Realnetworks, Inc. et al v. DVD Copy Control Association, Inc. et al

Filing 8

PUBLIC REDACTED VERSION -- Application and Ex-Parte Application for Restraining Order and Order to Show Cause re; Preliminary Injunction filed by Disney Enterprises, Inc., Paramount Pictures Corp., Twentieth Century Fox Film Corporation, Warner Bros. Entertainment, Inc.. (Attachments: # 1 Exhibit, # 2 Exhibit, # 3 Exhibit, # 4 Exhibit, # 5 Exhibit) c(Lynch, Rebecca) (Filed on 10/3/2008) Text modified on 10/6/2008 (bw, COURT STAFF).

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JAMES A. DiBOISE, State Bar No. 83296 Email: [e-mail] COLLEEN BAL, State Bar No. 167637 Email: [e-mail] MICHAEL A. BERTA, State Bar No. 194650 Email: [e-mail] WILSON SONSINI GOODRICH & ROSATI Professional Corporation One Market Street Spear Tower, Suite 3300 San Francisco, CA 94105

Attorneys for Plaintiffs REALNETWORKS, INC. and 8 REALNETWORKS HOME ENTERTAINMENT, INC.
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UNITED STATES DISTRICT COURT
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CENTRAL DISTRICT OF CALIFORNIA
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DEFENDANTS' OPPOSITION TO EX PARTE APPLICATION FOR TRO CASE NO. 08-cv-06412-SJO-AJW

UNIVERSAL CITY STUDIOS PRODUCTIONS LLLP, UNIVERSAL CITY STUDIOS LLLP, PARAMOUNT PICTURES CORPORATION, TWENTIETH CENTURY FOX FILM CORPORATION, SONY PICTURES TELEVISION INC., COLUMBIA PICTURES INDUSTRIES, INC., SONY PICTURES ENTERTAINMENT INC., DISNEY ENTERPRISES, INC., WALT DISNEY PICTURES, and WARNER BROS. ENTERTAINMENT INC., Plaintiffs, v. REALNETWORKS, INC.; and REALNETWORKS HOME ENTERTAINMENT, INC., Defendants.

) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )

CASE NO.: 2:08-cv-06412 SJO AJWx

DEFENDANTS REALNETWORKS, INC. AND REALNETWORKS HOME ENTERTAINMENT, INC.'S OPPOSITION TO PLAINTIFFS' EX PARTE APPLICATION FOR A TRO

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Defendants RealNetworks, Inc. and RealNetworks Home Entertainment, Inc. ("Real" or "Defendants") submit the following in opposition to Plaintiffs Ex Parte Application for Temporary Restraining Order: INTRODUCTION Plaintiffs filed a complaint and sought a TRO today seeking to disrupt Real's in-progress launch of RealDVD this morning. Plaintiffs have known since the first week of September that Real was planning to launch the RealDVD product by today, and as is evident from the volume and content of Plaintiffs' ex parte papers (comprising a 25-page brief and four inches of supporting documents), they have been preparing their papers for quite some time. Yet, they chose not to share those papers with Real until approximately 10:00 am this morning, in an apparent effort to block any possibility of a response from Real. Given these time constraints, Real has only had enough time to address here a few of the highlights demonstrating why Plaintiffs' ex parte application should be denied. Accordingly, Real requests that if the Court is inclined to grant Defendants' ex parte application for a TRO, that Real be given an opportunity to appear before the Court to address the issues more fully. I. This Action Should Be Dismissed In Favor Of The Action Filed by Real in the Northern District of California. This action should be dismissed in favor of the first filed, properly venued action initiated by Real today (September 30, 2008) at 9:04 a.m. in the Northern District of California. The action initiated by Real raises issues virtually identical to those presented here, but also includes a necessary party to the resolution of these issues, the DVD Copy Control Association ("DVD CCA"), the party that licenses the CSS technology at issue. Real's action seeks a declaratory judgment that RealDVD is in compliance with the CSS License Agreement and the DMCA. Federal courts recognize a doctrine of federal comity that permits district courts to
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decline jurisdiction when a complaint involving the same parties and issues has already been filed in another court. Plaintiffs suggest that Real's declaratory judgment action should be dismissed as an "anticipatory filing." Plaintiffs are dead wrong. Pursuant to the agreement of the parties, neither party could file an action until this morning, when Real filed its declaratory judgment action.1 More importantly, Real filed its declaratory judgment action in the only county where all the necessary parties could be venued. Plaintiffs filed in Los Angeles to avoid joining the DVD Copy Control Association ("DVD CCA") ­ a necessary party to the claim for breach of the CSS License Agreement ­ because the DVD CCA was only amenable to suit in Santa Clara County. That agreement is fundamental and dispositive to the parties' dispute. Section 10.4(b) of the CSS License Agreement mandates that actions between Real and the DVD CCA be litigated in the state and federal courts in Santa Clara County. See Pomerantz Decl., Exh. F. Thus, the Northern District of California is the only appropriate venue for these claims. Real filed its declaratory judgment action in the Northern District of California out of necessity, not out of bad faith or a desire to forum shop. II. RealDVD Fully Complies With The CSS License Agreement And Therefore Is Not "Circumventing" The CSS Technology. Plaintiffs' argument depends on the assertion that Real is "circumventing" CSS technology. Plaintiffs' assertions are both conclusory and wrong. Real's use of the CSS technology is licensed under the CSS License Agreement ("CSS Agreement"), and Real complies with the requirements of that license. There is therefore no legitimate argument that Real is circumventing the CSS technology when it uses that technology pursuant to a valid license. Plaintiffs seek to wave away the CSS Agreement and ask this Court to look

