Real Worried About Apple Lawsuits

sebFlyte writes "silicon.com is reporting that Real is very worried that Apple will sue it over its Harmony technology that 'breaks' iTunes' FairPlay DRM to allow its music to play on the iPod. They acknowledged in an SEC filing that a lawsuit from Apple would potentially be very damaging to the company's bottom line, as it accepts that a court might not agree that the reverse-engineering is legal."

Re:Reverse-engineering

[pauljlucas]

Is reverse-engineering software necessarily illegal?

No, it isn't. The story submitter is confused. The last line of the summary should have read something like:

... as it accepts that a court might find that Real violated the DMCA.

I.e., Real cracked the DRM. How they did it is irrelevant be it reverse-engineering or reading tea leaves.

Re:Well, I'm confused..

[gstoddart]

I play non-DRM'ed mp3s on my iPod mini all the time. What am I missing?

According to Real, the ability to play a different form of DRM'd files on the iPod while still keeping it DRM'd.

Non-DRM'd mp3s, as you point out, will just play fine.

Reverse Engineering

[merkhet]

The problem at issue here is not really the reverse engineering. This is somewhat different than having someone figure out the secret forumla to Coca-cola and reproducing it for their own profit. The DRM that they are breaking is merely a method of allowing for the file to play on an iPod. It might be a little more analogous to getting a locksmith to copy a key for you. The physical act of copying the key or having possession of the copied key may not be illegal but the act of using the key to enter into another person's house might be... The real question is whether or not Apple has the right to enforce the types of files that it allows on its iPods. (I think that they do, but then again, I'm not comfortable with the idea that people can tell me what I can and cannot do with my own hardware...)

Re:wow....

[badasscat]

is this the first time I'll be rooting FOR Real?

Neither side is acting in particularly good faith on this issue.

BUT, before all of Slashdot flies off the handle on this "story", I think it's worth pointing out that this is an SEC filing, and it is every company's responsibility, in fact under the law, to state all possibilities that may negatively affect a business, however remote those possibilities may be. I don't think it's any secret to anybody that Apple could sue Real, and that there is at least a chance that Apple would win (because you just never know what can happen in the courts). Given that, Real must disclose this information to investors.

The news here seems to be that Real is "admitting" to something that seems to be common sense. But Real has to admit that they're at risk of a lawsuit, and that there's a chance that they would lose - to do otherwise would be fraud. It would be withholding information in order that people would continue buying their stock.

If you are not used to reading these SEC filings, even the healthiest of companies can seem to be in pretty dire straits once you get to the "risks" section. These are worst-case scenarios, presented basically to cover the company's ass from class action lawsuits and SEC investigations should the unthinkable happen. That doesn't mean anything listed as a risk will happen, or even has a good chance of happening. It's kind of the same as putting a warning label on a 9 volt battery that says "warning! eating this battery may cause injury!" I mean, duh. But they have to put that label on there or you just know that one idiot who eats that battery and gets sick is going to sue.

Re:Reverse-engineering

[slashjames]

The courts recently ruled that reverse-engineering hardware (Lexmark printer catridges, garage door openers) is legal and the DMCA doesn't apply for purposes of interopability. If you approach the potential case of Real getting sued by Apple about Rhapsody, it's the same concept: reverse engineering software (vs hardware) for purposes of interopability. Should be cut-and-dried, but who knows which way the courts will go.

Re:Reverse-engineering

[oliverthered]

There's a legal process called Abstraction, [google.co.uk]
Filtration, Comparison that happens when someone claims that reverse engineering violates copyright.

The process is basically as follows:

For a copyright violation someone must have copied to code, so the source code is the only thing that relates to reverse-engineering and copyright.

First of all all trivial bits of the code are ignored
The two code bases are then checked for common areas of code.
Then the code in the common areas that is their due to necessisity is removed.
and the code that's left is used as the basis of the copyright infringement.

It's also a good argument for GPL not being able to prevent dynamic runtime linking. (Since GPL is based on copyright)

Re:Reverse-engineering

[Hope Thelps]

I.e., Real cracked the DRM. How they did it is irrelevant be it reverse-engineering or reading tea leaves.

It's about the reverse engineering exception under the DMCA. This concerns why it was done (interoperability) not how it was done.

