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Kaleidescape vs. DVD CCA: Judge Rules Against Movie Servers

Tentative ruling in landmark DVD-copying case suggests Kaleidescape knew its movie servers might be in violation of DVD CCA licensing agreement. Case has broad implication for media-server market.


Kaleidescape, a prominent manufacturer of high-end movies servers, has lost a major battle in its eight-year war against the DVD Copy Control Association, the organization that licenses the Content Scramble System (CSS) for DVD players.

The DVD CCA sued Kaleidescape in 2004, arguing that its products violate a licensing agreement that expressly prohibits the copying (ripping, archiving) of DVDs.

Judge William J. Monahan of the Santa Clara County Superior Court in California issued a tentative judgment favoring the DVD CCA on Jan. 9, 2012. Discovered by CE Pro after an anonymous tip, the unpublished ruling is subject to revision pending input from the two parties. If it stands as written, the DVD CCA can permanently prohibit Kaleidescape from selling its DVD movie servers, unless the manufacturer adds some kind of authentication mechanism, such a carousel that stores the physical discs. The DVD CCA also can collect court costs.

This landmark case could set a precedent that would make virtually all current DVD movie servers illegal – that is, all servers whose makers have a license with the DVD CCA.

“We are very disappointed by the tentative decision,” Kaleidescape CEO Michael Malcolm tells CE Pro. "The DVD CCA is controlled by the six large movie studios in concert with some of Kaleidescape’s competitors. They object to the innovations of the Kaleidescape System, and want new Kaleidescape Systems to require the presence of the DVD in a disc vault, as with Blu-ray Discs today. Despite the evidence presented at trial, Judge Monahan has tentatively adopted a statement of decision that was drafted by the DVD CCA, which goes far beyond anything in the license."

Malcolm adds that Kaleidescape has filed objections to the order "and if those objections are not successful, we plan to appeal."

Background of DVD CCA v Kaleidescape


CE Pro has been following this lawsuit and related cases since 2004, and a history of DVD-ripping legality can be found here.

Briefly, the DVD CCA licenses the CSS digital rights management (DRM) technology required for all (legal) DVD players to play copy-protected content.

Kaleidescape, a DVD CCA licensee, makes high-end movie servers that are populated with movies copied to the device. The DVD CCA has claimed that its CSS licensing agreement bars such copying.

Kaleidescape has maintained that the contract says no such thing; in any case, archiving DVDs is legal under the “fair use” doctrine and Kaleidescape servers make bit-for-bit copies so that the DRM provisions of CSS are preserved.

RELATED OPINION: What the ruling means for innovation and future of media servers

After several appeals and counterclaims, Judge Monahan ruled that the CSS licensing agreement does in fact require a disc to be present in a DVD player for playback. Kaleidescape servers – and countless similar products from other manufacturers – skirt this requirement, which is the “law of the case and thus is binding on this Court,” Monahan asserts.

At the heart of the matter is Section 1.5 of the General Specifications that states CSS is “intended to prevent casual users from unauthorized copying of copyrighted materials recorded in [DVDs].”

The DVD CCA, as well as content owners represented by the Motion Pictures Association of America (MPAA), have argued that even bit-for-bit DVD transfers don’t prevent users from renting a movie and copying it for their permanent use, the so-called rent-rip-return practice.

To thwart this practice, the CSS agreement requires disc authentication including bus encryption and bus decryption, which does not occur in the case of Kaleidescape servers “because the DVD disc is eliminated from the playback process….” Monahan notes. “Instead, they [discs] are intercepted and diverted to the Kaleidescape System’s server.

From the ruling (citations omitted):

Kaleidescape contends that the Kaleidescape System can detect that an imported DVD is rented when the DVD has been marked as a rental DVD and that some rental DVDs are so marked. The Kaleidescape System cannot detect if an imported DVD is a DVD that the user has borrowed. After the Kaleidescape System copies the DVD content to the server, it displays a message that states that it is illegal for a user to import a DVD that the user does not own and that the user must delete the copy if the DVD is not owned. The message further states that the user must click “Agree” to signify that the user either owns the imported DVD or that the user will delete it. The Kaleidescape System does not, however, provide any mechanism for confirming that a user actually owns an imported DVD. Furthermore the Kaleidescape System itself cannot delete the imported DVD – the user has to delete it using a personal computer.”

Kaleidescape had considered some options for extra protections when it began product development in 2001, according to court documents. The company contemplated a carousel that would hold the discs and a “DVD-destruction” scheme that would kill the DVD once it was copied. Both ideas were rejected (although the carousel method is employed in Kaleidescape’s latest Blu-ray servers).

Monahan says Kaleidescape was aware before entering into the licensing agreement that a physical disc might be required for DVD playback, noting that “Kaleidescape rejected proposed alternative products that would have played back DVDs from the physical DVD disc, not because it concluded that the License Agreement would allow the play back of DVDs from permanent copies stored on a server, but rather, because of marketing considerations.”

In numerous interviews with CE Pro and in court, Kaleidescape has said that the CSS requirement is too vague with regards to DVD copying, but an earlier court ruled that it is “not so vague that the court cannot tell what it requires – it requires that playback of DVD content by a Drive plus Decryption device be performed utilizing the physical DVD.”

