RealNetworks, Inc., et al. v. DVD Copy Control Association, Inc., et al., USDC N.D. California, March 8, 2010

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RealNetworks settles with major motion picture studios and DVD CCA over its RealDVD software and agrees to have distribution of its software enjoined. RealNetworks, Inc. and RealNetworks Home Entertainment, Inc. reached a settlement with Paramount Pictures Corporation, Twentieth Century Fox Film Corporation, Universal City Studios Productions LLLP, Universal City Studios LLLP, Warner Bros. Entertainment Inc., Disney Enterprises, Inc., Walt Disney Pictures, Sony Pictures Television Inc., Sony Pictures Entertainment Inc., Columbia Pictures Industries, Inc., NBC Universal, Inc., Viacom Inc., and the DVD Copy Control Association, Inc.

RealNetworks developed software called RealDVD that allowed users to copy CSS-protected DVDs to a hard drive. CSS (Content Scramble System) is anti-piracy technology used on many entertainment DVDs and is licensed by the DVD Copy Control Association (DVD CCA), a non-profit corporation made up of motion picture studios, consumer electronics companies and computer companies. DVD CCA licenses CSS technology to manufacturers of DVD devices and software. A CSS license is required to play back CSS-protected DVDs; CSS licensees are prohibited from producing or selling devices that circumvent CSS technology.

RealNetworks obtained a CSS license from DVD CCA and launched its RealDVD player on September 30, 2008. On the same day, RealNetworks filed a declaratory action in the Northern District of California against DVD CCA and several motion picture studios seeking a judgment that it had not violated the Digital Millennium Copyright Act (DMCA) or breached the CSS license. Also that day, several motion picture studios filed an action in the Central District of California, alleging that RealNetworks did, in fact, breach the CSS license agreement and violated the anti-circumvention measures of the DMCA. On October 14, 2008, that suit was formally transferred to the Northern District of California, and shortly thereafter related to RealNetworks’s declaratory judgment action. Also in October 2008, the court granted defendants’ request for a temporary restraining order, preventing the distribution or sale of RealDVD.

In May 2009, the court imposed monetary sanctions against RealNetworks for spoliation of evidence and denied RealNetworks’s motion to dismiss the studio defendants’ counter-claim for breach of implied covenant of good faith and fair dealing.

In August 2009, the court granted the defendants’ motion for a preliminary injunction barring RealNetworks from manufacturing and distributing its RealDVD software. The court held that DVD CCA and the motion picture studios were likely to succeed on their counter-claims for breach of contract and violation of the anti-circumvention provisions of the DMCA, and that the fair use defense is not available for these DMCA claims.

In January 2010, the court granted the motion picture studios’ motion to dismiss RealNetworks’s antitrust claims arising from the studios’ refusal to license RealNetworks’s product. The court held that RealNetworks lacked standing to plead an antitrust claim because it failed to prove that it suffered an anticompetitive injury and failed to plead a plausible antitrust conspiracy.

In March 2010, the parties reached a settlement. The court entered a consent judgment and permanent injunction enjoining RealNetworks from, among other things, manufacturing, importing, marketing, and selling its ReaIDVD product, or any other technology, product, service, or device that enables or is designed to facilitate copying or unauthorized access to copyrighted content protected by CSS, ARccOS, or RipGuard. The court also ordered RealNetworks to render inoperable any software or hardware copies of ReaIDVD in its possession, custody or control. While not in the content judgment, it was reported by Law.com that, RealNetworks also agreed to pay the motion picture studios $4.5 million to cover attorney’s fees and costs associated with the litigation.