Court Sounds Death Knell for 321 Studios

321 Studios may be in for its last dance. Chief Executive Robert Moore announced that the company's operations could grind to a halt in the near future. 321's controversial flagship product DVD X Copy, which bypasses rights management applications, was deemed illegal by a San Francisco judge who consequently ordered the company to pull its product from the market.

This legal setback, coupled with the significant loss of revenue stemming from the judge's decision and a recent round of lawsuits, set in motion the chain of events that led to Moore's dire proclamation.

Moore testified on May 12 in front of the U.S. House Congressional Hearing for H.R. 107, the Digital Media Consumers' Rights Act (DMCRA), advocating "Fair Use" and vowed to fight on.

As per LegalDefinitions.com, "The fair-use rule is a privilege in others than the owner of the copyright to use the copyrighted material in a reasonable manner without his consent. The reasonableness of a use is determined on a case-by-case basis applying an equitable rule of reason analysis."

More detailed information about Fair Use is available from the Electronic Frontier Foundation.

However, Moore's fight could be all but over. In what may be a telltale sign of 321's demise, Julia Bishop-Cross, 321 Studios' Director of Public Relations, is no longer with the company and was unable to grant a request for an interview.

In a last ditch attempt to sway public opinion, 321 Studios delivered 175,000 supportive letters written by its customers to the Motion Picture Society of America (MPAA). The MPAA would not accept the letters.

"It's not surprising that Hollywood, having seen the volume of music traded online, would want to keep a lock and key on DVDs. The concern is no small stakes," commented Jupiter Research senior analyst Joe Wilcox.

"With double layer DVD burners coming to market, consumers would have the capacity to burn content from Hollywood movies. Rent it. Burn it. Steal it. That scenario, and trading of high-quality movies online, is something studios would want to prevent," said Wilcox.

According to 321's Web site, the company has reduced its payroll from roughly 400 employees down to fewer than 50.