U.S. District Court Enjoins 321 Studios from Manufacturing or Distributing DVD Copying Software

On Thursday, Feb. 19, 2004, Judge Susan Illston of the U.S. District Court for the Northern District of California granted summary judgment in favor of the Hollywood movie studios (“Studios”) against 321 Studios (“321”), which makes and sells software that allows users to copy digital versatile discs (“DVDs”). Judge Illston found that 321’s software, DVD Copyplus and DVD-X Copy, violates the anti-circumvention provisions of the Digital Millennium Copyright Act (“DMCA”), Sections 1201(a)(2) and 1201(b)(1). The Court rejected 321’s claim that its software was protected by the fair use right of DVD owners to make back-up copies of DVDs that they have purchased.

The court relied heavily on previous decisions by the Second Circuit in Universal City Studios v. Corley, 273 F.3d 429 (2nd Cir. 2001), and by the same California district court in United States v. Elcom, 203 F.Supp. 2d 1111 (ND Cal. 2002). Specifically, the court found that the Contents Scramble System (“CSS”) used to encrypt DVDs “is a technological measure that both effectively controls access to DVDs and effectively protects the right of a copyright holder.” As such, the use of CSS access keys by 321’s software to decrypt DVDs for copying purposes was held to violate the DMCA.

The court first analyzed DMCA Section 1201(a)(2), which prohibits the manufacture or trafficking of any product that is primarily designed to circumvent a technological measure that “effectively controls access to a work protected under [the Copyright Act].” (Emphasis added). 321 argued that the purchaser of a DVD has the right of access to that DVD and, therefore, the right to decrypt it. The court rejected that defense on the grounds that the owner’s right to view a DVD does not give the owner a right to decrypt the CSS encryption. The court also rejected 321’s reliance on the fact that DVD players (used by the DVD owners to view their DVDs) have a CSS decryption key, on the grounds that the manufacturers of DVD players are licensed by the Studios to decrypt CSS for DVD playback purposes.

The court then analyzed DMCA Section 1201(b)(1), which prohibits the manufacture or trafficking of any product that is primarily designed to circumvent a technological measure “that effectively protects a right of a copyright owner” (which, in this case, is the right to make copies). (Emphasis added). 321 argued that its software only permits access to DVDs, but does not otherwise control copying. The court rejected this argument as essentially putting form over substance, since the DVDs cannot be copied unless they are accessed. 321 then argued that, in any event, its software does not violate the right of a copyright owner, since the owner of a DVD has a fair use right to make a backup copy of that DVD. The court rejected this defense on the grounds that it was irrelevant what the DVD owner’s rights might be. The court said the relevant point is that 321 traffics in and markets a product that is primarily designed to circumvent “the use restriction protective technologies,” i.e., CSS.

321 argued that its software was not “primarily designed” to circumvent CSS (a statutory requirement), but rather to allow DVD owners to copy all or part of their DVDs. In response, the court relied on statutory language in Section 1201 stating that so long as a “part” of its software has a circumvention purpose, that is sufficient for finding a DMCA violation. The court also rejected 321’s reliance on the First Amendment, stating that “the First Amendment does not protect commercial speech that involves illegal activity, and this court has found that the CSS circumvention portion of the 321 software is illegal.”

The court relied on both Corley and Elcom to reject 321’s arguments that the DMCA generally is an unconstitutional restriction on speech under the First Amendment. The court held that the DMCA does not suppress speech because the “functional capability” of its software “is not speech within the meaning of the First Amendment.” Similarly, the Court found that the DMCA does not unconstitutionally burden the fair use rights of users of the copyrighted material, stating that “[f]air use is still possible under the DMCA, although such copying will not be as easy, as exact, or as digitally manipulable as plaintiff desires.” As Judge Illston noted, “the doctrine of fair use does not guarantee copying by the optimum method or in the identical format of the original.” Accordingly, the court granted the defendants’ motion for partial summary judgment and enjoined the manufacture and distribution of 321’s software. 321 Studios is expected to file an appeal with the Ninth Circuit U.S. Court of Appeals.

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