RealNetworks expands lawsuit against studios

PHYSICAL: Accuses violation of antitrust laws

By Jennifer Netherby -- Video Business, 5/14/2009

MAY 14 | PHYSICAL: RealNetworks is stepping up its battle against the major studios as it fights to save its RealDVD copying software.

Calling the six major studios and the DVD Copy Control Assn. an “illegal cartel,” Real filed an amended lawsuit charging them with violating antitrust laws by joining together to prevent consumers from making a “fair use” copy of their DVDs.

The new complaint comes just as Judge Marilyn Hall Patel is set to rule on the legality of the DVD ripping software RealDVD and Facet, a hardware device in development by Real that copies movies from DVDs for later playback. The studios claim both products violate the Digital Millennium Copyright Act by circumventing CSS copy protection on DVDs. Real claims both products allow consumers to backup copies of movies from DVDs they own, while keeping copy protection in place.

Closing arguments in the preliminary injunction hearing are set for May 21.

Now Real is asking the court to consider its new complaint, writing in the filing that in preparing for the hearing, it became aware that the studios and DVD CCA engaged in “a horizontal group boycott of RealNetworks.”

Glenn Pomerantz, a lawyer respresenting the MPAA in the case, issued a statement by e-mail Thursday calling the filing an "attempt to distract attention away from the issue of RealNetworks’ misconduct and the injunction issue pending before the Court." The statement also said that while the studios haven't been able to fully review the new allegations, it believes them to be based on factual and legal errors.

The DVD CCA is the licensing body for CSS, the copy protection used on commercial DVDs. Real has a CSS license, but the studios and DVD CCA claim that it only allows the company to make DVD products, not products that rip movies from the disc.

Real charges the studios and DVD CCA conspired to prevent competitors from making and selling products that allow consumers to make fair use copies of DVDs they own, violating the Sherman Antitrust Act, the California Cartwright Act and the California Unfair Competition Law. Real also charges that the studios “agreed amongst themselves to refuse to enter into individual licenses with Real unless the entire group of studios consented,” the company said in a statement. “Without this illegal cartel, Real and others would be able to compete to provide consumers with products to enable them to gain more value from their DVDs, without having to pay again to make a fair-use copy of the DVDs they had already purchased.”

Real is asking for an injunction to stop studio antitrust practices and monetary damages for lost business.

Real claims that the studios' efforts to eliminate RealDVD and Facet “deprive consumers” of the ability to make fair-use copies of their movies, according to the complaint.

The legal filing comes as RealNetworks continues to develop Facet, which CEO Rob Glaser has hyped as “the successor to the DVD player,” which could be available within months. RealNetworks spokesman Bill Hankes told VB last week that Facet is “entirely dependent upon the judge’s ruling” in the RealDVD case.

At the same time, the legal bill to defend RealDVD and Facet is growing. The company said during a first-quarter earnings conference call that it spent $6 million on legal fees in the first quarter. Last week, the judge imposed monetary sanctions on Real for destroying evidence in the case.