.2d 1356, 1365 (9th Cir. 1987).  The administrative agency's actual expertise in exercising decision making authority is understandably an important factor in a court's determining whether it should relinquish its obligation to decide an issue and allow the agency to exercise its authority.  See, e.g., Golden Hill Paugusett Tribe of Indians v. Weicker, 39 F.3d 51 59-60 (2d Cir. 1994) (determination of "tribe" status passed from courts to Board of Indian Affairs after Department of Interior created a "structured administrative process" and had developed experience and expertise); see also Nader v. Allegheny Airlines, Inc., 426 U.S. 290, 96 S.Ct. 1978 (1976).
In this case, there is no reasonable argument that the Commerce Department has a "structured administrative process" with expertise or experience in assessing technology to prohibit unauthorized serial copying.  The Commerce Department never established procedures or any regulations for SCMS equivalence verification mandated by Section 1002(b).  There is no reason to vest primary jurisdiction in an agency that for six years has failed to carry out the relevant statutory mandate.

3. The AHRA Cannot Constitutionally Prohibit Distribution of the Rio Music Player.

a. The First and Fifth Amendments Protect The Rio Against An Injunction.

Music is a form of expression and communication protected by the free speech guarantees in the First Amendment to the United States Constitution.  Ward v. Rock Against Racism, 491 U.S. 781, 789, 109 S.Ct. 2746, 2753 (1989); Cinevision Corp. v. City of Burbank, 745 F.2d 560, 567 (9th Cir. 1984), cert. denied, 471 U.S. 1054, 105 S.Ct. 2115 (1985); McCollum v. CBS, Inc., 249 Cal. Rptr. 187, 192 (Cal. Ct. App. 1988).  The First Amendment protects all musical expression, regardless of whether the expression relates to citizen participation in public affairs.  Cinevision Corp., 745 F.2d at 569.

 Protection extends to the rights of the artist to communicate his or her expression, as well as the rights of the listener to receive it.  Virginia State Bd. of Pharmacy v. Virginia Citizens Consumer Council, Inc., 425 U.S. 748, 756, 96 S.Ct. 1817, 1823 (1976); Young v. American Mini Theatres, Inc., 427 U.S. 50, 96 S.Ct. 2440 (1976) (Powell, J., concurring).  It covers not only the content of expression, but also the means used to disseminate and secure access to it.  Wollam v. Palm Springs, 379 P.2d 481, 486 (Cal. 1963); Weaver v. Jordan, 411 P.2d 289, 294 (Cal.), cert. denied, 385 U.S. 844, 87 S.Ct. 49 (1966).

Enforcement of the AHRA against distribution of the Rio would violate the First Amendment for a number of reasons.  First, the Act is facially overbroad.  In addition to prohibiting activities which may be constitutionally forbidden, it also includes within its coverage a serious restraint on technology for the lawful dissemination and receipt of musical expression protected by the First Amendment.  The district court expressly found that the Rio will inevitably be used to record legitimate music and has significant beneficial uses.  ER 130:20-131:11  (Order re PI).  Because the overbreadth is real and substantial, and no suitable limiting construction of the statute is possible if it applies to the Rio, the AHRA is invalid.  Tucker v. California Dep't of Ed., 97 F.3d 1204 (9th Cir. 1996) (declaring unqualified ban on religious advocacy by government employees overbroad); see also In Re Englebrecht, 67 Cal. App. 4th 486 (Cal. App. 4th Dist. 1998) (striking down ban on gang members' use of pagers and beepers).

 Second, the AHRA, by failing to provide manufacturers clear guidance for compliance, is void for vagueness.  It is a basic constitutional principle that regulations must be sufficiently clear to avoid punishing people for behavior that they could not have known was illegal and to avoid subjective enforcement of laws based on arbitrary or discriminatory interpretations.  United States v. Wunsch, 84 F.3d 1110 (9th Cir. 1996).  Where, as here, First Amendment freedoms are at stake, an even greater degree of specificity and clarity of laws is required than under due process vagueness principles.  Foti v. Menlo Park, 146 F.3d 629, 638 (9th Cir. 1988); see also N.A.A.C.P. v. Button, 371 U.S. 415, 432-33, 83 S.Ct. 328, 337-38 (1963) (First Amendment is independent source of vagueness doctrine).

