REALNETWORKS, INC. v. STREAMBOX, INC.
United States District Court
for the Western District of Washington
2000 U.S. Dist. LEXIS 1889
January 18, 2000
CASE SUMMARY
PROCEDURAL POSTURE: Plaintiff filed a motion for a preliminary
injunction to enjoin the manufacture, distribution, and sale of
defendant's products that allegedly infringed upon plaintiff's copyright
pending resolution of its underlying action charging defendant with
violations of the Digital Millennium Copyright Act, 17 U.S.C.S. § 1201
et seq.
OVERVIEW: Plaintiff brought an action claiming defendant violated the
Digital Millennium Copyright Act (DMCA), 17 U.S.C.S. § 1201 et seq., by
distributing and marketing certain products that allegedly infringed
upon a copyright held by plaintiff and sought a preliminary injunction
to prevent defendant's continued manufacture, distribution, and sale of
such products. The court entered a preliminary injunction prohibiting
defendant from two products allegedly infringing upon plaintiff's
copyright after the court held that plaintiff was likely to succeed
meritoriously on the claims at trial, and would likely suffer
irreparable harm without injunctive relief pending resolution of the
underlying DMCA action. Parts of defendant's disputed products were
likely to violate 17 U.S.C.S. § § 1201(a)(2) and 1201(b), given their
circumvention capacities. Consumers who used defendant's disputed
products were likely to infringe upon plaintiff's rights as a copyright
owner, creating an impermissible derivative work in violation of
plaintiff's copyright.
OUTCOME: The court granted plaintiff's requested preliminary injunctive
relief regarding two of defendant's products after holding that
plaintiff was likely to recover at trial on the merits of its Digital
Millennium Copyright Act claims regarding the two disputed products, and
was likely to suffer irreparable harm absent the requested injunctive
relief.
COUNSEL:
For REALNETWORKS INC, plaintiff: James A DiBoise, David H Kramer,
WILSON, SONSINI, GOODRICH & ROSATI, PALO ALTO, CA. Robert D Stewart,
MCNAUL, EBEL, NAWROT, HELGREN & VANCE, SEATTLE, WA.
For STREAMBOX INC, defendant: Robert J Carlson, CHRISTENSEN, O'CONNOR,
JOHNSON & KINDNESS, PLLC, SEATTLE, WA. Chun M Ng, BLAKELY SOKOLOFF
TAYLOR & ZAFMAN, KIRKLAND, WA.
OPINIONBY:
MARSHA J. PECKHAM, United States District Judge.
ORDER ON PLAINTIFF'S MOTION FOR PRELIMINARY INJUNCTION
INTRODUCTION
Plaintiff RealNetworks, Inc. ("RealNetworks") filed this action on
December 21, 1999. RealNetworks claims that Defendant Streambox has
violated provisions of the Digital Millennium Copyright Act ("DMCA"), 17
U.S.C. § 1201 et seq., by distributing and marketing products known as
the Streambox VCR and the Ripper. RealNetworks also contends that
another Streambox product, known as the Ferret, is unlawfully designed
to permit consumers to make unauthorized modifications [*2] to a
software program on which RealNetworks holds the copyright.
On December 21, 1999, RealNetworks applied for a temporary restraining
order to bar Streambox from manufacturing, distributing, selling, or
marketing the VCR, the Ripper, and the Ferret. On December 23, 1999,
Chief Judge Coughenour of this Court entered a Temporary Restraining
Order, finding RealNetworks was likely to succeed on the merits of its
claims and that it was suffering irreparable harm from Streambox's
conduct. The Court also ordered Streambox to show cause as to why the
restraints contained in the Temporary Restraining Order should not be
continued as a preliminary injunction.
After expedited briefing, a show cause hearing was held on January 7,
2000 before the Court. Both parties were permitted to submit overlength
briefs in support of their arguments. The Court further requested that
both parties submit and highlight portions of the legislative history of
the DMCA that they believe to be relevant to interpreting the statute
with respect to Plaintiff's claims under the statute.
The Court, having considered the papers and pleadings filed herein and
having heard oral argument from the parties, concludes that [*3] a
preliminary injunction should be entered to enjoin the manufacture,
distribution, and sale of the Streambox VCR and the Ferret during the
pendency of this action. The Court does not conclude that a preliminary
injunction should be entered with respect to the Ripper. Pursuant to
Fed. R. Civ. P. 52(a), the Court's findings of fact and conclusions of
law are stated below.
FINDINGS OF FACT
RealNetworks
1. RealNetworks is a public company based in Seattle, Washington that
develops and markets software products designed to enable owners of
audio, video, and other multimedia content to send their content to
users of personal computers over the Internet.
