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Kaleidescape Ruling on DVD Copying Could Quash Innovation

The DVD CCA wields too much power, and will drive consumers to purchase unlicensed movie service and cheap DVD-ripping software overseas.

The DVD Content Copy Association has won its lawsuit against Kaleidescape, maker of high-end movie servers.

A Santa Clara, Calif., court handed down a temporary judgment on Jan. 9 that Kaleidescape breached its contract with the DVD CCA, which licenses the Content Scramble System (CSS) decryption scheme for DVD players.

Kaleidescape lets users copy their DVDs onto a media server, and play back the movies disc-free. The court ruled that the CSS licensing agreement expressly prohibits this functionality – a disc must be present in the player. Period. It doesn’t matter if the consumer owns the disc. It doesn’t matter if the server is “locked down” with no way to share movies across a network.

I can’t argue with Judge William J. Monahan’s recent ruling in the breach-of-contract case, but I can argue these two things: 1) This is a very sad day for innovation in the digital entertainment realm and 2) there’s something fishy with the DVD CCA’s power.

I should clarify: It is a sad day for innovation when it comes to American-made consumer electronics manufacturers that try to abide by the intent of the law.

Kaleidescape makes expensive servers that transfer DVDs “bit-for-bit” with CSS encryption intact. The copied content cannot leave the Kaleidescape ecosystem.

It is true, as Judge Monahan noted, that Kaleidescape could have done more to protect content using a DVD carousel or destroy-after-copying scheme. But, really? Such burdens would surely force consumers to instead turn to illegal (by our standards) DVD-ripping products from offshore providers like Slysoft, which distributes AnyDVD ripping software.

MAIN STORY: Kaleidescape vs. DVD CCA: Judge Rules Against Movie Servers

It also encourages otherwise legitimate DVD server manufacturers to simply bypass the DVD CCA rather than be burdened by its licensing agreement. The CSS software is readily available, and many server manufacturers use it without licensing it from the DVD CCA. Other providers simply exclude DVD-copying software in their own products but encourage customers to download it from Slysoft and others.

Is this want Hollywood wants?

How many years has it been since movie makers have known about the potential of DVD-ripping abuse? At least a decade. And still, they have done nothing about it, when so much could be done to encourage the enjoyment of their products.

You’d think in 10 years, the DVD CCA and movie makers could come up with a way to thwart piracy and encourage compensation for their work.

I have argued in the past -- as have many others -- that the DVD CCA is an innovation-stifling cartel.

Judge Monahan debunked many of Kaleidescape's claims about the secrecy of the DVD CCA but other potentially antitrust-violating claims should be addressed.

The organization wields too much power and favors its handful of board members, allowing would-be competitors to quash innovations from … innovators.

The DVD CCA must have some checks and balances in place to ensure that its cronies allow -- indeed, encourage -- new developments in digital media.

The End for Movie Servers?

It will be a tough road ahead for many of today's movie-server vendors, some of which have licenses from the DVD CCA and some that don't.

The licensees have plenty to fear from the DVD CCA. The recent ruling, though tentative, probably kills all hope that the Kaleidescape model will survive legal challenges.

But that doesn't mean the end for media servers. First, the DVD CCA does not regulate digital rights management (DRM) for Blu-ray discs, just DVDs. Second, we're sure to see more and more movie servers that bypass the DVD CCA altogether.

They may be subject to copyright-protection claims under the Digital Millennium Copyright Act (DMCA) -- as RealNetworks knows all too well -- but so far movie studios seem to have left the litigation to the DVD CCA, except in the case of Real, which had the potential to be a mass-market product. Will the Motion and Pictures Association (MPAA) and others keep their hands off the little guys such as Kaleidescape? Let's cross our fingers.

Kaleidescape vs. DVD CCA: Judge Rules Against Movie Servers
Would Studios Rather We Buy DVD Ripping Products Offshore?\
DVD CCA Is an Innovation-Stifling Cartel
Is Your DVD Server Legal? Manufacturers Say Yes!

