It’s Now Kaleidescape’s Turn to Appeal in CSS Battle With DVD CCA

The Superior Court of California, Santa Clara County, ruled in favor of DVD CCA Friday in its suit against Kaleidescape, saying Kaleidescape “is in breach” of the CSS License Agreement, according to court documents. The court had issued a tentative judgment in January in support of DVD CCA claims that Kaleidescape’s DVD servers violated the agreement (CED Feb 1 p4).

Kaleidescape, which has filed an appeal, believes that “under California law, the injunction should be automatically stayed and we are operating under this belief,” a Kaleidescape spokesman told us. The decision is on an appeal of an earlier decision in favor of Kaleidescape in 2007, he noted.

According to documents, a permanent injunction due to go into effect April 8, said Kaleidescape and its “franchisees, and those acting in concert with them or at their direction, are hereby permanently restrained and enjoined from directly or indirectly making, having made, offering to sell, marketing, importing or otherwise transferring any DVD Playback Product” unless that playback product a) obtains the Disc Key and Title Key(s) from a DVD Disc each time one or more Titles is to be played back; b) ensures that the DVD Disc is physically present in the DVD Playback Product when playback of one or more Titles from such DVD Disc is occurring; c) does not make a persistent copy of any encrypted or unencrypted Disc Key or Title Key(s); and d) does not make any persistent playable copy of any Title."

The decision also prohibits Kaleidescape from transferring any intellectual property of the technology. The company is barred from “directly or indirectly providing any support services that include Prohibited Technology to third parties, including but not limited to the provision of updates and upgrades to software and hardware."

Dealers we contacted in January when the tentative judgment was filed were concerned about the reach of the final judgment and whether dealers or even consumers would be enjoined from any activity related to DVD servers. The Kaleidescape spokesman said Monday that company lawyers were still reviewing the terms of the injunction but noted that the lawsuit was between DVD CCA and Kaleidescape only.

"Kaleidescape operates with a very high degree of integrity, and we work meticulously to comply with each and every agreement that we sign, so this ruling is extremely disappointing,” said CEO Michael Malcolm, Kaleidescape’s founder. “We have always believed, and continue to believe, that our products comply with the CSS license agreement, and in court we will continue to fight the DVD CCA’s allegations to the contrary."

DVD CCA, formed by the six major movie studios to protect the content on DVDs and the licensor of the copy control system used on DVDs, welcomed the decision. “The Appellate Court recognized what we have maintained all along; Kaleidescape had agreed to a complete contract that mandated certain requirements with which devices must conform in order to be Content Scramble System (CSS) compliant,” said William Sloan Coats, DVD CCA counsel.

In a letter to dealers, Malcolm said Kaleidescape is confident that when the Court of Appeal reviews the facts of this case, “particularly in light of the complete absence of any harm to the DVD CCA or its members,” it will reverse the trial court decision. The company believes the appeal process could take 1-2 years. Meantime, Kaleidescape’s Blu-ray and music servers are not covered by the lawsuit and meet necessary copyright provisions, the spokesman told us.

Also in the dealer letter, Kaleidescape’s Malcolm said, “We believe in a balance between consumer rights and copy control.” The company also believes individuals “have the right to make personal copies of movies they own” and view them instantly on any TV in the home, he said. On the flip side, Kaleidescape supports “respecting and protecting the rights of the content creators,” he said, and the company “carefully designed our product not only to preserve the CSS scrambling on the original DVDs, but also to add encryption for greater security.” Kaleidescape’s closed system can’t be used to copy DVDs to or from the Internet, to writable DVDs, or to mobile devices or computers, he said, and a feature integrated into the system detects rental DVDs and prevents them from being copied. Kaleidescape customers have to “agree to only copy DVDs that they rightfully own, and to reaffirm this agreement each time they copy a disc,” he said.

For the past eight years, Kaleidescape has been “baffled” about why the lawsuit happened in the first place, since the company’s media servers “don’t encourage piracy, but do increase sales of movies,” Malcolm said. “Maybe it’s because the large CE companies in Japan and the big computer companies in the U.S.A., on the board of the DVD CCA, are afraid that Kaleidescape is building a better way to enjoy DVDs and Blu-ray Discs than they are,” he said. Comparing Kaleidescape servers to the iPod, he said, “Imagine a world where Apple wasn’t allowed to build the iPod because Sony wanted a ‘level playing field’ for the Walkman.”