Prior to receiving any correspondence from Plaintiffs' counsel, Real initiated its preparation for filing its declaratory judgment action on the day it was to launch RealDVD.
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solely to copyright law. But the CSS Agreement must be the starting point of the analysis, as it sets forth the parameters of Real's obligations with respect to the CSS technology. As set forth in the Declaration of Jeffrey Buzzard, Real has a license to the CSS technology, received the technical specifications for implementing the CSS technology, and designed its product in compliance with the CSS Agreement ­ all to work with the CSS technology utilized on DVDs according to the specifications, not to circumvent that technology. RealDVD is therefore fully compliant with the requirements of that Agreement. Because Real is authorized by its licensor, DVD CCA, to do everything it is doing with respect to the CSS technology, there is no legitimate basis to contend that it is somehow "circumventing" that technology. The entire basis for Plaintiffs' DMCA argument is based on this false premise ­ without that premise, Plaintiffs' argument collapses. In an effort to confuse the issue, Plaintiffs assert that ­ regardless of the terms of the actual CSS Agreement and the actual performance and capabilities of CSS technology for licensed users ­CSS technology was (according to Plaintiffs) intended to protect against any DVD copying whatsoever. Thus, Real must be circumventing something. But, again, Plaintiffs are wrong. The question is not what CSS is intended to do in the abstract, but what CSS permits licensed CSS users to do. First, if CSS were supposed to prevent copying by a licensed user, the CSS Agreement would prohibit such conduct. But, the CSS Agreement does not contain such a prohibition. Plaintiffs attempt to construct a copying prohibition from two fragments in the CSS Agreement (one taken from a recital of the CSS Agreement and another taken from a technical specification). But the recital relied upon by Plaintiffs (Mot. at 8, citing Pomerantz Exh. F) describes the intention of two nonparties to the contract, Matshushita and Toshiba, to prohibit unauthorized copying ­ not all copying. And, the technical specification, which merely describes the purpose of a certain type of authentication, suffers from the same flaw. (See Mot. at
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4, citing Pomerantz Exh. G). RealDVD performs that authentication as required by the license agreement. Whether that authentication process may prevent unlicensed users from copying is simply irrelevant to what a licensed user may do under the terms of the CSS Agreement. Indeed, whether the CSS Agreement prohibits copying was recently litigated by the actual licensor to the CSS Agreement (the DVD Copy Control Association), and the Santa Clara Superior Court found after a full trial that there existed no such prohibition. DVD Copy Control Association, Inc. v. Kaleidescape, Inc., Santa Clara Superior Court Case No. 1-04-CV031829. Kaleidescape continues to be accessible today. Indeed, Plaintiffs have neither asserted any DMCA claims against Kaleidescape nor sought an injunction against their product. Second, as explained in Mr. Buzzard's declaration, it is simply not true that the CSS protection scheme prevents copying by licensed CSS users. As Mr. Buzzard explained, the CSS system controls access to a DVD and decryption of content by licensed applications. This distinction is critical and removes this case from the ambit of cases such as Universal City Studios, Inc. v. Corley, 273 F.3d 429 (2nd Cir. 2001) and 321 Studios v. MGM Studios, Inc., 307 F. Supp. 2d 1085 (N.D. Cal. 2004), cited by Plaintiffs involving unlicensed products. In 321 Studios, for example, the Court recognized that CSS does not, in fact, prevent copying of DVD content. Instead, the Court noted that the unlicensed copy would be useless without licensed copies of the correct CSS keys. That reasoning simply does not apply here, where Real is a licensed CSS user with licensed access to the correct content keys.2 Plaintiffs' reliance on case law regarding unlicensed users is entirely misplaced. In sum, RealDVD fully complies with and functions within the scope of the CSS Agreement, works with the CSS technology on a DVD, and does nothing to
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Contrary to the claims of the Plaintiffs, RealDVD does not strip or remove the CSS encryption from the image of the DVD created on a user's storage medium. 28 See Buzzard Decl., ¶9.
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circumvent any such technology. There is therefore no DMCA violation. III. The Balance of Hardships Favors Defendants A. The Harms Claims by Plaintiffs Are Compensable or Illusory.

