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Real's Legal Setback Clouds DVD Servers

8/12/2009 01:51:43 PM Eastern

San Francisco - The preliminary
injunction
issued by a federal court to prohibit the sale of
DVD-copying software from RealNetworks casts doubts on the future of residential
video servers that copy DVD discs.

In issuing the injunction, the court concluded that Real would likely
lose in a lawsuit lodged late last year by the movie industry, which alleges violations
of the Digital Millennium Copyright Act (DMCA) and the terms of the Content
Scramble System (CSS) license signed by Real. The preliminary injunction also signifies
the judge's belief that Hollywood
would suffer "irreparable harm" if RealDVD software went on the market again.

The ruling would likely apply to other brands of PC software that
rip DVDs and allow for their transfer to residential video servers that lack
embedded DVD-copying capabilities.

The judge, Marilyn Patel of the U.S. District Court for northern
California, said her ruling applied to Real's PC-based RealDVD software and
similar software developed for a planned set-top DVD-copying jukebox, which
would have been equipped with hard drive to store multiple DVD movies. RealDVD
software was on the market for several days last October before Patel issued a temporary
retraining order
prohibiting sales until she decided on a preliminary
injunction.

The movie industry would be seriously harmed, she contended,
because Real's technologies do not limit multiple consumers from copying a
single purchased disc, nor do they prevent consumers from renting a disc and
copying it.

RealNetworks is reviewing its options, which include an appeal or
a decision to go to trial on the merits of the dispute while the injunction in
force.

In her decision, Patel was unequivocal in stating that:

·        
Products that copy DVD content to a hard drive,
including their encryption, violate the DMCA and CSS license stipulations
because they remove other CSS copy-control technologies. Those technologies are
needed to implement the license agreement's requirements for drive locking
[locking a DVD drive after insertion of a protected disc until a player
authenticates the disc], authentication, and bus encryption. Those protections
are lost when a hard-drive-stored copy is played back, the judge said.

·        
The CSS license agreement "does not give license
to copy DVD content to a hard drive permanently" and that the only authorized
copying "is temporary copying, i.e. buffering or caching, because it is a
necessary part of the playback process in all DVD players."

·        
CSS protections are designed expressly to
prevent "unauthorized interception and the creation of a copy of the keys and
DVD video content on a storage device for future playback without the DVD."

·        
The DMCA "broadened copyright owners' rights
beyond the Sony holding [1984 Betamax case]" and "did clearly rebalance the
competing interests of copyright owners against copyright users."

·        
Although consumers retain the right to make fair
use copies for their own personal use under existing laws, including the DMCA, fair
use under two DMCA provisions "is not a defense to trafficking in products used
to circumvent effective technological measures that prevent unauthorized
access, or unauthorized copying of, a copyrighted work."

In referring to the Sony Betamax case, the court said the DMCA
expanded the rights of copyright holders "by creating new grounds for liability
due to circumvention of access controls in ways that facilitate copyright
infringement and for trafficking in circumvention devices that facilitate
copyright infringement."

The judge continued, "To the extent that Real seeks to rely on
Sony here to establish some new form of time- or space-shifting fair use under
the DMCA, this effort fails. Sony involved videocassette recorders and
copyrighted television broadcasts in a pre-digital era, and its ‘substantial
non-infringing use' reasoning has no application to DMCA claims."

Real's $29.99 RealDVD software copied movie DVDs to a PC's hard
drive for storage and playback. Up to four additional PCs could be registered
with Real at a cost of $19.99 each to play copies saved to an external USB hard
drive. The company also planned to use similar DVD-copying software in a set-top
movie jukebox that would copy DVDs and store them for quick selection and
playback. The stored movies, however, would be locked to the jukebox and could
not be transferred to USB drives or other devices.

Despite the ruling, home servers that store copies of Blu-ray
discs could nonetheless become available legally. The Advanced Access Content System License
Administrator, which licenses Blu-ray's AACS copy protection technology, recently
approved a final
AACS licensing agreement
that next year will require studios
and other content holders to give consumers the ability to make one full-resolution
copy of a purchased Blu-ray Disc.

The requirement means
almost all Blu-ray discs released after the first quarter of 2010 will offer
consumers the ability to make one full-resolution backup copy, initially to
recordable Blu-ray or DVD discs or as a download to a Windows Media
DRM-compatible portable player or hard drive, or to memory cards. Studios could
choose, however, to charge for the copy, and they could sell additional copies.