2. RealNetworks offers products that enable consumers to access audio
and video content over the Internet through a process known as
"streaming." When an audio or video clip is "streamed" to a consumer, no
trace of the clip is left on the consumer's computer, unless the content
owner has permitted the consumer to download the file.
3. Streaming is to be contrasted with "downloading," a process by which
a complete copy of an audio or video clip is delivered to and stored on
a consumer's computer. Once a consumer [*4] has downloaded a file, he
or she can access the file at will, and can generally redistribute
copies of that file to others.
4. In the digital era, the difference between streaming and downloading
is of critical importance. A downloaded copy of a digital audio or video
file is essentially indistinguishable from the original, and such copies
can often be created at the touch of a button. A user who obtains a
digital copy may supplant the market for the original by distributing
copies of his or her own. To guard against the unauthorized copying and
redistribution of their content, many copyright owners do not make their
content available for downloading, and instead distribute the content
using streaming technology in a manner that does not permit downloading.
5. A large majority of all Internet Web pages that deliver streaming
music or video use the RealNetworks' format.
RealNetworks' Products
6. The RealNetworks' products at issue in this action include the
"RealProducer," the "RealServer" and the "RealPlayer." These products
may be used together to form a system for distributing, retrieving and
playing digital audio and video content via the Internet.
7. Owners of audio [*5] or video content may choose to use a
RealNetworks product to encode their digital content into RealNetworks'
format. Once encoded in that format, the media files are called
RealAudio or RealVideo (collectively "RealMedia") files.
8. After a content owner has encoded its content into the RealMedia
format, it may decide to use a "RealServer" to send that content to
consumers. A RealServer is software program that resides on a content
owner's computer that holds RealMedia files and "serves" them to
consumers through streaming.
9. The RealServer is not the only available means for distributing
RealMedia files. RealMedia files may also be made available on an
ordinary web server instead of a RealServer. An end-user can download
content from an ordinary web server using nothing more than a freely
available Internet browser such as Netscape's Navigator or Microsoft's
Internet Explorer.
10. To download streaming content distributed by a RealServer, however,
a consumer must employ a "RealPlayer." The RealPlayer is a software
program that resides on an end-user's computer and must be used to
access and play a streaming RealMedia file that is sent from a
RealServer.
RealNetworks' Security [*6] Measures
11. RealNetworks' products can be used to enable owners of audio and
video content to make their content available for consumers to listen to
or view, while at the same time securing the content against
unauthorized access or copying.
12. The first of these measures, called the "Secret Handshake" by
RealNetworks, ensures that files hosted on a RealServer will only be
sent to a RealPlayer. The Secret Handshake is an authentication sequence
which only RealServers and RealPlayers know. By design, unless this
authentication sequence takes place, the RealServer does not stream the
content it holds.
13. By ensuring that RealMedia files hosted on a RealServer are streamed
only to RealPlayers, RealNetworks can ensure that a second security
measure, which RealNetworks calls the "Copy Switch," is given effect.
The Copy Switch is a piece of data in all RealMedia files that contains
the content owner's preference regarding whether or not the stream may
be copied by end-users. RealPlayers are designed to read this Copy
Switch and obey the content owner's wishes. If a content owner turns on
the Copy Switch in a particular RealMedia file, when that file is
streamed, an end-user [*7] can use the RealPlayer to save a copy of
that RealMedia file to the user's computer. If a content owner does not
turn on the Copy Switch in a RealMedia file, the RealPlayer will not
allow an end-user to make a copy of that file. The file will simply
"evaporate" as the user listens to or watches it stream.
14. Through the use of the Secret Handshake and the Copy Switch, owners
of audio and video content can prevent the unauthorized copying of their
content if they so choose.
15. Content owners who choose to use the security measures described
above are likely to be seeking to prevent their works from being copied
without their authorization. RealNetworks has proferred declarations
from copyright owners that they rely on RealNetworks security measures
to protect their copyrighted works on the Internet. Many of these
copyright owners further state that if users could circumvent the
security measures and make unauthorized copies of the content, they
likely would not put their content up on the Internet for end-users.
16. Many copyright owners make content available on their Web site as a
means to attract end-users to the Web site; that is, to drive "traffic"
to the Web site. The more [*8] traffic a Web site generates, the more
it can charge for advertisements placed on the Web site. Without
RealNetworks' security measures, a copyright owner could lose the
traffic its content generates. An end-user could obtain a copy of the
content after only one visit and listen to or view it repeatedly without
ever returning to the Web site. That end-user could also redistribute
the content to others who would then have no occasion to visit the site
in the first instance.