It was up to Monahan to determine whether the Kaleidescape system is a Drive plus Decryption Module. He judged that it is such a device.






DVD Ripping: The Whole Picture
 
Kaleidescape vs. DVD CCA: Judge Rules Against Movie Servers
Tentative ruling in landmark DVD-copying case says Kaleidescape knew its movie servers might be in violation of DVD CCA licensing agreement that prohibits copying of DVDs.
DVD Ripping: The Latest on the Legal Front
This compilation of articles on the legality of DVD ripping, and related fair-use cases, will be updated continuously.
Understanding the Kaleidescape, RealDVD Cases
What have the courts really decided on DVD copying, and what are the implications for the future? We debunk the myths about the the two lawsuits and clarify the current legal state of DVD ripping.
Is DVD 'Ripping' the Same as 'Archiving?'
Is the term "ripping" generally understood as the "illegal" form of copying a disk? Likewise, is "archiving" known as the bit-for-bit "legal" way of doing it?
Can You Be Sued for Helping Clients Rip DVDs?
EFF attorney Fred von Lohmann explains some of the legal issues involved in selling and installing products that enable users to copy DVDs.
Is Your DVD Server Legal? Manufacturers Say Yes!
Developers of movie-ripping products insist their products are legal. Here's how the manufacturers justify their solutions.
Copy Protection Group Sues Kaleidescape (2005)
Kaleidescape has a license from the DVD CCA to employ CSS decoding in its media servers, which it does. Now, DVD CCA is suing Kaleidescape for breach of contract.
Would Studios Rather We Buy DVD Ripping Products Offshore?
As studios work to quash legitimate products like RealDVD, offshore providers of DVD ripping software -- like AnyDVD developer SlySoft -- are reaping the rewards.
Industry Insider: DVD CCA Is an Innovation-Stifling Cartel (2005)
The DVD Copyright Control Association (DVD CCA) is a bunch of bullies. The organization manages to coerce all manufacturers of DVD players to sign away their rights to innovation.
 



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Article Topics

News · Product News · Video · Blu-ray · Media Servers · 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]

47 Comments (displayed in order by date/time)

Posted by Mike  on  01/27  at  10:59 AM

Wow, just wow!

**He adds, “Rather, the harm is to DVD CCA itself from the undermining of those industries’ trust and confidence in the License Agreement, and thus in DVD CCA, if a breach by a licensee were to go unaddressed.”**

Any 11-year-old with a $300 computer can crack and make unlimited copies of DVDs but trust in the DVD CCA would be undermined by letting the Kaleidescape system exist? I mean really, who trusts the DVD CCA’s ability to stop DVD copying given that all it takes is one google search to break the copy protection?

If this same kind of license agreement existed on CD’s, we wouldn’t have iPods and even our smart phones would be caught in the crossfire.

Posted by Jason Knott  on  01/27  at  11:07 AM

If only the industry could organize a grass-roots public campaign like the one that killed SOPA legislation. How about it CEA? You were vocal on that issue… how about this one?

Posted by The People's Champion  on  01/27  at  11:16 AM

I would have loved to see Mike Malcolm’s face when he heard the ruling.  Kaleidescape is lost and struggling to remain relavant.  If the DVD CCA isn’t the demise of Kaleidescape, you can bet your company on it that solutions from Apple and the likes are going to sink what’s left of them. 

Consumers are demanding digital media solutions.  WIthin the Apple ecosystem we can stream disc-less audio and video content all over the home and for a small fraction of the cost.  I find it amusing that Kaleidescape has managed to go back in time.  Seriously, a disc vault?  Lol, no thanks.

My advice to Malcolm: get your affairs in order and find a new hobby.

Posted by Julie Jacobson  on  01/27  at  11:18 AM

CEA can’t pick sides on this one. Here’s what I wrote in “DVD CCA is an innovation-stifling cartel” in 2005:


“If you want to innovate in that market space, you have to get permission from your competitors,” says Fred von Lohmann, a staff attorney for the Electronic Frontier Foundation, a nonprofit defender of digital rights. “They’ll say, ‘We’ll give you that capability, but we’ll do it on our own time, in our own way. The Kaleidescapes of the world aren’t invited.’ They [the DVD CCA] want to eliminate this entire category until their members are ready to enter the segment with the next generation of their cartel-approved solution.”

That’s absurd, right? Let’s see what the Consumer Electronics Association (CEA) and the Home Recording Rights Coalition (HRRC) have to say.

“We have members on both sides so we’re not commenting officially,” says CEA spokesperson Jeffrey Joseph. Ditto for the HRRC. How ingenious of the DVD CCA—establishing a structure that discourages dissension from CE and PC makers and the organizations that represent them.

http://www.cepro.com/article/industry_insider_dvd_cca_is_an_innovation_stifling_cartel/

Posted by Mike  on  01/27  at  11:21 AM

If somebody who bought a refurb 5U server for $5,000 and a media player for $1,000 were then later told that they would need to buy 3 new vaults for $15000 total so that the system could continue to work, I could imagine a lot of justifiable anger.

