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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.

Julie Jacobson · January 30, 2012

Parallels with DVD CCA vs. Real Networks

The Kaleidescape case is not unlike a similar lawsuit filed by the DVD CCA against Real Networks for its $30 RealDVD copying software.

Real lost in that breach-of-contract case; however, appeals were not exhausted because Real capitulated to the MPAA on another lawsuit – infringement of the Digital Millennium Copyright Act. (Kaleidescape has not been sued by the MPAA or any other parties for DMCA violations.)

In his Kaleidescape ruling Monahan noted the parallels with the Real case and agreed with that court, which ruled the CSS licensing agreement unambiguously “prevent[s] unauthorized interception and the creation of a copy of the [CSS] keys and DVD video content on a storage device for future playback without the DVD, such as a computer hard drive.”

Dispute about Damage

An interesting point of contention concerns whether or not the DVD CCA could enjoin Kaleidescape from selling its existing DVD servers. Kaleidescape has said no injunction is warranted because the DVD CCA cannot prove that any harm has been done to that entity or to movie studios or content providers due to Kaleidescape products.

But as Monahan and earlier courts have maintained, content holders, including the MPAA, are not parties in this case, “and so any harm to them is irrelevant.”

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.”

In regards to a permanent injunction, Kaleidescape claims it will be greatly burdened by such an action, but Monahan concludes that is not the case, saying “Kaleidescape will survive no matter the outcome of the lawsuit because of its substantial business that is ‘unrelated’ to the suit.”

Furthermore, Kaleidescape’s Malcolm has testified that his company likely can come into compliance with an injunction within four to 12 months.

Malcolm and other Kaleidescape officials have told CE Pro that same thing. When Kaleidescape introduced its M700 Blu-ray server with an attached carousel that authenticates the presence of discs, senior marketing director Tom Barnett told CE Pro that the same concept could be applied to Kaleidescape’s DVD-only products, but “we don’t want to take away any freedoms from consumers than we’re required to do.”

And, of course, Kaleidescape believes it is not required by the licensing agreement to have a DVD disc present for playback.

Monahan says Kaleidescape has been on notice that the DVD CCA objected to its products since the manufacturer was notified in 2003, about four months after it began selling product.

He points to an email exchange that suggests “Kaleidescape took a calculated risk, knowing it might be sued, to release their product without any carousel, and Mr. Malcolm noted that ‘[t]hings move very, very slowly in the litigation world.’”

As the judge noticed, Malcolm was right about the slow-moving legal process. Kaleidescape had sold about 300 systems when the DVD CCA filed its lawsuit in 2004. Today, Kaleidescape claims to have about 10,000 systems in the field.

’Fair Use’ Does not Apply

Kaleidescape argues that consumers have a “fair use” right to back up their copy-protected DVDs, but that argument did not hold muster in Monahan’s court (citations omitted):

Kaleidescape’s affirmative defense that the CSS License Agreement is “unenforceable” because it violates a supposed “fair use” right of consumers to copy DVDs has no business in this case. As Kaleidescape has conceded, fair use is a defense to copyright violations, not breaches of contractual rules. This is a breach of contract case, not a copyright case, and so fair use is simply not application here. Furthermore, this fair use was discussed and rejected in the RealNetworks case.

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.

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  About the Author

Julie Jacobson is founding editor of CE Pro, the leading media brand for the home-technology channel. She has covered the smart-home industry since 1994, long before there was much of an Internet, let alone an Internet of things. Currently she studies, speaks, writes and rabble-rouses in the areas of home automation, security, networked A/V, wellness-related technology, biophilic design, and the business of home technology. Julie majored in Economics at the University of Michigan, spent a year abroad at Cambridge University, and earned an MBA from the University of Texas at Austin. She is a recipient of the annual CTA TechHome Leadership Award, and a CEDIA Fellows honoree. A washed-up Ultimate Frisbee player, Julie currently resides in San Antonio, Texas and sometimes St. Paul, Minn. Follow on Twitter: @juliejacobson Email Julie at

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  Article Topics

News · Kaleidescape · All Topics
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