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Article Topics

News · Blogs · Video · Digital Media · Media Servers · Legal · Kaleidescape · Dvd Cca · Drm · All topics

About the Author

Julie Jacobson, Co-Founder, EH Publishing / Editor-at-large, CE Pro
Julie Jacobson, recipient of the 2014 CEA TechHome Leadership Award, is co-founder of EH Publishing, producer of CE Pro, Electronic House, Commercial Integrator, Security Sales and other leading technology publications. She currently spends most of her time writing for CE Pro in the areas of home automation, security, networked A/V and the business of home systems integration. Julie majored in Economics at the University of Michigan, spent a year abroad at Cambridge University, earned an MBA from the University of Texas at Austin, and has never taken a journalism class in her life. She's a washed-up Ultimate Frisbee player currently residing in Carlsbad, Calif. Follow her on Twitter @juliejacobson. [More by Julie Jacobson]

42 Comments (displayed in order by date/time)

Posted by Kevin  on  01/27  at  01:10 PM

Wow.. i think ill go download a bunch of movies illegally now

Posted by Mark Cichowski  on  01/27  at  03:53 PM

Julie - Yes, sad that things like this thwart innovation. Do you have an opinion about how UltraViolet will take hold in the marketplace? It seems to address access to the content that someone owns, and allow them to play when/where they want it. I checked it out a few months back and not sure about the resolution quality. Anyone else have info on this?

Posted by kabster  on  01/28  at  01:17 AM

When someone buys a DVD, CD or whatever, isn’t it theirs to do with as they will ? If someone wants to put it on their own personal media server so they can watch it anywhere isn’t that their right ? Where does that leave things like Sling Box and future technology ? The government is killing all innovation. Sad.

Posted by 39 Cent Stamp  on  01/28  at  01:31 AM

@ kabster… According to the content makers the answer to your first question is NO. There is tons of legal mumbo jumbo, no user agreements are the same and a whole lot of “consumer assumption” about how things “should be” but this is the nuts and bolts.

Content makers claim you are purchasing a license to use the product in the format its sold in (CD/DVD). You do not own anything other than the right to use that CD or DVD as a CD or DVD. Some agreements say you can back the disk up and some dont.

Typical consumer buys furniture like a table and they own the table and they can do anything they want with their table (or chair or comb etc). Purchasing a CD or DVD or software is not the same but you can see why there is confusion.

Posted by paulcunningham  on  01/28  at  02:26 AM

Buying a table isn’t even remotely the same. You can put dishes on it, dance on it, burn it, or smear it with gravy and roll around on it. You could do the same with a plastic DVD. But if you made an exact copy of that table, the designer - IKEA or whoever - would probably have something to say about it. This analogy is terrible, but my current blood alcohol level prevents me from canceling this post. GOOD NIGHT!

Posted by Wesley Mullings  on  01/28  at  10:45 AM

I have a question: if the DVD CCA’s rules are so “expressly prohibited”, then why is this not quoted or quotable? Isn’t the DVD CCA at fault for misleading practices for having such a complicated and ambiguous set of rules? Implied law is not law. And what about Kaleidescape’s product development cycle with the DVD CCA’s ombudsman? Isn’t there a fair practice understanding that says they MUST give a written and recorded ruling on the finished product (within a minimum timeframe) BEFORE filing any lawsuit? And shouldn’t the ombudsman be capable by any stretch to call out objections AS THEY HAPPEN? If that is the case, then the DVD CCA is at fault yet again for hiring incompetent personnel to fulfill their tasks, but requiring Kaleidescape to foot the bill. They are liable for errors and omissions here.

The DVD CCA should be hit with a major antitrust lawsuit that shows that their actions are only in place to provide obstacles, opposition, and resistance to innovation instead of making a way for companies to create innovative products that can be sold to businesses AND residences! All of the steps Kaleidescape followed were in keeping with the DVD CCA’s initial requirements, so there is NO REASON why Kaleidescape should not be able to manufacture their products in peace.