17. Copyright owners also use Real Networks' technology so that
end-users can listen to, but not record, music that is on sale, either
at a Web site or in retail stores. Other copyright owners enable users
to listen to content on a "pay-per-play" basis that requires a payment
for each time the end-user wants to hear the content. Without the
security measures afforded by RealNetworks, these methods of
distribution could not succeed. End-users could make and redistribute
digital copies of any content available on the Internet, undermining the
market for the copyrighted original.
18. RealNetworks' success as a company is due in significant part to the
fact that it has offered copyright owners a successful means of [*9]
protecting against unauthorized duplication and distribution of their
digital works.
The RealPlayer Search Functionality
19. In addition to its content playing and content protection
capabilities, the RealPlayer enables end-users to search the Internet
for audio and video content. Currently, a company known as Snap! LLC
supplies the search services available to end-users through the
RealPlayer under a contract with RealNetworks.
20. Under RealNetworks' contract with Snap, the search bar on the bottom
of the RealPlayer's graphical user interface (the screen end-users view
and interact with) is emblazoned with Snap's logo. An end-user can input
a search request by inserting "key words" into the search bar. The
RealPlayer then uses Snap's search services to locate specific content
corresponding to the search request from among the millions of media
files available on the Internet. The RealPlayer then routes the end-user
to a Web site maintained and co-branded by RealNetworks and Snap, where
the names and locations of the files responsive to the search request
are displayed.
21. Through this process, Snap garners visibility and visitors,
enhancing Snap's ability to sell [*10] advertising and products. Snap
compensates RealNetworks for the promotional value it receives based on
the number of searches performed by users who are directed to the Snap
search engine. RealNetworks maintains that it has earned several million
dollars from its contract with Snap.
Streambox
22. Defendant Streambox, Inc. is a Washington corporation which provides
software products for processing and recording audio and video content,
including but not limited to content which is streamed over the
Internet. Streambox also maintains a searchable database of Internet web
addresses of various audio and video offerings on the Internet. The
Streambox products at issue in this case are known as the Streambox VCR,
the Ripper, and the Ferret.
Streambox VCR
23. The Streambox VCR enables end-users to access and download copies of
RealMedia files that are streamed over the Internet. While the Streambox
VCR also allows users to copy RealMedia files that are made freely
available for downloading from ordinary web servers, the only function
relevant to this case is the portions of the VCR that allow it to access
and copy RealMedia files located on RealServers.
24. In order [*11] to gain access to RealMedia content located on a
RealServer, the VCR mimics a RealPlayer and circumvents the
authentication procedure, or Secret Handshake, that a RealServer
requires before it will stream content. In other words, the Streambox
VCR is able to convince the RealServer into thinking that the VCR is, in
fact, a RealPlayer.
25. Having convinced a RealServer to begin streaming content, the
Streambox VCR, like the RealPlayer, acts as a receiver. However, unlike
the RealPlayer, the VCR ignores the Copy Switch that tells a RealPlayer
whether an end-user is allowed to make a copy of (i.e., download) the
RealMedia file as it is being streamed. The VCR thus allows the end-user
to download RealMedia files even if the content owner has used the Copy
Switch to prohibit end-users from downloading the files.
26. The only reason for the Streambox VCR to circumvent the Secret
Handshake and interact with a RealServer is to allow an end-user to
access and make copies of content that a copyright holder has placed on
a RealServer in order to secure it against unauthorized copying. In this
way, the Streambox VCR acts like a "black box" which descrambles cable
or satellite broadcasts so that [*12] viewers can watch pay programming
for free. Like the cable and satellite companies that scramble their
video signals to control access to their programs, RealNetworks has
employed technological measures to ensure that only users of the
RealPlayer can access RealMedia content placed on a RealServer.
RealNetworks has gone one step further than the cable and satellite
companies, not only controlling access, but also allowing copyright
owners to specify whether or not their works can be copied by end-users,
even if access is permitted. The Streambox VCR circumvents both the
access control and copy protection measures.
27. The Streambox VCR can be distinguished from a third-party product
sold by RealNetworks called GetRight. GetRight enables end-users to
download RealAudio files that have been placed on a web server, but not
RealAudio files placed on a RealServer.
28. A copyright owner that places a RealMedia file onto a web server
instead of a RealServer does not make use of protections offered by the
RealNetworks security system. Thus, when GetRight is used to obtain such
a file, it need not and does not circumvent RealNetworks' access control
and copyright protection measures. GetRight [*13] cannot access
materials available from a RealServer because it cannot perform the
requisite Secret Handshake. Unlike GetRight, the Streambox VCR
circumvents the Secret Handshake and enables users to make digital
copies of content that the copyright owner has indicated that it should
not be copied.
29. Once an unauthorized, digital copy of a RealMedia file is created it
can be redistributed to others at the touch of a button.