 The AHRA, to pass muster under the vagueness doctrine, must give a person of ordinary intelligence adequate notice of the conduct it proscribes.  Conlan v. U.S. Dep't of Labor, 76 F.3d 271 (9th Cir.), cert. denied, 519 U.S. 980, 117 S.Ct. 431 (1996).  It does not.  Neither Congress nor the Secretary of Commerce has enacted or implemented any statutory or regulatory definition of a key term in the AHRA: "Serial Copy Management System" or "SCMS."  The Secretary of Commerce has not enacted or implemented any regulation, standard or procedure required by the AHRA for verifying SCMS equivalence pursuant to 17 U.S.C. § 1002(a)(2) and (b).  Nor has the Secretary of Commerce enacted or implemented any regulation, standard or procedure for certifying devices pursuant to 17 U.S.C. § 1002(a)(3).

Third, the AHRA does not meet the requirements for content-neutral regulations that restrict protected expression.  Such regulations may only be sustained if they are narrowly tailored to serve a significant government interest and they leave open ample alternative channels of communication.  Ward, 491 U.S. at 791; S.O.C., Inc. v. Clark, 152 F.3d 1136, 1145 (9th Cir. 1998); Perry v. Los Angeles Police Dept., 121 F.3d 1365 (9th Cir. 1997), cert. denied, 118 S.Ct. 1362 (1998).

 Insofar as the AHRA would cover the Rio, it is not narrowly tailored.  A ban of the Rio would not focus specifically on the elimination of piracy, but would instead sweep broadly, without exceptions for substantial legitimate activity.  Cf. California Satellite Sys. v. Seimon, 767 F.2d 1364 (9th Cir. 1985) (order carefully drawn so as not to restrict legitimate, noninfringing uses of radio equipment does not conflict with First Amendment).  The restriction would deprive musicians and small record companies of the ability to publish musical recordings on the Internet.  At the same time, it would impair the public's right to secure convenient access to legitimate musical works made available only through Internet distribution.  As the Supreme Court has declared, "Government may not regulate expression in such a manner that a substantial portion of the burden on speech does not serve to advance its goals."  Ward, 491 U.S. at 799.

Nor would the application of the AHRA to ban the Rio leave open ample alternative channels of communication.  Many musicians and small record companies look to the Internet as the single effective means of entry into the musical distribution business without significant barriers to entry posed by the cost of manufacturing plants and competition for shelf space in traditional retail stores.  SER 20 (Caterine  5-6), 22, 25 (Kohn  2,16-17), 31-32 (Mudd  7), 36-37 (Robertson  1-5), 42-43 (Schatzkin  14-15,17,19).  If the AHRA applies to the Rio, it denies the public an important means of accessing Internet music distribution and denies to many artists effective access to an audience for recorded music.

b. The AHRA is Unconstitutional as Unauthorized by the Copyright and Commerce Clauses.

The AHRA is unconstitutional because it has no foundation in either the Copyright Clause (Art. I, § 8, cl. 8) or the Commerce Clause (Art. I, § 8, cl. 3) of the Constitution.

 Congress' authority to enact the AHRA cannot be founded on the Copyright Clause.  The Constitution grants to Congress the power "To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries."  U.S. Const., Art. I, § 8, cl. 8.  The Supreme Court has recognized that "the monopoly privileges that Congress has authorized, while 'intended to motivate the creative activity of authors and inventors by the provision of a special reward,' are limited in nature and must ultimately serve the public good."  Fogerty v. Fantasy, Inc., 510 U.S. 517, 526, 114 S.Ct. 1023, 1029 (1994) (quoting Sony Corp. v. Universal City Studios, 464 U.S. 417, 429, 104 S.Ct. 774, 782 (1983) ("Sony-Betamax")); see also Twentieth Century Music Corp. v. Aiken, 422 U.S. 151, 156, 95 S.Ct. 2040, 2043 (1975) ("private motivation must ultimately serve the cause of promoting broad availability of literature, music, and the other arts . . . ."); Fox Film Corp. v. Doyal, 286 U.S. 123, 127, 52 S.Ct. 546, 546 (1932).

