RealNetworks just screwed us all by settling lawsuits in which it might have lost–but which might also have given some new life to fair use for digital media.

The post-RealDVD world means that unless there's a major change to the law surrounding copy protection, there will never be a legal way to perform legal acts of copying or shifting protected movies, music, and games.

Take it from a guy who has a special E Ticket. The major movie studios can never sue me nor four other individuals ever for a variety of media-moving activities that you and 300 million other Americans could be subject to lawsuits over. It's like a superpower. More on how we got this pass later.

The suits in question revolve around RealDVD, software Real introduced in September 2008 that would copy the full contents of a video DVD to a file that could be played back on a Windows system. RealDVD is not a DVD ripper: those programs use one of many methods to strip the Content Scramble System (CSS), the DRM that wraps up DVD content, and other defensive techniques.

CSS and its ilk aren't precisely defended by technology–the standards are too weak or poorly executed–but by law. The much-excoriated Digital Millennium Copyright Act (DMCA) prohibits "circumvention" of software that's designed to prevent copying. Breaking DRM encryption breaks the law.

But Real went through the steps to obtain a license from the DVD Copy Control Association (DCCA), which controls CSS on behalf of the movie industry. RealDVD decrypted the DVD, copied it, and then locked it tight. Up to five PCs licensed by the same person could play back the discs. (Real also broke through a couple of unrelated protection efforts.)

RealNetworks must have calculated that as a company with a large war chest, it could succeed where others didn't dare to tread. As soon as it released RealDVD, it preemptively sued the DCCA and several studios to establish that it had the right to use CSS in the way RealDVD did. The studios and DCCA sued in return, and got software sales halted. The studios won in August 2009; Real appealed.

The settlement on Monday clears all the suits by RealNetworks agreeing to never sell the software again, refund the money to about 2,700 RealDVD purchasers, disable an associated metadata service, and pay $4.5 million to several movie studios, its Rhapsody partner Viacom, and the DCCA to cover legal and other expenses.

Some people may truly hate RealNetworks for its mediocre RealPlayer software (once a technical miracle) that was bundled with poorly disclosed third-party adware programs. But RealDVD was a thin blade trying to shimmy open the door of fair use.

Fair use is a maddeningly ambiguous set of rules enshrined in copyright law that mention nothing whatsoever about personal use and copying. Court decisions have shaped fair-use exemptions to copyright laws. Congress has passed extremely narrow copyright exclusions for personal use as well.

Without testing specific ideas about fair use or copyright scope in court, there's no sure way to know whether your particular software program, Web site, tweet, or steampunk-based laser decrypter isn't in violation. When the MPAA or a studio sues you, you could potentially plow through millions of dollars with no idea of the outcome.

You can always be sued, but you want to make sure that you have some basis on which to defend yourself, especially if the law and court decisions firmly back you up.

As BoingBoing recently reported about its battle with MagicJack, a group without crazily deep pockets can win and recover costs when it has a strong idea it is in the right. (BoingBoing benefitted from the California strategic lawsuit against public participation or SLAPP, which wouldn't apply to software and hardware.)

That what was made the RealDVD suits so exciting, because Real has hundreds of millions of dollars in the bank, and had a pugnacious CEO, Rob Glaser. Glaser faced down Microsoft over unfair competition and got nearly $800 million from the Windows maker. (Glaser was forced out as head of Real a few weeks ago, although he intended to move on after an executive search; he remains chairman of the board and owns nearly 40 percent of the firm.)

Even better, Real wasn't promoting piracy, or the broad right to rip DVDs into an unprotected format and then move them onto all kinds of devices for playback. RealDVD was very very narrow in purpose: can individuals buy software that converts one kind of protected content on a specific physical medium into another, with even stronger encryption?

Back in 2002, I joined a model lawsuit brought by the Electronic Frontier Foundation, what became known as Newmark v Turner (after Craig Newmark of craigslist, one of four other co-plaintiffs). The EFF wanted Newmark v to be joined to a lawsuit originated in 2001 by 28 movie studios, TV production firms, and cable operators against SonicBlue, which made ReplayTV, a digital video recorder that was at one point mildly superior to TiVo.

You may recall the ReplayTV suit, which begat the statement in a magazine interview from then chief executive of Turner Broadcasting that skipping ads was "theft," and that not watching ads was breaking a contract. He said, "There's a certain amount of tolerance for going to the bathroom." The industry later tried to backpedal from these statements.

Our suit was a way to try to establish that consumers had rights in this fight among firms: that time-shifting (recording for later consumption) and space-shifting (moving among devices under our control for personal use) were perfectly acceptable, and that we were in danger of losing such rights. Ad skipping was also part of the suit.

Remarkably, a judge agreed to join us in the fight, to the surprise, we think, of the 28 media firms. That would have been ugly had we gone to trial. We faced some potential (though unlikely) penalties were it to be proved that we had violated copyright in our efforts to establish we had used media fairly.

The media firms had a big problem, though, in that it would have been an ugly public-relations battle to try to paint Craig Newmark, your humble reporter, and three other mild-mannered individuals as horrible scofflaws.

Had we won, we would have enshrined a judicial opinion that would have perhaps emboldened consumer-electronics firms and software makers to create products that put much more control over recorded programs in the hands of consumers.

Instead, SonicBlue went bankrupt and sold its assets to another firm that removed the features in question in 2003. The media firms then dismissed their lawsuit against the companies involved.

Here's where it gets interesting. I had completely forgotten until researching the case to write this editorial that the 28 firms gave Craig, me, and our three fellow plaintiffs a "covenant not to sue" for the acts in question. That essentially nullified the suit because we had no more fear of litigation. (The EFF tried to get the same rights for all ReplayTV owners, just 5,000 people, but failed when the judge wouldn't move the case into class-action status.)

So we are copyright superheroes, with the ability to advance ads in a single click, shift content among hardware, and watch at our leisure! Behold us, and despair, for you will not see our like again.

RealNetworks needs to work with studios, so it settled and paid less than 1 percent of its still-giant cash hoard–last year, the company's cash was of greater value than its market capitalization for several months–to be able to move forward on content licensing.

I can understand why they did it, but it resembles the Google Book Settlement, a massive effort by Google to get a special judicial and settlement right to not be sued for selling works to which the owner cannot be found and to which it does not have assigned rights (so-called orphan works).

If Google succeeds, then no other firm will go through the expensive litigation that allowed Google to reach the point where it can settle and win in cooperation with the Authors Guild and the Association of American Publishers. Google will have a de facto monopoly.

It's unlikely that any other firm with the resources to challenge the media industry will release software or hardware that would allow DVD conversion in a manner that a court could find legal. Real was the last, great hope, because any other similar firm already has multi-million to multi-billion-dollar deals in play. Apple, Microsoft, and others aren't going to release anything that jeopardizes how they work with giant copyright holders.

That leads to the conclusion that in order to make legal copies, you are obliged to be a pirate. Media companies' failure to accommodate the notion that people may have legitimate purposes for making digital copies for their own use dooms them to eternal piracy.

We're all screwed. Well, I'm not, probably. But you are.

(Disclosure: About a decade ago, a company I helped incubate was bought by RealNetworks, and I received a modest amount of stock, long since sold.)