Kaleidescape, Under Settlement, Has Until Nov. 29 to Sell DVD-Based Servers

Technology provided a solution for the long-awaited resolution of the decade-old breach of license suit brought by the DVD Copy Control Association (DVD CCA) against Kaleidescape (CED Dec. 9/04). Kaleidescape will be able to continue selling its DVD-based movie servers that import Content Scramble System (CSS) DVDs through Nov. 29. Kaleidescape had been enjoined from selling the DVD servers by a court order that was under appeal (CED March 13/12 p1). By November, Kaleidescape said, it expects to have most DVD movies available for download from the Kaleidescape Store in the U.S., giving its customers a legal option for importing movies not on Blu-rays into their Kaleidescape systems.

Under a settlement approved by the California state courts, DVDs will be playable on Kaleidescape servers until Nov. 29. The ruling doesn’t apply to playback of Blu-ray discs and downloads, which are in compliance with content provisions with Kaleidescape systems, sources said. Prior to the settlement, Kaleidescape agreed to drop its appeal of the Superior Court injunction barring its servers from the ability to import CSS-protected DVDs, and both parties agreed that the injunction take effect Nov. 30. Outside the U.S., the Kaleidescape system after Nov. 29 will be sold as a Blu-ray movie server only, Kaleidescape said.

DVD CCA said in a statement the remaining terms of the settlement are confidential. The settlement agreement and actions by the two parties concludes the lawsuit DVD CCA brought against Kaleidescape “to preserve the integrity of the CSS license agreement’s anti-copying mandate,” it said. On the Nov. 30 date, DVD CCA said the injunction is modified “to give the trial court jurisdiction to enforce the terms of the settlement agreement."

Kaleidescape maintained throughout the legal proceedings that it operated with a “very high degree of integrity, and we work meticulously to comply with each and every agreement that we sign,” said CEO and founder Michael Malcolm, after the injunction ruling barring the sale of Kaleidescape DVD servers two years ago. “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,” he said.

In a letter to dealers at the time of the injunction, Malcolm said Kaleidescape was “baffled” by why the lawsuit happened in the first place, since the company’s media servers “don’t encourage piracy, but do increase sales of movies. … 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.” 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.”