Studios look to courts as piracy rises.

Finding that any long-sought technological solution to digital piracy remains elusive, Hollywood is following the lead of the recording industry and going to court.

The latest legal salvo was fired earlier this month, when the seven major motion picture studios sued a Fremont microprocessor firm for allegedly selling digital de-scramblers to unauthorized DVD makers.

Consumers could be next. The prospect of taking legal action against individual downloaders has gained supporters in meetings at the Motion Picture Association of America, the lobbying group that represents the seven major studios.

Suing individuals who illegally download or copy movies, "is one scenario, believe me," said one studio source.

Such a strategy would follow a tactic taken last year by the Recording Industry Association of America, which in September sued 261 people for allegedly putting large amounts of music online for others to download.

The legal effort created a public relations nightmare for the record industry, where piracy has been a significant problem. But the suits have been credited with some reduction in online music file swapping. "We've been going to school on everything that the RIAA has done," said the source.

How soon such an effort gets under way remains in question. The prospect of taking movie downloaders to court has not been universally embraced by the studios, whose interests don't always coincide. The costs could be significant.

Predictably, privacy advocates don't endorse the idea.

"I think it's a horribly bad decision to follow what the RIAA did," said Cindy Cohn, legal director for the Electronic Frontier Foundation, a privacy group in San Francisco. "Suing your customers as a business strategy isn't in the long-term interest of any industry."

Money slips away

Still, the studios are feeling pressure to stem the loss of revenues from piracy.

Digital files containing movies are monstrously larger than those of any individual song or album, and therefore take far longer to download even with the fastest Internet connections. But as technology advances and more homes adopt high-speed connections, there is growing concern in Hollywood that piracy will grow to the same epic proportions it did for the recording industry if early action isn't taken.

The MPAA estimates that piracy costs studios $3 billion annually in potential worldwide revenues, although costs specifically associated with Internet piracy aren't broken out.

Rich Taylor, vice president of public affairs for the MPAA, said the group has estimated that between 400,000 and 600,000 movies are being illegally downloaded each day. That's substantially larger than the estimated 21 million unlicensed movie downloads in the United States last year, according to the Yankee Group, a Boston-based technology consulting firm. Either number represents a significant potential loss.

Michael Goodman, a senior Yankee analyst, said he expected movie piracy to fall slightly this year as a residual effect of the RIAA suits. Even so, a technological solution to the problem--such as a strong encryption technology--is a long way off, he said.

"There has not yet been a digital encryption scheme that works," said Goodman. "Encryption technology on DVDs is easily bypassed by hackers. Within two to four weeks of (a movie) being uploaded, the code is broken."

That, said Taylor, is one reason alternate means of fighting the practice are being actively considered.

"Technology is going to make it easier to upload and download movies," he said. "That will make it easier to do legally, but it will also enable it to be done illegally that's why we have to prepare now."

More court action

The industry has brought only a handful of suits against individuals, and all have been aimed at those who made the movies available for downloading, not the downloaders.

In January, Warner Bros. and Sony Pictures Entertainment sued 10 people, including actor Carmine Caridi, claiming they made illegal digital copies of "The Last Samurai" and "Mystic River" and distributed them on the Internet.

Exactly when the studios might take action is not known. Trade paper Daily Variety, which first reported the MPAA's consideration of the strategy, said suits could come as early as next month, though there were doubts that the industry could marshal its forces that soon.

"I think that is a bit optimistic," said Ben Mulcahy, a partner in the entertainment practice at Sheppard Mullin Richter & Hampton LLP.

The MPAA has yet to build a planned fund to pay for legal, public relations, advertising and other elements of an aggressive front in the piracy fight, Taylor said. "(The fund) is a level of detail we're not at," said Taylor, who declined to discuss specifics of the MPAA's strategy.

The association, which represents Metro-Goldwyn-Mayer Inc., Paramount Pictures, Sony Pictures, Twentieth Century Fox Film Corp., Walt Disney Co., Warner Bros. and Universal Studios, still faces a lack of unity among its membership.

One industry source said that Disney has more immediate issues to deal with, such as Comcast Corp.'s takeover offer and efforts by dissident shareholders to oust Chief Executive Michael Eisner.

For its part, a Disney spokeswoman said it was too early to discuss its strategy regarding movie piracy.

The seven studios have already have engaged in litigation.

In the most recent case, they filed suit against Fremont-based ESS Technology Inc., which they claim sold microprocessors that descramble encoded digital videodiscs to unauthorized buyers.

The studios claim ESS breached its contract with the non-profit DVD Copy Control Association not to sell, distribute or transfer the descrambler chips to unauthorized entities, according to a suit filed April 5 in Los Angeles Superior Court. The chip allows users to view the encoded content on a DVD.

The studios discovered the sale after acquiring an Aspire brand DVD player with a button labeled "DVD Copy" that copies encrypted DVDs, the suit said.

Dan Robbins, chief technology counsel at the MPAA, said ESS is the first to be sued among 270 technology firms licensed to sell the decryption chips. Calls to ESS were not returned.

Suing a technology company is one thing. Suing individuals is another.

When the RIAA launched its courtroom campaign in the fall, it was roundly criticized for taking on a risky public relations move at a time the public was growing restive with higher CD prices and already held the industry in low regard.

The movies studios said they won't see the same response.

"We have a different relationship with our audience than the music industry did. The music industry has always been the bad guy; the artists have been the rebels. They couldn't win for losing," said one studio source.

Movie consumers appreciate their products more, the source said. Consumers feel they're getting more with a DVD than they do with a compact disc, including documentary footage and actor interviews.

The perception that it is the "bad guy," true or not, rankled the RIAA.

"Any form of music has enormous value," said Jonathan Lamy, a spokesman for the group. "No matter what anyone's perception about what the record industry may be, our own surveys show that people appreciate the role and value of a record label. It does not change the underlying fact that when someone downloads or distributes a copyrighted song without authority it is illegal. That kind of piracy hurts everyone in the music community."

Amanda Bronstad contributed to this story.