According to a lawsuit recently filed by the Recording Industry Association of America (RIAA), XM Satellite Radio is infringing the copyright of music labels by allowing its subscribers to record songs. Those who subscribe to XM Radio and own an Inno recorder from Pioneer can use the cell phone-size device to listen to satellite radio broadcasts, record songs and replay them as MP3 files. XM Radio markets the Inno as an alternative to the Apple iPod.

The RIAA said XM was committing “massive wholesale infringement” of copyright sound recordings, and asked the court to stop XM’s broadcasts and award damage payments. The suit also posits that XM is basically a competitor to legal online music stores such as Apple’s iTunes, Napster and others because they allow listeners to record MP3 files. The suit was filed in the U.S. District Court for the Southern District of New York.

The RIAA is an industry group that includes major music labels such as Capitol, Atlantic, Motown, Sony BMG, Virgin and Warner Bros. Records. Its members deny they are opposed to satellite radio in general. “We celebrate the growth of XM and Sirius. We think the downloading capability of XM’s Inno is attractive and appealing — it just needs to be licensed,” the RIAA said.

Listeners have been able to legally record songs off commercial, analog radio stations for years. The RIAA says this is different because the broadcast is digital, so XM subscribers can scan through a broadcast and record only certain songs. The Inno’s one GB of storage holds about 50 hours of music, or about 1,000 songs. The RIAA said that as future devices deliver greater memory, that storage capacity could easily fit 10,000 songs. When this happens, the RIAA fears no one will ever buy music from the labels again.

“Because XM makes available vast catalogues of music in every genre, subscribers will have little need ever again to buy legitimate copies of plaintiffs’ sound recordings,” the RIAA said, and XM projects that its subscriber base will reach 9 million by the end of 2006. In its lawsuit, RIAA says that XM already has the ability to stop the practice. XM currently embeds software code in its encrypted satellite transmissions that deletes saved songs if a user stops paying his XM subscription fee. RIAA says XM could use that same code to prevent users from recording certain songs.

When the RIAA brought a similar suit against XM’s rival, Sirius Satellite Radio, Sirius agreed to make it harder for listeners to record specific songs on its S50, a handheld satellite radio similar in size and price to the Inno.