Plaintiffs contend that "starting today," DVD users are able to copy for the first time DVD content onto their computer drives as a result of the product launch of RealDVD. Mot. at 1. According to Plaintiffs, this will suddenly change consumers' attitudes about DVD copying, irreparably harm sales of DVDs and the rental market, and irreparably harm the Plaintiffs' developing markets. Plaintiffs' argument ignores reality. Unlicensed DVD software products that decrypt and remove the encryption of CSS ("rippers") have been available, widely used and discussed in the media for years. Plaintiffs themselves claim to have "lost" $2.3 billion in revenue to Internet piracy in 2005 alone (a statement which not only illustrates the state of the industry prior to the launch of RealDVD, but also undercuts Plaintiffs' claim that alleged damages here are somehow new and immeasurable). [See Motion Picture Association of America website, www.mpaa.org.]. As noted in the recent article in PC Magazine, unlicensed "rippers" provide much greater flexibility, often for free, to those willing to use an unlicensed product: Unfortunately, the resulting [RealDVD] movie files are locked up tighter than Hannibal Lecter; you can play them on up to five licensed PCs, but you can't watch them on your iPod or other device. As such, RealDVD doesn't really give users what they want: a way to put their purchased movies on their PCs and move them to iPods, iPhones, PSPs, and network attached devices . . . Essentially, we want the same freedom with DVDs that we have with CDs, and there are lots of DVDripping and file-converting tools online that give users that freedom.

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Many of the best ones are free or accept donations . . ."3 RealDVD does not offer any new or attractive options to users interested in piracy. To the contrary, RealDVD is targeted precisely to those users who have avoided rippers, and are instead simply looking to make a backup copy of what is notoriously fragile, cumbersome and inconvenient to use in today's digital world ­ a DVD disc. See Declaration of Gordon Klein, ¶¶5-9. Backup copies made with RealDVD simply will not work in any hard drive other than the one upon which they were initially created and cannot be disseminated on the Internet to others for use. This is not piracy ­ this use is well within the fair use exception to copyright infringement. See, e.g., Sony Corporation of America v. Universal City Studios, Inc., 464 U.S. 417 (1983).4 In addition, Plaintiffs undercut their own claims of irreparable harm. Plaintiffs claim that RealDVD will upset Plaintiffs' licensing schemes with others. But, the fact of these licensing schemes with Apple or Amazon only confirms that what is at issue here, if anything, is calculable damages, not unquantifiable harm. In fact, as explained in the Klein Declaration, Plaintiffs' declarant Dunn provides specific data that could be used to quantify the alleged harm to Plaintiffs. See, e.g., Sampson v. Murray, 415 U.S. 61, 90 (1974) ("`The key word in this consideration is irreparable. Mere injuries, however substantial, in terms of money, time and energy necessarily expended ... are not enough.'") More importantly, Plaintiffs' argument mixes the markets for digital downloads with the market for sales or rentals of DVDs. For example, one does not purchase a digital download of the same movie that one bought on DVD. The user
Monson, Kyle, "Tools for Ripping Your DVDs," 9/11/08 PC Magazine, http://www.pcmag.com/print_article2/0,1217a%253D231870,00.asp Indeed, had there existed any real threat of irreparable harm from the violation of the DMCA that Plaintiffs claim here, Plaintiffs should have brought this suit long ago against Kaleidescape rather than acquiesce to Kaleidescape's continued presence in the market to this day.
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can watch the DVD. At best, the user only purchases the digital download of a previously purchased DVD for a transformative use, i.e., to play on an iPod. RealDVD does NOT permit transformative uses ­ a RealDVD will not work on an iPod. Therefore claims of harm regarding the digital downloads are simply misplaced. Plaintiffs' claims of harm are at best compensable, but more likely entirely illusory. Either way, Plaintiffs cannot and have not met their burden to justify the entry of the extraordinary remedy of a temporary restraining order. Oakland Tribune, Inc. v. Chronicle Pub. Co., Inc., 762 F.2d 1374 (9th Cir. 1985) ("Under any formulation of the test, plaintiff must demonstrate that there exists a significant threat of irreparable injury.") B. Real Would Suffer Irreparable Injury If An Injunction Were Entered.

