Under a deal announced Wednesday, the companies said they would work together to create a digital watermark system. Watermarking technology places a unique bit of code into a video or audio file, making the file difficult to copy or play without permission from copyright holders.
Both DivXNetworks and Fraunhofer have been on the other side of the digital piracy debate. DivXNetworks created the DivX format, a video-compression technology that has long been associated with movie piracy. Fraunhofer is one of the companies behind the MP3 audio format, one of the most popular formats for creating and trading digital music files.
The partnership is part of DivXNetworks' ongoing struggle to put its bootlegbehind it and become a legal provider of video-on-demand and download services.
Two months ago, DivXNetworks signed a deal to let Germany-based Fraunhoferits codec. DivXNetworks has also allied with The Jim Henson Co. and Broadway Television Network.
Although the two companies aim to capture a piece of the so-called digital rights management market, they face a field crowded by powerful rivals.
The competition is "going to be a tough area to crack because between Digimarc, Microsoft and RealNetworks, the whole space seems like it's pretty much locked up," said Phil Benyola, a digital media research associate for investment company Raymond James Financial.
DivXNetworks and Fraunhofer also face hurdles in creating a robust watermark technology. Last year, university researchersthe code to four watermarks being considered for a secure digital music standard by a cross-industry group called the Secure Digital Music Initiative (SDMI). That coalition has been to create a standard after disagreements over priorities between music and consumer-electronics companies.
Still, DivXNetworks and Fraunhofer are confident that they can jointly develop a digital rights management system that provides content owners with a secure means to distribute copyrighted works over the Web.
"From the inception of our company, DivXNetworks has been committed to developing and implementing state-of-the-art digital rights management technology," Jordan Greenhall, DivXNetworks' chief executive, said in a statement. "Combining the video watermarking technology we have developed with the cutting-edge audio watermarking techniques developed by Fraunhofer is a logical next step."