We're All Thieves to the RIAA

Editor's Note: This article has been edited to further clarify that the RIAA's complaint in the Arizona case focuses on files the defendant allegedly placed in a shared music folder.

You buy a CD. You rip a digital copy so you can put it on your Apple (Nasdaq: AAPL  ) iPod or Microsoft (Nasdaq: MSFT  ) Zune. You're not worried; you paid premium price for the CD. You're not some lawless pirate. You wouldn't dream of sharing your music on a P2P network.

Well, you may be walking a fine line toward thiefdom in the eyes of the Recording Industry Association of America (RIAA), the industry trade association that includes heavyweights like Sony (NYSE: SNE  ) BMG, Warner Music Group (NYSE: WMG  ) , Vivendi Universal, and EMI.

Current litigation against Jeffrey Howell of Arizona shows that while the industry's gone after him for file-sharing, not ripping, MP3s, it's also taking exception to recordings on his computer that he copied from CDs he purchased, with the outlook that Howell is also liable for the "unauthorized copies" he allegedly placed on his PC in a shared folder, which can be used to distribute to P2P networks. Although there's a lot of clarification going on over the Internet now -- pointing out that the RIAA can't specifically target ripping CDs for personal use, since that falls within "fair use" -- the RIAA hasn't lent much reason to give it the benefit of the doubt as a reasonable entity here lately. After all, a lawyer for Sony BMG said during a recent high-profile file-sharing trial that making one measly copy was, "a nice way of saying 'steals just one copy'." I joked at the time that maybe they'll come after us for singing tunes in the shower, but at this point, maybe that thought isn't funny so much as scary.

I'd think companies like Apple, Microsoft, and Amazon.com (Nasdaq: AMZN  ) might start to get uncomfortable, since their participation in the varying channels of the digital music business rely on content that can be used with electronic devices in a way consumers can accept. If the RIAA does start targeting personal use, it certainly could spur a newfound revolution away from legit services (or even to new, more innovative solutions). As it stands, the industry already seems almost hell-bent on creating plenty of disgruntled customers who don't particularly want to do business with it anymore ... and then suing them for it.

As I've said before, a good sign of a dying industry that investors might want to avoid is when it would rather litigate than innovate, signaling a potential destroyer of value. If it starts to pursue paying customers -- which doesn't seem that outlandish at this point -- then I guess we'll all know the extent of the desperation. Investor, beware.

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