30. Streambox's marketing of the VCR notes that end-users can "download
RealAudio and RealMedia files as easily as you would any other file,
then reap the benefits of clean, unclogged streams straight from your
hard drive" and that the product can be used by "savvy surfers who enjoy
taking control of their favorite Internet music/video clips."
31. The Streambox VCR poses a threat to RealNetworks' relationships with
existing and potential customers who wish to secure their content for
transmission over the Internet and must decide whether to purchase and
use RealNetworks' technology. If the Streambox VCR remains available,
these customers may opt not to utilize RealNetworks' technology,
believing that it would not protect their content against unauthorized
copying. [*14]
Streambox Ripper
32. Streambox also manufactures and distributes a product called the
Streambox Ripper. The Ripper is a file conversion application that
allows conversion (adaptation) of files from RealMedia format to other
formats such as .WAV, .RMA, and MP3. The Ripper also permits conversion
of files between each of these formats, i.e., .WAV to .WMA and .WAV to
MP3.
33. The Ripper operates on files which are already resident on the hard
disk of the user's computer. The Ripper permits users to convert files
that they have already created or obtained (presumably through
legitimate means) from one format to another.
34. Streambox has proferred evidence that one potential use of the
Ripper would be to permit copyright owners to translate their content
directly from the RealMedia format into other formats that they may wish
to utilize for their own work. Streambox has provided examples of
various content owner who need a way to convert their own RealMedia
files into different formats, such as .WAV for editing, or .WMA to
accommodate those users who wish to access the content with a Windows
Media Player instead of a RealPlayer. In addition, content which is
freely available, [*15] such as public domain material and material
which users are invited and even encouraged to access and copy, may be
converted by the Ripper into a different file format for listening at a
location other than the user's computer.
Streambox Ferret
35. Streambox manufactures, markets, and distributes a third product
called the Streambox Ferret. The Ferret may be installed as a "plug-in"
application to the RealPlayer.
36. When a consumer installs the Ferret as a plug-in to the RealPlayer,
the RealPlayer's graphical user interface is configured with an added
button, which allows the user to switch between the Snap search engine
and the Streambox search engine. The use of the Ferret may also result
in replacement of the "Snap.Com" logo that appears on the RealPlayer's
graphical user interface with a "Streambox" logo.
37. When consumers install the Ferret as a plug-in to the RealPlayer,
the visual appearance and operation of the RealPlayer is altered.
CONCLUSIONS OF LAW
1. The Court has jurisdiction over this action under 28 U.S.C. § § 1331
and 1338.
2. The Court finds that RealNetworks has standing to pursue DMCA claims
under 17 U.S.C. § 1203, [*16] which affords standing to "any person"
allegedly injured by a violation of sections 1201 and 1202 of the DMCA.
Preliminary Injunction Standard
3. To obtain a preliminary injunction, a party must show either (1) a
combination of probable success on the merits and the possibility of
irreparable harm, or (2) that serious questions are raised and the
balance of hardships tips in its favor. Apple Computer v. Formula
Int'l, Inc., 725 F.2d 521, 523 (9th Cir. 1984). These are not separate
tests, but rather "opposite ends of a single 'continuum in which the
required showing of harm varies inversely with the required showing of
meritoriousness.'" Rodeo Collection v. West Seventh, 812 F.2d 1215, 1217
(9th Cir. 1987); Cadence Design Sys., Inc. v. Avant! Corp., 125 F.3d
824, 826 (9th Cir. 1997), cert. denied, 118 S. Ct. 1795 (1998)
(quotation omitted).
4. RealNetworks argues that a plaintiff who demonstrates a reasonable
likelihood of success on claims under section 1201 of the DMCA is
entitled to a presumption of irreparable harm. In support of this
argument, RealNetworks cites cases in which such a presumption was [*17]
afforded to plaintiffs who brought copyright infringement claims. See
Cadence Design Sys., Inc. v. Avant! Corp., 125 F.3d 824, 827 (9th Cir.
1997), cert. denied, 118 S. Ct. 1795, and Triad Sys. Corp. v.
Southeastern Express, 64 F.3d 1330, 1335 (9th Cir. 1995).
5. RealNetworks' claims against the Streambox VCR and the Ripper, by
contrast, arise under section 1201 of the DMCA, and thus do not
constitute copyright "infringement" claims. See 1 Nimmer on Copyright
(1999 Supp.), § 12.A17 (noting that section 1201 of the DMCA
occupies "a niche distinct from copyright infringement" and that section
1201 is removed from the Act's definition of copyright infringement.)
Because the DMCA is a recently-enacted statute, there appears to be no
authority holding that a plaintiff seeking a preliminary injunction who
shows a reasonable likelihood of success on a claim arising under
section 1201 of the DMCA is entitled to a presumption of irreparable
harm.
