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Real Networks rolls over to Hollywood

Will kill RealDVD, pay $4.5m

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RealNetworks has agreed to destroy all traces of its short-lived DVD-duplicating software, RealDVD, to appease the Hollywood heads that brought legal action against it.

As part of a settlement filed Wednesday in a California court, the company will also cough up $4.5m in legal fees to the six movie studios, Viacom, and the DVD Copy Control Association, who claimed RealDVD software violates US copyright law.

The pact effectively ends a legal battle lasting nearly 17 months. It began the same day Real released the DVD copying software in 2008.

Real had argued that consumers have the right to create backup copies of their DVDs under US copyright law's recognition of the doctrine of fair use. RealDVD software copies DVD files to a hard drive with decryption keys in place.

But movie studios and others claimed the software is illegal under the US Digital Millennium Copyright Act (DMCA) of 1998 because RealDVD must circumvent technology designed to prevent unauthorized copying of copyrighted work.

"Almost from the moment this product was introduced, it was clear RealDVD violated the [Content Scramble System] license," said Jacob Pak, President of the DVD CCA in a statement. "Now, after months of arguments from both sides, the legal message is clear: making a DVD copier is a breach of the CSS license."

Although relatively respectful to decryption keys compared to other DVD copying software, RealNetworks clearly had a notion its product would rouse the legal dogs of Hollywood. On the day of RealDVD's release in September 2008, Real preemptively filed a lawsuit seeking a declaratory judgment that the software was legal. That was immediately followed by movie studios countering with their own lawsuit aimed at banning the product.

In August 2009, the court granted the studios' request for a preliminary block on RealDVD. Real then took an unusual step of revising its complaint to argue that Hollywood's collective scheme to block the software amounted to a "cartel" in violation to US anti-competition laws.

But US district judge Marilyn Patel dismissed Real's antitrust claims, ruling that any financial injury suffered from the injunction was due to "its own decision to manufacture and traffic in a device that is almost certainly illegal under the DMCA".

With the court clearly against it, Real seemed to have little choice but to settle or lose the case.

Under the agreement between Real and Hollywood, the company agreed to end support for RealDVD and will not sell, advertise, or duplicate any more software that provides unauthorized access to copyrighted content under various DRM technologies such as CSS and RipGuard. It is also forbidden to transfer any RealDVD intellectual property or know-how to third parties.

Real also said it will "render inoperable" any software or hardware copies of RealDVD in the possession of Real and its employees.

"We are pleased to put this litigation behind us," said a mollified Bob Kimball, president and acting CEO for Real in a statement. "This is another step toward fulfilling our commitment to simplify our company and focus on our core business. Until this dispute, Real had always enjoyed a productive working relationship with Hollywood."

Kimball added that the company will turn off the metadata service that provides DVD cover art and movie information to owners of RealDVD, and it's in the process of refunding the purchase price of the product to customers. ®

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