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."

We're worried

[ackthpt]

Dear SEC: "We're worried that the shot we fired across their bow will be interpreted the wrong way."

What? This is a page out of the SCO play-book? Rambus play-book?

"Hello, Bernie Ebbers? You busy? We'd like some ideas on how to run our business."

and Apple should be worried about the Beatles

[Anonymous Coward]

Breaking 20 year old contracts [out-law.com] binding you not to get involved in music won't be good for the bottom line either

but hey lawsuits is what America likes doing !, the legal industry is the biggest cash contributers in the world to American politics [opensecrets.org] so nothing is going to change until everyone is either dead or in court

see you in court or hell !

Re:If Real is so worried...

[wankledot]

Because (believe it or not) Real wants to provide something for its customers. They want to sell songs, and they want to make them work with the iPod, since there are tons of iPods out there. By supporting a popular product, they expect to sell more songs. QED. (And they should be able to, IMO, and even according to the law. This type of reverse engineering is specifically protected by the DMCA.)

"Can't they find another way to make money?"

Same could be said for Apple. Can't they make money from the iPods and be happy? No company should be kept from selling something legally simply because the competition doesn't want them to.

They do make money another way...

[Anonymous Coward]

They inundate you with ads. Want to access their pages? Ads. Want to see a video or clip? Well, first you get a page with more ads then the actual link. Click the link, get an ad. At the end of the clip? Another ad. Flip to another page, it's ads galore.

One must wonder, with all of their touted subscribers, why do they focus more on selling ad space than actually making some for the consumer?

Not to get offtopic, but really: what is Real's actual relevance in the market today?

Re:Reverse-engineering

[mnemonic_]

Is reverse-engineering software necessarily illegal?

I doubt it, since SAMBA, linux's NTFS support, countless device drivers and many other hacking efforts have involved reverse engineering software. Those projects still thrive, so either corporate lawyers are being nice (hah!), or it's completely legal.

Oh boohoo

[mikeophile]

Anyone remember Streambox? [uh.edu]

I don't think Real was whining about the DMCA then.

Apple vs Real

[rm999]

I consider what both companies are doing as wrong, so I don't know who to root for.

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. Oh, and I'm still pissed about that who bloated Real Player thing :)

On the other hand, what Apple is doing is very akin to something that M$FT would do. They have a virtual monopoly on music players and online music downloads (to avoid starting an obvious argument, I will stress that I know what Apple has is not an actual monopoly, but imo it basically is. There are alternatives, but many people do not know this.) 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.

I think Apple will win this fight and Real was foolish to get into it. Reminds me of MP3.com's downfall.

Re:Reverse-engineering

[oliverthered]

Have real really broken DRM i.e. all files are clean, or have they just implemented the same DRM in a different way? If your still leaving exactly the same restrictions that were there in the firstplace then your not providing software to crack anything. I should imagine this would make a huge difference to a possible DMCA violation.

You've got to be kidding

[geekee]

"Apple built a product (iTunes + iPod) that a lot of consumers love (marketshare speaks much louder than OGG support, open-ness, etc.), and Real wants a piece of that because very few are using their service. Why is it that we think just because it involves a computer or teh intarweb that it should all be fair game (or fair play, to pull a pun)?"

So then you must agree that it's good for Microsoft to use closed file formats for Office and that Lexmark should be able to sue competitors for refilling their ink cartridges. Also, cracking the DVD encrpytion scheme to make a Linux DVD player must be wrong too.

"If I create a product that is easier to use, looks good, and appeals to more consumers than everyone else's product, why should I have to share? I mean, if in the mean time I was running around telling the music companies that they could only use my service or could get some sort of incentive to not allow other services (i.e., the allegations behind much of the Wintel monopoly) that'd be one thing, but it appears that nothing of that sort happened."

Apple shouldn't be required to share, but if someone reverse engineers their product to make something that is compatible, do you really believe Apple should have legal grounds to sue?

So what, its just an SEC filing

[dysk]

Companies try to make as exhaustive a list of risks as they can when compiling their SEC filings, as that ensures that investors won't sue the execs for not disclosing the risks.

To put it into perspective, their "worry" about being sued by Apple is one paragraph in 15 pages of disclosures, including entries like "Our mobile products will not be successful if consumers do not use mobile devices to access digital media." and "Any development delays or cost overruns may affect our operating results."

Re:Apple is isolating itself...

[Kelson]

Mainly, Apple's DRM is a lot less stringent than others have tehnded to be (assuming, of course, you have an iPod). They actually look like they made an effort to compromise between music publishers that don't want you to do anything but play the track on one computer (and maybe a player), and consumers who want to be able to burn mix CDs, play tracks on more than one computer, etc.

