The suit, filed in California Superior Court in Marin County, alleges that Denver, Colo.-based Fahrenheit Entertainment misled consumers by failing to include an adequate disclaimer on CDs encoded with digital copyright-protection software.
The suit also cites SunnComm, the Phoenix-based software company that created the protection program as a preliminary measure to prevent people from distributing digital copies of the songs over the Internet.
The lawsuit said the protected album, "Charley Pride: A Tribute to Jim Reeves," does not offer a disclaimer that it will not operate on computer CD players. It also requires a consumer to register personal information in a proprietary Web site before downloading the songs onto a computer, raising privacy concerns, the suit says.
"The law requires companies who are selling products to give the consumer material information that is relevant to making decisions about whether to buy the product or not, and Fahrenheit did not do that," Ira Rothken, the attorney who filed the suit, said Friday.
The practice of embedding copyright-protection technology in CDs is gaining popularity, as record labels seek to protect music from file swappers. The recording industry, including Bertelsmann's BMG Entertainment, is suing file-sharing service Napster for copyright infringement. Despite successful measures to cripple Napster through the courts, other file-trading clones continue to find ways to distribute MP3-encoded songs online.
Up to now, audio on most CDs could be played on a PC. Software allows people to convert those songs into the MP3 format, compressing standard audio tracks into smaller, digital files. The resulting files can be distributed at will via the Internet or copied onto MP3 playback devices.
SunnComm's technology prohibits people from listening to a CD on a computer without registering on a separate Web site first, making it difficult to freely copy the album. The company already has a revenue deal with German media giant Bertelsmann.
Executives from Fahrenheit and SunnComm said they had not seen the complaint filed by Rothken. Nevertheless, Fahrenheit maintains it has adequately provided a disclaimer on its CD case informing buyers of the copyright protection embedded in the disc.
"There's a disclaimer on the outside, and we're not preventing anyone from doing downloads," said Peter Trimarco, the chief executive of Fahrenheit. "But we're saying you have to go to the Web site to do it. It's not being designed to be a distraction."
A photocopy of the CD's packaging faxed by Trimarco to CNET News.com includes a disclaimer that reads: "This audio CD is protected by SunnComm MediaCloQ Ver 1.0. It is designed to play in standard audio CD players only and is not intended for use in DVD players. Licensed copies of all music on this CD are available for downloading. Simply insert CD into your computer to begin."
However, Rothken criticized the disclaimer for what it left out, such as the inability to play the CD on a computer and the inability to transfer songs onto portable MP3 devices.
"Fahrenheit has statements on its CD case which do not address these issues," Rothken said. "The omissions are also unfair business practices."
The lawsuit seeks an injunction against Fahrenheit and SunnComm that would keep them from tracking consumer habits and require them to provide adequate privacy notices on the CD case.