DMCA 1201 (f) [harvard.edu] (1) provides:

(f) Reverse Engineering. -

        * (1) Notwithstanding the provisions of subsection (a)(1)(A), a person who has lawfully obtained the right to use a copy of a computer program may circumvent a technological measure that effectively controls access to a particular portion of that program for the sole purpose of identifying and analyzing those elements of the program that are necessary to achieve interoperability of an independently created computer program with other programs, and that have not previously been readily available to the person engaging in the circumvention, to the extent any such acts of identification and analysis do not constitute infringement under this title.

This would appear to permit circumvention of a technological measure that effectively controls access to a copyrighted work for the purposes of achieving interoperability (such circumvention otherwise being banned by secion 1201 (a)(1)(A)). That appears to be what Real have done. So it IS about the legality of reverse engineering in this particular scenario.

Note: I'm not saying that they are legally in the clear, just that reverse engineering (as the term is used in the DMCA) IS what they are talking about.

Analysis of DMCA and Real's Harmony

[Landaras]

Back in July of 2004 I wrote up an analysis of Apple's DMCA claim against Real. The full article is available here [fallinggrace.com]. Here's the last part of it (after I give definitions and background).

*****

As mentioned above, Real has claimed that, with their Harmony software, downloads from the Real music store will now be usable by the iPod. Real accomplished this by reverse-engineering FairPlay, so that Real can now create a level of DRM that is indistinguishable from FairPlay by the iPod. Until a few days ago, only music purchased from iTMS could have any form of DRM on it and be playable on the iPod. With the creation of Harmony, the iPod will no longer be able to lock out Real's DRM'd music, creating (something resembling) a true competitor to iTMS in the form of Real's store.

Realizing this, Apple has quickly and angrily accused Real of using the "tactics and ethics of a hacker" in creating Harmony.

Apple's statement should be summarily ignored. They are using ad hominem attacks with terms that carry misleading connotations. It could be argued that Real "cracked" the FairPlay DRM, but even that is misleading. The right to reverse-engineer is protected by law, and as such what Real did is legal.

Or rather, would have been definitively legal several years ago, before the passage of the DMCA. In fact, "Apple said it is investigating the implications of Real's software strategy under the Digital Millennium Copyright Act" (news.com article [com.com]).

Now that statement by Apple is worth investigating. What does the DMCA say as to Real's reverse-engineering of FairPlay?

The sections that pertain to this case are Sec. 1201 (a)(1)(A), Sec. 1201 (a)(2)(A), and Sec. 1201 (f)(1). These sections are somewhat long and legal, but I will quote only what is necessary and break the verbage down into "normal english." Their relevant parts are, respectively

• No person shall circumvent a technological measure that effectively controls access to a work protected under this title.
• 
  and
• No person shall manufacture, import, offer to the public, provide, or otherwise traffic in any technology, product, service, device, component, or part thereof, that is primarily designed or produced for the purpose of circumventing a technological measure that effectively controls access to a work protected under this title.
• 
  and
• Notwithstanding the provisions of subsection (a)(1)(A), a person who has lawfully obtained the right to use a copy of a computer program may circumvent a technological measure that effectively controls access to a particular portion of that program for the sole purpose of identifying and analyzing those elements of the program that are necessary to achieve interoperability of an independently created computer program with other programs, and that have not previously been readily available to the person engaging in the circumvention, to the extent any such acts of identification and analysis do not constitute infringement under this title.

The first excerpt says that if there is some "technological measure that effectively controls access to a work", it is now illegal to circumvent that measure. To borrow from the Fair Use example above, if someone purchased a music compact disc that had some technological measure on it that kept them from copying it to their hard drive as mp3s, it would now be illegal for them to circumvent that technological measure.

The second excerpt says that you cannot create or distribute tools or software that allows circumvention of technological anti-copying measures. To continue the Fair Use example, it is illegal for someone else to create a method to turn a protected purchased disc into mp3s, or to give that method to others.

The third excerpt

Re:Why the DMCA sucks so badly

[Anonymous Coward]

Real makes a competing product. They want to be able to interoperate with the songs sold on iTunes. This should be an open and shut case.

