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UNITED STATES DISTRICT COURTNORTHERN DISTRICT OF CALIFORNIA
REALNETWORKS, INC., a WashingtonCorporation; and REALNETWORKS HOMEENTERTAINMENT, INC., a DelawareCorporationPlaintiffs and Counter-defendants,v.DVD COPY CONTROL ASSOCIATION,INC., a Delaware nonprofit corporation,DISNEY ENTERPRISES, INC., a Delawarecorporation; PARAMOUNT PICTURESCORP., a Delaware corporation; SONYPICTURES ENTER., INC., a Delawarecorporation; TWENTIETH CENTURY FOXFILM CORP., a Delaware corporation; NBCUNIVERSAL, INC., a Delaware corporation;WARNER BROS. ENTER. INC., a Delawarecorporation; and VIACOM, Inc., a DelawareCorporation,Defendants and Counter-complainants./ UNIVERSAL CITY STUDIOSPRODUCTIONS L.L.L.P., UNIVERSALCITY STUDIOS L.L.L.P., PARAMOUNTPICTURES CORPORATION, TWENTIETHCENTURY FOX FILM CORP., SONYPICTURES TELEVISION INC., COLUMBIAPICTURES INDUSTRIES, INC., SONYPICTURES ENTERTAINMENT INC.,DISNEY ENTERPRISES, INC., WALTDISNEY PICTURES and WARNER BROS.ENTER. INC.,Plaintiffs,No. C 08-04548 MHPNo. C 08-04719 MHP
Case 3:08-cv-04548-MHP Document 316 Filed 05/05/2009 Page 1 of 22
 
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123456789101112131415161718192021222324252627282v.REALNETWORKS, INC., a WashingtonCorporation; and REALNETWORKS HOMEENTERTAINMENT, INC., a DelawareCorporationDefendants./ 
MEMORANDUM & ORDERRe:
 
Plaintiffs’ Motion to Dismiss DVDCCA’s Second Counterclaim;Plaintiffs’ Motion to Preclude Claims Basedon Non-CSS Technologies;Defendants’ Motion for Sanctions forSpoliation of Evidence.
Plaintiffs RealNetworks, Inc. and RealNetworks Home Entertainment, Inc. (together, “Real”)seek a declaratory judgment that they have neither breached a license agreement with DVD CopyControl Association, Inc. (“DVD CCA”) nor violated the anti-circumvention provisions of theDigital Millennium Copyright Act, 17 U.S.C. sections 1201, et seq. (“DMCA”). Now before thecourt are three motions: (1) Real’s motions to dismiss DVD CCA’s second counter-claim for breachof the implied covenant of good faith and fair dealing; and (2) Real’s motion to preclude claimsbased on non-Content Scramble System (“non-CSS”) technologies or, alternatively, to continue thepreliminary injunction hearing, and for the appointment of a discovery referee; and (3) Defendants’motion for sanctions for spoliation of evidence. Having considered the parties’ submissions and forthe reasons set forth below, the court enters the following memorandum and order.BACKGROUNDRealNetworks, Inc. is a company incorporated and based in Seattle, Washington, thatdevelops, manufactures and sells platforms for the delivery of digital media. Amended Complaintfor Declaratory Relief, Docket No. 62, ¶ 10, Exh. A (“Amended Complaint”).
1
RealNetworksHome Entertainment, Inc. is a subsidiary of RealNetworks, Inc. and is incorporated in Delaware,with its principal place of business in Seattle, Washington. Id. ¶ 11.Real sells and distributes a software product known as RealDVD. Id. ¶ 2. The RealDVDproduct has a variety of different functions, such as playing back DVDs placed into the computer’sDVD drive, looking up information about the DVD from Internet databases, providing links tovarious information websites relevant to the chosen DVD and storing an image of the copy-protectedDVD to a computer hard drive for safekeeping and later playback purposes. Id. Moreover, the
 
Case 3:08-cv-04548-MHP Document 316 Filed 05/05/2009 Page 2 of 22
 
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123456789101112131415161718192021222324252627283RealDVD allows users to create personal copies of DVDs on a computer’s hard drive. Id. ¶ 24.Real also has a new product called “New Platform” or “Facet.” Id. ¶ 2.Columbia Pictures Industries, Inc., Disney Enterprises, Inc., Paramount Pictures Corp., SonyPictures Entertainment, Inc., Sony Pictures Television, Inc., Twentieth Century Fox Film Corp.,NBC Universal, Inc., Walt Disney Pictures, Warner Bros. Entertainment, Inc., Universal CityStudios Productions L.L.L.P., Universal City Studios L.L.P. and Viacom, Inc. (collectively, “Studiodefendants”) are motion picture companies that are members of DVD CCA, a not-for-profitcorporation that consists of companies in the motion picture, consumer electronics and computerindustries. Id. ¶ 4. DVD CCA licenses Content Scramble System (“CSS”) technology tomanufacturers of devices and software pursuant to a standard license agreement (“CSS LicenseAgreement”). Id.CSS technology scrambles the DVD content so that it cannot be copied or played coherentlywithout first being decrypted through a process employing a set of decryption keys. Id. ¶ 20.Studio defendants use CSS technology to encrypt the content on their copyrighted DVDs. Id. TheCSS License Agreement imposes restrictions on the use of CSS technology, according to CSSspecifications and provides a licensee with decryption keys and the authorized methods andprocesses for decryption. Id. ¶ 21. DVD CCA has a strong interest in protecting DVD content andpreventing unauthorized copying of the content providers’ copyrighted materials. See Counter-Complaint by Disney Enterprises, Inc., Paramount Pictures Corporation, Sony PicturesEntertainment Inc., Twentieth Century Fox Film Corporation, and Warner Bros. Entertainment Inc.,Docket No. 15, (“Counter-Complaint”) ¶¶ 24, 26-27.On August 13, 2007, DVD CCA licensed its CSS technology to Real pursuant to a CSSLicense Agreement. Amended Complaint ¶ 23; see also Docket No. 2, Exh. 1 to Complaint (CSSLicense Agreement). Under this license, Real obtained the CSS technology with authorization tobuild a product to play DVDs. Approximately a year later, Real was contacted by various studiosobjecting to the impending release of the RealDVD product, expressing concerns that RealDVDviolated terms of the CSS License Agreement by making playable, permanent copies of DVDs.
Case 3:08-cv-04548-MHP Document 316 Filed 05/05/2009 Page 3 of 22
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