Appeal from the United States District Courtfor the Central District of CaliforniaAudrey B. Collins, District Judge, PresidingArgued and SubmittedApril 15, 1999--Pasadena, CaliforniaFiled June 15, 1999Before: Diarmuid F. O'Scannlain and A. Wallace Tashima,Circuit Judges, and Edward C. Reed, Jr.,* District Judge.Opinion by Judge O'ScannlainSUMMARY
______________________COUNSEL Hadrian R. Katz (argued), Lawrence J. Hutt, Arnold & Porter,Washington, D.C., for the plaintiffs-appellants.Andrew P. Bridges (argued), Wilson Sonsini Goodrich &Rosati, Palo Alto, California, for the defendant-appellee.John B. Wyss, Wiley, Rein & Fielding, Washington, D.C., forthe amicus Consumer Electronics Manufacturers Association.
_____________________________OPINION O'SCANNLAIN, Circuit Judge:In this case involving the intersection of computer technol-ogy, the Internet, and music listening, we must decidewhether the Rio portable music player is a digital audiorecording device subject to the restrictions of the Audio HomeRecording Act of 1992.IThis appeal arises from the efforts of the Recording Indus-try Association of America and the Alliance of Artists andRecording Companies (collectively, "RIAA") to enjoin themanufacture and distribution by Diamond Multimedia Sys-tems ("Diamond") of the Rio portable music player. The Riois a small device (roughly the size of an audio cassette) withheadphones that allows a user to download MP3 audio filesfrom a computer and to listen to them elsewhere. The disputeover the Rio's design and function is difficult to comprehendwithout an understanding of the revolutionary new method ofmusic distribution made possible by digital recording and theInternet; thus, we will explain in some detail the brave newworld of Internet music distribution.AThe introduction of digital audio recording to the consumerelectronics market in the 1980's is at the root of this litigation.Before then, a person wishing to copy an original musicrecording -- e.g., wishing to make a cassette tape of a recordor compact disc -- was limited to analog, rather than digital,recording technology. With analog recording, each successivegeneration of copies suffers from an increasingly pronounceddegradation in sound quality. For example, when an analogcassette copy of a record or compact disc is itself copied byanalog technology, the resulting "second-generation" copy ofthe original will most likely suffer from the hiss and lack ofclarity characteristic of older recordings. With digital record-ing, by contrast, there is almost no degradation in sound qual-ity, no matter how many generations of copies are made.Digital copying thus allows thousands of perfect or near per-fect copies (and copies of copies) to be made from a singleoriginal recording. Music "pirates" use digital recording tech-nology to make and to distribute near perfect copies of com-mercially prepared recordings for which they have notlicensed the copyrights.Until recently, the Internet was of little use for the distribu-tion of music because the average music computer file wassimply too big: the digital information on a single compactdisc of music required hundreds of computer floppy discs tostore, and downloading even a single song from the Internettook hours. However, various compression algorithms (whichmake an audio file "smaller" by limiting the audio bandwidth)now allow digital audio files to be transferred more quicklyand stored more efficiently. MPEG-1 Audio Layer 3 (com-monly known as "MP3") is the most popular digital audiocompression algorithm in use on the Internet, and the com-pression it provides makes an audio file "smaller " by a factorof twelve to one without significantly reducing sound quality.MP3's popularity is due in large part to the fact that it is astandard, non-proprietary compression algorithm freely avail-able for use by anyone, unlike various proprietary (andcopyright-secure) competitor algorithms. Coupled with theuse of cable modems, compression algorithms like MP3 maysoon allow an hour of music to be downloaded from the Inter-net to a personal computer in just a few minutes.These technological advances have occurred, at least inpart, to the traditional music industry's disadvantage. By mostaccounts, the predominant use of MP3 is the trafficking inillicit audio recordings, presumably because MP3 files do notcontain codes identifying whether the compressed audiomaterial is copyright protected. Various pirate websites offerfree downloads of copyrighted material, and a single piratesite on the Internet may contain thousands of pirated audiocomputer files.RIAA represents the roughly half-dozen major record com-panies (and the artists on their labels) that control approxi-mately