The best path moving forward would be to appeal the case while trying to work out an agreement with the DVD CCA to allow the Kaleidescape to work as it has been or at a minimum to grandfather in existing systems.

A grass-roots campaign won’t help much here via legislative relief. It is one thing to kill a bill before a vote, but something entirely different to get a new law passed that affects a contract dispute.

The only thing that would work via grass-roots would be to put public pressure on the MPAA and DVD CCA but I don’t really think they give a damn what the public thinks of them.

Unfortunately, as a contract dispute, there is little to look for in legislative salvation unless they really just gutted the DMCA and given the clout the MPAA and RIAA have with sitting politicians through their financial donation strings, don’t hold your breath unless you want to look like a smurf.

Posted by Todd Nelson  on  01/27  at  11:24 AM

Most of my installations are on yachts. We found out many years ago that carousel products do not work when the vessel is moving. The rocking motion moves the DVD, or CD, into and away from the laser reader, completely ruining whatever is trying to be watched, or listened to in the old days. Having to go to a carousel would rule out the use of such a product on any yacht.Kaleidescape has been perfect for our purposes as it takes up little room and the DVDs get stored somewhere else on the yacht, out of the way. It will be a shame to lose a market where the consumers have no problem including it in their budgets.

Posted by joel degray  on  01/27  at  11:30 AM

“You need to get permission to innovate” too funny… We created copyright for our benefit, gave them a market and huge income, and we need permission to innovate? Next thing you know you are going to have to ask your bank if it’s OK
to create new revenue stream smile

Posted by Mike  on  01/27  at  11:39 AM

“Next thing you know you are going to have to ask your bank if it’s OK
to create new revenue stream”

Joel, remember that the MPAA didn’t want their new revenue stream: home movies. They fought the invention and marketing of the VCR all the way to the Supreme Court. They lost and now home video is their largest source of income.

Posted by Brad  on  01/27  at  12:04 PM

MISLEADING HEADLINE!

was not a ruling against ALL media servers, just that Kaleidescape was violating their contract with the CCA.

“This is a breach of contract case, not a copyright case, and so fair use is simply not application here.”

Stop spreading false rumors and fear!!

This just PROVES that Kaleidescape knew they were violating their agreement and selling ILLEGAL product to dealers knowing that they were violating the rules!

Why do you think they did a Blu-ray vault?? Because they did not have permission and still do NOT have permission to rip Blu-ray movies! Look into it! Stop drinking the Kool-aid!

Posted by joel degray  on  01/27  at  12:19 PM

Copyright is a public trust. It was written (in the US) to give us a stock pile of arts and cultural IP. They were given a market to grow and almost a Monopoly. Then they continued to lobby and have our rights rewritten and minimized (funny how any big enterprise can just have the laws rewritten- isn’t it?). So what I am saying is that innovation (of this sort- not Nuclear, Biological- etc) doesn’t say please, it’s a function of necessity. Ford didn’t want anyone tinkering under their hoods either, but if it weren’t
for back yard mechanics and reverse engineering we would have never gotten off the ground, so while they may think that they can control an industry, they are in fact there to serve it.

Posted by Julie Jacobson  on  01/27  at  12:24 PM

Brad, I think it’s pretty clear from headline that judge ruled against KALEIDESCAPE media servers, and of course the article is definitely clear about that.

We also make very clear in the article that this has nothing to do with copyright infringement or so-called fair use. Simple breach of contract, with serious implications for other movie servers made by mfrs who are DVD CCA licensees.

Posted by Chad  on  01/27  at  12:49 PM

Are they really selling these products by the hundreds per month as would be required to keep the company afloat? Economy must not be too bad anymore..

Posted by Edward A  on  01/27  at  12:52 PM

So how do they legally sell their Movie Collections - there is no disc present for the customer.

Posted by Edward A  on  01/27  at  12:55 PM

... Or do they send the original disc to the customer to load themselves??

Posted by Brad  on  01/27  at  01:00 PM

Julie - thank you for replying.

My point on the headline is that it states:
“Judge Rules Against Movie Servers”
Which sounds very encompassing of the entire server market, not just Kaleidescape.

I agree that the rest of the article was very clear that Kaleidescape was found to be in knowledgeable violation of their contract and that the ruling was not a copyright issue, but a breach of contract case.

You have always done a very good job in discussing the realities of the server market - thank you.

My biggest question, that never seems to be answered adequately, is how Kaleidescape can legally load Blu-ray movies to their server? They claim the vault proves the disc is owned via authentication, but the fact is that Kaleidescape does “rip” the Blu-ray to their hard drives which requires them to decrypt the movie.
It is known that the act of decrypting is illegal - they claim it is Managed Copy that gives them the right, but Managed Copy is not universally recognized with Blu-ray and therefore cannot apply to all Blu-ray discs.
So how do they legally do it? They ship with the decrypting software, but they do not have permission from the Blu-ray Association to do this?
What is your opinion on this matter?
I feel that now they have been shown that they were breaking the CCA for DVD that they need to come clean about Blu-ray.

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