RealNetworks Has Demonstrated a Reasonable Likelihood of Success on its
DMCA Claims With Respect to the Streambox VCR
6. The DMCA prohibits the manufacture, import, [*18] offer to the
public, or trafficking in any technology, product, service, device,
component, or part thereof that: (1) is primarily designed or produced
for the purpose of circumventing a technological measure that
effectively "controls access to" a copyrighted work or "protects a right
of a copyright owner;" (2) has only limited commercially significant
purpose or use other than to circumvent such technological protection
measures; or (3) is marketed for use in circumventing such technological
protection measures. 17 U.S.C. § § 1201(a)(2), 1201(b).
Parts of the VCR Are Likely to Violate Sections 1201(a)(2) and 1201(b)
7. Under the DMCA, the Secret Handshake that must take place between a
RealServer and a RealPlayer before the RealServer will begin streaming
content to an end-user appears to constitute a "technological measure"
that "effectively controls access" to copyrighted works. See 17 U.S.C. §
1201(a)(3)(B) (measure "effectively controls access" if it "requires the
application of information or a process or a treatment, with the
authority of the copyright holder, to gain access to the work"). To gain
access to a work [*19] protected by the Secret Handshake, a user must
employ a RealPlayer, which will supply the requisite information to the
RealServer in a proprietary authentication sequence.
8. In conjunction with the Secret Handshake, the Copy Switch is a
"technological measure" that effectively protects the right of a
copyright owner to control the unauthorized copying of its work. See 17
U.S.C. § 1201(b)(2)(B) (measure "effectively protects" right of
copyright holder if it "prevents, restricts or otherwise limits the
exercise of a right of a copyright owner"); 17 U.S.C. § 106(a)
(granting copyright holder exclusive right to make copies of its work).
To access a RealMedia file distributed by a RealServer, a user must use
a RealPlayer. The RealPlayer reads the Copy Switch in the file. If the
Copy Switch in the file is turned off, the RealPlayer will not permit
the user to record a copy as the file is streamed. Thus, the Copy Switch
may restrict others from exercising a copyright holder's exclusive right
to copy its work.
9. Under the DMCA, a product or part thereof "circumvents" protections
afforded a technological measure by "avoiding bypassing, [*20]
removing, deactivating or otherwise impairing" the operation of that
technological measure. 17 U.S.C. § § 1201(b)(2)(A), 1201(a)(2)(A).
Under that definition, at least a part of the Streambox VCR circumvents
the technological measures RealNetworks affords to copyright owners.
Where a RealMedia file is stored on a RealServer, the VCR "bypasses" the
Secret Handshake to gain access to the file. The VCR then circumvents
the Copy Switch, enabling a user to make a copy of a file that the
copyright owner has sought to protect.
10. Given the circumvention capabilities of the Streambox VCR, Streambox
violates the DMCA if the product or a part thereof: (i) is primarily
designed to serve this function; (ii) has only limited commercially
significant purposes beyond the circumvention; or (iii) is marketed as a
means of circumvention. 17 U.S.C. § § 1201(a)(2)(A-C), 1201(b)(b)(A-C).
These three tests are disjunctive. Id. A product that meets only one of
the three independent bases for liability is still prohibited. Here, the
VCR meets at least the first two.
11. The Streambox VCR meets the first test for liability under the DMCA
because at least [*21] apart of the Streambox VCR is primarily, if not
exclusively, designed to circumvent the access control and copy
protection measures that RealNetworks affords to copyright owners. 17
U.S.C. § § 1201(a)(2)(A), 1201(b)(c)(A).
12. The second basis for liability is met because portion of the VCR
that circumvents the Secret Handshake so as to avoid the Copy Switch has
no significant commercial purpose other than to enable users to access
and record protected content. 17 U.S.C. § 1201(a)(2)(B),
1201(b)(d)(B). There does not appear to be any other commercial value
that this capability affords.
13. Streambox's primary defense to Plaintiff's DMCA claims is that the
VCR has legitimate uses. In particular, Streambox claims that the VCR
allows consumers to make "fair use" copies of RealMedia files,
notwithstanding the access control and copy protection measures that
copyright owner may have placed on that file.
14. The portions of the VCR that circumvent the secret handshake and
copy switch permit consumers to obtain and redistribute perfect digital
copies of audio and video files that copyright owners have made clear
they do not want copied. For [*22] this reason, Streambox's VCR is
entitled to the same "fair use" protections the Supreme Court afforded
to video cassette recorders used for "time-shifting" in Sony Corp. v.
Universal City Studios, Inc., 464 U.S. 417, 78 L. Ed. 2d 574, 104 S. Ct.
