A lawsuit in which record companies allege XM Satellite Radio Holdings Inc. is cheating them by letting consumers store songs can proceed toward trial, a judge ruled Friday after finding merit to the companies' claims.

U.S. District Judge Deborah A. Batts made the finding in a case brought by Atlantic Recording Corp., BMG Music, Capitol Records Inc. and other music distribution companies against the licensed satellite radio broadcaster.

In a lawsuit last year, the companies said XM directly infringes on their exclusive distribution rights by letting consumers record songs onto special receivers marketed as "XM + MP3" players.

XM has argued it is protected from infringement lawsuits by the Audio Home Recording Act of 1992, which permits individuals to record music off the radio for private use. The judge said she did not believe the company was protected in this instance by the act.

In a statement, XM said it remains confident that the lawsuit is without merit and it will prevail.

"At this stage of the proceeding, the court's ruling is required to be based on the false characterizations set forth in the plaintiffs' complaint. The real facts strongly support our view that the lawsuit is barred by the Audio Home Recording Act. We look forward to making our case in court," the company said.

Messages for comment left with lawyers on both sides were not immediately returned.

In refusing to toss out the lawsuit, the judge noted that the record companies consent to XM's use of their copyrighted material solely for the purposes of providing a digital satellite broadcasting service.

She said XM operates like traditional radio broadcast providers who cannot offer an interactive service, publish programming schedules prior to broadcast and play songs from an artist more often than specified within a three-hour period. But by broadcasting and storing copyrighted music for later recording by the consumer, the judge said XM is both a broadcaster and a distributor, but only paying to be a broadcaster.

"The record companies sufficiently allege that serving as a music distributor to XM + MP3 users gives XM added commercial benefit as a satellite radio broadcaster," Batts said.

Although XM argued in court papers that an XM + MP3 player is much like a traditional radio-cassette player, the judge said "it is not."

"It is manifestly apparent that the use of a radio-cassette player to record songs played over free radio does not threaten the market for copyrighted works as does the use of a recorder which stores songs from private radio broadcasts on a subscription fee basis," she said.

XM shares fell 70 cents, or 4.3 percent, to $15.75 in midday trading on the Nasdaq Stock Market.

Ney's prison sentence will include two years of probation and a $6,000 fine. If he completes a prison alcohol rehabilitation program to address his recently-acknowledged alcohol abuse problem, his sentence could be reduced by up to a year. During sentencing proceedings, Ney's defense team provided evidence that he was a "functioning alcoholic" whose decision-making ability was clouded by his dependency on alcohol. US District Judge Ellen Segal Huvelle rejected the claim, asserting that it didn't fully explain his corrupt behavior or excuse violating laws he was "sworn to enforce and uphold."

Ralph Klein, the former Alberta premier whose grip on office earned him the sobriquet King Ralph, has gone from reigning to making rain.

The one-time TV reporter and high-school dropout announced yesterday he is joining national law firm Borden Ladner Gervais LLP as senior business adviser, just one month after resigning as premier and three days after relinquishing his seat in the Alberta Legislative Assembly.

Although not licensed to practise law, Mr. Klein says he will act as a resource for BLG lawyers working on files of key personal interest, such as energy development, health care reform and the evolution in securities law, among other things -- "although I need to bone up a bit on securities legislation."

Klein will devote about spend two-thirds of his time to the law firm and be based out of its Calgary office.

He is working with former Newfoundland premier Brian Tobin to develop an energy policy for the Fraser Institute and he’s joining another conservative think-tank, the Manning Centre for Building Democracy.

Klein will be a guest lecturer in the fall at the prestigious Woodrow Wilson International Center for Scholars in Washington, D.C. The former premier also has commitments to be executive in residence at the University of Alberta, and chair of communications at Calgary’s Mount Royal College.

The bill also requires clearer reporting of home state projects, denies pension benefits to those convicted of serious crimes and requires lawmakers to pay the full price fare when traveling on chartered planes. Opponents of the bill complained the measure discouraged free speech by deterring petition drives, but majority leader Sen. Harry Reid (D-NV) called the measure "the most significant legislation in ethics and lobbying reform we've had in the history of this country."

In a sharply worded speech directed at the third, and equal, branch of the government, Gonzales outlined some of the qualities the Bush administration looks for when selecting candidates for the federal bench. He condemned what he termed activist judges with lifetime appointments who "undermine the right of the people to govern themselves."

In nominating a judge, "we want to determine whether he understands the inherent limits that make an unelected judiciary inferior to Congress or the president in making policy judgments," Gonzales said in the 20-minute speech to American Enterprise Institute, a Washington think tank. "That, for example, a judge will never be in the best position to know what is in the national security interests of our country."

Gonzales did not cite any specific activist jurists or give examples of national security cases.

Pressed later for examples, he noted that Congress approved the Military Commissions Act, which authorizes military trials for terrorism suspects, four months after the Supreme Court ruled the trials would violate U.S. and international law.

"I don't think the judiciary is equipped at all to make decisions about what's in the national security interests of our country," Gonzales said. "How would they go about doing that? They don't have embassies around the world to give them that information. They don't have intelligence agencies gathering up intelligence information. ... It was never intended that they would have that role."

Carl Tobias, a constitutional law professor at the University of Richmond in Virginia, said it is inevitable that courts would decide some of the most contentious questions involving national security.

"Some of the most difficult issues are about national security, how to balance national security and civil liberties - especially in the context of domestic surveillance and enemy combatants," Tobias said. "Those are critically important issues that the courts are being asked to resolve."

Gonzales, a former Texas Supreme Court justice, also characterized efforts to retaliate against unpopular rulings as misguided. He mentioned a failed South Dakota proposal to sue or jail judges for making unpopular court decisions.

He also urged Congress to consider increasing the number of federal judges to handle heavy workloads and to offer them higher salaries to lure and keep the best ones on the bench.

The US Senate passed the Legislative Transparency and Accountability Act of 2007 by a 96-2 vote Thursday, but declined to create a Senate Office of Public Integrity to investigate ethics breaches. The bill was the first major initiative taken by the Senate in the new Democrat-dominated session of Congress. The measure regulates lobbying activities by preventing lawmakers from accepting gifts and travel from lobbyists, requiring stricter reporting of lobbying activity, preventing spouses of lawmakers from lobbying the Senate and extending the period a former senator must wait before undertaking lobbying activities to two years. The final text passed by the Senate, however, did not include a provision which would have required disclosure of grass-roots lobbying. Senators voted 55-43 not to include that provision in the bill.

The bill also requires clearer reporting of home state projects, denies pension benefits to those convicted of serious crimes and requires lawmakers to pay the full price fare when traveling on chartered planes. Opponents of the bill complained the measure discouraged free speech by deterring petition drives, but majority leader Sen. Harry Reid (D-NV) called the measure "the most significant legislation in ethics and lobbying reform we've had in the history of this country."