Put it in the wrong category.
Neither side in this case is probably terribly worked up over this. This is only a district court opinion, the lowest (for these purposes) federal venue. The appeal will go now to a small group of 9th Circuit judges, which is probably where the parties have always expected to do the main work in the case, for a few reasons.
First, district courts don't have much influence. Their opinions set precedent only in the same district, and sometimes not even there. Circuit courts bind the entire circuit (here, the whole west coast, Alaska, Hawaii, and I think Nevada and Utah) and are influential elsewhere.
Second, district judges are notorious for making bad decisions in complex cases. District courts have very heavy dockets, especially on the federal level where the same judges hear civil and criminal matters. Circuit courts hear only appellate questions, and only the ones they decide to hear, so they have more time and resources to commit to understanding a case. They also don't sit alone; there will be at least three judges hearing the appeal, and that helps hash out complexities. Probably. In practice, the judges won't discuss the case, but rather send drafts of briefs and opinions to each other through their clerks. Still better than doing it alone, I think.
So neither party probably cares an enormous amount about the district opinion; they're shooting for a circuit decision, and maybe an eventual writ of certiorari to the Supreme Court.
There are some problems, of course. The 9th Circuit isn't as overloaded as some others, but it's still very busy; they may very well not take the appeal. That's not critical, since as I said, district courts have limited powers of precedent - although the matter will still be binding on the parties here. The plaintiffs, for example, might be precluded from bringing the same suit against the same people elsewhere in the country.
Another problem is that circuit judges tend to be older and more hidebound than district judges; they might be even less inclined to really grasp the technical aspects of a DMCA claim. That's not as big a problem in the 9th Circuit; Rush Limbaugh's hyperventilating hyperbole aside, it's got some of the best judges in the country. Kozinski, for example, is a judicial superstar, and while there's no guarantee that someone of his caliber would hear the case, there are lots of good judges on the 9th.
Finally, there's one other consideration. Some lawyers believe that when you're shooting for an appeal from the get-go, you want a bad district opinion. It makes it harder for the circuit to uphold it, and makes them lean towards remanding it at least. For myself, I'm not so sure... the circuit can always just decide not to hear it or dump it on a technicality. Also, circuit courts can't admit new evidence or re-hear questions of fact, so how the district judge managed the trial and what evidence she admitted could be much more important than the opinion she wrote.
Anyway, long story short, this is not a disaster. Wait a year or so, see what happens on appeal. For now, it's good to understand the issue, and chide judges who fail to think things through, but copyright liberalization has lost a minor battle, not the war.