A judge tells Kaleidescape to stop copying movies
The legal situation for Kaleidescape, a company making pricey home-movie servers, has taken a turn for the worse, although not a surprising one. In an order disclosed Monday, a state Superior Court judge barred the company from selling its flagship products, which rip movies off of copy-protected DVDs and store them for later playback.
The judge's ruling echoes the findings of a California appeals court in 2009, which tossed out an earlier ruling that upheld the legality of Kaleidescape's products. In essence, Judge William J. Monohan held that the contract Kaleidescape signed with the DVD CCA requires that its devices play a movie only by reading the actual DVD.
Kaleidescape says it will appeal. According to the company, the DVD CCA -- the coalition of movie studios, tech companies and consumer electronics manufacturers that controls the licenses to the anti-piracy technology on DVDs -- has admitted that it has suffered no harm from Kaleidescape's products. The company's expensive media servers are roach motels; once a movie file goes in, it can't be copied or redistributed. And the target market for Kaleidscape's systems, which cost more than $20,000 when the DVD CCA originally filed suit, has little conceivable overlap with the universe of disc pirates. Instead, company officials say, their customers buy more movies.
The problem for Kaleidescape is that the legal battle has focused on the terms of the contract the DVD CCA requires companies to sign in order to obtain the right to decrypt discs. The company contends that the contract doesn't forbid the sort of disc ripping its devices do, but that's a semantic argument based on a hunt for loopholes. An appeals panel and, now, Monohan have agreed with the DVD CCA that the contract offers no such wiggle room.
The more interesting argument is that the DVD CCA is a cartel that used its control over encryption technology on discs to block innovative new entrants into the home-video market. For the consumer electronics and tech companies in the association, Kaleidescape is a competitor with a novel high-end gadget. The Hollywood studios, meanwhile, may not object to Kaleidescape's products -- they're equipped with military-grade security, after all, and they're far too expensive to attract hackers. But they don't like the idea of Kaleidescape setting a precedent for other, less piracy conscious companies to follow.
Said Kaleidescape Chief Executive Michael Malcolm:
For the past eight years, we've been baffled about why this lawsuit ever happened, since our products don't encourage piracy but do increase sales of movies. Maybe it's because the large CE companies in Japan and the big computer companies in the USA, on the board of the DVD CCA, are afraid that Kaleidescape is building a better way to enjoy DVDs and Blu-ray discs than they are. Imagine a world where Apple wasn't allowed to build the iPod because Sony wanted a "level playing field" for the Walkman.
But the dispute really isn't all that baffling. One of the studios' biggest bugaboos is the thought of consumers making permanent copies of the movies they rent or borrow from friends. Never mind that the Internet supplies any number of ways to do that already, often at no cost. The studios just can't seem to abide the idea of companies building a business around consumer copying of movies. But again, although Kaleidescape tried to guard against "rent, rip and return" abuse, there's no guarantee other device makers would take the same steps.
The idea of a home DVD server seems quaint now, with rentals, subscription services and digital outlets on the rise and DVD sales drooping. Nevertheless, the studios seem committed to the idea of wringing more money out of consumers for the privilege of creating digital video jukeboxes to go along with their iTunes music collections and their digital photo galleries. Witness the recent introduction of a digital copying service from Rovi, which is expected to charge a small fee for converting a disc into a downloadable or streamable digital file.
The injunction issued last week means that Kaleidescape will have to stop selling its DVD-ripping system, at least until an appeals court intervenes. The injunction doesn't appear to apply to the company's Blu-ray system, which also copies movies but requires the corresponding discs to remain in the device for playback.
Photo: A woman and child check out the DVDs at a Target in Culver City. Credit: Lori Shepler/Los Angeles Times