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An injunction against RealDVD would be devastating to Defendants, as they would be forced to pull from the market a product which was announced and publicized in early September, and whose launch was already delayed once in a failed effort to appease the Plaintiffs. As explained in the Declaration of Jacqueline Lang ("Lang Dec."), Real initially planned to launch RealDVD upon the announcement of the product at a technology conference on September 8, 2008. Lang Dec., ¶ 2. Real made a tremendous public relations and advertising push to prepare for the initial RealDVD launch, including securing press regarding RealDVD in dozens of publications (including the New York Times, Business Week, Newsweek, PC World and USA Today), giving demonstrations of the product and answering technical questions. Lang Dec., ¶ 4. Prior to the September 30th launch of RealDVD, Real attempted to recreate as much as possible the initial publicity "buzz" that surrounded RealDVD at the time of the planned initial September 8 launch. Lang Dec., ¶ 7. In the days leading up to the September 30th launch, Real's PR department and outside PR agencies again
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contacted numerous media outlets encouraging them to write articles regarding RealDVD. While Real made extensive PR efforts for the September 30th launch, many of the publications which had already generated press regarding RealDVD were not willing to run second articles on the product. Id. If RealDVD were enjoined, thereby undermining its second effort to launch the product, Real will lose credibility with its customers and potential customers, shareholders, analysts, advertising partners, PR contacts and the market generally. Much of the goodwill that Real has developed over the years would be lost. Even if Real were ultimately allowed to resume sales of the product, the ultimate success of RealDVD, Real's image, and perhaps other Real offerings, would be irreparably impaired. Lang Dec., ¶ 8. Real would most certainly not be able to successfully execute a "third" publicity blitz and launch of the product after having been tainted with the mislabel of an illegal product following two aborted launches. Most importantly, Real currently has a "first mover advantage" with respect to the RealDVD product as there are no licensed competitive products at this price point. Lang Dec., ¶ 9. In promoting the release of RealDVD, Real has explained its product in detail to the market (and to its competitors), provided demonstrations and answered technical questions. While the technical details of RealDVD have not been released, competitors were alerted in early September both to the feasibility and the attractiveness of a similar product. Id. Any further delay in the release of RealDVD will pose an unacceptable business risk to Real, as Real could lose its first mover advantage which could never be recovered.

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CONCLUSION For the foregoing reasons, Defendants respectfully request that the Plaintiffs' ex parte application be denied. Dated: September 30, 2008 WILSON SONSINI GOODRICH & ROSATI Professional Corporation

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DEFENDANTS' OPPOSITION TO EX PARTE APPLICATION FOR TRO

By: /s/Colleen Bal Colleen Bal [e-mail] Attorneys for Defendants REALNETWORKS, INC. AND REALNETWORKS HOME ENTERTAINMENT, INC.

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GLENN D. POMERANTZ (SBN 112503) [e-mail] BART H. WILLIAMS (SBN 134009) [e-mail] KELLY M. KLAUS (SBN 161091) [e-mail] MUNGER, TOLLES & OLSON LLP 355 South Grand Avenue, Thirty-Fifth Floor Los Angeles, CA 90071-1560 Tel: [phone]; Fax: [phone] ROBERT H. ROTSTEIN (SBN 72452) [e-mail] ERIC J. GERMAN (SBN 224557) [e-mail] BETSY A. ZEDEK (SBN 241653) [e-mail] MITCHELL SILBERBERG & KNUPP LLP 11377 West Olympic Boulevard Los Angeles, California 90064-1683 Tel: [phone]; Fax: [phone] GREGORY P. GOECKNER (SBN 103693) [e-mail] DANIEL E. ROBBINS (SBN 156934) [e-mail] 15301 Ventura Boulevard, Building E Sherman Oaks, California 91403-3102 Tel: [phone]; Fax: [phone] Attorneys for Plaintiffs UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA WESTERN DIVISION UNIVERSAL CITY STUDIOS PRODUCTIONS LLLP, UNIVERSAL CITY STUDIOS LLLP, PARAMOUNT PICTURES CORPORATION, TWENTIETH CENTURY FOX FILM CORPORATION, SONY PICTURES TELEVISION INC., COLUMBIA PICTURES INDUSTRIES, INC., SONY PICTURES ENTERTAINMENT INC., DISNEY ENTERPRISES, INC., WALT DISNEY PICTURES and WARNER BROS. ENTERTAINMENT INC., Plaintiffs,
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CASE NO. CV 08-06412 SJO AJWx PLAINTIFFS' REPLY BRIEF IN SUPPORT OF PLAINTIFFS' EX PARTE APPLICATION FOR TRO

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vs. REALNETWORKS, INC. and REALNETWORKS HOME ENTERTAINMENT, INC., Defendants.

