Hollywood Sues Maker of DVD X Copy

Call it "Hollywood Strikes Back: Episode II."

The Motion Picture Association of America is countersuing Missouri software firm 321 Studios, alleging that the company's DVD-copying software violates anti-copying laws.

The movie industry trade group seeks to prohibit the sale of 321 Studios' software titles DVD X Copy and DVD Copy Plus. It also wants any profits from sales as recovery of damages. 321 Studios says it has sold a total of 150,000 copies of the two software titles.

321 Studios insists that its software does not violate the Digital Millennium Copyright Act, which outlaws providing information or tools to circumvent copy-control technology, such as the Contents Scramble System used on DVD media.

"We have long said we wanted to work with the MPAA to open a dialogue about protecting both copyrights and a consumer's right to fair use," says Elizabeth Sedlock, 321 Studios spokesperson.

The case is the latest to thrust the DMCA into the legal limelight. On Tuesday, a jury acquitted a Russian software company charged with violating the DMCA.

The 321 Studios case underscores the polarization between copyright holders, who seek to prevent a wholesale rip-off of their intellectual property, and fair-use advocates, who argue that copy protection as outlined in the DMCA is too restrictive.

David Sues Goliath

The legal tussle between Hollywood and 321 Studios dates back to April 2002, when the firm, worried it would be sued by Hollywood, preemptively filed suit in a San Francisco court against the MPAA. The company asked the judge to declare that its initial program, DVD Copy Plus, does not violate the DMCA.

The $50 DVD Copy Plus software lets you make lesser-quality copies of DVD movies on CD-ROM discs that can be played back on a DVD player. The company maintains that it is a consumer's fair-use right to make a backup copy of a DVD that is legally owned.

321 Studios upped the ante in November when it released DVD X Copy, a $99 program that is the first to let users create a mirror image of an entire DVD on a second blank DVD. The copy even includes menus, special features, and enhanced audio.

The company claims that DVD X Copy doesn't actually break the CSS on commercial DVDs. Instead, the program intercepts the video and audio stream after a DVD player has decrypted the disc's CSS code in order to show the movie. Because the program intercepts the signal after decryption but before the video is rendered, it doesn't run afoul of the DMCA, according to 321 Studios' Sedlock.

New DMCA Challenge

If indeed DVD X Copy manages to copy a DVD without breaking CSS, it may present "an interesting legal challenge" for anyone who argues that DVD X Copy violates the DMCA, says copyright law expert Evan Cox, a partner in the Covington and Burling law firm in San Francisco.

But the MPAA, which consists of nine Hollywood studios--including MGM, Sony, and Time Warner Entertainment--insists that 321 Studios violates the DMCA.

"There is no question in our mind that 321 Studios' products violate the DMCA," says Marta Grutka, MPAA spokesperson.

Sedlock says it hopes the MPAA's legal action leads to a more open conversation between 321 Studios and the MPAA.

"We have been trying to work with MPAA on a way we can both protect copyrights," Sedlock says. She adds that the only dialogue the MPAA has entertained with the firm has been in a courtroom.

The next round of legal challenges will make its way to court in the spring of 2003, Cox says. In the interim, 321 Studios is free to sell its software.