ninety percent of the distribution of recorded music inthe United States. RIAA asserts that Internet distribution ofserial digital copies of pirated copyrighted material will dis-courage the purchase of legitimate recordings, and predictsthat losses to digital Internet piracy will soon surpass the $300million that is allegedly lost annually to other more traditionalforms of piracy.1 RIAA fights a well-nigh constant battleagainst Internet piracy, monitoring the Internet daily, and rou-tinely shutting down pirate websites by sending cease-and-desist letters and bringing lawsuits. There are conflictingviews on RIAA's success -- RIAA asserts that it can barelykeep up with the pirate traffic, while others assert that few, ifany, pirate sites remain in operation in the United States andillicit files are difficult to find and download from anywhereonline.In contrast to piracy, the Internet also supports a burgeon-ing traffic in legitimate audio computer files. Independent andwholly Internet record labels routinely sell and provide freesamples of their artists' work online, while many unsignedartists distribute their own material from their own websites.Some free samples are provided for marketing purposes or forsimple exposure, while others are teasers intended to enticelisteners to purchase either mail order recordings or record-ings available for direct download (along with album coverart, lyrics, and artist biographies). Diamond cites a 1998"Music Industry and the Internet" report by Jupiter Communi-cations which predicts that online sales for pre-recordedmusic will exceed $1.4 billion by 2002 in the United Statesalone.Prior to the invention of devices like the Rio, MP3 usershad little option other than to listen to their downloaded digi-tal audio files through headphones or speakers at their com-puters, playing them from their hard drives. The Rio rendersthese files portable. More precisely, once an audio file hasbeen downloaded onto a computer hard drive from the Inter-net or some other source (such as a compact disc player ordigital audio tape machine), separate computer software pro-vided with the Rio (called "Rio Manager") allows the userfurther to download the file to the Rio itself via a parallel portcable that plugs the Rio into the computer. The Rio device isincapable of effecting such a transfer, and is incapable ofreceiving audio files from anything other than a personalcomputer equipped with Rio Manager.Generally, the Rio can store approximately one hour ofmusic, or sixteen hours of spoken material (e.g., downloadednewscasts or books on tape). With the addition of flash mem-ory cards, the Rio can store an additional half-hour or hour ofmusic. The Rio's sole output is an analog audio signal sent tothe user via headphones. The Rio cannot make duplicates ofany digital audio file it stores, nor can it transfer or uploadsuch a file to a computer, to another device, or to the Internet.However, a flash memory card to which a digital audio filehas been downloaded can be removed from one Rio andplayed back in another.BRIAA brought suit to enjoin the manufacture and distribu-tion of the Rio, alleging that the Rio does not meet therequirements for digital audio recording devices under theAudio Home Recording Act of 1992, 17 U.S.C. S 1001 et seq.(the "Act"), because it does not employ a Serial CopyrightManagement System ("SCMS") that sends, receives, and actsupon information about the generation and copyright status ofthe files that it plays. See id. S 1002(a)(2).2 RIAA also soughtpayment of the royalties owed by Diamond as the manufac-turer and distributor of a digital audio recording device. Seeid. S 1003.The district court denied RIAA's motion for a preliminaryinjunction, holding that RIAA's likelihood of success on themerits was mixed and the balance of hardships did not tip inRIAA's favor. See generally Recording Indus. Ass'n of Amer-ica, Inc. v. Diamond Multimedia Sys., Inc., 29 F. Supp. 2d 624(C.D. Cal. 1998) ("RIAA I"). RIAA brought this appeal.II[1] The initial question presented is whether the Rio fallswithin the ambit of the Act. The Act does not broadly prohibitdigital serial copying of copyright protected audio recordings.Instead, the Act places restrictions only upon a specific typeof recording device. Most relevant here, the Act provides that"[n]o person shall import, manufacture, or distribute anydigital audio recording device . . . that does not conform tothe Serial Copy Management System ["SCMS"] [or] a systemthat has the same functional characteristics." 