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Plaintiffs submit this reply brief to correct misstatements of fact and law in Real's opposition papers. Timing of TRO Request: In the introductory paragraph of its opposition brief, Real asserts that Plaintiffs knew "since the first week of September" that RealDVD would be launched on September 30. Opp. at. 1. Based on that statement, Real suggests throughout their papers that the Plaintiffs held off filing a request for a TRO for tactical reasons. Real knows the facts are otherwise. Here's what really happened: Real and Plaintiffs entered into a standstill agreement on September 6, to facilitate settlement discussions. In that agreement, the parties expressly agreed that neither party would argue "that any delay in asserting any claim during the [t]olling period is germane" to any issue in any litigation. Real's suggestion in its papers that Plaintiffs delayed in seeking the TRO runs afoul of this commitment.1 The truth is that Plaintiffs have acted promptly and in the utmost good faith. The parties tried for two weeks to resolve their dispute without Court intervention. On September 22, Real terminated the standstill agreement, which under the terms of the agreement meant that the parties were free to file a lawsuit on Tuesday, September 30. Three days after the September 22 termination notice, Plaintiffs asked Real to delay its launch by a few weeks to allow for expeditious and orderly briefing and consideration of Plaintiffs' request for immediate injunctive relief. Pomerantz Decl. Ex. A. Real refused to do so, and also refused to provide details on the ease with which it can disable the RealDVD software from its servers once the software has been distributed (a fact it still fails to disclose in its opposition papers). Plaintiffs also informed Real last week that they would file their lawsuit Tuesday morning in this Court, and then worked around the clock to draft TRO The parties also agreed that the standstill agreement was confidential (which is why Plaintiffs did not mention it in their opening papers), but could be disclosed to enforce its terms. If the Court would like to review a copy of the standstill agreement, Plaintiffs will file it promptly under seal.
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papers, which were finalized in the early morning hours of Tuesday, September 30, and provided to Real's counsel as soon as they were completed, even before they were filed. Venue: Footnote 2 of Plaintiffs' opening papers explains why Real's anticipatory declaratory action brought in the Northern District (which it brought only after Plaintiffs told Real it would be filing in Los Angeles) is an improper attempt to forum-shop. See also Xoxide, Inc. v. Ford Motor Co., 448 F. Supp. 2d 1188, 1192-93 (C.D. Cal. 2006) ("Anticipatory suits . . . are viewed with disfavor as examples of forum shopping and gamesmanship."). Also, Real's opposition never explains why venue of its contract claim against the DVD CCA matters to this TRO request, which is based solely on a DMCA claim by Plaintiffs against Real, over which venue is clearly proper in this district. And even as to the contract claim, Real's opposition overlooks the dispositive venue provision in the CSS license. Real itself has signed a license agreement that expressly provides that Plaintiffs, as third-party beneficiaries of the CSS license, can file an action in Los Angeles to enforce the terms of the license. Pomerantz Decl. Ex. F at 23-25 (§ 9.5). That is precisely what Plaintiffs have done in their second cause of action.2 Likelihood of Success on Merits: Real does not seriously dispute that RealDVD evades the technological protections of CSS. It artfully says that "RealDVD does not strip or remove the CSS encryption from the" copy it creates. Opp. at 4 n.2 (emphasis added). But Plaintiffs have demonstrated that RealDVD avoids and bypasses all the other technological protections--e.g., drive locking, authentication, bus encryption, the secure lead in area--that CSS provides and that RealDVD circumvents CSS's core copy protection function. See Pls' Memo. at 1314. Neither Real nor its declarants deny that.
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Indeed, Plaintiffs have filed 10 other CSS lawsuits against other CSS licenses in Los Angeles under the third-party beneficiary venue provisions of the CSS license, and not one of those licensees claimed that venue was improper or that the DVD CCA was a necessary party.
