Most DVDs contain anti-copying software, known as CSS, or Content Scrambling System, which prevents them from being copied, except by players containing the correct encryption keys. 321 Studios developed software, incorporated in products called DVD Copy Plus and DVD-X COPY, that "ripped" the CSS, allowing the copying of the DVD.
Recognising that circumvention of the copy protection was not likely to be welcomed by the industry, 321 Studios took pre-emptive action in April 2002, filing a suit that asked the court to declare that its software did not infringe on the intellectual property rights of the film industry.
In December 2002, before the court could rule on the matter, the industry sued.
The case has forced the court to decide on the scope of the controversial 1998 Digital Millennium Copyright Act (DMCA). This prohibits people from using or distributing devices that can bypass copyrights and copy prevention measures. The UK has similar provisions, which came into force late last year.
In court, 321 argued that the software merely allowed people to make fair use of their DVDs, making backup copies in case the original was destroyed or damaged. The MPAA countered with the argument that the software allowed people to use unauthorised versions of the encryption keys.
The San Francisco district court issued its ruling on Friday, stating that the software was in violation of the DMCA.
According to Judge Susan Illston: "The statute prohibits manufacturing, importing, offering to the public, providing, or otherwise trafficking in any technology that circumvents protection afforded by a technological measure that effectively protects a right of a copyright owner."
She continued, "While 321 is technically correct that CSS controls access to encrypted DVDs, the purpose of this access control is to control copying of those DVDs, since encrypted DVDs cannot be copied unless they are accessed."
According to Illston, "the downstream uses of the software by the customers of 321, whether legal or illegal, are not relevant to determining whether 321 itself is violating the statute." In particular, "It is the technology itself at issue," she reasoned, "not the uses to which the copyrighted material may be put."
The judge granted an injunction against 321, ordering the company to remove the offending part of the software, or to stop selling the software completely within seven days.
321 Studios has vowed to appeal, and will seek a stay of the injunction during the appeal process.
"Despite today's ruling, 321 stands firm in our vow to fight the Hollywood Studios in their effort to take away our customers' digital rights," said Robert Moore, founder and President of 321 Studios. "There is no difference between making a copy of a music CD for personal use and making a backup of a DVD movie for personal use. We are so firm in our belief in the principle of fair use that we will appeal this ruling immediately. And we will take our fight all the way to the Supreme Court, if that's what it takes to win."
MPAA CEO, Jack Valenti said in a statement: "Companies have a responsibility to develop products that operate within the letter of the law and that do not expose their customers to illegal activities".
He added, "Today's ruling sends a clear message that it is essential for corporations to protect copyrighted works while facilitating the enjoyment of entertainment offerings through new digital technologies."