Kane Kramer, a "serial inventor", dreamed up the idea as a 23 year old in the UK. He applied for a patent on his device, which he called the IXI, in 1981, which was awarded in 1985. Sadly for him, he could no longer afford to keep up the payments on the patent and was forced to let it lapse in 1988, after which the design became public domain.
Kramer's story came to light in 2006 when Burst.com sued Apple for copyright infringement and Apple hired Kramer as a "consultant" for the trial, during which images of his creation were released. It wasn't just that he came up with the device, he also envisioned the online store from which users would purchase and download songs. (The original capacity of the IXI was only enough for one song!) He even addressed issues of piracy and copyright infringement.
Kramer is still in there pitching, serving as the Chariman of the British Inventors Society. But even though he wasn't able to reap the rewards, his invention completely changed the way we listen to music.
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