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October 31, 2001

Networks Sue Digital Recorder Maker

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Filed at 9:30 p.m. ET

NEW YORK (AP) -- The three major television networks are suing the maker of the first Internet-ready personal digital video recorder, saying the ReplayTV 4000 allows people to make and distribute illegal copies of television programs.

NBC, ABC and CBS filed a lawsuit Wednesday in federal court in California against SONICblue Inc. (news/quote), claiming the ReplayTV 4000 would violate their copyrights by allowing users to distribute copies of programs over the Internet.

The networks also complained that technology in the personal video recorder can automatically strip out commercials.

In a joint statement, the networks said the device ``violates the rights of copyright owners in unprecedented ways'' and ``deprives the copyright owners of the means by which they are paid for their creative content and thus reduces the incentive to create programming and make it available to the public.''

The ReplayTV 4000 has not yet been released for sale to the public, and the networks are asking the court to prevent the device from coming to market. SONICblue, which is based in Santa Clara, Calif. was planning to begin sales in mid-November.

SONICblue officials said they have not seen the lawsuit but stressed that they took precautions against a Napster-like unfettered distribution of television programming.

The company limited the number of times -- to 15 -- in which a user could send a particular show to another ReplayTV 4000 owner, or so-called ``TV buddy.'' A recorded show could only be sent -- or resent to another user -- a maximum of 15 times.

``I think we've treaded softly,'' SONICblue's chief executive Ken Potashner said.

The product also supports a digital rights copy protection technology made by Macrovision (news/quote), giving broadcast networks the option to use that technology to restrict consumers from sending copies of a show over the Internet.

``The idea is not mass distribution of TV programming,'' Steve Shannon, ReplayTV's vice president of marketing said in September during the product announcement. ``We want to be cooperative with the (television) industry as we explore these different business models.''

Potashner was optimistic the copyright issues would eventually sort out, much in the same way record labels years ago sued Rio, the first maker of portable MP3 music players, and then later became business partners of Rio, which is now owned by SONICblue.

``The content providers are ultimately going to be our partners,'' Potashner said. He said that SONICblue is already discussing different business models with some of the same networks named as plaintiffs on the lawsuit.

Some of the plaintiffs, including Disney Enterprises Inc., NBC and Showtime Networks, made investments in ReplayTV in the late 1990s, before it became a SONICblue company.

``We do have an investment. However we never consented or would consent to the misuse of our copyrighted works,'' said Michelle Bergman, a Disney spokeswoman. ``We made clear we expect the use of copyrighted materials to be licensed and this technology does not allow for that. We're protecting ourselves.''

The networks did not object to earlier versions of the ReplayTV recorder or a rival recording device called TiVo (news/quote). Both allow users to fast-forward through commercials but have not included technology to automatically delete them or to share the files of the recorded shows.

The networks make two arguments in their complaint. First, that the automatic stripping of commercials ``harms the potential market for and value of'' their programming. They said they were not challenging the widespread consumer practice of recording shows on VCRs or other devices.

Second, the networks said the ability of ReplayTV 4000 users to share copies of recorded shows through high-speed Internet connections would also undermine the value of media company copyrights.

The second argument bears similarity to the basis for the case successfully brought against the online music file-sharing service Napster by the major record companies. Unlike Napster, however, the ReplayTV 4000 is a standalone device designed for home use by consumers.

Napster has shut down and is trying to relaunch itself as fee-paying service.

Potashner contended the ReplayTV 4000's commercial-free recording feature simply offers another choice for viewers.

``We're not forcing consumers to skip the commercials,'' he said. ``We're asking consumers -- do they want to see the commercials, fast-forward through the commercials or simply record shows without them?''

ReplayTV and TiVo were the first to market digital video recorders in 1998. The devices enable consumers to store hours of TV offerings on built-in hard drives, freeing themselves from the shackles of program schedules and the hassles of videotape. And while watching live television, users can pause, rewind, even do instant replays.

The technology, now also offered by Microsoft (news/quote)'s UltimateTV, has yet to take off, partly because of steep prices. Today the estimated number of users is still below 750,000, according to the Carmel Group research firm.

The potential market for the ReplayTV 4000, a souped-up DVR that connects to a home's high-speed broadband network, is further limited because less than 8 percent of American households have broadband Internet access.

But most analysts expect DVR prices to drop and broadband access to increase, enabling a faster streaming of video content and a greater temptation to share, or pirate, the content over the Internet.

The ReplayTV 4000 ``is not going to impact the revenues of networks today but they care about what the technology could to do them by 2003 and 2004,'' said Carmel Group analyst Sean Badding.

The suit was filed in Los Angeles in the U.S. District Court for the Central District of California.

Personal digital video recorders currently on the market offer up to 60 hours of recording time. The ReplayTV 4000 advertises 320 hours. SONICblue's Web site boasts that with a high-speed Internet connection ``sending and receiving programs is a breeze.''


AP Business Writers May Wong and Gary Gentile contributed to this story.

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