17 U.S.C.S 1002(a)(1), (2) (emphasis added). The Act further providesthat "[n]o person shall import into and distribute, or manufac-ture and distribute, any digital audio recording device . . .unless such person records the notice specified by this sectionand subsequently deposits the statements of account andapplicable royalty payments." Id. S 1003(a) (emphasis added).Thus, to fall within the SCMS and royalty requirements inquestion, the Rio must be a "digital audio recording device,"which the Act defines through a set of nested definitions.The Act defines a "digital audio recording device " as: any machine or device of a type commonly distrib- uted 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 . . . .Id. S 1001(3) (emphasis added).A "digital audio copied recording" is defined as: a reproduction in a digital recording format of a digital musical recording, whether that reproduction is made directly from another digital musical record- ing or indirectly from a transmission.Id. S 1001(1) (emphasis added).A "digital musical recording" is defined as: a material object- (i) in which are fixed, in a digital recording for- mat, only sounds, and material, statements, or instructions incidental to those fixed sounds, if any, and (ii) from which the sounds and material can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device.Id. S 1001(5)(A) (emphasis added).[2] In sum, to be a digital audio recording device, the Riomust be able to reproduce, either "directly" or "from atransmission," a "digital music recording."IIIWe first consider whether the Rio is able directly to repro-duce a digital music recording -- which is a specific type ofmaterial object in which only sounds are fixed (or materialand instructions incidental to those sounds). See id.A[3] The typical computer hard drive from which a Riodirectly records is, of course, a material object. However, harddrives ordinarily contain much more than "only sounds, andmaterial, statements, or instructions incidental to those fixedsounds." Id. Indeed, almost all hard drives contain numerousprograms (e.g., for word processing, scheduling appoint-ments, etc.) and databases that are not incidental to any soundfiles that may be stored on the hard drive. Thus, the Rioappears not to make copies from digital music recordings, andthus would not be a digital audio recording device under theAct's basic definition unless it makes copies from transmis-sions.[4] Moreover, the Act expressly provides that the term"digital musical recording" does not include: a material object- (i) in which the fixed sounds consist entirely of spoken word recordings, or (ii) in which one or more computer programs are fixed, except that a digital 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 com- munication of the fixed sounds and incidental mate- rial.Id. S 1001(5)(B) (emphasis added). As noted previously, ahard drive is a material object in which one or more programsare fixed; thus, a hard drive is excluded from the definition ofdigital music recordings. This provides confirmation that theRio does not record "directly" from "digital musicrecordings," and therefore could not be a digital audio record-ing device unless it makes copies "from transmissions."BThe district court rejected the exclusion of computer harddrives from the definition of digital music recordings underthe statute's plain language3 (after noting its "superficialappeal") because it concluded that such exclusion "is ulti-mately unsupported by the legislative history, and contrary tothe spirit and purpose of the [Act]." RIAA I, 29 F. Supp. 2dat 629. We need not resort to the legislative history becausethe statutory language is clear. See City of Auburn v. UnitedStates, 154 F.3d 1025, 1030 (9th Cir. 1998) ("[W]here statu-tory command is straightforward, `there is no reason to resortto legislative history.' " (quoting United States v. Gonzales,
520 U.S. 1, 6
(1997))). Nevertheless, we will address the leg-islative history here, because it is consistent with the statute'splain meaning and because the parties have briefed it soextensively.41[5] The Senate Report states that "if the material objectcontains computer programs or data bases that are not inci-dental to the fixed sounds, then the material object would notqualify" under the basic definition of a digital musicalrecording.5 S. Rep. 102-294 (1992), reprinted at 1992 WL133198, at *118-19. The Senate Report further states that thedefinition "is intended to cover those objects commonlyunderstood to embody sound recordings and their underlyingworks." Id. at *97. A footnote makes explicit that this defini-tion only extends to the material objects in which songs arenormally fixed: "[t]hat is recorded compact discs, digitalaudio tapes, audio cassettes, long-playing albums, digitalcompact cassettes, and mini-discs." Id. at n.36. There are sim-ply no grounds in either the plain language of the definitionor in the legislative history for interpreting the term "digitalmusical recording" to include songs fixed on computer harddrives.