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Real's central argument is that it is not circumventing CSS because it "complies with the requirements" of the CSS License Agreement, and "if CSS were supposed to prevent copying by a licensed user, the CSS Agreement would prohibit such conduct." Opp. at 2-3 (emphasis added). Real does not dispute, however, that under federal law the question is not whether the license prohibits the conduct, but rather whether it affirmatively authorizes it. See Pls' Memo. at 16-19 (citing S.O.S. Inc. v. Payday, Inc., 886 F.2d 1081 (9th Cir. 1989); LGS Architects, Inc. v. Concordia Homes of Nevada, 434 F.3d 1150, 1156-57 (9th Cir. 2006)). Real points to no language in the license that affirmatively authorizes a CSS licensee to enable consumers to freely make permanent, playable copies of DVDs. And for good reason, because that is contrary to the entire purpose of CSS--developed by the Copy Protection Technical Working Group and managed by the DVD Copy Control Association. All the language regarding copying in the license is designed to prohibit consumer copying. See Pls' Memo. at 18 (quoting Pomerantz Decl. Ex. F at 1 (Recital A), 22 (§ 9.2)); see also id. at 4 (quoting Pomerantz Decl. Ex. G). Real's Buzzard Declaration only confirms this. He admits RealDVD is a "licensed and authorized DVD player." Buzzard Decl. ¶ 5 (emphasis added). He does not suggest that Real has been licensed to distribute a DVD copier. As he admits, once "access has been properly granted" under the playback license, RealDVD uses that access to "make a backup copy of the content." Id. ¶ 9. Because RealDVD exceeds the scope of its license, Real is using the CSS keys for a prohibited purpose and, under well-settled law, is liable under the DMCA. See Pls' Memo. at 15 (citing 321 Studios v. Metro Goldwyn Mayer Studios, Inc., 307 F. Supp. 2d 1085, 1098 (N.D. Cal. 2004); Microsoft Corp. v. EEE Business Inc., 555 F. Supp. 2d 1051, 1059 (N.D. Cal. 2008)). Irreparable Injury: The thrust of Real's argument on irreparable injury is that Plaintiffs will suffer no harm because illegal DVD ripping software has been available for years, and already costs the Plaintiffs dearly. The argument misses the
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point entirely. RealDVD is the first such branded product from a recognized company that holds itself out as "legal." As Real frankly concedes, it is "targeted precisely to those users who have avoided rippers[.]" Opp. at 6. That is exactly the concern expressed by Mr. Dunn in his declaration: that the broad sweep of lawabiding consumers will now be likely to start copying DVDs, causing Plaintiffs irreparable injury above and beyond that caused by illegal rippers. Dunn. Decl. ¶¶ 5, 27-28. Real simply does not address that serious threat. Real's "two wrongs make a right" argument should be rejected. The only supposed "evidence" submitted by Real regarding irreparable injury is a declaration by Gordon Klein, a lawyer and accountant. There is nothing apparent in Mr. Klein's background that even might permit him to opine authoritatively or reliably about the marketplace for home video products or services, or the effect of RealDVD on that marketplace. His declaration does not set forth any relevant work or academic experience that would qualify him as an expert in any area relating to the market for entertainment products or, specifically, home entertainment products. Nor does he indicate that he has previously qualified as an expert in the area. In any event, in opining that damages are likely to be quantifiable, Mr. Klein simply points to the fact that there are some numbers in Mr. Dunn's declaration, and completely ignores the specific factors that Mr. Dunn points to in explaining why economic damages would be extraordinarily difficult to measure in this specific market, which he knows well after twenty-one years. He also does not even purport to address Mr. Dunn's testimony about the irreparability of harm to nascent markets, or harm flowing from changes in consumer attitudes and behavior. The numerous cases cited on page 22 of Plaintiffs' opening brief make clear that this is precisely the type of harm that warrants immediate injunctive relief. Balance of Hardship: The only evidence of harm that Real even purports to offer is the Lang Declaration. Ms. Lang, however, points to supposed harm that
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flowed from the decision to delay the launch of RealDVD past September 8. To her credit, Ms. Lang acknowledges that the decision was Real's. Lang Decl. ¶ 3. This hardship, however, has nothing to do with the granting or denying of injunctive relief; it is something Real voluntarily chose to do. The only issue now is what harm, if any, Real will suffer if the launch is pushed back by a few more weeks to allow for consideration of the merits of a preliminary injunction motion. As to that issue, Ms. Lang's declaration offers very little. Ms. Lang says that Real tried to re-interest the press in advance of the September 30 re-launch, but candidly admits that many publications "were not willing to run second articles." Id., ¶ 7. Although she alludes to some unspecified "advertising efforts" around the September 30 re-launch, she does not quantify or detail any. Ms. Lang also insists that Real will suffer hardship because it will lose its "first mover advantage." The law is clear, however, that a party is not entitled to any advantage as a result of being the "first mover" in the market for an unlawful product or service.3 Perhaps most important, Real's opposition papers do nothing to respond to the risk of irreparable harm that the Plaintiffs explained in detail in the declaration of Mr. Dunn and that other courts have found exists when they have addressed similar situations. See Pls' Memo. at 22. The balance of hardships clearly tilts in favor of issuance of a temporary restraining order.

