Company Reaches Settlement on DVD Issue

Wednesday, August 11th 2004, 10:54 am

By: News On 6

ST. LOUIS (AP) _ A company driven out of business by Hollywood and the video game industry over its DVD- and computer game-copying software has reached a settlement with the motion picture industry.

In the settlement, suburban St. Louis-based 321 Studios Inc. and its owners agreed to stop selling DVD copying software worldwide, said Matthew Grossman, a spokesman for the Motion Picture Association of America. The company's owners also agreed to a financial settlement, he said. Terms were not disclosed.

Robert Moore, owner of 321 Studios, declined comment. Michael Paige, an attorney for 321, said the deal has been signed by both owners, Moore and Robert Semaan.

The company ceased operation last month.

``321 Studios built its business on the flawed premise that it could profit from violating the motion picture studios' copyrights; the courts have been amply clear _ there is no leniency for violating federal copyright laws,'' said Jack Valenti, the MPAA's president and chief executive.

``Now that the company's illegal copying software is off of store shelves worldwide, we have moved to settle the case,'' Valenti said. ``This is not the end of the story in our massive fight against piracy.''

Valenti said the settlement funds will be used to educate consumers about the harm caused by illegal DVD copying.

Hollywood film companies and 321 have battled for the past two years over 321's software, a battle later joined by the video game industry.

Earlier this year, federal judges in both New York and California ordered 321 to stop making and marketing the products. They sided with the motion picture studios' contention that the DVD-copying products violate the 1998 Digital Millennium Copyright Act.

In appeals, the company argued that its products merely gave consumers fair use of the movies they've bought, including backing up expensive copies of children's movies in case the originals get scratched. Both appeals argued that the DMCA is unconstitutional and illegally extends copyright protections.

On Aug. 3, with no fanfare, 321 announced on its Web site that it ceased operation and would no longer sell, support or promote its products, blaming unfavorable court rulings.

The announcement came just five days after a federal judge in New York imposed a worldwide ban on the production and distribution of 321's Games X Copy software. The $60 product allowed users to make what 321's Web site had called ``a PERFECT backup copy of virtually any PC game.''

That injunction came as part of a June lawsuit by three leading makers of video games _ Atari, Electronic Arts Inc. and Vivendi Universal Games _ also accusing 321 of violating the DMCA.

As recently as earlier this year, 321 had nearly 400 employees and expectations of sales approaching $200 million for the year, Moore had said in June.