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RealNetworks RealDVD Bites the Dust

The DVD Copy Control Association (DVD CCA) announced that RealNetworks, Inc. must permanently halt the manufacture and sale of RealDVD under a ‘stipulated consent judgment and permanent injunction’ approved by Judge Marilyn Hall Patel of the United States District Court, Northern District of California.

According to the statement, the order ends nearly a year and a half of legal action, during which the DVD Copy Control Association (DVD CCA) and the major motion picture studios successfully argued RealDVD violated the Content Scramble System (CSS) license agreement and made illegal permanent copies of copy-protected DVDs.

A temporary injunction stopping sales of RealDVD was imposed in September 2008, shortly after the product was introduced. At that time, DVD CCA and the studios alleged the product (which made permanent playable copies of DVD-Video discs) failed to comply with copy protection requirements to which RealNetworks had contractually agreed. This order permanently prohibits RealNetworks from, among other things, “manufacturing, importing, marketing, offering to the public, providing or otherwise trafficking in RealDVD.”

“Almost from the moment this product was introduced, it was clear RealDVD violated the CSS license,” said Jacob Pak, President of DVD CCA. “Now, after months of arguments from both sides, the legal message is clear: making a DVD copier is a breach of the CSS license. This case demonstrates how important it is to uphold legal agreements that are essential to fostering and maintaining a vibrant competitive industry.”

“We would always prefer to focus our efforts on working with licensees on the development of new or improved DVD products for consumers and our industry,” added Mr. Pak. “But such a cooperative approach requires licensees to respect the CSS license and its amendment process, which did not occur in this case. The CSS license, which allows licensees to develop and manufacture compatible products under common specifications and at low cost, enabled the birth and growth of a robust DVD industry, benefiting consumers and technology companies as well as those companies whose high-quality entertainment is protected on DVDs.”

In its own statement,  RealNetworks announced that it has settled lawsuits with the six major Hollywood movie studios, Viacom Inc., and the DVD Copy Control Association related to Real’s RealDVD product.

As part of the settlement, RealNetworks will withdraw its pending appeal of the District Court’s preliminary injunction.  The parties have agreed to the terms of a permanent injunction that will prohibit RealNetworks from distributing or supporting RealDVD or any other technology that enables the duplication of copyrighted content protected by the Content Scramble System, ARccOS, or RipGuard.  The parties agreed that the injunction resolves all open issues in the case.  Real agreed to pay the studios $4.5 million for their costs and fees in connection with the litigation.

Real will turn off the metadata service that provides DVD cover art and movie information, for the approximately 2,700 existing RealDVD customers, and the company is in the process of refunding the purchase price of the product to these customers.

“We are pleased to put this litigation behind us,” said Bob Kimball, president and acting CEO for Real. “This is another step toward fulfilling our commitment to simplify our company and focus on our core businesses.  Until this dispute, Real had always enjoyed a productive working relationship with Hollywood.  With this litigation resolved, I hope that in the future we can find mutually beneficial ways to use Real technology to bring Hollywood’s great work to consumers.”

Real’s payment obligation under the settlement agreement will be reflected in its consolidated financial results for the quarter and year ended December 31, 2009, which the company will include in a Form 8-K to be furnished to the Securities and Exchange Commission.

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