774 (1984).
15. The Sony decision turned in large part on a finding that substantial
numbers of copyright holders who broadcast their works either had
authorized or would not object to having their works time-shifted by
private viewers. See Sony, 464 U.S. at 443, 446. Here, by contrast,
copyright owners have specifically chosen to prevent the copying enabled
by the Streambox VCR putting their content on RealServers and leaving
the Copy Switch off.
16. Moreover, the Sony decision did not involve interpretation of the
DMCA. Under the DMCA, product developers do not have the right to
distribute products that circumvent technological measures that prevent
consumers from gaining unauthorized access to or making unauthorized
copies of works protected by the Copyright Act. Instead, Congress
specifically prohibited the distribution of the tools by which such
circumvention could be accomplished. The portion [*23] of the Streambox
VCR that circumvents the technological measures that prevent
unauthorized access to and duplication of audio and video content
therefore runs afoul of the DMCA.
17. This point is underscored by the leading treatise on copyright,
which observes that the enactment of the DMCA means that "those who
manufacture equipment and products generally can no longer gauge their
conduct as permitted or forbidden by reference to the Sony doctrine. For
a given piece of machinery might qualify as a stable item of commerce,
with a substantial noninfringing use, and hence be immune from attack
under Sony's construction of the Copyright Act- but nonetheless still be
subject to suppression under Section 1201." 1 Nimmer on Copyright (1999
Supp.), § 12A.18. As such, "equipment manufacturers in the
twenty-first century will need to vet their products for compliance with
Section 1201 in order to avoid a circumvention claim, rather than under
Sony to negate a copyright claim." Id.
18. Streambox also argues that the VCR does not violate the DMCA because
the Copy Switch that it avoids does not "effectively protect" against
the unauthorized copying of copyrighted works [*24] as required by §
1201(a)(3)(B). Streambox claims this "effective" protection is lacking
because an enterprising end-user could potentially use other means to
record streaming audio content as it is played by the end-user's
computer speakers. This argument fails because the Copy Switch, in the
ordinary course of its operation when it is on, restricts and limits the
ability of people to make perfect digital copies of a copyrighted work.
The Copy Switch therefore constitutes a technological measure that
effectively protects a copyright owner's rights under section.
1201(a)(3)(B).
19. In addition, the argument ignores the fact that before the Copy
Switch is even implicated, the Streambox VCR has already circumvented
the Secret Handshake to gain access to a unauthorized RealMedia file.
That alone is sufficient for liability under the DMCA. See 17 U.S.C. §
1201(i)(e).
20. Streambox's last defense to liability for the VCR rests on Section
1201(c)(3) of the DMCA which it cites for the proposition that the VCR
is not required to respond to the Copy Switch. Again, this argument
fails to address the VCR's circumvention of the Secret Handshake, which
is enough, [*25] by itself, to create liability under Section
1201(a)(2).
21. Moreover, Section 1201(c)(3) states that "nothing in this section
shall require . . . a response to any particular technological measure,
so long as . . . the product . . . does not otherwise fall within the
prohibitions of subsections (a)(2) or (b)(1)." 17 U.S.C. § 1201(c)(3).
As the remainder of the statute and the leading copyright commentator
make clear, Section 1201(c)(3) does not provide immunity for products
that circumvent technological measures in violation of Sections
1201(a)(2) or (b)(1). See 17 U.S.C. § 1201(c)(3) (a product need not
respond to a particular measure "so long as such . . . product . . .
does not otherwise fall within the prohibitions of subsections (a)(2) or
(b)(1)." (emphasis added); 1 Nimmer on Copyright (1999 Supp.), §
12A.05[C]. If the statute meant what Streambox suggests, any
manufacturer of circumvention tools could avoid DMCA liability simply by
claiming it chose not to respond to the particular protection that its
tool circumvents.
22. As set forth above, the Streambox VCR falls within the prohibitions
of sections 1201(a)(2) [*26] and 1201(b)(1). Accordingly, Section
1201(c)(3) affords Streambox no defense.
RealNetworks is Likely to Suffer Irreparable Harm With Respect to the
VCR
23. RealNetworks argues that because it has demonstrated a reasonable
likelihood of success on its DMCA claims concerning the VCR, it is
entitled to a presumption of irreparable harm. As noted above, however,
this point is not settled.
24. Assuming that a plaintiff who demonstrates a reasonable likelihood
of success with respect to claims arising under section 1201 of the DMCA
is entitled to a presumption of irreparable harm, RealNetworks would be
entitled to such a presumption.
