From http://www.rev-ed.co.uk/picaxe/forum/Topic.asp?topic_id=1912
Technical Posted :
This error can occur if you are trying to use a serial COM port that does not exist on the machine (or is already in use e.g if you have two instances of a piece of software running, both trying to use the same serial port). It is most common with USB adapters with an incorrectly configured 'virtual' COM port.
Before downloading make sure you have selected the correct serial port from the View>Options menu.