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Kaleidescape Stay Denied, Manufacturer Vows to Fight

Kaleidescape CEO Michael Malcolm will petition to overturn injunction on movie servers in DVD CCA case, continue to ‘develop exciting new products and services’


DVD CCA vs. Kaleidescape

The DVD CCA (Copy Control Association) racked up another win against Kaleidescape, developer of high-end servers for DVDs, Blu-rays and CDs.

The company is enjoined from selling its DVD movie servers as of April 8, 2012.

Judge William J. Monahan denied Kaleidescape’s request for a stay of an injunction order issued this month. The injunction was issued after seven years of legal battles between Kaleidescape and the organization that licenses the Content Scramble System (CSS) for copy-protecting DVDs.

Kaleidescape CEO Michael Malcolm seemed confident that the judgment against the company would be deemed by the courts as a “mandatory” injunction, meaning the decision would be stayed automatically pending the conclusion of an appeal.

However, Judge Monahan ruled in a one-page notice on March 23 that the application for an automatic stay is denied.

Related: Dealers React to DVD CCA vs. Kaleidescape

Malcolm tells CE Pro, “We were not surprised by the Judge’s decision on the stay, given that he previously decided 100% in favor of the DVD CCA in this case.”

At least the court decided quickly, Malcolm says, allowing Kaleidescape to petition the appellate court for a writ of supersedes, a request to overturn the judge’s decision on the stay.

Kaleidescape urges dealers to keep on selling.

“Even if the injunction goes into effect on April 8, it will in no way enjoin our dealers,” Malcolm says. He sent a notice to dealers to this effect shortly after the initial ruling was handed down.

Malcolm tells us, “This is a sad period for all of us. Decisions like this rob Americans of their freedom, and they rob America of its ability to innovate and compete.”

Not surprisingly, dealers overwhelmingly agree with the sentiment.

Mark Nettleson of Recluse AV in Melbourne, Australia, calls the latest ruling "clearly ridiculous."

He tells CE Pro, "Kaleidescape are being punished when they have done so much work to legitimize movie servers. Do the DVD CCA not realize that they are going to do more damage than good if they take down Kaleidescape?"

Kaleidescape is plowing ahead, says Malcolm: “We aren’t giving up. We will appeal the entire decision, and we are continuing to develop exciting new products and services for the future.”

The company’s Blu-ray server products, which require discs to reside in a carousel for authentication, have never raised legal questions. The DVD CCA has denied Kaleidescape’s offer of a similar solution for DVDs. The court has punished Kaleidescape with a total injunction of any DVD server products, even those that might require carousels.

In a flash survey by CE Pro, 23% of respondents said they don’t care about how the courts rule in DVD-ripping cases, noting that the future is Blu-ray and Kaleidescape is perfectly legal in that regard.

An injunction also has been issued against technical support for such products, but Kaleidescape says the ruling applies only to a compartmentalized software module that relates to CSS decryption software.

Meanwhile, the studios and affiliated parties are embracing Ultraviolet, a cloud-based scheme for charging consumers $2 to $5 to digitize their DVD discs. The service is currently being offered by Walmart via its Vudu streaming service.

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Article Topics

News · Product News · Video · Digital Media · Media Servers · Kaleidescape · Dvd Cca · All topics

About the Author

Julie Jacobson, 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.

25 Comments (displayed in order by date/time)

Posted by paulcunningham  on  03/26  at  01:45 PM

Can anyone clarify what is meant by “it will in no way enjoin our dealers”? My interpretation is that come 04/08/2012, all newly purchased Kaleidescape systems will not be able to import DVDs.

Any system purchased PRIOR to that date will be able to import DVDs forever, as the injunction is not retroactive. In other words, hurry up and buy it prior to 04/08 if you want to import DVDs.

Yes/no/other?

Posted by ohreally  on  03/26  at  01:57 PM

I read the text of the injunction as saying that Kal cannot transfer any system with DVD archiving / playback without disc present functions. 

So this sounds bad for a unit sold today but needing back-to-base repair.  Surely the injunction would prevent them sending it back out repaired and performing those prohibited functions?

Posted by paulcunningham  on  03/26  at  02:17 PM

My understanding is that the SOFTWARE is at issue here. In other words, as long as the software (specifically the CSS decryption module) is licensed/activated prior to that date, whatever hardware you associate with the system afterwards (new or replacement players, servers, hard drives) would not be affected.

Posted by ohreally  on  03/26  at  03:10 PM

Hmm, sounds like a bit of wishful thinking.  I wish I saw it as clearly as you do; but it sounds to me like you are justrepeating their CEO’s previous statement (which clearly wasn’t worth much in respect of the injunction being mandatory!).  I believe the SW lives on the product itself, and the injunction seems to prevent any transfer of product with the offending technology.  So how can they send you back a product with this SW on it in the event of repair?  I’ve seen this asked a couple of times with no satisfactory answer.

