Piracy costs U.S. film studios more than $3 billion in sales each year, the MPAA says. The studios have won court orders to stop distribution of programs such as 321 Studio Inc.'s DVD Copy Plus as they attempt to stop DVD piracy becoming as prevalent as song-swapping Internet sites.
"By selling chips to unlicensed manufacturers, ESS was effectively enabling wholesale piracy," Dan Robbins, the MPAA's chief technological counsel, said in a statement.
"We are in full compliance with all provisions of our contract with CSS, as well as our contracts with other industry leaders," said Rebecca Mack, an outside spokeswoman for Fremont-based ESS. "ESS is an active supporter of upholding intellectual property rights worldwide."
The film industry group sued in April, claiming ESS breached its license with the DVD Copy Control Association by selling descrambler chips that were discovered in the Aspire Digital AD-8000 DVD Player and Digital Recorder.
The DVD Copy Control Association licenses encryption software for the movie, computer and consumer-electronics industries. Licensees are barred from distributing or selling the descrambler chips to unauthorized parties, who are under no contractual obligation to build devices that contain any copyright protections.
ESS, whose clients include LG Electronics Inc. and Sharp Corp., also makes chips for devices including personal computers and digital cameras. ESS shares fell 31 cents to $8.51 in Nasdaq Stock Market trading.