RealNetworks loses critical ruling in RealDVD case

A federal court has found enough evidence to decide that RealDVD, the software that enables users to copy DVDs and store digital duplicates on a hard drive, violates U.S. copyright law.

U.S. District Court Judge Marilyn Patel on Tuesday issued a preliminary injunction that will prevent RealNetworks from selling the $30 software until a jury can decide the issue. That will undoubtedly keep RealDVD and Facet, Real's prototype DVD player, off store shelves for an indefinite period. Facet also makes digital copies and stores them to a built in hard drive.

The decision represents a major victory for the film studios, which had accused Real of violating the Digital Millennium Copyright Act (DMCA) and breach of contract in a lawsuit filed last fall. Had the decision gone against the film studios and its trade group, the Motion Picture Association of America (MPAA), it would have been an affirmation that consumers have the right to copy their DVDs for personal use. Right now, when a DVD owner loses or breaks a disc, they conceivably must purchase another copy. RealDVD and Facet eliminate the need for discs once copies are made.

But the MPAA argued that Facet and RealDVD are pirate tools that enabled users to copy and redistribute movies and could cost the industry billions. The MPAA has maintained that under the DMCA, consumers do not have the right to copy films--ever.

"We are very pleased with the court's decision," MPAA Chairman and CEO Dan Glickman said in a statement. "This is a victory for the creators and producers of motion pictures and television shows and for the rule of law in our digital economy. Judge Patel's ruling affirms what we have known all along: Real took a license to build a DVD-player and instead made an illegal DVD-copier."

"We are disappointed that a preliminary injunction has been placed on the sale of RealDVD," Real said in a statement. The company that makes entertainment software said it would have more to say after it had reviewed Patel's decision.

The big question for Real is whether it has the stomach to continue the fight. The legal fees have already set Real back more than $6 million.

"RealDVD makes a permanent copy of copyrighted DVD content," Patel wrote in her decision, "and by doing so breaches its (Content Scramble System) License Agreement with the (DVD Copy Control Association, the group that oversees the protection of DVDs for the major Hollywood studios) and circumvents a technological measure that effectively controls access to or copying of the Studios' copyrighted content on DVDs."

In her decision, Patel made a play on words using Vegas--Real's code name for RealDVD--to illustrate how the software could lead to the mass pirating of movies.

"Had Real's products been manufactured differently, i.e., if what happened in Vegas really did stay in Vegas," Patel continued, "this might have been a different case. But, it is what it is. Once the distributive nature of the copying process takes hold, like the spread of gossip after a weekend in Vegas, what's done cannot be undone."

Patel's decision is unlikely to surprise anyone who followed the case. During last year's hearings on a temporary injunction and last spring's proceedings on the preliminary injunction, Patel appeared highly skeptical of Real's arguments.

In her questions to both sides' attorneys, Patel seemed concerned about the potential for people to use RealDVD and Facet, to copy rented discs without compensating the creators, a practice known as "rent, rip, and return."

One glaring hole in Real's argument was its assertions that RealDVD didn't circumvent ARccOS and RipGuard because they really aren't anticopying software; and that Real had licensed CSS, the technology designed to prevent unauthorized copying of DVDs, so it was essentially authorized to do what it wanted with it.

The MPAA crushed these arguments in proceedings. The studios showed that both ARccOS and RipGuard are anticopying technologies used by some of the major film studios as a layer of piracy protection in addition to CSS. The studios' lawyers produced documents that revealed ARccOS and RipGuard were effective enough copy protections to stymie Real's engineers, as well as a group of "Ukranian hackers," from cracking them.

One other important detail: ARccOS and RipGuard are not included in the CSS license. By circumventing the technology, Real had risked violating the DMCA, which prohibits the cracking of antipiracy technologies. And that's exactly what happened.

"Real was aware of ARccOS and RipGuard during the development of the RealDVD products," Patel wrote in her 58-page decision. "Real software engineers identified ARccOS and RipGuard as both copy protection systems and barriers to their development of a DVD copying device from the outset of the RealDVD project."

While the courtroom showdown was first billed as a fight over RealDVD, it soon became clear that what was really at stake for Real was Facet.

Real CEO Rob Glaser demonstrated the device in court last spring and showed how an owner could move between films--it holds more than 70--in a way similar to how someone scrolls through an iTunes playlist. I wrote that the device could have helped spur flagging DVD sales and given DVD collectors, such as myself, a way to revitalize their movie collections.

Hollywood, however, is working on its own programs to give consumers access to digital copies after buying a CD. But the studios typically want additional money for the digital copy.

So, now we wait to hear whether Real will carry on the fight. However it turns out, the company has earned kudos from anticopyright proponents for waging the campaign. The question is whether carrying the flag for the free-content crowd is enough of a payoff.