Here is what the case ultimately revolves around:
At the time, iPods could play music that was either DRM Free, such as that purchased at Brick and Mortar Stores or Online Retailers via CD, MP3s, or DRM Protected Music using Apple's FairPlay encryption.
The RIAA did not like Online Retailers selling DRM Free Music at the time, for piracy concerns.
RealNetworks opened an Online Store to sell Music specifically to iPod customers that was encrypted using FairPlay encryption.
One of two scenarios took place here.
Either RealNetworks engaged in industrial espionage and stole FairPlay from Apple, thereby engaging in copyright violation, or they identified a weakness within the cryptographic scheme that allowed for RealNetworks to gain the Private Key of the Encryption Scheme, thereby letting them encrypt and decrypt data at will. Either scenario is bad because it means that Apple is in violation of their legal agreements as they are no longer in possession of their cryptographic keys, and thereby third parties can encrypt and decrypt content at will either to masquerading as Apple or to provide DRM Free Content Electronically.
Regardless of how it happened, to protect Apple's business interest and their contracts with RIAA Member Companies, they elected to change FairPlay and issue an update to iPods to address the vulnerability of the FairPlay Encryption Algorithm. As a byproduct, RealNetworks was prevented from continuing to operate their competing business of Online Sales of exclusively FairPlay DRM Protected Music to iPod Users who were running the most recent firmware.
Because RealNetworks was prevented from engaging in their business as they were previously, they sued Apple for "fixing" the vulnerability within FairPlay, regardless of how the issue ultimately came about, specifically citing lost business opportunities.
This is effectively no different than the Shellshock, Heartbleed, or other cryptographic vulnerabilities that have been going around as of late. The fact that a business exploited these circumstances to make money should ultimately be irrelevant.
RealNetworks *could* have licensed the technology for the encryption scheme as any other company is expected to do with regards to intellectual property, or as RealNetworks themselves expected Apple to do relative to various video technologies over the years, or engaged in a business relationship as Audible had done for Audio Books using their Audible Audio Encryption technology to bring an additional vendor to the iPod. Real Networks did none of these things. They engaged in either industrial espionage or exploited a cryptographic flaw and then sought a payday when they were ultimately excluded from the market.