[6] RIAA contends that the legislative history reveals thatthe Rio does not fall within the specific exemption from thedigital musical recording definition of "a material object inwhich one or more computer programs are fixed." 17 U.S.C.S1001(5)(B)(ii). The House Report describes the exemptionas "revisions reflecting exemptions for talking books andcomputer programs." H.R. Rep. 102-873(I) (1992), reprintedat 1992 WL 232935, at *35 (emphasis added); see also id. at*44 ("In addition to containing an express exclusion of com-puter programs in the definition of `digital musical record-ing'. . . .") (emphasis added). We first note that limiting theexemption to computer programs is contrary to the plainmeaning of the exemption. As Diamond points out, a com-puter program is not a material object, but rather, a literarywork, see, e.g., Apple Computer, Inc. v. Franklin ComputerCorp., 714 F.2d 1240, 1249 (3d Cir. 1983) ("[A] computerprogram . . . is a `literary work.' "), that can be fixed in a vari-ety of material objects, see 17 U.S.C. S 101 (" `Literaryworks' are works . . . expressed in words, numbers, or otherverbal or numerical symbols or indicia, regardless of thenature of the material objects, such as books . . . tapes, disks,or cards, in which they are embodied.") (emphasis added).Thus, the plain language of the exemption at issue does notexclude the copying of programs from coverage by the Act,but instead, excludes copying from various types of materialobjects. Those objects include hard drives, which indirectlyachieve the desired result of excluding copying of programs.But by its plain language, the exemption is not limited to thecopying of programs, and instead extends to any copyingfrom a computer hard drive.Moreover, RIAA's assertion that computer hard drives donot fall within the exemption is irrelevant because, regardlessof that portion of the legislative history which addresses theexemption from the definition of digital music recording, seeid. S 1001(5)(B)(ii), the Rio does not reproduce files fromsomething that falls within the plain language of the basicdefinition of a digital music recording, see id. S 1001(5)(A).2The district court concluded that the exemption of harddrives from the definition of digital music recording, and theexemption of computers generally from the Act's ambit,"would effectively eviscerate the [Act] " because "[a]nyrecording device could evade [ ] regulation simply by passingthe music through a computer and ensuring that the MP3 fileresided momentarily on the hard drive." RIAA I, 29 F. Supp.2d at 630. While this may be true, the Act seems to have beenexpressly designed to create this loophole.a[7] Under the plain meaning of the Act's definition of digi-tal audio recording devices, computers (and their hard drives)are not digital audio recording devices because their "primarypurpose" is not to make digital audio copied recordings. See17 U.S.C. S 1001(3). Unlike digital audio tape machines, forexample, whose primary purpose is to make digital audio cop-ied recordings, the primary purpose of a computer is to runvarious programs and to record the data necessary to run thoseprograms and perform various tasks. The legislative history isconsistent with this interpretation of the Act's provisions, stat-ing that "the typical personal computer would not fall withinthe definition of `digital audio recording device,' " S. Rep.102-294, at *122, because a personal computer's "recordingfunction is designed and marketed primarily for the recordingof data and computer programs," id. at *121. Another portionof the Senate Report states that "[i]f the`primary purpose' ofthe recording function is to make objects other than digitalaudio copied recordings, then the machine or device is not a`digital audio recording device,' even if the machine or deviceis technically capable of making such recordings." Id.(emphasis added). The legislative history thus expressly rec-ognizes that computers (and other devices) have recordingfunctions capable of recording digital musical recordings, andthus implicate the home taping and piracy concerns to whichthe Act is responsive. Nonetheless, the legislative history isconsistent with the Act's plain language -- computers are notdigital audio recording devices.6b[8] In turn, because computers are not digital audio record-ing devices, they are not required to comply with the SCMSrequirement and thus need not send, receive, or act uponinformation regarding copyright and generation status. See 17U.S.C. S 1002(a)(2). And, as the district court found, MP3files generally do not even carry the codes providing informa-tion regarding copyright and generation status. See RIAA I, 29F. Supp. 2d. at 632. Thus, the Act seems designed to allowfiles to be "laundered" by passage through a computer,because even a device with SCMS would be able to downloadMP3 files lacking SCMS codes from a computer hard drive,for the simple reason that there would be no codes to preventthe copying.