updated 5/16/2006 6:29:22 PM ET 2006-05-16T22:29:22

The recording industry sued XM Satellite Radio on Tuesday over its new iPod-like device that can store up to 50 hours of music for a monthly fee, sending to the courts a roiling dispute over how consumers can legally record songs using next-generation radio services.

The federal lawsuit, filed in New York by the largest labels, accuses XM Satellite of "massive wholesale infringement" because its $400 handheld "Inno" device can record hours of music and automatically parse recordings by song and artist. The device is sold under the slogan, "Hear it, click it, save it."

The lawsuit seeks $150,000 in damages for every song copied by XM Satellite customers using the devices, which went on sale weeks ago. The company said it plays 160,000 different songs every month.

XM Satellite has balked at the industry's efforts to collect expensive distribution licenses similar to those required for Internet downloading services, such as Apple Inc.'s iTunes. Its chief rival, Sirius Satellite Radio Inc., has already agreed to pay for such licenses to cover similar gadgets for its service.

XM Satellite's chairman, Gary Parsons, previously said requiring such licenses — in addition to broader performance licenses the company already pays — would represent "a new tax being imposed on our subscribers."

XM Satellite has compared its new device to a high-tech videocassette recorder, which consumers can legally use to record programs for their personal use. It also noted that songs stored on the device from its broadcasts can't be copied and can only be played for as long as a customer subscribes to its service.

The head of the music industry's trade group said the XM Satellite device is legally indistinguishable from iPods and other portable music players that work with downloading services.

"Yahoo!, Rhapsody, iTunes and Napster all have licenses," said Mitch Bainwol, chief executive for the Recording Industry Association of America. "There's no reason XM shouldn't as well."

XM subscribers pay $12.95 per month to listen to more than 170 channels of entertainment, sports and news programs, including 69 channels of different music genres without commercials.

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