03.29.2007 — Manufacturers, dealers, and champions of digital rights everywhere can rejoice: Video server maker Kaleidescape has beaten the DVD Copy Control Association (DVD CCA).

The DVD CCA, which licenses the Content Scramble System (CSS) for protecting DVDs, had claimed that Kaleidescape breached a contract when it created products that enable (indeed encourage) individuals to copy protected DVDs onto hard-drive servers.

Kaleidescape argued, first and foremost, that nothing in the DVD CCA licensing agreement prohibits the development of products that allow users to copy their DVDs.

Indeed, that’s exactly what Judge Leslie C. Nichols ruled today in the non-jury trial at the Downtown Superior Court of Santa Clara in San Jose, Calif.: There was no breach of contract.

As Kaleidescape CEO Michael Malcolm explains, “The DVD CCA went on a fishing expedition for three years, trying to find a breach.” In the end, he says, Judge Nichols agreed that “nothing in the agreement prevents you from making copies of DVDs. Nothing requires that a DVD be present during playback.”

Because of this ruling, the Judge did not have to get into copyright issues, so the Kaleidescape ruling has no copyright implications. It is not a statement on the legality of ripping DVDs.

There was the possibility that copyright issues ~could~ have come into play. The DVD CCA submitted to the Court a particular document, the “CSS General Specifications,” that it asserted was part of the licensing agreement.

Malcolm argued that the particular document, which is “available only after you sign the license and pay the fee,” is not part of the contract.

The paper describes the CSS spec, he says, but it does not prescribe any type of action.

The CSS General Specifications document includes wording about thwarting the “unauthorized copying” of DVDs. The issue of what constitutes an unauthorized copy could have come up, but Judge Nichols ruled that the document in fact is not part of the DVD CCA licensing agreement.

Specifically, the document indicates that CSS is meant to keep “casual users from making unauthorized copies of DVDs,” Malcolm explains. “We would have argued that users ~are~ authorized under U.S. law,” specifically the doctrine of fair use.

Other Implications of the Case

Might the DVD CCA appeal? There is always that chance, of course, but Malcolm says the Judge was extremely thorough in his ruling, which might make it tough for the DVD group to win on appeal.

Will the DVD CCA change its licensing agreement to prohibit licensees from making DVD servers? “They could do that,” Malcolm says, but it could take a very long time to get all of the appropriate board approvals.

Malcolm suggests, “What we may see instead is that more of their [DVD CCA’s] members may want to compete in this market rather than ignore it.”

Malcolm has argued in the past, and I’ve agreed, that the reason the DVD CCA sued Kaleidescape in the first place is that the organization’s influential board members didn’t have products to compete with the Kaleidescape server.

So how will case affect other video server vendors in the same boat? It won’t affect many of them because most of the video server vendors in our industry do not have licenses from the DVD CCA. (Malcolm’s take on that: “I never wanted to take the approach, like other video server manufacturers, that makes outlaws out of customers.")

It could be that the evil ways of the DVD CCA have kept server manufacturers from going legit. In fact, by suing Kaleidescape, the DVD CCA was essentially telling manufacturers that they are better off making DVD ripping products without the CSS licenses.

Not all DVD server vendors, however, would be in compliance with the DVD CCA’s regulations, which prohibit the exposure of DVD decryption keys on a publicly available bus. In other words, protected content cannot leave a closed ecosystem, as in a PC network. “We have gone to a lot of trouble to comply with that,” Malcolm says.

AMX is one company that does have a DVD CCA license, and it came out in court that the consortium is pursuing or would pursue the vendor, according to EE Times, which followed the case.

AMX probably doesn’t need to worry now.

Although this particular decision does not have far-reaching implications for the fair-use movement, it certainly doesn’t hurt.

“This is one small victory,” Malcolm says.

Small, indeed. Even the newly introduced Fair Use Act of 2007, which is meant to tone down the Digital Millennium Copyright Act (DMCA) of 1998, would not allow consumers to rip DVDs.