The AHRA cannot be said to advance these limited interests.  To the extent it bans technology that encourages musicians who lack mainstream record-label distribution to create works for Internet distribution, the AHRA is inimical to the Copyright Clause.

 The record below contains substantial evidence of the importance of the Internet to the creative activity of new musicians and the activity of new record labels that promote them.  See SER 20 (Caterine  5-6), 22, 25 (Kohn  2,16-17), 31-32 (Mudd  7), 36-37 (Robertson  1-5), 42-43 (Schatzkin  14-15,17,19).  By denying them a creative outlet, application of the AHRA to prohibit the distribution of the Rio would do nothing to further the creative interests of mainstream artists who already have an arsenal of effective remedies under laws relative to copyright infringement.  It would merely protect for them a competitive advantage over other artists who lack mainstream distribution channels.   By impeding the dissemination of creative expression outside mainstream distribution channels the AHRA is contrary to the Copyright Clause.

Even the royalty provisions of the AHRA are contrary to the purposes of the Copyright clause.  By securing for Plaintiffs what is essentially a royalty on sales of digital audio recording devices, it has the practical effect of extending their monopoly in protected expression to the manufacture, import and distribution of technology.

The Supreme Court addressed this very issue in Sony-Betamax, in the context of video tape recorders (VTRs):

It seems extraordinary to suggest that the Copyright Act confers upon all copyright owners collectively, much less the two respondents in this case, the exclusive right to distribute VTRs simply because they may be used to infringe copyrights.  That, however, is the logical implication of their claim.  The request for an injunction below indicates that respondents seek, in effect, to declare VTRs contraband.  Their suggestion in this court that a continuing royalty pursuant to a judicially created compulsory license would be an acceptable remedy merely indicates that respondents, for their part, would be willing to license their claimed monopoly interest in VTR's to petitioners in return for a royalty.  Sony-Betamax, 464 U.S. at 441, n. 21.

Here, too, Congress lacks the constitutional power to grant to copyright owners a continuing royalty on digital audio recording devices simply because they may be used to copy works that are protected by copyright.  Nothing in the Copyright Clause lends support to the grant of such expansive monopoly power.
Nor does the Commerce Clause save the AHRA in the absence of a Copyright Clause foundation.  As the Supreme Court stated in striking down early federal trademark legislation:

When . . . Congress undertakes to enact a law, which can only be
valid as a regulation of commerce, it is reasonable to expect to find
on the face of the law, or from its essential nature, that it is a
regulation of commerce with foreign nations, or among the several
States, or with the Indian tribes.  If not so limited, it is in excess
of the power of Congress.  Trade-Mark Cases, 100 U.S. 82, 96 (1879).

 B. The District Court Acted Within its Discretion In Finding No Harm to Plaintiffs to Support a Preliminary Injunction.

1. Even if the Rio Player is Subject to the AHRA, and Violates It For Failure To Have A Certification, Such a "Technical" Violation Does Not Mandate a Preliminary Injunction.
Plaintiffs depend heavily upon an argument that the district court lacked discretion to refuse an injunction if a violation of the AHRA is shown, even if that violation were merely technical or de minimis.   Plaintiffs have relied upon a Sixth Circuit case reviewing a final judgment involving peculiar facts in a case of first impression under Michigan state law.  The language of the AHRA and this court's precedents contradict Plaintiffs' argument.

 The AHRA specifies "the court may grant temporary and permanent injunctions on such terms as it deems reasonable to prevent or restrain [a] violation."  17 U.S.C. § 1009(c)(1) (emphasis added).  The legislative history of the Act states injunctions under the AHRA are never mandatory:  "Section 1009(c) permits, but does not mandate, the courts to issue temporary and permanent injunctions"  H.R. Rep. 102-873(I) at 24.  The district court is authorized to exercise its discretion in determining whether injunctive relief is appropriate according to traditional equitable considerations, including consideration of irreparable harm, when a violation of a statute occurs.

