A legal fight erupted Tuesday over the ability of consumers to copy DVDs onto their computers, setting the stage for a new battle between Hollywood and a purveyor of technology that could alter how consumers watch movies at home.
The six major Hollywood movie studios sued Seattle-based RealNetworks, asking a federal court in Los Angeles to bar the digital media company from distributing new software that they say lets consumers copy movies illegally.
RealNetworks also took legal action, asking a court to declare that the company's new RealDVD software program, which went on sale Tuesday, was legal and complied with the DVD Copy Control Assn.'s license agreement.
Whether consumers are clamoring for a technology that gives them the ability to copy movies they might otherwise rent is unclear. But the man behind the push, RealNetworks Chief Executive Rob Glaser, is no stranger to rattling the cages of behemoths.
The volatile Glaser took on software nemesis Microsoft Corp. and won a $760-million settlement; he later invited the ire of Apple Inc. CEO Steve Jobs with a technical work-around that evaded the iTunes copy protection. Indeed, Glaser's company has engaged in at least half a dozen high-profile legal battles over the last decade.
So it's no surprise that Glaser was willing to take on all of Hollywood over a new software product that -- if it survives the legal challenge from the studios -- would make it legal for consumers to rip their DVD movies. It's a gamble he's eager to take, say industry observers, because it would position RealNetworks to capitalize on what it hopes will be a popular consumer product.
"Great products should not be bullied out of the market by people trying to misuse the law to suppress legitimate innovation," Glaser wrote in an online statement outlining his reasons for launching the RealDVD software Tuesday despite the legal challenges. In a separate interview, Glaser said he had been in negotiations "into the wee hours of the night" and hoped to eventually reach an agreement with the studios.
"I wouldn't want it be characterized that we look for trouble," Glaser said.
Knowing the studio suit was imminent, RealNetworks preemptively filed a complaint in federal district court in San Jose on Tuesday, asking that its right to make and sell the RealDVD software be affirmed. Its legal argument leans heavily on the 2007 outcome of a case involving Kaleidescape, a maker of home media servers, which had been sued by the DVD Copy Control Assn. because DVDs could be copied onto the device's hard drive.
Kaleidescape won the case on a technicality, and it is now under appeal. Glaser nonetheless seized on that ruling and the "poor-man's Kaleidescape" was born -- RealNetworks RealDVD.
The software, sold for $29.99, lets consumers copy a DVD movie onto their computer's hard drive much as they have ripped music off CDs for more than a decade. RealNetworks says the copies are encrypted so files can't be "shared."
The studios' suit seeks a temporary restraining order to block distribution of RealDVD. Studio attorneys argue that the software illegally bypasses the copy protection built into DVDs to protect movies against theft, in violation of federal copyright laws.
The studios warned that the software would enable a practice of "rent, rip and return," in which consumers build a digital movie library on films they've rented at Blockbuster or Netflix, at a fraction of the price of buying the DVDs.
Moreover, it threatens to deal "a potentially fatal blow" to efforts by the studios and their technology partners -- Apple's iTunes, Amazon.com and others -- to offer legitimate ways for consumers to get digital copies of movies onto their computers or portable players. Twentieth Century Fox and other studios have even begun offering digital copies of films in the same package as its DVD and Blu-ray movies.
"RealNetworks' RealDVD should be called StealDVD," said Greg Goeckner, general counsel for the Motion Picture Assn. of America, the industry trade group.
Stanford law professor Mark A. Lemley, who worked on the Kaleidescape case, said the dispute may ultimately hinge on the language of the license RealNetworks obtained from the DVD Copy Control Assn.
"If Real has a legitimate license to do this under the contract, the circumvention claim goes away, because they're not cracking the encryption system," Lemley said. "They've been given the keys and authorized to do it."
RealNetworks, an early innovator in Internet streaming technology, is in search of something to give its digital entertainment business some spark after reporting a loss in its most recent quarter.
Josh Martin, a digital media analyst with researcher Yankee Group, said RealNetworks has become marginalized in other facets of online entertainment. Its music subscription service, Rhapsody, ranks third behind Apple's dominant iTunes store and the even the struggling Napster service. And the fast-growing online movie distribution market is already crowded, with offerings from Apple, Netflix, Amazon and others.
The introduction of DVD copying software, previously the province of the underground pirate community, is one way to capture consumers' attention.
"Rather than launch a 'me too' this or 'me too' that, we thought there was an interesting opportunity that goes beyond what any mainstream product does today, in a way that we believe is fully legitimate," Glaser said.