Posted by Julie Jacobson  on  01/28  at  05:30 PM

Hello, all—lots of great questions here. I can address many of them, hopefully in a few days. Thanks for your interest. Keep the comments coming.

Posted by Jon W.  on  01/30  at  05:39 PM

Not sure that I can agree that this kills innovation.  Traditional movie servers became largely irreverent with the advent of protected HD content that could be reliably streamed or stored.  Apple won…now the industry needs to innovate value added applications around that ecosystem.

Posted by hometheater  on  01/30  at  06:13 PM

Jon -
let’s be clear that Apple HD content is only 720p and only available if you purchase through the iTunes store.

For example: the new release for MONEYBALL is $17.99 on iTunes and $17.99 on Amazon for the Blu-ray.  Why would I want to pay the same for inferior quality picture and audio?  Not to mention limitations on what I can view it on.  There is no physical product to manufacture and no shipping.    At least if you buy the digital copy from Amazon instant video it’s only $13.

Posted by Jon W.  on  01/30  at  06:38 PM

@hometheater:  720p limitation for the ATV2 will likely be removed with next big software release (it is more of a bandwidth thing…the hardware is perfectly capable of 1080p).  This will likely be timed with the release of their new Integrated TV offerings.  Savvy integrators and consumers are jailbreaking ATV2’s (which BTW is perfectly OK according to the USPTO), installing Plex or XBMC and forging ahead.  It is far from the ideal situation…low ASP and low margin…but I think it will be nearly impossible for the custom market to reclaim this product segment is a way that would be acceptable to them.  That being the case, you embrace the winning product, leverage it as a feature (even with its limitations) and make your money somewhere else.

Posted by hometheater  on  01/30  at  09:37 PM

“jailbreaking” the AppleTV may be ok right now, but that exemption is about to expire.  Once you have “broken” the unit, you can’t go back.  Be prepared to replace all the ones you changed.

SOPA, PIPA, OPEN, ACTA, and other top level domain legislation are getting pushed through quickly and quietly.  I wouldn’t count on being able to “jailbreak” for much longer.  The name alone will have non-technical politicians vote against it. 

I think it’s odd that you say that Apple “won” yet you need to change it’s operating system to make it acceptable to your clients.

Posted by Jon W.  on  01/31  at  02:03 PM

In regards to “jailbreaking”, if the exemption is allowed to expire, going back to factory is as simple as turning automatic upgrades back on in the settings.

I can’t argue with your assertions regardingSOPA/PIPA etc.  However, in regards to Apple winning, it is hard for me not to make that argument…they won the content battle a long time ago…over 70% of digital music and video delivered legally is done so through the iTunes store.  Just like we learned to live with and accommodate the iPod years ago, we are going to need to learn to live with and accommodate ATV2 and the eventual integrated AppleTV because they are going to own the interface too.

I’ll jailbreak while I can, but will respect the law should it change.  The smart manufacturers and integrators will be figuring out how fit into the new ecosystem (Jailbroken or not) rather than ignoring or pushing against it.

Posted by GHAJM  on  01/31  at  02:50 PM

How is what Kaleidescape did with DVD’s any different than what Apple does with CD’s in iTunes? iTunes gives the ability to rip CD’s to a hard drive and copy the music to as many devices or CD’s as desired . . . Even if the song is downloaded from iTunes, you are authorized to copy it onto up to 5 different computers . . . Is it just that Hollywood has a stronger union protecting “movie rights” than music artists have to protect their “song rights”?

Posted by Jon W.  on  01/31  at  02:59 PM

@GHAJM:  It isn’t so much the copying for personal use that is the problem, but the fact that the content is behind encryption and copy protection.  To get at the content you have to break both of those and thus violate the “use” license of the DVD.  In general the music industry gave up on similar protections years ago (even walking away from DRM on digital download) and begrudgingly embraced the new model that is essentially “buy once, play on most of your devices.”

Posted by GHAJM  on  01/31  at  03:01 PM

@Jon W.: Thanks for the explanation!

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