321 Studios, which sells software for copying DVDs, games and other content, may go out of business because of another lawsuit challenging the legality of one of its products.
With the latest lawsuit, the company is considering filing for bankruptcy protection, a move that would "probably spell the end for our company," said 321 Studios president Robert Moore.
Atari, Electronic Arts, and Vivendi Universal Games have all sued 321 Studios over its Games X Copy product, which can be used to copy video games. The companies said the product violates US copyright law and want it banned.
321 Studios has been struggling since it was ordered to stop selling its flagship DVD X Copy product earlier this year. Judges in San Francisco and New York both found the software to be illegal. A replacement product that cannot sidestep copy protection on DVDs never sold well.
As a result, 321 Studios has had to slash its headcount from 400 staff to about 20. And now, because of the lawsuit over Games X Copy, distributors have stopped carrying the product, he said.
The company's international sales had already been cut off after the DVD X Copy cases were lost.
321 Studios is looking for a company to take over its customer base. That company would also handle tech support and outstanding rebate requests for products, Moore said.
321 Studios contends that its products do not violate any laws and that they simply allow consumers to take advantage of their "fair use" rights and has been backed by civil liberties group the Electronic Frontier Foundation.
However, the demise of 321 Studios would not leave consumers without a way to copy their CDs, DVDs or video games.
Copy tools, including a decryption technology called DeCSS, which circumvents the Contents Scrambling System used on most DVDs, are freely available on the internet.
Joris Evers writes for IDG News Service