And then of course there is the “other” question; with the inevitable loss of sales, will there be anyone left to fix it?

This is a big issue for existing customers and dealers, it would be nice to hear a definitive statement from Kal on the matter.

Posted by Movistar  on  03/26  at  03:50 PM

It does not sound straight foreward to say please hurry up to buy now ?!
And if you need more Drive Space, or another Client, or support later please ask somebody else ?!
Autsch… .. Not really future prove?!

Posted by Mike  on  03/26  at  04:55 PM

If for example you have a server that needs repairs, you can take out the drives and send the server in. They won’t have your software and would just repair the hardware. Once it is back, put your drive array back in and fire it up.

Still, that isn’t transferring. I think the text of the injunction means they cannot sell or transfer ownership of a non-compliant system.

I cannot speak for Kaleidescape but given the 7 year battle they put up when others just immediately folded like a house of cards, I sense that Kaleidescape is not done fighting. Only they could say what affect this will have on sales.

I did notice that they discontinued their Cinema 1 DVD only server because of a lack of demand for non Blu-ray systems. While that is a resounding endorsement of Blu-ray, it doesn’t say DVD demand isn’t there.

I don’t think this is over, but even if it was, it begs the question, what exactly did the DVD CCA win? This ruling won’t increase sales of DVDs. It won’t make DVDs more relevant. It does not apply to Blu-ray discs (and that is a different organization anyway). The only thing I can come up with is that it clears out one established media server provider so that the industry can try to market something different that the studios prefer. Seriously, do you have to ban Coke so you can start marketing Pepsi?

Posted by Danny  on  03/26  at  06:42 PM

Does Kaleidescape currently accept unencrypted ISO or Video TS files to be installed on their servers?

If not that really seems to be their best bet moving forward.

Posted by David  on  03/26  at  08:33 PM

Hail to Mozaex!  This company now rules even more because they are not subject to DVD CCA!

Posted by ohreally  on  03/26  at  10:03 PM

A more cynical person might look at the decision to stop selling the Cinema One as Kal being pretty certain they would lose in this way, and so thinking it better to have killed the product themselves than face the embarrassment of having to kill a whole product because most of its functionality was forbidden.

Doesn’t the timing of that decision look, well, at least a bit unfortunate?  And if that were the case, then isn’t there a possibility these arguments are an attempt to just string us along?  I’m not sure on what basis they thought the injunction would be stayed as it looked pretty “prohibitory” to me (perhaps they’re still wearing the same rose tinted glasses which got them here in the first place with the DVD CCA license…)

Posted by Mike  on  03/27  at  01:35 AM

They can accept unencrypted DVDs into the system and the DVD CCA has no jurisdiction over that because CSS isn’t present on such discs.

One could remove the CSS from a movie then import it but that would be an extra step and a lot of hassle.

Posted by EJ Feulner  on  03/27  at  06:14 AM

Can someone please confirm that we no longer have to wait for April 8 to see if new systems will support DVD storage?  This decision was made ahead of the April 8th date when it was expected- correct?  TIA

Posted by Julie Jacobson  on  03/27  at  06:21 AM

EJ, injunction was always going into effect April 8. I thought that was a typo on the order (issued March 8) but apparently not. Seems Kscape can ship DVD-copying-enabled products until then. But I’m no lawyer.

Posted by Hank  on  03/27  at  10:15 AM

I am not an attorney but I am fairly conversant in legalese.  I have read and re-read the injunction and it is quite clear that they “are hereby permanently restrained and enjoined from directly or indirectly making, having made, selling, offering to sell, marketing, importing or otherwise transferring any DVD Playback Product”

If they sell a DVD product after April 8th, they will be in violation of the injunction.  If they do, then things get really heavy.

The decision is unfortunate for end users, dealers, and Kal.

Posted by Robert  on  03/27  at  11:16 AM

It appears to me to be more of the “PUSH” to get the media out of our hands and into the “Cloud” where they can safely hold their movies, and charge you everytime you hit play.  Once we can no longer acquire the disc, then they will be able to charge whatever they want for a “rental” lets say family of 4 going to the retail theatre $60, so anything less than that would become a deal.  If you don’t believe that look at the new ablilty to “rent” movies that are currently in the theatre for the low price of $50 (viewable only with an HDMI connection to TV).  Hollywood hates and loves the dvd at the same time- they want to be paid EVERYTIME the show is played be it to one person or hundreds, or like at my house when you start the show and the kids watch for 10 minutes then get distracted.  A FOOL GIVES UP CONTROL FOR CONVENIENECE.  And if you don’t believe that look at iTunes- how many people are getting less than CD quality music because they are too lazy to go to the store or the online store for that matter and then archive it themselves.  Hollywood is hoping for the same level of stupidity from us.

Posted by hometheater  on  03/27  at  11:44 AM

Mike -
The injunction prohibits making a copy of any encrypted or unencrypted title.

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