See, e.g., Power-One, Inc. v. Artesyn Techs., Inc., 2008 WL 1746636, *1, n.1 (E.D. Tex. 2008); Warrior Sports, Inc. v. STX, L.L.C., 2008 WL 783768, *12 (E.D. Mich. 2008); Tivo, Inc. v. Echostar Communications Corp., 446 F. Supp. 2d 664, 669-670 (E.D.Tex. 2006); Lyrick Studios, Inc. v. Big Idea Prods., Inc., 2002 WL 32157203, *1 (N.D. Tex. 2002).
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DATED: October 1, 2008

MUNGER, TOLLES & OLSON LLP MITCHELL SILBERBERG & KNUPP LLP GREGORY P. GOECKNER DANIEL E. ROBBINS

By: /s/ GLENN D. POMERANTZ Attorneys for Plaintiffs

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UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA CIVIL MINUTES - GENERAL

Priority Send Enter Closed JS-5/JS-6 Scan Only

CASE NO.: CV 08-06412 SJO (AJWx) TITLE:

DATE: October 2, 2008

Universal City Studios Productions, LLLP, et al. v. RealNetworks, Inc., et al.

======================================================================== PRESENT: THE HONORABLE S. JAMES OTERO, UNITED STATES DISTRICT JUDGE Victor Paul Cruz Courtroom Clerk COUNSEL PRESENT FOR PLAINTIFFS: Not Present Not Present Court Reporter COUNSEL PRESENT FOR DEFENDANTS: Not Present

======================================================================== PROCEEDINGS (in chambers): ORDER TRANSFERRING ACTION TO NORTHERN DISTRICT OF CALIFORNIA This matter is before the Court on Plaintiffs Universal City Studios Productions LLLP, Universal City Studios LLLP, Paramount Pictures Corporation, Twentieth Century Fox Film Corporation, Sony Pictures Television Inc., Columbia Pictures Industries, Inc., Sony Pictures Entertainment Inc., Disney Enterprises, Inc., Walt Disney Pictures and Warner Bros. Entertainment, Inc.'s (collectively "Plaintiffs") Application for Temporary Restraining Order ("TRO"), and Order to Show Cause re: Preliminary Injunction, filed September 30, 2008. Defendants RealNetworks, Inc. And RealNetworks Home Entertainment, Inc. (collectively "RealNetworks") filed an Opposition, to which Plaintiffs replied. Because of the following reasons, Plaintiffs' Application and Complaint action are hereby TRANSFERRED to the Northern District of California. I. BACKGROUND

On September 30, 2008, RealNetworks began selling a software product entitled "RealDVD," which enables users to make copies of DVDs on their computer hard drives. (Pls.' P. & A. 1.) RealNetworks created this product using DVD Content Scramble System ("CSS") technology, which it obtained pursuant to an agreement with the DVD Copy Control Association ("DVD CCA"), which licenses the use of CSS. (Pls.' P. & A. 8.) The terms of RealNetworks' agreement with DVD CCA provide that disputes between RealNetworks and DVD CCA must be litigated exclusively in Santa Clara County, California. (CSS License Agreement, filed as Pomerantz Decl. Ex. F, at 26.) The agreement also provides that disputes between RealNetworks and third party beneficiaries may be brought in courts located in Los Angeles, Santa Clara, or San Francisco counties. Id. RealNetworks originally planned to release RealDVD on September 8, 2008, but delayed the release at Plaintiffs' request. (Letter from James DiBoise to Glenn Pomerantz, Sept. 25, 2008, filed as Pomerantz Decl. Ex. C.) On September 6, 2008, Plaintiffs and RealNetworks entered into a "standstill agreement" under which all parties agreed to refrain from bringing suit to facilitate
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settlement discussions. (Pls.' Reply 1, Defs.' Opp'n 2.) According to Plaintiffs, RealNetworks terminated the standstill agreement on September 22, 2008, which under the terms of the agreement meant the parties could bring suit beginning September 30, 2008. Plaintiffs then asked RealNetworks to delay its release of RealDVD until late October so they could seek injunctive relief, and informed RealNetworks that they intended to file suit in Los Angeles on September 30, 2008. (Letter from Glenn Pomerantz to Robert Kimball, Sept. 25, 2008, filed as Pomerantz Decl. Ex. A.) RealNetworks refused to delay the launch. (Pls.' P. & A. 1.) On September 30, 2008, at 9:05 a.m. in the Northern District of California, RealNetworks filed a complaint seeking a declaratory judgment against Plaintiffs, DVD CCA, and Viacom, Inc., that RealDVD does not violate the Digital Millennium Copyright Act ("DMCA") or the CSS License Agreement. (08-04548, Docket No. 1.) At 10:21 a.m., Plaintiffs filed their Application in the Central District of California. II. DISCUSSION

