Sony BMG sues CD software firm
Sony BMG Music Entertainment is suing a company that developed antipiracy software for CDs, claiming the technology was defective and cost the record company millions of dollars to settle consumer complaints and government investigations.
Context & Ripple Effects
This lawsuit is the final act of a saga that began in November 2005, when researchers exposed hidden copy-protection code on Sony BMG CDs — code that opened security holes on listeners' PCs and forced the label into an emergency patch for its copy-protected CDs. The fallout moved fast: an uninstaller followed within weeks (researchers had already cracked the DRM schemes), and by late December 2005 Sony BMG agreed to a nationwide class-action settlement, with Business Week framing it as the end of a legal nightmare.
What changed on 2007-07-12 is who pays: rather than absorbing the cost of the fiasco, Sony BMG is suing the company that built its MediaMax antipiracy technology, claiming the software was defective and seeking to recover the millions it spent settling consumer complaints and government investigations. The story traveled widely the same day — CNET framed it around the rootkits, Ars Technica as Sony seeking closure on the MediaMax fiasco.
First-order effects
- Sony BMG shifts from defendant to plaintiff, putting the DRM developer on the hook for the settlement costs and investigation expenses the label incurred after the 2005 disclosures.
- The vendor now faces a damages claim that treats its copy-protection product not as licensed software but as a defective good that caused measurable harm to its customer.
Second-order effects
- Other labels buying third-party copy protection face pressure to demand indemnification clauses and security audits, raising the cost of outsourcing DRM development.
- DRM vendors across the music industry must price in product-liability risk for stealth-installed code, making aggressive copy-protection contracts harder to sell.
Third-order effects
- If defect claims stick against DRM suppliers, the economics of CD copy protection invert: the technology meant to protect revenue becomes a litigation exposure, accelerating labels' retreat from intrusive disc-based DRM.
- The case helps establish that security flaws in embedded consumer software carry supplier liability, a precedent line regulators and plaintiffs can extend beyond music discs.
The trend: Copy-protection suppliers are being pushed from behind-the-scenes contractors to liable parties, as labels seek to recover the costs of DRM that damaged customers instead of protecting revenue.