Wednesday, May 13, 2009

RealNetworks asserts antitrust claims against studios; claims CSS license is vehicle for group boycott

Press reports suggest that things are going pretty well for the major movie studios in their effort to convince federal judge Marilyn Hall Patel to enjoin the sale of RealNetworks' RealDVD ripping software. But Real isn't waiting for a ruling to hit back -- hard -- against the studios and the DVDCCA. Real is now seeking to broaden the case considerably and put its opponents on the defensive, charging that the studios violated federal and state antitrust law by allegedly engaging in a prohibited group boycott against Real.

Real's theory is that the studios agreed among themselves that none of them would enter into licenses with Real to allow their movies to be transferred to users' computers through RealDVD. Charges Real:
48. Any individual Studio could have decided not to enter into an agreement with RealNetworks and to sue to prevent its customers from using RealDVD to make copies of that Studio’s titles. Doing so individually, however, risked the possibility that another Studio might reach an agreement with RealNetworks to promote its titles in connection with the release of apopular new product. The litigating Studio then would face what could be a legal and public relations nightmare.

49. The Studio Defendants agreed that they would claim that they cannot enter into individual agreements with RealNetworks – in other words, they agreed collectively not to deal with RealNetworks. So, for example, they claim that, because of the CSS Agreement, Paramount cannot grant a license to make an archival copy of its own Iron Man DVD without the permission of Fox, Disney, and the rest. This is a horizontal group boycott, and it is a horizontal group boycott even though the Studios in fact have no right to grant or withhold authority to make fair use copies and RealNetworks does not need their consent.
RealNetworks Proposed Second Amended Complaint
Real's antitrust allegations put before the court a number of difficult legal issues that are of vital importance to the studios, most prominently: 1) the extent to which the studios are protected by the Noerr-Pennington doctrine in their anti-piracy and related activities; and 2) whether a consumer has a fair use "right" to copy a DVD to his computer or other device.

Procedurally, things are a bit complicated. Real directly filed its counterclaims against the DVDCCA, but is required to seek leave of the court to file its proposed Second Amended Complaint against the studios. Today's filings by Real should not have any direct effect on the ongoing preliminary injunction hearing; testimony has concluded, and closing arguments are set for May 21. But Real's new allegations almost certainly mean that the case is far from over.

(h/t NY Times)

UPDATE: The studios have issued the following statement through their outside counsel:
Last evening, RealNetworks served the motion picture studios with a motion to add antitrust claims to the lawsuit filed over six months ago to stop RealNetworks from distributing its illegal DVD-copying product. The Court is scheduled to take the studios’ request for a preliminary injunction under consideration one week from today. While we have not yet had a chance to examine RealNetworks’ new antitrust allegations fully, they appear to be based on significant factual and legal errors, and to be an attempt to distract attention away from the issue of RealNetworks’ misconduct and the injunction issue pending before the Court.

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