Courts have consistently found that "the grant of jurisdiction to ensure compliance with a statute hardly suggests an absolute duty to do so under any and all circumstances, and a federal judge sitting as chancellor is not mechanically obligated to grant an injunction for every violation of law."   Miller v. Cal. Pac. Bell Med. Ctr., 19 F.3d 449, 457 (9th Cir. 1994) (quoting Weinberger v. Romero-Barcelo, 456 U.S. 305, 313, 102 S.Ct. 1798, (1982)).

 Federal law is replete with examples in which technical or de minimis violations do not require courts to grant injunctive relief.  For example, although patent law on its face prohibits any and all uses of a patented invention, 35 U.S.C. § 271(a), injunctive relief is discretionary even if there was unauthorized use of the patented invention resulting in a technical violation.  See Roche Prods, Inc. v. Bolar Pharm. Co., Inc. 733 F.2d 858, 866-67 (Fed. Cir.), cert. denied, 469 U.S. 856, 105 S.Ct. 183 (1984)).  Following the Supreme Court in Hecht Co. v. Bowles, 321 U.S. 321, 64 S.Ct. 587 (1944), the Roche court concluded that if the Supreme Court could exercise its equitable discretion and refuse to grant an injunction where statutory language mandated injunctions, permissive statutory language of the patent laws did not make injunction mandatory.  Roche, 733 F.2d at 866-67.  Indeed the court stated "if Congress wants the federal courts to issue injunctions without regard to historic equity principles, it is going to have to say so in explicit and even shameless language rarely if ever expected  from a body itself made up very largely of American lawyers, having, probably, as much respect for traditional equity principles as do the courts."  Id. at 867.

2. Plaintiffs Are Not Entitled to a Presumption of Irreparable Harm Under the AHRA.
 Plaintiffs urge that a presumption of irreparable harm arises in all copyright cases once the plaintiff establishes a likelihood of success on the merits.  As the district court noted, "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) [cert. denied, 513 U.S. 1145, 116 S.Ct. 1015 (1996)]."  ER 117:13-18 (Order re PI) (emphasis added by the district court).  This rebuttable presumption is granted in cases of infringement because of the exclusivity of the copyright holder's rights and "[b]ecause the financial impact of copyright infringement is hard to measure and often involves intangible qualities such as consumer goodwill."  Country Kids 'N City Clicks, Inc., v. Sheen, 77 F.3d 1280, 1288-89 (10th Cir. 1996).

This case does not involve any claim of copyright infringement.  Moreover, the AHRA is very distinct from infringement provisions of the Copyright Act.

Under the AHRA, the copyright owner's right to exploit its work by copying is expressly not unique.  The AHRA grants consumer the right to make unlimited personal copies of original musical works.  Accordingly, the AHRA expressly forbids infringement actions based on the copying of music by consumers for personal use.  17 U.S.C. § 1008.

 In light of the AHRA's express displacement of the copyright holder's exclusive right to copy, its unequivocal prohibition on suits for infringement arising from the legalized copying, and its provision for financial compensation through royalty payments, the Plaintiffs' assertion that the same presumption of irreparable harm granted in infringement cases should arise in actions brought under the AHRA is groundless.

Moreover, assuming there were a rebuttable presumption of irreparable harm, it is available only to those plaintiffs who have demonstrated a probability of success on the merits.  The district court correctly found that Plaintiffs did not demonstrate that probability.  In any event, copyright law recognizes a de minimis exception to injunctive relief for copyright infringement.  In Cadence Design Sys., Inc. v. Avant! Corp., 125 F.3d 824 (9th Cir. 1997), cert. denied, 118 S.Ct. 1795 (1998), a case cited by Plaintiffs, this court explained that the presumption of harm which arises in copyright infringement cases "is rebutted where the plaintiff has not been harmed, where any harm is de minimis, or where the defendant acted with innocent intent. . . ."  Id. at 829 (citing Abend v. MCA, Inc, 863 F.2d 1465, 1478 (9th Cir. 1988), aff'd sub nom., Stewart v. Abend, 495 U.S. 207 (1990) (injunction not required because "the defendant had done nothing improper but had simply lost the right to [the work] on a 'technicality' . . . .")).
 

