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RealNetworks Loses First Round In DVD Software Lawsuit

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Not the biggest shock … A federal judge issued a preliminary injunction against RealNetworks (NSDQ: RNWK) Tuesday, prohibiting the company from manufacturing and distributing its RealDVD software. The injunction follows a temporary restraining order issued last October at the request of movie studios owned by Disney (NYSE: DIS), Sony (NYSE: SNE), NBC Universal (NYSE: GE), Viacom (NYSE: VIA), and Warner Bros., and the DVD Copy Control Association, then extended several times as the case made its way through court. RealDVD, for sale only briefly, allows users to store an image of copy-protected DVDs on a Windows PC.

The studios, the DVD CCA and Real filed dueling lawsuits in different U.S. district courts the same day, Sept. 30, 2008; Real asking for a declaratory judgment that it wasn’t in breach of its DVD license agreement or in violation of the Digital Millenium Copyright Act (DMCA), the studios and DVD CCA claiming the opposite.The cases were combined in the Northern District of California under U.S. District Judge Marilyn Hall Patel.

Why did Judge Patel grant the preliminary injunction? We’ve embedded the full ruling below for detail junkies — it includes a history of DVD DRM — but among the judge’s “facts”:

— every time RealDVD or a companion product in development called Facet accesses DVD content from the hard drive, it is “circumventing CSS technology and violating the access-control provision of the license.”

— also, that Real violates part of the DMCA by removing protection and “can’t escape this liability merely because it is a CSS licensee and RealDVD leaves content encryption on the discs.

Her language was scathing at points:

— Patel called one Real assertion “circular nonsense.”

— The RealDVD products, she wrote, “by their very nature, open a veritable Pandora’s box of liability for Real.”

But the judge didn’t leave DVD CAA unscathed, calling its argument that its business model would destroyed under “fair use.” The judge scolded: The purpose of copyright law … is not to protect the business model of any particular company.”

What will Real do next? A company statement issued late Tuesday leaves a lot of room: “We are disappointed that a preliminary injunction has been placed on the sale of RealDVD. We have just received the Judge’s detailed ruling and are reviewing it. After we have done so fully, we’ll determine our course of action and will have more to say at that time.”

RealDVD Preliminary Injunction Order

One Response to “RealNetworks Loses First Round In DVD Software Lawsuit”

  1. ed dunn

    I'm surprised this story was without comment because it is pretty more significant than people think.

    The irony in this sounds like RealDVD used the same rationale that "sound card rippers" argue to justify the customer ripping off high-quality MP3s off audio subscription service like, umm, Real Rhapsody service?

    There is an underlying trend and vulnerability I've noticed that I keep in my "real" business plan as a competitive advantage – the business plan no VC will ever get to see. I noticed these tech firms poorly execute strategies on what I see as ill-informed legal advice. It is as if these firms think they can play the same games with a judge as they play with the fanboy/tech media crowd and they learning the hard way.

    Intellectual property and infringement is a slippery slope that has not been successfully challenged by the courts. Many firms believe they can infringe and argue in court they are dong the copyright owner a "favor" by giving them "free publicity" which is a big mistake.

    This injunction on Real should be a wake up call to any content aggregation/ripper startup out there who think they can infringe first and pay up later…