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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 Discovered by CE Pro after an anonymous tip, the unpublished ruling is subject to revision pending input from the two parties.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 · 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  03:03 PM

Chad, yes they do sell a lot of systems per month. Figuring that since 2004 selling about 10,000 systems would be approximately 105 systems per month.

Edward, when they sell a movie collection, they ship the discs to the customer. It is basically like buying a bundle of DVDs or BluRays.

Posted by Tom  on  01/27  at  04:00 PM

Brad, see for an explanation as to why the Kaleidescape Blu-ray movie server is 100% legal.

Posted by Tom  on  01/27  at  04:19 PM

Todd Nelson,

The M700 and DV700 disc vaults are unlike ordinary carousels. Blu-ray movies are played from copies on the hard disk drive. An internal disc-retention shell holds the discs in place, and carousel rotation is halted when the tilt sensor indicates that the vault is not level.

Posted by Julie Jacobson  on  01/27  at  04:56 PM

Please note I added this update:

Updated Jan. 27: Summary was changed for clarification. There was a correction about monetary damages, which the DVD CCA waived a few years ago; the only remuneration considered in this case is court costs. Minor changes were made to make it clear that the ruling is not an indictment of all media servers, just ones that don’t require a physical disc to be present for playback—which is effectively all media servers currently on the market.

Posted by Bill Maxey  on  01/27  at  06:22 PM

One small step for Lobbyists.
One giant leap (back) for mankind.

Posted by Andrew Southern  on  01/27  at  08:23 PM

Kscape’s value going forward will be the software and hardware they have come up with. That stuff is rock solid, however once Plex is onto v1.0 they might have a problem. But still the hardware is awesome and doesn’t act like a typical media server (unreliable computers). Don’t worry about how people get the content just set up the software to automatically scan NAS drives.

Posted by AVDad  on  01/27  at  09:02 PM

I know the popular opinion is to side with Kaleidescape but only so our industry could sell an illegal DVD copy system.

Granted, the DVD industry hasn’t been too good about protecting their product but the fact remains that everyone in this business that sold movie servers knew about and even encouraged the copying of movies that may or may not have been owned by the copier.

The solution has always been to have a disc, license or authenticating code present for playback.

Posted by paulcunningham  on  01/28  at  02:09 AM

Brad - of course Kscape can decrypt a Blu-ray, how else would they be able to play it? What do you think a cheapo Sony Blu-ray player does? Otherwise you’d just see a blank screen or scrambled BS. Kscape is a licensee which is why they can do that. The agreement very specifically stipulates that a disc must be present, which is why the vault is necessary.

Edward - when you buy a Kscape movie collection you get physical plastic discs shipped to you as well, along with the convenience of having them pre-loaded on your server.

Posted by paulcunningham  on  01/28  at  02:16 AM

Also, the movie industry just wants this whole category to fail. An extremely simple solution would be to sell rental-only discs to Netflix et al with a flag that Kaleidescape and other movie servers would see and now allow a user to copy it to the hard drive. Warner actually already does this; I’ve gotten a bunch of movies from Netflix that are a silver rental-only disc with no special features or anything.

Posted by Harald Steindl  on  01/28  at  03:02 AM

How about the enduser side of things?
AFAIK the K-scape can and does autodownload software updates to the client’s system.
IF they get a final verdict forbidding the DVD thing, will they (have to?) simply push a software upgrade and disabling the functionality in all enduser systems? Guess, this would make a few lawers very busy.
Any words of wisdom from you?

Posted by hometheater  on  01/28  at  10:18 AM

The People’s Champion - “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.”

Not the same at all.  Apple will allow you to stream disc-less video content you purchased from ITUNES to an APPLETV.  All of your existing content? - re-buy it.  You cannot control it with a 3rd party controller other than an IPHONE or IPAD.  You are limited to 5 APPLETVs.  High Def is limited to 720p.  You cannot stream DVDs from your MAC to the Apple TV and apple does not support Blu-Ray on any of their machines.

Sure it’s cheap, but at what cost?  NYT has a scathing article about the slave-ish conditions at the factories that put together your devices “at a fraction of the cost”  In China, Human Costs Are Built Into an iPad

Apple’s monopolistic control over it’s “ecosystem” does not allow for any innovation that does not feed their coffers.  They can decide who gets let in and who doesn’t.  They can determine how much you can charge and how much you must pay them.  They can tell you that if you sell your product through them, you cannot sell it anywhere else.

go ahead - support the 1%.  Let a few people in California make billions and don’t worry about the labor abuse in China.

Posted by Hifiguru  on  01/29  at  10:38 PM

I love how so many people love to bash innovative companies like Kaleidescape.  It is this type of luxury product and innovation that allows many of us to earn an income and support our families.  With the demise of high end performance gear and the thought that a $99.00 Apple TV is the answer to all of our media needs we are headed down a very short path to irrelevance. 

Tell me, how much money do you make on the average Apple TV sale.  Maybe a little for programming the remote and a few HDMI cables?  How often is the client going call for support on this small sale when they have trouble with iTunes?  How much recurring revenue are you going to earn when they decide to pick up the next one at Wal-Mart and install it themselves with a $20.00 HDMI cable?  How many referrals are you going to get on an Apple TV?  So go ahead and keep cheering the court’s decision and installing iTunes based systems and let me know who wins the race to Zero.

Posted by Dr Modero  on  01/30  at  10:24 AM

Well said (or typed) HifiGuru!

Posted by Chad  on  01/30  at  12:26 PM

Even if this case did not exist, the evolution to cloud-based media would still continue. Apple is successful because they make products that people WANT! Don’t you get it? We don’t tell people what they should have, they tell us what they want. If lower costs and easy to use/integrate products are what the public demands then that is what they will get.
If you cannot continue to justify your existence because technology is advancing faster than you can adapt, then you might want to look into another line of work. I didn’t go out of business when they stopped making VCR’s.

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