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Court Extends Restraining Order On RealDVD Software

San Francisco — A U.S. District Court extended a temporary restraining order that prevents RealNetworks from marketing its RealDVD software package, which copies movie DVDs to a PC’s hard drive for storage and playback.

In an initial win for Hollywood studios, Judge Marilyn Patel said she will keep the restraining order in effect until she learns more details about the software. A follow-up hearing won’t be scheduled until sometime after Nov. 17, Patel said.

The ruling extends a temporary halt ordered Oct. 3 by the judge, who is considering a request by movie studios

for a temporary injunction on sales. The studios want the temporary injunction in place while the court hears a lawsuit in which they contend the software violates the Digital Millennium Copyright Act (DMCA). The studios seek damages and a permanent injunction against sales.

The DMCA, the studios contended in their suit, “prohibits the manufacturing or trafficking of any technology or product, service or device that is designed for the purpose of circumventing measures that effectively protect copyrighted titles.”

In its court filings, Real unsuccessfully cited several reasons to strike down the studio’s demands to extend the temporary halt in sales, including the assertion that making “personal backup copies” of legally acquired DVDs is permitted by the U.S. Supreme Court’s 1984 Betamax ruling. Because of that ruling, which allowed consumers to record TV shows for their personal use, the studios “cannot avail themselves of the DMCA as an end-run around fair use,” Real contended.

“We are gratified that the court recognized the harm of RealDVD to the motion picture industry and the strength of our arguments that the product circumvents the copyright protection built into DVDs,” the Motion Pictures Association of America (MPAA) said in a written statement. The studios fear that Real’s software, and by inference DVD-copying movie servers, will encourage consumers to rent and borrow DVDs and thus “cause immediate and irreparable harm” to the studios’ DVD rental and sales revenues, the studios’ suit said.

The outcome of the dispute could open up a new front in the movie industry’s war against home video servers that copy DVDs to a hard drive and stream their content throughout the house. Such servers are available from Kaleidescape, Marantz and Request. Other servers don’t copy DVDs but nonetheless store their content after the content has been transferred from a PC outfitted with third-party AnyDVD ripping software.

RealDVD works like this: The $29.99 software copies movie DVDs to a PC’s hard drive for storage and playback. Up to four additional PCs can be registered with Real, at a cost of $19.99 each, to play copies saved to an external USB hard drive connected to the first computer registered to a user’s RealNetworks account.

In its defense, Real also cited the successful defense by server maker Kaleidescape in a California state court, but the studios contend that case has no bearing on the validity of their lawsuit against Real. In the Kaleidescape case, the trial focused on an alleged breach of contract under state contract law. The studio’s suit alleges a violation of the federal DMCA.

In the Kaleidescape case, a state superior court judge ruled in early 2007 that the company did not, under California law, breach the terms of a license granted to it by the DVD Copy Control Association (CCA). The CCA is the authority that licenses the Content Scramble System (CSS) encryption and authentication technology used on DVDs and in DVD players to prevent unauthorized copying. That case, which is a civil but not criminal case, is currently under appeal by the CSS before a state appeals court.

“Real’s CSS license is no defense to its DMCA liability,” the studios contended in their suit.

Real and Kaleidescape don’t agree. “No published case anywhere, ever, has held that a CSS license in compliance with the CSS License agreement can be found liable for circumvention of CSS under the DMCA,” Real said in its filings. For his part, Kaleidescape chairman/CEO Michael Malcolm told TWICE that his company, too, would be “immune to a DMCA claim” because it has a license from the CCA. The DMCA states that companies or individuals “can’t circumvent an effective [copy-control] technology,” he said, and by definition, “circumvention means that you don’t have permission.”

MPAA disputes that assertion. In the Kaleidescape case, the suit contends, “the trial judge’s decision turned on whether the DVD CCA license expressly prohibited the defendant’s conduct. Relying on state rules of contract interpretation, including that uncertainty is to be construed against the drafter of the contract, the trial judge held that prohibitions … asserted by the DVD CCA as the basis for its breach claim were not clearly ‘part of the contract signed by the parties.’”

Under the DMCA, however, “the proper inquiry is whether a copyright owner affirmatively authorized the circumvention,” the suit continues. “Under federal law, rights holders must affirmatively authorize rights, or they are presumed to retain them.”

Neither Real nor Kaleidescape, however, describe their products as designed to circumvent copy-control technology. In fact, Real said its software “maintains the DVD encryption intact” and does “not enable users to distribute copies of their DVDs.” So does Kaleidescape and servers offered by such companies as Marantz and ReQuest.

For their part, the studios contended that although RealDVD doesn’t break CSS encryption, it nonetheless violates previous court rulings on the DMCA, including one in which a court ruled that circumvention is not limited to breaking encryption. That ruling, the studio assert, found circumvention to include “avoiding, bypassing or impairing” an access- or copy-control measure, “any of which may be accomplished while leaving the measure physically intact.” The suit concludes, “By using authorized technology for an unauthorized purpose, Real avoids, bypasses, and impairs those very measures. In short, RealDVD circumvents CSS’s access- and copy-control protections.” The purpose is unauthorized under DMCA, the studio’s stressed, because copyright owners did not expressively give their permission to Real “to make permanent, playable copies of content on computer hard drives or to gain access to these unauthorized copies.”

Should the judge agree with the MPAA on the definition of circumvention, Real believes its software is protected by the Sony Betamax ruling. “In short, the commercially significant purpose of RealDVD is activity which is clearly a ‘fair use’ copy of a DVD under the Supreme Court’s landmark decision of Sony Corp. of America Vs Universal City Studios,” Real said in its filings. “Defendants have no copyright right to prevent such fair use and cannot avail themselves of the DMCA as an end-run around fair use.”