RealNetworks Loses First Round In DVD Software Lawsuit

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