The battle over RealNetworks’ DVD copying software, called RealDVD, has finally come to a close, and Real has lost.

Judge Marilyn Hall Patel of the United States District Court, Northern District of California ruled today in favor of the DVD Copy Control Association, who argued that RealDVD actually made illegal copies that violated the Content Scramble System (CSS) license agreement.

The case began in late 2008 when RealDVD was only a couple of weeks old. RealNetworks preemptively sued the DVD Copy Control Association for the right to copy DVDs, using a previous case (DVD CCA v. Kaleidescape Inc.) as a hopeful legal precedent.

A temporary injunction was imposed as the case played out, and lower courts banned the software. One year into the case, Judge Patel determined that RealDVD’s methods for avoiding CSS were at the very least a breach of the Digital Millenium Copyright Act, and upheld the lower court’s ruling.

RealNetworks countersued, arguing that the motion picture industry was an illegal cartel that sought to corner the market for unprotected content (a.k.a., “digital copy”), but the judge again ruled in favor of the DVD Copy Control Association.

Today, Real said it has settled and will drop all of its appeals. The permanent injunction will stand, and Real will pay the studios a $4.5 million settlement.

“Almost from the moment this product was introduced, it was clear RealDVD violated the CSS license,” Jacob Pak, President of DVD CCA said in a prepared statement today. “Now, after months of arguments from both sides, the legal message is clear: Making a DVD copier is a breach of the CSS license. This case demonstrates how important it is to uphold legal agreements that are essential to fostering and maintaining a vibrant competitive industry.”

Bob Kimball, acting CEO of Real, said, “Until this dispute, Real had always enjoyed a productive working relationship with Hollywood. With this litigation resolved, I hope that in the future we can find mutually beneficial ways to use Real technology to bring Hollywood’s great work to consumers.”