Real Networks caved to the studios yesterday.

Instead of appealing a decision that deemed its $30 RealDVD ripping software illegal, the company is paying the studios $4.5 million as reimbursement for legal fees.

Under the auspices of the Motion Picture Association of America (MPAA), the studios sued Real in September 2008, claiming violations under the Digital Millennium Copyright Act (DMCA).

An injunction was imposed – and never lifted—on sales of RealDVD.

In August 2009, the MPAA prevailed in its case against Real, which promised to appeal the decision.

Yesterday, Real gave up.

In addition to coughing up $4.5 million, Real agreed to abandon its claims against the studios and shut off metadata to the 2,700 users who managed to buy the software before the injunction was ordered.

After yesterday’s decision, MPAA general counsel Daniel Mandil said that the court’s “rulings and this settlement affirm what we have said from the very start of this litigation: It is illegal to bypass the copyright protections built into DVDs.”

He added, “We will continue to vigorously pursue companies that attempt to bring these illegal circumvention products and devices to market.”

Death Knell for DVD Copying?

Consumers who want distributed video servers and custom electronics pros that install such systems are probably asking: What does this mean for Kaleidescape?

Kaleidescape was sued in 2004, not for violations under the DMCA but for breach of contract with the DVD CCA (Copy Control Association), which licenses the Content Scramble System (CSS) decryption software.

The DVD CCA maintains that its licensing agreement prohibits the sale of products that enable users to copy DVDs – even if the copies are bit-for-bit, with CSS intact.

Kaleidescape servers –- with their five-digit price tags—perform such bit-for-bit copying, which is one reason the company has always maintained that it complies with the DVD CCA licensing agreement and the DMCA.

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Julie Jacobson - Editor-at-large, CE Pro

Julie Jacobson is co-founder of EH Publishing and currently spends most of her time writing for CE Pro, mostly in the areas of home automation, networked A/V and the business of home systems integration. She majored in Economics at the University of Michigan, earned an MBA from the University of Texas at Austin, and has never taken a journalism class in her life. Julie is a washed-up Ultimate Frisbee player with the scars to prove it. Follow her on Twitter @juliejacobson.