Studios Win Round in Kaleidescape Case

12 Aug, 2009 By: Erik Gruenwedel

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A day after a court ruled RealDVD copying software violated copyright law, the studios won another round in another copying case.

A Northern California appeals court Aug. 12 overturned a 2007 lower court ruling that home theater company Kaleidescape was in compliance with the DVD Copy Control Association's license to the Content Scramble System (CSS).

Kaleidescape manufacturers a $30,000 home theater network system, in addition to sub-$3,000 mini-systems, that allows users to copy, store and disseminate copy-protected commercial DVDs on the server but not the Internet.

The Santa Clara County appellate court ordered the case be retried to determine whether Kaleidescape breached the DVD CCA license and, if so, to determine “an appropriate remedy.”

“We conclude that the mutual intent of the parties at the time the license agreement was signed was that DVD CCA would grant Kaleidescape permission to use CSS in exchange for the payment of an administrative fee and Kaleidescape’s promise to build its system according to specifications that DVD CCA would later provide,” wrote the court. “This promise is express and complete on the face of the license agreement.”

Mike Malcolm, CEO of Sunnyvale, Calif.-based Kaleidescape, said he was disappointed by the ruling and said the company would attempt to appeal it to the state supreme court.

“We think the decision to consider [CSS general specifications] to be part of the agreement seems quite wrong to us,” Malcolm said. “We’re confident that even if it is considered part of the agreement, we don’t breach it.”

The CEO said the key part of Kaleidescape’s appeal would be the argument whether a party to an agreement after the fact can include a document not referenced in the original agreement and make it part of it.

Malcolm said the CSS specifications were sent to Kaleidescape after signing the original DVD CCA license agreement.

“We didn’t consider it to be part of the agreement,” he said

U.S. District Court judge Marilyn Patel in her Aug. 11 ruling against RealNetworks said the RealDVD copying software “circumvents a technological measure that effectively controls access to or copying of the studios’ copyrighted content on DVDs.”

Patel’s order effectively bars RealNetworks from selling RealDVD in any form, including its Facet DVD player that can create and store DVD copies.

Dan Glickman, chairman and CEO of the Motion Picture Association of America, hailed the decision.

“This is a victory for the creators and producers of motion pictures and television shows and for the rule of law in our digital economy,” Glickman said in a statement. “Judge Patel’s ruling affirms what we have known all along: RealNetworks took a license to build a DVD player and instead made an illegal DVD copier.”

RealNetworks, in a statement, said it was “disappointed” by the ruling. It wasn’t immediately clear if it would appeal the ruling or request a jury trial. To date, litigation surrounding the case has cost the Seattle-based company more than $6 million.

Fred von Lohmann, senior attorney with the Electronic Frontier Association, a San Francisco-based civil liberties group, believed RealNetworks and Kaleidescape would both appeal.

“[These cases have] nothing to do with ‘piracy,’ and everything to do with Hollywood using the DMCA (Digital Millennium Copyright Act) to control the pace and nature of innovation for DVDs, to the detriment of those who legitimately buy their DVDs,” Lohmann wrote in a blog.

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