Another Major DVD Chip Maker Agrees To Implement Content Protection Features In DVD Components

Studios Obtain Fifth Injunction in Support of Efforts to Enforce Content Protection Licenses

March 17, 2006

The Motion Picture Association of America, Inc. (MPAA) today announced that its member companies have settled a breach of contract lawsuit against Taiwanese DVD chip manufacturer Cheertek, Inc. The settlement resulted in an agreement by Cheertek to abide by the Content Scramble System (CSS) license agreement, a security measure that protects DVDs from illegal reproduction. Within the last sixteen months, the major motion picture studios have obtained five court-ordered injunctions against major DVD chip manufacturers that breached the CSS license, making copyrighted material vulnerable to piracy. "Compliance with the CSS license is critical in protecting copyrighted material from being illegally reproduced,‰ said Dan Robbins, Chief Technology Counsel for the MPAA. "All companies must perform the obligations they agreed to in signing the license. Presently, five courts have issued permanent injunctions banning future violations of the license, and we intend to seek out and move promptly against further violations." Member companies filed suit in December 2005 after an MPAA investigation uncovered that Cheertek had breached its CSS license by selling CSS chips to a number of non-licensed companies. The CSS license specifically prohibits selling chips to non-licensed DVD player and computer manufacturers because such entities are not under contractual obligations to implement necessary security features to protect copyrighted material. The MPAA found that the non-licensed manufacturers to whom Cheertek had sold CSS chips used the chips in DVD players that lacked appropriate security features. The CSS license has provided the baseline protection that enables film studios to provide consumers with over 40,000 DVD titles. The motion picture studios are third-party beneficiaries of the CSS license and may enforce it against licensees who fail to honor its terms. A federal interagency report published in 2004 estimated that counterfeit and pirated goods, including those of copyrighted works, cost the American economy $250 billion a year. The MPAA estimates its member companies lost $3.5 billion in 2004 due to piracy of hard goods alone, not including losses due to Internet-based activities. A Smith Barney study released in 2003 predicted the movie industry would lose up to $5.4 billion in 2005 due to piracy, including Internet piracy. Working with law enforcement around the world, the MPAA seized more than 76 million illegal discs last year.

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