Real Drops Plans To Defend DVD-Copying Software

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Seattle - RealNetworks dropped plans to market its DVD-copying software as part of a settlement with Hollywood studios, which alleged in a lawsuit that the software violated the Digital Millennium Copyright Act (DMCA) and a licensing agreement.

As part of the settlement, RealNetworks will also pay $4.5 million to the plaintiffs for court costs and fees, and the company will withdraw its appeal of a preliminary injunction that barred the marketing of the software while a trial on the lawsuit's merits was underway.

The $29.99 RealDVD software copied encrypted movie DVDs to a PC's hard drive or to an external hard drive for storage and playback, locking the content to the drive to prevent further copying or sharing over file-sharing networks. 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 settlement also applies to a planned set-top DVD jukebox, which would store movie DVDs on an internal hard drive.

RealNetworks contended such restricted copying is allowed under federal law as a fair use, but the studios contended that under the DMCA, copyright owners must authorize what they considered Real's "circumvention" of DVD copy-prevention technology. Their argument would also apply to residential movie servers that stream copied DVDs to multiple rooms of a house.

In issuing the preliminary injunction last August, a district court judge in San Francisco contended a full trial would likely find the software in violation of the DMCA and the terms of Real's Content Scramble System (CSS) license, issued by the DVD Copy Control Association (DVD CCA). The judge also contended that Hollywood would suffer "irreparable harm" if the products went on the market while a full trial was underway because Real's technologies do not limit multiple consumers from copying the same disc, nor do the technologies prevent consumers from copying rented discs.

The software has been off the market since October 2008, when the judge imposed a temporary restraining after the studios filed their lawsuit. The judge imposed the preliminary injunction in August 2009.

That injunction and settlement, said MPAA general counsel Daniel Mandil, "affirm what we have said from the very start of this litigation. It is illegal to bypass the copyright protections built into DVDs designed to protect movies against theft."

The MPAA, Mandil continued, "will continue to vigorously pursue companies that attempt to bring these illegal circumvention products and devices to market."

The DMCA, the MPAA said, prohibits the making or selling of any technology, product, service or device designed to "circumvent measures that effectively protect copyrighted content." The CSS license, the MPAA continued, "bars companies from making a DVD copier."

For his part, RealNetworks president and acting CEO Bob Kimball called the settlement "another step toward fulfilling our commitment to simplify our company and focus on our core businesses." Until the dispute broke, "Real had always enjoyed a productive working relationship with Hollywood," he said. "With this litigation resolved, I hope that in the future we can find mutually beneficial ways to use Real technology to bring Hollywood's great work to consumers."

The settlement comes after Real founder and chairman Rob Glaser was stripped of his position as CEO by the board and Real's fiscal-2009 net loss of $212 million.

In issuing the preliminary injunction last August, the district court stated, among other findings, that:

* 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."

* 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.

* The CSS license agreement "does not give license to copy DVD content to a hard drive permanently."


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