25. In the event that such a presumption is not applicable, RealNetworks
has demonstrated that it would likely suffer irreparable harm if the
Streambox VCR is distributed. The VCR circumvents RealNetworks' security
measures, and will necessarily undermine the confidence that
RealNetworks' existing and potential customers have in those measures.
It would not be possible to determine how many of RealNetworks' existing
or potential customers declined to use the company's products because of
the perceived security problems created by the VCR's ability [*27] to
circumvent RealNetworks' security measures.
26. An injunction against the VCR also would serve the public interest
because the VCR's ability to circumvent RealNetworks' security measures
would likely reduce the willingness of copyright owners to make their
audio and video works accessible to the public over the Internet.
RealNetworks Has Not Demonstrated that It Is Reasonably Likely to
Succeed on its DMCA Claim With Respect to the Ripper.
27. RealNetworks also alleges that Streambox's marketing and
distribution of the Ripper violates section 1201(b) (but not section
1201(a)(2)) of the DMCA.
28. RealNetworks maintains that the primary purpose and only
commercially significant use for the Ripper would be to enable consumers
to prepare unauthorized "derivatives" of copyrighted audio or video
content in the RealMedia format in violation of 17 U.S.C. § 106(2).
29. The Ripper has legitimate purposes and commercially significant
uses. For example, the Ripper may be used by content owners, including
copyright holders, to convert their content from the RealMedia format to
other formats. Streambox has submitted evidence that at least some
content [*28] owners would use the Ripper for this legitimate purpose.
The Ripper may also be used by consumers to convert audio and video
files that they acquired with the content owner's permission from
RealMedia to other formats. RealNetworks has not demonstrated that it is
likely to succeed on its claims that the Ripper violates sections
1201(b)(1)(A) or (B) of the DMCA.
30. RealNetworks' DMCA claims with respect to the Ripper rely largely on
its argument that the proprietary RealMedia format constitutes a
technological measure that effectively protects a right of a copyright
owner because it prevents end-users from making derivative works based
on audio or video content that a consumer obtains in RealMedia format.
RealNetworks did not offer this argument in any detail in its opening
memorandum.
31. There is little evidence that content owners use the RealMedia
format as a "technological measure" to prevent end-users from making
derivative works. In any case, RealNetworks has not introduced evidence
that a substantial number of content owners would object to having
end-users convert RealMedia files that they legitimately obtain into
other formats.
32. Similarly, RealNetworks has not submitted [*29] substantial
evidence that the Ripper's alleged violations of section 1201(b) will
cause RealNetworks injury. None of the numerous declarations submitted
by RealNetworks' customers or recording industry employees express
concern that the Ripper will permit RealMedia files to be converted to
other formats. Instead, persons who submitted these declarations
indicate that they are concerned that unnamed Streambox products will
permit consumers to acquire unauthorized copies of copyrighted works
that are made available only in the streaming format. These concerns
appear to relate to the functions of the Streambox VCR, not to the
functions of the Ripper. The Ripper functions as a "converter," not as a
copier. As such, these declarations do not suggest that the Ripper's
alleged violations of section 1201(b) will result in any injury to
RealNetworks in the form of lost customers or business.
33. RN further alleges that Streambox's marketing of the Ripper violates
section 1201(b)(1)(C) of the DMCA. The brief quotes from Streambox's
promotional materials that RealNetworks references do not appear to urge
consumers to buy the Ripper in order to create derivative works in
violation of the Copyright [*30] Act. The evidence submitted by
RealNetworks is not sufficient to show a reasonable likelihood of
success on its claims under section 1201(b)(1)(C).
34. In light of Streambox's demonstration that the Ripper has legitimate
and commercially significant uses, RealNetworks has not shown that it is
likely to succeed on its DMCA claims with respect to the product.
35. Even if RealNetworks had raised a "serious question" about the
Ripper's alleged violation of the DMCA, RealNetworks has not
demonstrated that the balance of hardships tips sharply in its favor. As
noted above, RealNetworks has not submitted evidence that the sale of
the Ripper would cause it to lose customers or goodwill. By contrast,
enjoining the Ripper would deprive Streambox of the ability to market a
potentially valuable product with legitimate uses.
RealNetworks Has Demonstrated that It Is Entitled to a Preliminary
Injunction with Respect to the Ferret
36. Finally, RealNetworks claims that Streambox commits contributory
and/or vicarious copyright infringement by distributing the Ferret
product to the public. In order to prevail on such claims, RealNetworks
must demonstrate that consumers who use the [*31] Ferret as a plug-in
to the RealPlayer infringe RealNetworks' rights as a copyright owner.
RealNetworks alleges that consumers who install the Ferret as a plug-in
application to a RealPlayer create an unauthorized derivative of the
RealPlayer, thus violating RealNetwork's rights under 17 U.S.C. §
106(2).
