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Press Release

    Fair Use or No Use?

    Last fall, RealNetworks launched a new product, RealDVD, allowing users to legally save a copy of any DVD that they own. However, in what appears to be an ongoing war with consumers, the motion picture studios—including Disney, Paramount, Sony, Twentieth Century Fox, Warner Bros., and Viacom—have filed a lawsuit against RealNetworks to have the new product banned. Within a week of its unveiling, the studios had a temporary restraining order in place, removing the product from the market.

    Last fall, RealNetworks launched a new product, RealDVD, allowing users to legally save a copy of any DVD that they own. However, in what appears to be an ongoing war with consumers, the motion picture studios—including Disney, Paramount, Sony, Twentieth Century Fox, Warner Bros., and Viacom—have filed a lawsuit against RealNetworks to have the new product banned. Within a week of its unveiling, the studios had a temporary restraining order in place, removing the product from the market. Closing arguments were heard today in San Francisco, and if the studios have their way, RealDVD and all products like it will be banished from the market. As the Motion Picture Association of America stated during today’s closing arguments, there is no fair use when it comes to DVDs: “One copy is a violation of the DMCA.”

    The outcome of this legal scuffle will obviously determine the viability of RealDVD in the marketplace. But for consumers, the case may be far more significant, determining whether they have a right to copy DVDs they have legally purchased. Hollywood is alleging that RealDVD violates the anti-circumvention provisions of the Digital Millennium Copyright Act (DMCA). These provisions state that any action seeking to override the copy protections that copyright owners embed in their products is illegal. But these allegations fall flat when it comes to RealDVD, which does not remove existing encryption, and actually adds another layer on top to lock the copy to one specific hard drive.

    RealDVD was designed to comply with existing standards and DRM requirements, unlike the multitude of readily available illegal software that specifically targets and removes encryption. In fact, RealNetworks licenses the encryption software from the DVD Copy Control Association (DVD CCA), just as a hardware manufacturer producing DVD players would. Because RealDVD legally acquired a license and does not allow the distribution of DVDs, there is no circumvention, and there is no violation of the DMCA.

    This point was made clear in 2007 when the courts ruled that Kaleidescape—a high-end home media server that allows consumers to store their DVDs on one drive for use throughout their homes—was a legitimate product. Like RealDVD, Kaleidescape acquired a license from the DVD Copy Control Association to ensure compliance with DRM requirements. More importantly, Kaleidescape was challenged on breach of contract terms, not circumvention. Fortunately, the judge in that case ruled there was no breach of contract, as the license had no requirement that a DVD be present for playback.

    Perhaps to avoid this more sensible approach and another defeat in the courtroom, the studios are attempting to frame RealDVD as a case of circumvention rather than breach of contract. But that is a weak reed, indeed, given that RealDVD has not removed any encryption and has a valid license from the DVD CCA. No court has ever ruled that a licensee’s use of the product that it has licensed is a circumvention of the DMCA. The parties involved have entered a contract, and if disputes arise they should be settled by examining the terms of the contract. Accusing a company of circumvention after first providing them a license is akin to a hotel accusing a registered guest of trespass.

    In a world where new technology has increased the potential for copyright infringements, content providers worked to pass the DMCA, which criminalized anti-circumvention activities. The DMCA’s impact has been significant, but not in ways that benefit consumers or reduce illegal reproductions of copyrighted materials. With respect to piracy, it has been virtually useless. While an impediment to the average consumer, anyone seeking to illegally reproduce and distribute copyrighted materials can easily bypass DRM protections. Piracy of both recordings and motion pictures have increased in the wake of the DMCA’s passage and there are numerous DVD rippers available for illegal copying.

    The tensions between fair use doctrine and the DMCA have been mounting and the case against RealDVD is just the most recent clash in the struggle. But importantly, the movie studios seem more intent upon controlling technology—and the revenues that a monopoly provider enjoys—rather than protecting content with this case. If, in fact, the court rules against RealDVD, the DMCA will figure much more prominently in our lives, much to the detriment of fair use, innovation, and competition.