The "first to file" rule is a generally recognized doctrine of federal comity that permits a district court to decline jurisdiction over an action when a complaint involving the same parties and issues has already been filed in another district. Mediostream, Inc. v. Priddis Music, Inc., No. 072127, 2007 U.S. Dist. LEXIS 73707, at *6 (N.D. Cal. Sept. 24, 2007) (citing Pacesetter Systems, Inc. v. Medtronic, Inc., 679 F.2d 93, 94-5 (9th Cir. 1982)). The rule allows a court to dismiss, transfer, or stay an action when a similar complaint has been filed in another district. Alltrade, Inc. v. Uniweld Products, Inc., 946 F.2d 622, 623 (9th Cir. 1991). This doctrine "serves the purpose of promoting efficiency well and should not be disregarded lightly." Church of Scientology of California v. United States Dep't of Army, 611 F.2d 738, 750 (9th Cir. 1979). In applying the "first to file" rule, courts look to three threshold factors: (1) the chronology of the two actions; (2) the similarity of the parties; and (3) the similarity of the issues. Greenline Industries v. Agri-Process Innovations, LLC, No. 08-2438, 2008 U.S. Dist. LEXIS 60504, at *8 (N.D. Cal. July 28, 2008). Even if the threshold factors are met, a court may dispense with the "first to file" rule if the first suit filed is anticipatory, meaning the plaintiff filed it "upon receipt of specific, concrete indications that a suit by [the] defendant was imminent." Xioxide, Inc. v. Ford Motor Co., 448 F. Supp 2d. 1188, 1192 (C.D. Cal. 2006). In deciding whether to transfer an action based on the "first to file" rule, the court in the second-filed action normally does not consider the respective convenience of the two courts. Alltrade, 946 F.2d at 628 ("As for the respective convenience of the two courts, normally this argument should be addressed to the court in the first-filed action. Apprehension that the first court would fail to appropriately consider the convenience of the parties and the witnesses should not be a matter for our consideration.") Here, RealNetworks filed suit in the Northern District at 9:05 a.m. on September 30, 2008 ("Case 1"). Plaintiffs filed their action and Application at 10:21 a.m. on the same day, in the
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Central District. ("Case 2"). The parties in both cases are substantially the same: in Case 1, RealNetworks brought suit against Plaintiffs and two additional parties, DVD CCA and Viacom, Inc. In Case 2, Plaintiffs brought suit against RealNetworks. In addition, the issues in both cases are identical. In Case 1, RealNetworks seeks a declaratory judgment that its RealDVD violates neither the CSS License Agreement nor the DMCA. (08-4548 Compl. 9.) In Case 2, Plaintiffs allege RealNetworks violates both the CSS License Agreement and the DMCA. (Compl.15.) Thus, the threshold requirements are met. Plaintiffs contend that the Court should disregard the "first to file" rule because Case 1 was anticipatory. (Pls.' Reply 2.) In support, they point to the fact that RealNetworks filed its action "only after Plaintiffs told RealNetworks it would be filing in Los Angeles." Id. Indeed, Plaintiffs informed RealNetworks that it would be filing suit in Los Angeles in a letter dated September 25, 2008. (Letter from Glenn Pomerantz to Robert Kimball, filed as Pomerantz Decl. Ex. A.) However, Plaintiffs and RealNetworks had a "standstill agreement" under which all parties agreed to refrain from filing suit until September 30, 2008. (Pls.' Reply 1.) In this agreement, the parties agreed that "neither party would argue that any delay in asserting any claim during the tolling period is germane to any issue in any litigation." Id. Despite this, Plaintiffs now argue that because RealNetworks waited to file suit until the date agreed upon by the parties, that suit is improper. Id. RealNetworks maintains that it "initiated its preparation for filing its declaratory judgment action prior to receiving any correspondence from Plaintiffs' counsel" and that the only reason it did not file earlier is because of the standstill agreement. (Defs.' Opp'n 2.) Plaintiffs themselves rely on this agreement to explain their delay in seeking a TRO. (Pls.' Reply 1.) In other words, both parties intended to file suit on September 30, irrespective of Plaintiffs' letter to RealNetworks. As such, it does not appear that RealNetworks filed suit in response to Plaintiffs' letter, and thus the action was not anticipatory. In addition, the Court finds that judicial economy favors transferring Case 2 to the Northern District, because that is the only district where DVD CAA may be joined as a party, pursuant to the CSS Licensing Agreement. Therefore, were this Court to decline to transfer Case 2, Case 1 and Case 2 could not be consolidated and the identical issues of the legality of RealDVD under the DMCA and the CSS License Agreement would have to be litigated twice, in two separate courts. III. RULING

For the foregoing reasons, the Court hereby TRANSFERS this action to the Northern District of California. IT IS SO ORDERED.

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