Not so. Real's Harmony does not interoperate with iTunes Music Store songs. Harmony adds hacked FairPlay DRM to songs purchased From Real's music store, so that they'll work on the iPod, with the DRM intact.

It's not about fair use at all, it's about Real being as shady as ever.

Re:Apple vs Real

[99BottlesOfBeerInMyF]

What Apple is doing is unfairly using this monopoly to sustain the monopoly, something MSFT is notorious for. If I buy a song from iTunes, I should be able to use it on any player. This is a basic sentiment of slashdot - freely using what is yours. Your dollar spent on that song should give you a license to use it however you want to, not a license to go out and buy a 300 dollar iPod just to listen to it.

First I don't buy your argument that Apple has a monopoly (virtual or otherwise) on digital music players. They have about a 70% share. Given that, you might say that Apple is unfairly using it's near monopoly to tie the itunes music store to the ipod and leverage that near monopoly. Now take a look at their competition. It is made up of a dozen manufacturers who are selling mp3/wma players all of which equally tie the user into using a different player, a player bundled with basically every computer sold due to a real monopoly (legally found to be such and legally found to be abusing that monopoly). Yeah, yeah two wrongs don't make a right, but you have to admit, Apple doesn't have a lot of choice if they want to survive in the market.

Finally, you claim that if you buy a song you should be able to play it on any player, not just the ipod. The thing is, you can. Apple's DRM has a legal way to export to cd, which then plays in any cd player and which can them be re-encoded into another format for another player. They make it annoying, but legal. Neither Real nor Microsoft have that same feature on their DRM, as far as I know.

Mind you this whole piece is FUD trying to gain sympathy for a dying company after Apple has basically ignored them and done nothing about their weird hack, even though it violates the license agreement each user has with apple and it has a competitor using Apple's own servers to authenticate a for-profit enterprise that competes with them. Apple has really taken the high road here and deserve some credit for it.

Re:Apple is isolating itself...

[joelsanda]

I just don't understand why everyone rally's behind Apple with their iPod and the fact that people are forced to use iTune's. I like Apple's product line, but it will be a cold day in hell before I buy an iPod.

There is no forcing anyone to use iTunes. You don't have to wait for hell to freeze over to learn about the product, however. The restriction is on music purchased from iTunes, not on must loaded on to the iPod. Don't like the DRM on iTunes? Don't buy the music - copy it over from CD or another source without DRM.

Re:Apple vs Real

[Mr2001]

On one hand, Real is making it easy and accessible to its customers to break Apple's proprietary codec. Apple spent time and money to make the files only play on their players, and Real is trying to use the files without permission.

You've got it backwards. Real wants to make files from their own store play on Apple's player, by converting them to Apple style DRM files (instead of unrestricted MP3s, which is what they'd do if they really cared about their customers.. but I digress).

Also, don't forget that just because a company spends time and money to keep you from doing something, that doesn't mean you shouldn't be able to do it anyway. For example, if Ford spent months engineering a specially shaped gas tank opening to force customers to buy gas from Ford-owned stations, you'd still have every right to file it open and buy gas from the corner store - it's your car, and you should be able to fill it up however you like.

Similarly, it's your iPod, and you should be able to fill it with music from anyone who can supply it to you. If Apple wants you to come back to them for a "refill" of music, they can compete fairly by providing a better selection or lower prices... and if they can't compete fairly, they deserve to fail as their customers switch to other music stores.

Re:Reverse-engineering

[Hope Thelps]

Real has not obtained, lawfully or otherwise, a the right to use a copy of the computer program Apple uses to implement their DRM. Hence, the entire DMCA subsection does not apply.

The section only says that theyhave to have legally obtained a copy of the program that they are circumventing. That they will have done if they purchased an iPod for this purpose. I suspect they did.

This cited subsection of the DMCA provides for an individual person

Not just wrong, but laughable. The word "individual" is one you added on your own. The word used in the Act is "person". Legally a company is, of course, a person.

Said person could not distribute, sell, or profit from said reverse-engineering.

Again, this is something dredged up from your own fevered imagination.

There are very good arguments for saying that this section will not help Real, but not the nonsense you're producing here.

Regardless, the point of my post was that, contrary to what you originally said, they are indeed talking about the legality of reverse engineering. Again, as noted in my original post, that does not mean that they are legally in the clear.