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Court to RealNetworks: MPAA is not a ‘Price-Fixing Cartel’

RealNetworks claimed Hollywood studios and DVD CCA violated antitrust laws when they prevented the sale of products like RealDVD that enable fair-use copying of DVDs


Julie Jacobson · January 12, 2010

RealNetworks, whose RealDVD ripping software has so far been deemed illegal, recently lost an antitrust claim against the studios.

In May 2009, RealNetworks filed a claim against the Motion Pictures Association of America (MPAA), the organization that initially sued to keep RealDVD off the market.

Real argued that the MPAA, which represents Hollywood studios, illegally conspired with the studios to craft the Content Scramble System (CSS) licensing agreement – an agreement that prohibits the sale of products that facilitate fair-use copying of encrypted DVDs.

Also named in the antitrust suit was the DVD Copy Control Association (DVD CCA), which licenses the CSS code.

Under the aegis of the MPAA and DVD CCA, the studios are a “price-fixing cartel,” Real claimed.

Judge Marilyn Hall Patel on Friday struck down that argument, according to Wired:

“Real’s purported injury stems from its own decision to manufacture and traffic in a device that is almost certainly illegal under the DMCA [Digital Millennium Copyright Act],” Patel wrote.

In other words, Real’s injury was a result of its own wrongdoings – circumventing CSS technology—not from illegal cartel activity among the Hollywood set.

For that reason, Patel did not need to decide whether the studios do in fact violate antitrust laws.

First Antitrust Claim Against Studios

RealNetworks is the first organization to attack the studios on antitrust claims.

We argued about five years ago – when the DVD CCA sued media server manufacturer Kaleidescape – that the organization was an “innovation stifling cartel” for other reasons: It used the CSS licensing scheme to protect an unknown group of decision-making board members against small innovators such as Kaleidescape:

So what do you think happens when one of the common members of the DVD CCA launches a new product category, say, video servers? The six competitors on the board, who don’t offer video servers of their own, can nix the idea and put the innovator out of business.

“If you want to innovate in that market space, you have to get permission from your competitors,” says Fred von Lohmann, a staff attorney for the Electronic Frontier Foundation, a nonprofit defender of digital rights. “They’ll say, ‘We’ll give you that capability, but we’ll do it on our own time, in our own way. The Kaleidescapes of the world aren’t invited.’ They [the DVD CCA] want to eliminate this entire category until their members are ready to enter the segment with the next generation of their cartel-approved solution.” …

But a legal challenge, it seems, could only come from an antitrust complaint. Indeed, says von Lohmann, “From the beginning, there have been antitrust concerns because of the obvious cartel structure of the DVD CCA, but it’s all cloaked in ‘protecting copyright owners from piracy.’ Some anti-competitive behavior has to be tolerated.”

Antitrust suits are “incredibly expensive to mount,” says von Lohmann. “I think the DVD CCA is taking the view that nobody out there has the money… The people that have the money are in the club!”

RealNetworks had the money, but lost round one of the antitrust battle.

In the meantime, RealNetworks is appealing Judge Patel’s ruling last year that prevents the company from selling RealDVD.

That decision is not expected for at least a year.

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  About the Author

Julie Jacobson is founding editor of CE Pro, the leading media brand for the home-technology channel. She has covered the smart-home industry since 1994, long before there was much of an Internet, let alone an Internet of things. Currently she studies, speaks, writes and rabble-rouses in the areas of home automation, security, networked A/V, wellness-related technology, biophilic design, and the business of home technology. Julie majored in Economics at the University of Michigan, spent a year abroad at Cambridge University, and earned an MBA from the University of Texas at Austin. She is a recipient of the annual CTA TechHome Leadership Award, and a CEDIA Fellows honoree. A washed-up Ultimate Frisbee player, Julie currently resides in San Antonio, Texas and sometimes St. Paul, Minn. Follow on Twitter: @juliejacobson Email Julie at julie.jacobson@emeraldexpo.com

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  Article Topics


News · DRM · DVD CCA · Fair Use · Kaleidescape · MPAA · RealDVD · All Topics
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