RealNetworks is upping the ante in litigation seeking to prevent it from distributing DVD-copying software. The company argues the Hollywood studios are a "price-fixing cartel" that have no right to prevent consumers from duplicating the movie discs.

The Seattle-based electronics concern is making the argument in a bid to convince a federal judge to lift the distribution ban of its RealDVD software (.pdf) that allows consumers to make copies of the discs to their computer hard drives. The Motion Picture Association of America, which represents Hollywood studios, and others, sued RealNetworks last year, claiming the software is illegal because it circumvents technology designed to prevent copying.

But RealNetworks, in counterclaims filed late Wednesday, maintains that the studios, as a collective, have illegally crafted a licensing scheme called the Content Scramble System licensing agreement that prevents the fair-use copying of DVDs. It is the first time the studios, in conjunction with the DVD Copy Control Association (which licenses the CSS code) have been accused of anti-trust practices in a lawsuit.

The CSS code is licensed to DVD-player manufacturers so electronic companies can acquire the keys to unscramble Hollywood's encrypted DVDs. The code is designed to prevent unauthorized copying of movie discs.

"The CSS agreement is being used to extend a legally granted monopoly over content into separate markets – to prevent competition from technologies that would allow a copy of content for fair use purposes. But making the making of a copy of a studio DVD is authorized fair use under the Copyright Act," RealNetworks wrote U.S. District Judge Marilyn Hall Patel in a court filing.

That said, RealNetworks has gargantuan legal hurdles to clear before it can prevail on its claim, which includes allegations the companies colluded against RealNetworks to banish its DVD-copying software.

For starters, RealNetworks' argument that consumers have a "fair use" right to make copies of their DVDs for personal use is a claim the federal courts have never embraced. The reason is the 10-year-old Digital Millennium Copyright Act, which clearly bans circumventing encryption technology designed to prevent copying.

Hence, for good or bad, fair use is not a part of the legal equation, at least as far as the DMCA is concerned. RealNetworks, however, maintains the DMCA does not apply because the company is not circumventing technology. It claims the CSS license it acquired allows for copying DVDs – an issue at the center of the case and a proposition the studios staunchly reject.

What's more, it's possible the so-called cartel of studios is immunized from anti-trust allegations under what is known as the Noerr-Pennington doctrine, where the Supreme Court has said that competitors (in this instance the studios) have the First Amendment right to band together to advocate for their interests. Without such immunity, there likely wouldn't be trade associations, according to Los Angeles copyright attorney Ben Sheffner, who writes the must-read Copyrights & Campaigns blog,

"In the RealDVD case, I expect one of the studios' defenses (though certainly not their only defense) will be that, to the extent that they cooperated or made any agreements regarding copyright enforcement, such cooperation or agreements are immunized under N-P as legitimate anti-piracy activities," Sheffner said in an e-mail. "I also expect them to argue strenuously that – contrary to what Real alleges – there was no agreement among them not to deal with Real."

Fred von Lohmann, a copyright attorney with the Electronic Frontier Foundation, agreed that "this will be one of their arguments. But whether the court will buy it is another."

The studios said RealNetworks' counterclaims are a ploy.

"While we have not yet had a chance to examine RealNetworks' new antitrust allegations fully, they appear to be based on significant factual and legal errors, and an attempt to distract attention away from the issue of RealNetworks’ misconduct and the injunction issue pending before the court," Glenn Pomerantz, an MPAA attorney, said in an e-mail.

Patel, the judge in the case, also presided over the Napster trial. Anti-trust issues raised in that case went by the wayside. Among them were allegations that the record labels colluded to delay the sale of digital audio files to extract more money from music fans. The theory was that the music industry didn't quickly adopt digital sales because it wanted to sell CDs, thus forcing consumers to pay for an entire CD instead of individual – and cheaper – digital songs.

But let's assume RealNetworks prevails on its anti-trust claims, that the CSS licensing agreement should be null and void. Would consumers be better off? They might not unless the DMCA is changed.

If the DMCA is left intact, the individual studios – even if barred from being a collective – would still encrypt their DVDs to prevent copying. The DMCA would still make it unlawful to circumvent encryption technology designed to prevent copying.

A likely result would be that the studios might each encrypt their DVDs differently. That might result in consumers having to purchase several DVD-playing machines to unscramble discs from different studios.

So even if RealNetworks is right on the anti-trust issues, it does not necessarily result in the company being able to market its DVD-copying software. Instead, RealNetworks should lobby to change the DMCA.

Photo: john_a_ward

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