[9] Again, the legislative history is consistent with theAct's plain meaning. As the Technical Reference Documentthat describes the SCMS system explains, "[d]igital audio sig-nals . . . that have no information concerning copyright and/orgeneration status shall be recorded by the[digital audiorecording] device so that the digital copy is copyright assertedand original generation status." Technical Reference Docu-ment for the Audio Home Recording Act of 1992, II-A, P 10,reprinted in H.R. Rep. 102-780(I), 32, 43 (1992) (emphasisadded). Thus, the incorporation of SCMS into the Rio wouldallow the Rio to copy MP3 files lacking SCMS codes so longas it marked the copied files as "original generation status."And such a marking would allow another SCMS device tomake unlimited further copies of such "original generationstatus" files, see, e.g., H.R. Rep. 102-873(I), at *47 ("UnderSCMS . . . consumers will be able to make an unlimited num-ber of copies from a digital musical recording."), despite thefact that the Rio does not permit such further copies to bemade because it simply cannot download or transmit the filesthat it stores to any other device. Thus, the Rio without SCMSinherently allows less copying than SCMS permits.c[10] In fact, the Rio's operation is entirely consistent withthe Act's main purpose -- the facilitation of personal use. Asthe Senate Report explains, "[t]he purpose of[the Act] is toensure the right of consumers to make analog or digital audiorecordings of copyrighted music for their private, noncom-mercial use." S. Rep. 102-294, at *86 (emphasis added). TheAct does so through its home taping exemption, see 17 U.S.C.S 1008, which "protects all noncommercial copying by con-sumers of digital and analog musical recordings, " H.R. Rep.102-873(I), at *59. The Rio merely makes copies in order torender portable, or "space-shift," those files that alreadyreside on a user's hard drive. Cf. Sony Corp. of America v.Universal City Studios,
464 U.S. 417, 455
(1984) (holdingthat "time-shifting" of copyrighted television shows withVCR's constitutes fair use under the Copyright Act, and thusis not an infringement). Such copying is paradigmatic non-commercial personal use entirely consistent with the purposesof the Act.IVEven though it cannot directly reproduce a digital musicrecording, the Rio would nevertheless be a digital audiorecording device if it could reproduce a digital music record-ing "from a transmission." 17 U.S.C. S 1001(1).A[11] The term "transmission" is not defined in Act,although the use of the term in the Act implies that a transmis-sion is a communication to the public. See id. S 1002(e) (plac-ing restrictions upon "[a]ny person who transmits orotherwise communicates to the public any sound recording indigital format") (emphasis added). In the context of copyrightlaw (from which the term appears to have been taken), "[t]o`transmit' a performance or display is to communicate it byany device or process whereby images or sounds are receivedbeyond the place from which they are sent." 17 U.S.C. S 101.The legislative history confirms that the copyright definitionof "transmission" is sufficient for our purposes here. The Actoriginally (and circularly) provided that "[a ] `transmission' isany audio or audiovisual transmission, now known or laterdeveloped, whether by a broadcast station, cable system,multipoint distribution service, subscription service, directbroadcast satellite, or other form of analog or digitalcommunication." S. Rep. 102-294, at *10. The Senate Reportprovides a radio broadcast as an example of a transmission.See id., at *119 (referring to "a transmission (e.g., a radiobroadcast of a commercially released audio cassette)."). Theparties do not really dispute the definition of transmission, butrather, whether indirect reproduction of a transmission of adigital music recording is covered by the Act.BRIAA asserts that indirect reproduction of a transmission issufficient for the Rio to fall within the Act's ambit as a digitalaudio recording device. See 17 U.S.C. S 1001(1) (digitalaudio recording devices are those devices that are capable ofmaking "a reproduction in a digital recording format of a digi-tal musical recording, whether that reproduction is madedirectly from another digital musical recording or indirectlyfrom a transmission") (emphasis added). Diamond asserts thatthe adverb "indirectly" modifies the recording of the underly-ing "digital music recording," rather than the recording "fromthe transmission." Diamond effectively asserts that the statuteshould be read as covering devices that are capable of makinga reproduction of a digital musical recording, "whether thatreproduction is made directly[,] from another digital musicalrecording[,] or indirectly[,] from a transmission."