37. RealNetworks holds a valid copyright registration for version 7 of
the RealPlayer, which constitutes prima facie evidence that RealNetworks
is the owner of the copyright to the program. See Apple Computer, Inc.
v. Formula Int'l, Inc., 725 F.2d 521, 523 (9th Cir. 1984).
38. Streambox does not dispute that consumers who use the Ferret as a
plug-in to a RealPlayer create a change the RealPlayer user interface by
adding a clickable button that permits the user to access the Streambox
search engine, rather than the Snap search engine.
39. Streambox claims that changes that the Ferret makes to the
RealPlayer do not constitute the creation of a derivative work. To
support this argument, Streambox cites generally the Ninth Circuit's
decision in Lewis Galoob Toys, Inc. v. Nintendo of America, Inc., 964
F.2d 965 (9th Cir. 1992). [*32] As RealNetworks notes, however, the
court in Galoob held that the manufacturer of a product that altered the
audiovisual displays of a Nintendo game did not commit contributory
copyright infringement because the "the altered displays do not
incorporate a portion of a copyrighted work in some concrete or
permanent form." Id. at 968. Here, by contrast, the alterations to the
RealPlayer assume a more concrete form that the altered displays at
issue in Galoob.
40. However, the Court is not persuaded that RealNetworks has
demonstrated that it is likely to succeed on its contributory/vicarious
copyright infringement claims with respect to the Ferret. The facts and
issues presented in the principal case that RealNetworks relies upon,
Micro Star v. Formgen, Inc., 154 F.3d 1107 (9th Cir. 1998), do not
appear to be completely analogous to the situation here. In addition,
RealNetworks' argument that consumers who install the Ferret breach a
license agreement that they must agree to in order to obtain the
RealPlayer was first raised in RealNetworks' reply brief.
41. Nonetheless, the Court concludes that RealNetworks has raised
serious questions going [*33] to the merits of its claim. It is
undisputed that consumers who install the Ferret as a plug-in
application to the RealPlayer cause the graphical interface of the
RealPlayer to be modified, arguably creating a derivative work under 17
U.S.C. § 106(2) without the copyright owner's authorization. In
addition, RealNetworks has proferred evidence that end, users who
install the Ferret are violating a license agreement with RealNetworks.
42. A plaintiff seeking a preliminary injunction who raises serious
questions going to the merits of its claim is entitled to an injunction
if the balance of hardships tips sharply in its favor. See Micro Star v.
Formgen, Inc., 154 F.3d 1107, 1109 (9th Cir. 1998).
43. The balance of hardships here clearly favors RealNetworks. The
Ferret's ability to permit consumers to modify the RealPlayer
jeopardizes RealNetworks' exclusive relationship with Snap. In addition,
each time a consumer opts to use the Streambox search engine that is
present on a modified RealPlayer rather than the Snap search engine that
is present on an unmodified RealPlayer costs RealNetworks royalty
payments from Snap, and it would be difficult [*34] if not impossible
to calculate the lost revenue to RealNetworks.
44. By contrast, the hardship that Streambox would experience if an
injunction issued against the product would not be nearly as severe. The
Ferret plug-in simply provides consumers with a way to access the
Streambox search engine through the RealPlayer. The Streambox search
engine is already accessible to consumers in other places. If the Ferret
is not available for distribution as a plug-in to the RealPlayer,
consumers will still have the ability to conveniently access and use the
Streambox search engine.
CONCLUSION
Consistent with the findings of fact and conclusions of law above, the
Court hereby ORDERS that:
During the pendency of this action, Defendant Streambox, Inc. and its
officers, agents, servants, employees and attorneys, and those persons
in active concert and participation with Streambox, Inc. who receive
actual notice of this Preliminary Injunction, are restrained and
enjoined from manufacturing, importing, licensing, offering to the
public, or offering for sale:
a) versions of the Streambox VCR or similar products that circumvent or
attempt to circumvent RealNetworks' technological security [*35]
measures, and from participating or assisting in any such activity;
b) versions of the Streambox Ferret or similar products that modify
RealNetworks' RealPlayer program, including its interface, its source
code, or its object code, and from participating or assisting in any
such activity.
Plaintiff's motion for a preliminary injunction with respect to the
Streambox Ripper is DENIED.
This Order shall be effective immediately, on the condition that
RealNetworks continues to maintain security with the Clerk in the amount
of $ 1,000,000 for the payment of such costs and damages as may be
incurred by Streambox if it is found that Streambox was wrongfully
enjoined by this Order.
The TRO entered by Judge Coughenour on December 23, 1999, and extended
by the Court until 5:00 p.m. on January 18, 2000, is hereby VACATED by
this Order.