 3. The District Court Rightly Found No Harm From the Alleged Violation of the AHRA.
The district court correctly recognized that "for purposes of a preliminary injunction, the irreparable injury 'must be caused by the alleged wrongful conduct.'"  ER 130 (Order re PI) (quoting Stanley v. University of So. Calif., 13 F.3d 1313, 1324-25) (9th Cir. 1994) (district court's emphasis deleted).

Plaintiffs assert they will be harmed by the Rio player.  The district court rightly focused on whether there would be harm from the alleged violation--the absence of SCMS in the Rio.  Judge Collins expressly found that a Rio with SCMS and a Rio without SCMS are functionally equivalent and that SCMS would have no practical effect on the Rio.  ER 128:10-129:1 (Order re PI).  Thus, the failure of the Rio to have SCMS cannot cause the harm alleged by Plaintiffs.  Nor can the mere absence of a certification by the Secretary of Commerce cause the harm.

 Plaintiffs claim that injury results because the Rio is "sold without any limit on what [it] can be used to copy" and "can and will be used to copy illicit MP3 files from the Internet without any capability to determine whether such copying is authorized."  Appellants' Brief  41.  The district court correctly found that the same thing could occur even if the Rio had SCMS.  ER 130: 24-26 (Order re PI).  A personal computer is not a device that operates in conjunction with SCMS to allow a peripheral to "determine whether such copying is authorized."

 Plaintiffs also argue that "the copy in the Rio device would be a second or higher generation copy, exactly the type of copy that the AHRA and its requirement of a serial copying prohibition are intended to prohibit."  Appellants' Brief  42. Plaintiffs make a misleading use of the defined term "second-generation."  The term "second-generation," as used in the SCMS Technical Reference Document describing the type of copy that the AHRA and its requirement of a serial copying prohibition are intended to prohibit, is the second copy in a chain of reproductions which all contain the SCMS codes.  See H.R. Rep. 102-780(I) at 38  (Technical Reference Document).  The district court found that the copy residing on the Rio player comes from a file without SCMS codes.  The copy on the Rio would therefore be deemed an "original generation" under SCMS standards and is expressly authorized by SCMS.  H.R. Rep. 102-780(I) at 43 ("Digital audio signals . . . that have no information concerning copyright and/or generation status shall be [set by the receiving device] so that the digital copy is copyright asserted and original generation status").

Finally, Plaintiffs claim that the advent of portable digital listening devices for MP3 formatted audio, specifically the Rio player, will cause expansion in the market and in the demand for MP3 files and, with that expansion, stimulation of traffic in illegal MP3 files.  Appellants' Brief 43.  Plaintiffs' claims of the "upstream" effect of the Rio without SCMS on MP3 "piracy" are speculative and lack factual support.  As the district court found, SCMS would make no difference to the Rio's function or effect.
Plaintiffs' argument is a broadside attack on the MP3 format and compression technology ÷ but MP3 technology is not illegal contraband.  Even if MP3 technology can be used to commit copyright infringement, there are substantial, and growing, lawful commercial uses for it.  The district court found no causal link between the Rio's failure to have SCMS and any of the harms that Plaintiffs speculate about.  Instead, it is the Rio device itself, and the concept of a portable MP3 music player, not the failure to incorporate SCMS, that Plaintiffs really attack because of their aversion to the MP3 format.

 C. Plaintiffs Failed to Demonstrate Harm Sufficient to Outweigh Harm to Defendant and The Public.

Denying the preliminary injunction, the district court balanced the harm to Plaintiffs against the harm to Diamond Multimedia and the public if the Rio player's distribution were delayed during the pendency of this case.

 Plaintiffs do not dispute Defendant's showing of harm from an injunction against distributing the Rio player.  They rest solely upon the claimed "illegality" of the player and limit their focus to lost sales.  Defendant's harms go beyond the anticipated lost profits from the sale of the Rio.  They include loss of a wide range of benefits from being the first to market, including a reputation for innovation and technological achievement; goodwill from consumer awareness, favorable word-of-mouth, magazine reviews, and early market share leadership; and the spillover effect on other products.   Moreover, a delay or interruption could kill the Rio product altogether.  Similar actions by Plaintiffs to delay similar products from other vendors
could fatally impair the market for this new technology, just as Plaintiffs' earlier efforts have caused digital audio tape to be a technology backwater in the marketplace.  The pace of innovation and product introduction in the computer industry is
lightning fast and those who are delayed may never get into, or create, the market at all.  SER 49
(Declaration of V. David Watkins ("Watkins")  4).