[12] While the Rio can only directly reproduce files froma computer hard drive via a cable linking the two devices(which is obviously not a transmission), the Rio can indirectlyreproduce a transmission. For example, if a radio broadcast ofa digital audio recording were recorded on a digital audio tapemachine or compact disc recorder and then uploaded to acomputer hard drive, the Rio could indirectly reproduce thetransmission by downloading a copy from the hard drive.Thus, if indirect reproduction of a transmission falls withinthe statutory definition, the Rio would be a digital audiorecording device.1[13] RIAA's interpretation of the statutory language ini-tially seems plausible, but closer analysis reveals that it iscontrary to the statutory language and common sense. Thefocus of the statutory language seems to be on the two meansof reproducing the underlying digital music recording --either directly from that recording, or indirectly, by reproduc-ing the recording from a transmission. RIAA's interpretationof the Act's language (in which "indirectly" modifies copying"from a transmission," rather than the copying of the underly-ing digital music recording) would only cover the indirectrecording of transmissions, and would omit restrictions on thedirect recording of transmissions (e.g., recording songs fromthe radio) from the Act's ambit. This interpretation would sig-nificantly reduce the protection afforded by the Act to trans-missions, and neither the statutory language nor structureprovides any reason that the Act's protections should be solimited. Moreover, it makes little sense for the Act to restrictthe indirect recording of transmissions, but to allow unre-stricted direct recording of transmissions (e.g., to regulatesecond-hand recording of songs from the radio, but to allowunlimited direct recording of songs from the radio). Thus, themost logical reading of the Act extends protection to directcopying of digital music recordings, and to indirect copyingof digital music recordings from transmissions of thoserecordings.2Because of the arguable ambiguity of this passage of thestatute, recourse to the legislative history is necessary on thispoint. Cf. Moyle v. Director, Office of Workers' Compensa-tion Programs, 147 F.3d 1116, 1120 (9th Cir. 1998) ("[I]f thestatute is ambiguous, [this court] consult[s] the legislative his-tory, to the extent that it is of value, to aid in[its]interpretation."), cert. denied, 119 S. Ct. 1454 (1999). TheSenate Report states that "a digital audio recording made froma commercially released compact disc or audio cassette, orfrom a radio broadcast of a commercially released compactdisc or audio cassette, would be a `digital audio copiedrecording.' " S. Rep. 102-294, at *119 (emphasis added). Thisstatement indicates that the recording of a transmission neednot be indirect to fall within the scope of the Act's restric-tions, and thus refutes RIAA's proposed interpretation of therelevant language. Moreover, the statement tracks the statu-tory definition by providing an example of direct copying ofa digital music recording from that recording, and an exampleof indirect copying of a digital music recording from a trans-mission of that recording. Thus the legislative history con-firms the most logical reading of the statute, which we adopt:"indirectly" modifies the verb "is made " -- in other words,modifies the making of the reproduction of the underlyingdigital music recording. Thus, a device falls within the Act'sprovisions if it can indirectly copy a digital music recordingby making a copy from a transmission of that recording.Because the Rio cannot make copies from transmissions, butinstead, can only make copies from a computer hard drive, itis not a digital audio recording device.7 VFor the foregoing reasons, the Rio is not a digital audiorecording device subject to the restrictions of the Audio HomeRecording Act of 1992. The district court properly denied themotion for a preliminary injunction against the Rio's manu-facture and distribution. Having so determined, we need notconsider whether the balance of hardships or the possibility ofirreparable harm supports injunctive relief.AFFIRMED.
