321Studios Loses a Round

If you were thinking about buying a copy of 321Studios' DVD-backup software, you'd better hurry. On Friday, February 20, a San Francisco federal judge ruled that the company's popular "DVD X Copy" software is illegal, and ordered a halt to its distribution within seven days.

Barring any reversal of Judge Susan Illston's ruling, Friday, February 27 will be the last day that anyone can buy the products. Attorneys for 321Studios said they would ask for an emergency stay to keep the company's "DVD X Copy" available in retail outlets such as CompUSA, one of the company's biggest dealers. The lawyers also said they would appeal the ruling regardless of the outcome of the stay request. The legal battle may eventually be decided in "the Supreme Court or at the congressional level," said 321 Studios president Robert Moore.

Illston's ruling capped eight months of litigation. In 2002, St. Louis–based 321Studios initiated a preemptive strike against Hollywood studios, in an attempt to establish the legality of software that allows movie fans to make backup copies of DVDs that they have legally purchased. The studios responded with two counter suits, one in California and one in New York. Judge Illstons ruling acknowledged that consumers might have a right to make backup copies of movies they have purchased—as "fair use" provisions of copyright law allow—but that "DVD X Copy" operates counter to the intent of the Digital Millennium Copyright Act (DMCA) that makes circumventing antipiracy technology a crime.

Should Hollywood executives decide to seek damages under the DMCA, 321Studios could quickly be bankrupted. The company has sold approximately one million copies of "DVD X Copy;" the DMCA provides for $150,000 in fines for each infraction. On February 18, two days before Judge Illston's ruling, 321Studios' Australian distributor caved into threats of lawsuits and pulled the company's products from stores down under.