DVD Jon Reverse Engineers the iPod

Having gained notoriety as the teenage computer hacker who figured out a way to crack encrypted DVDs, he has now reversed-engineered the FairPlay encryption technology that prevents users from playing iTunes files on "unauthorized" computers or devices.

This time, though, Johansen's actions are not clearly illegal -- although it is still up for debate whether the courts will eventually agree.

Johansen, through his firm DoubleTwist Ventures, is beginning to license the "work-around" to content providers that want to target the huge iPod market, according to accounts.

It is unclear what Apple's (Nasdaq: AAPL) thoughts are on the matter -- reports have claimed that Steve Jobs does not plan to launch litigation against the upstart company.

Cashing In

"However, since the work-around does not involve circumventing the Apple DRM system to allow Apple's .aac files to play elsewhere, there is no copyright or Digital Millennium Copyright Act (DMCA) violation relating to the copying of the songs onto the iPod or playing them on the iPod," Venglarik explained.

A copyright claim might be made based on the particular format, or "handshaking," of the Apple DRM system, but a defense of necessity for inoperability could be raised, and it would be tricky for Apple to prove damages, he added. "They would have to establish that the user would have purchased the song (or movie) from iTunes rather than from the competitor."

Looking ahead to possible lawsuits, Venglarik noted that the best bet for Apple might be claiming infringement on any patents relating to how its DRM system works. There is no possibility for a trade secret claim as long as DoubleTwist Ventures limit themselves to reverse engineering the iPod.

Surprisingly, he noted, a misappropriation claim -- often asserted, but very difficult to win -- may actually have legs in this context, since the apparent goal is to cash in on the iPod's popularity.

What's Good for iTunes

That said, it may be that Apple will decide not to pursue legal action. If so, that will surely be because it has decided that DoubleTwist's licenses are in its best interest. This is a company, after all that has sent numerous cease-and-desist letters to firms that have incorporated the word 'pod' into a product or service.

One rationale for ignoring DoubleTwist is that it is likely to increase sales of the already wildly popular iPod line of products. Apple has barely broken even with iTunes revenues, by contrast.