___________________________FOOTNOTES *The Honorable Edward C. Reed, Jr., Senior United States DistrictJudge for the District of Nevada, sitting by designation.1 Whether or not piracy causes such financial harm is a subject of dis-pute. Critics of the industry's piracy loss figures have noted that a willing-ness to download illicit files for free does not necessarily correlate to lostsales, for the simple reason that persons willing to accept an item for freeoften will not purchase the same item, even if no longer freely available.See Lewis Kurlantzick & Jacqueline E. Pennino, The Audio Home Record-ing Act of 1992 and the Formation of Copyright Policy, 45 J. CopyrightSoc'y U.S.A. 497, 506 (1998). Critics further note that the price of com-mercially available recordings already reflects the existence of copyingand the benefits and harms such copying causes; thus, they contend, thecurrent price of recordings offsets, at least in part, the losses incurred bythe industry from home taping and piracy. See id. at 509-10.2 At the time the preliminary injunction was sought and denied, the Riodid not incorporate SCMS; Diamond asserts that it has now incorporatedsuch a system into the Rio Manager software, though not into the Rioitself.3 We can, of course, affirm on any grounds supported by the record, seeGemtel Corp. v. Community Redevelopment Agency of City of LosAngeles, 23 F.3d 1542, 1546 (9th Cir. 1994), thus, we can affirm even ifthe lower court relied on incorrect grounds or faulty reasoning, seeAronson v. Resolution Trust Corp., 38 F.3d 1110, 1114 (9th Cir. 1994).4 There is no precedent (other than the district court's order) to guide thepanel's interpretation of the Act. The Act has only been discussed once ina published opinion by another federal court, and there, only to explainwhy it had no effect on the Copyright Act provisions at issue in that case.See ABKCO Music, Inc. v. Stellar Records, Inc., 96 F.3d 60, 65-66 (2dCir. 1996) (rejecting the contention that the Act changed or affected thedefinition of "phonorecord" in the Copyright Act).5 The Senate Report discusses the original term "audiogram," which wasreplaced by the term "digital music recording, " but the two definitions arenearly identical, with the only difference being the deletion from the"audiogram" definition of examples of material objects in which thingsother than sounds are fixed. Compare S. Rep. 102-294, at *4-5 ("An`audiogram' is a material object (i) in which are fixed, by any method nowknown or later developed, only sounds (and not, for example, a motionpicture or other audiovisual work even though it may be accompanied bysounds), and material, statements or instructions incidental to those fixedsounds, if any, and (ii) from which the sounds and material can be per-ceived, reproduced, or otherwise communicated, either directly or with theaid of a machine or device.") (emphasis added), with 17 U.S.C.S 1001(5)(A) ("A `digital music recording' is a material object--(i) inwhich are fixed, in a digital recording format, only sounds, and material,statements, or instructions incidental to those fixed sounds, if any, and (ii)from which the sounds and material can be perceived, reproduced, or oth-erwise communicated, either directly or with the aid of a machine ordevice."). Thus, comments in the legislative history regarding the"audiogram" definition are relevant to our interpretation of the "digitalmusic recording" definition.6 Indeed, Diamond asserted at oral argument (and supports the assertionwith the affidavit of a direct participant in the negotiations and compro-mises that resulted in the final language of the Act) that the exclusion ofcomputers from the Act's scope was part of a carefully negotiated com-promise between the various industries with interests at stake, and withoutwhich, the computer industry would have vigorously opposed passage ofthe Act.7 We further note that any transmission reproduced indirectly must passthrough a computer, as an MP3 file, to reach the Rio. As we explained inpart III.B.2, supra, computers are exempted from the requirement of read-ing and transmitting SCMS codes, and MP3 files do not incorporate suchcodes. Thus, requiring the Rio to implement SCMS because it can indi-rectly reproduce a transmission of a digital music recording would be, asthe district court concluded, "an exercise in futility." RIAA I, 29 F. Supp.2d at 632. SCMS would not alter the Rio's ability to reproduce such trans-missions, just as it would not alter the Rio's ability to reproduce digitalmusic recordings uploaded to a computer hard drive. the end