D. Public Interest Favors Distribution of the Rio Player.
The public interest favors distribution of the Rio player and would be harmed by an injunction in this case.  First, the public has an interest in improved distribution of music and a wider choice of artists.  SER 20-21 (Caterine  4-6), 25 (Kohn  16), 37 (Robertson  5), 43 (Schatzkin  19).   Inhibiting the growth of the MP3 market by restricting the very tools that enable the public to participate in this emerging, legitimate market would deny artists access to audiences and prevent the broad public availability of new music, which is an ultimate aim of the copyright laws.  SER 26 (Kohn  19).

 Plaintiffs assert that the Rio will encourage infringement and that therefore its distribution would result in irreparable harm to Plaintiffs.  The Court, in Sony-Betamax, stated that an injunction against videotape recorders, based on the possibility of infringing activities by others, would deprive the public of the ability to use the apparatus for non-infringing activities.  Sony-Betamax, 464 U.S. at 443. The Court confirmed that "[w]hatever the future percentage of legal versus illegal home-use recording might be, an injunction which seeks to deprive the public of the very tool or article of commerce capable of some non-infringing use would be an extremely harsh remedy, as well as one unprecedented in copyright law."  Id. at 444 (quoting district court).  The district court here likewise found that "because the Rio is capable of recording legitimate digital music, an injunction would deprive the public of a device with significant beneficial uses."  ER 131:9-11 (Order re PI).

Second, the public interest is served by increased competitiveness and availability of new technologies.  In enacting the AHRA Congress was responding to a chill that had fallen on the production of new technologies as a result of the longstanding conflict, and litigation, over the uses of digital audio tape for home taping.  S. Rep. 102-780(I) at 18.  Now, however, Plaintiffs are using the AHRA to attempt to ban the introduction of exciting new Internet music technology.  Resolution of the competing interests of Plaintiffs and other industries in this arena may require a new legislative compromise, but it does not justify application of the AHRA far beyond its scope.  The encouragement of competition in production of new technology is strongly in the public interest.

 Finally, the public interest favors Congressional amendment to the copyright laws, rather than judicial expansion, in order to accommodate technological developments.  The Supreme Court has forcefully stated that Congress, not the courts, must adapt copyright law to meet the challenges posed by new technology:

Sound policy, as well as history, supports our consistent deference to Congress when major technological innovations alter the market for copyrighted materials.  Congress has the constitutional authority and the institutional ability to accommodate fully the varied permutations of competing interests that are inevitably implicated by such new technology.  Sony-Betamax, 464 U.S. at 430-431 (citations omitted).

 CONCLUSION
The district court rightly found that the Rio neither violates the AHRA nor causes any justiciable harm.  Moreover, the AHRA does not apply to the Rio and cannot constitutionally justify a prohibition against the Rio's distribution.  This court should affirm with directions to the district court to dismiss Plaintiffs' claims and enter judgment for Diamond Multimedia Systems, Inc.

Respectfully submitted,
Dated:  December 22, 1998
Wilson Sonsini Goodrich & Rosati
By:  Andrew P. Bridges
Attorneys for Defendant/Appellee
Diamond Multimedia Systems, Inc.

 CERTIFICATE OF COMPLIANCE
Pursuant to Ninth Circuit Rule 32(e)(3), I certify that the answering brief is proportionately spaced, has typeface of 14 points, and contains
12,850 words.

Dated:  December 22, 1998
Wilson Sonsini Goodrich & Rosati
Professional Corporation
 By: Andrew P. Bridges
Attorneys for Defendant/Appellee
Diamond Multimedia Systems, Inc.

ADDENDUM:

CORPORATE DISCLOSURE STATEMENT
Pursuant to Rule 26.1 of the Federal Rules of Appellate Procedure, defendant-appellee Diamond Multimedia Systems, Inc. states that it is a corporation organized under the laws of the state of Delaware.  Diamond Multimedia Systems, Inc. has no parent corporations nor any publicly held companies owning 10% or more of its stock.