If you consider any form of DRM to be oppressive, then there isn't much difference between FairPlay and anything else. If you want choice in players, it won't work for you either. But it's a compromise that works for a lot of people.

Re:wow....Wrong statement of law ... Asteroids

[ziani]

" . . . 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."

Not quite. It is every company's responsibility to state all facts that a reasonable investor might consider important in deciding whether to invest.

The required level of disclosure is certainly something less than "all possibilities . . . however remote [they] may be." Under this type of standard, a company would have to disclose the possibility of an asteroid hitting the corporate headquarters, or the possibility of the CEO's having a heart attack and an infinite number of other "possibilities".

To be fair (and at the risk of stating the obvious), Real's disclosure is right on the money. Given the current state of the law and the spectre of even a threatened DMCA action, any new technology that requires reverse engineering (especially one that goes straight for Apple's market) makes its author vulnerable, and disclosure in this case is warranted.

They're not very worried.

[tqbf]

If they were, they wouldn't have done it.

The fact is that Real's move garnered them lots of press attention, and in light of that, they are now obliged to disclaim the possibility of a lawsuit in their filings.

It's probably not that they think Apple is going to sue them out of existence. It's that, if they DIDN'T disclose that, even a minor legal tussle with Apple could be the basis for a shareholders lawsuit.

Re:If Real is so worried...

[wankledot]

"So then Real broke the law because they didn't get what they wanted. Boo hoo for Real."

What law has Real broken? The DRM has been reverse engineered expressly for interoperability. There is no law being broken here. And the DRM wasn't even reverse engineered to break a copyright at all! In fact, it was reverse engineered for the purposes of CREATING DRM, not breaking it. (or at least, the appearance of it.)

"That's irrelevant to the news story at hand which is only about Real basing their business model on a very-likely illegal strategy."

You seem stuck on the fact that Real broke a law (although I see you are now qualifying it as "likely"), care to tell me which one? They didn't "break" FairPlay for the purposes of getting around a copyright. In fact, Nothing Real is doing breaks anyone's copyright. Apple did not patent all DRM on all portable devices. Because Real's implementation of FairPlay is cleanroomed, Apple (or whoever they license FairPlay from) has no claim that their copyright was violated. "The iPod was designed to play encrypted music only if it was encrypted by Apple. Real is free to negotiate with Apple for the legal right to use their DRM" Oh, this is fucking rich. You're actually saying that when you buy an iPod, you agree to only play encrypted music from Apple? Where did I agree to that? And what legal basis to Apple has to limit how its product is used. You're barking up the wrong tree here, the iPod's ability to play DRM'd music from another source is not limited by any law or contract that any user agrees to. Do I have to ask Apple to put a file on the iPod with a format it was not designed for? No. Does Real? No.

Answer this: If I can flip one bit of a protected WMA file in order to make it work on my iPod, can Apple sue me for playing it on my iPod? Can they sue me for "breaking" WMA's DRM? Can Microsoft?

So again, which law has Real broken? You'll notice from this story and many others that almost everyone who knows what they are talking about agrees that Real is pretty much in the clear on this one.

"In all my posts on this, I haven't said or even hinted at whether I think Apple is right or wrong."

You've said repeatedly that Real is doing something illegal. (Implying that suing Real would be OK since they are breaking the law.) So I'll ask you straight up: Does Apple have the right to sue Real.

Re:If Real is so worried...

[ArbitraryConstant]

"The difference that sets Apple apart is that when they get into something, they're not just another "me too" company with some crappy product that is barely distinguishable from all the others that are already on the market.

Other music players are crap compared to the iPod"

Are they? Depends on your criteria. Other music players variously cost less, have support for more formats, have a better battery life, and so on.

"other music stores are crap compared to the iTMS"

Again, depends on your criteria. Allofmp3 gives you a choice of format, gives you better quality (including lossless), doesn't have DRM etc. That puts it ahead in my books.

"OS X is Unix, yes, but the UI is so far ahead of what Linux desktop have been trying to do for years."

But it is behind in many other ways. It has poor performance compared to Linux, in particular Linux has better responsiveness on single-CPU systems and that significantly impacts usability. Linux also, dare I say it, runs on generic hardware. That is an issue that impacts usability because some options are not affordable with MacOS X (eg you must buy a second CPU to get a second display).

Apple is only special if we define the terms of the comparison to favor Apple. Otherwise, they are exactly like everyone else: good at some things, bad at others.