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DVD CCA, 1; Kaleidescape and Innovation, 0

by John Sciacca “Here’s to the crazy ones. The misfits. The rebels. The troublemakers. The round pegs in the square holes. The ones who see things differently. They’re not fond of rules. And they have no respect for the status quo. You can quote them, disagree with them, glorify or vilify them. About the only thin

by John Sciacca

“Here’s to the crazy ones. The misfits. The rebels. The troublemakers. The round pegs in the square holes. The ones who see things differently. They’re not fond of rules. And they have no respect for the status quo. You can quote them, disagree with them, glorify or vilify them. About the only thing you can’t do is ignore them. Because they change things. They push the human race forward. And while some may see them as the crazy ones, we see genius. Because the people who are crazy enough to think they can change the world, are the ones who do.” —Apple’s “Think Different” Ad.

Remember that? Sorry, Steve, but apparently instead of ignoring them or just disagreeing with them, you can sue them. And try to get their innovation rolled back to before it changed the world.

Last Friday, news broke that very well could be a railroad-sized spike in the coffin of one of the most innovative companies in the home theater space in the past decade: Kaleidescape.

The gist is that Kaleidescape has been battling it out in court against the DVD Copy Control Association (DVD CCA) for the past eight years. The DVD CCA claim that Kaleidescape’s hard disk based movie server system violates its licensing agreement that prohibits the copying (storing, archiving, backing-up, ripping—use whatever term you like) of DVDs. And a tentative ruling was released that goes against Kaleidescape.

The tentative ruling made by Judge William J. Monahan of the California Superior Court affirms that the CSS licensing agreement does require a disc to be present in a DVD player for playback. And while the ruling handed down is a tentative judgment and subject to revision, as written Kaleidescape could be prohibited from selling its system unless it added some kind of disc authentication that would warehouse the physical disc and insure that it was present during playback, similar to Kaleidescape’s current Disc Vault solution for use with Blu-ray movies.

Unlike Star Jones, I am NOT a lawyer, so I’m not going to try and delve into or explain or untangle the arguments presented by both sides. But from what I can decipher, the complaint boils down to the fact that Kaleidescape feels they are complying with the licensing agreement they entered into with the DVD CCA while the DVD CCA feels that Kaleidescape is violating its terms by breaking the CSS (Content Scramble System) encryption present on all DVD discs in order to make a digital copy.

So as a Kaleidescape dealer, user, reviewer and unabashed fan, I thought I would weigh-in on this ruling.

It sucks. Sucks big time. Sucks big, flaming, gooey, BP-tarballs kinds of suck.

Obviously, it sucks biggest for Kaleidescape. They’ve got the most blood in this fight and have the most to lose. They created a system that offers movie lovers an entirely new way to experience and enjoy their collections via an interface that is still head-and-shoulders above anything else out there. And as the company that pioneered — and still OWNS — the movie server category, doing for movies what iPod did for music, the essential core and essence of what they do is in transforming discs into more manageable data. And while the disc being in place wouldn’t kill their system, it would certainly stifle it.

It sucks for the custom installation industry as well. These companies are the principal Kaleidescape dealers that love integrating amazing products like Kaleidescape and who are able to use this kind of killer tech to provide solutions for demanding clients and differentiate themselves as a luxury supplier. Kaleidescape was also the solution for managing large audio and video libraries aboard yachts and private jets. The “disc in tray” requirement would kill these kinds of installs where weight and space restrictions are often unavoidable and non-negotiable.

It sucks for movie lovers and collectors who will have to continue managing their collections either in horrible stacks or by using some alphabetized, Excel spreadsheet system to remember what they have. Or who keep movies in a slow and bulky and “play one/imprison all” mega-changer. If you own more than 100 movies, I bet there are 90 or more in your collection that you haven’t watched for months/years because it’s too much bother to locate and load the disc. “If you’re having disc-finding problems, I feel bad for you son, I’ve got 99 problems and playing a DVD ain’t one.” —Every Kaleidescape Owner Ever.

And it sucks for innovation; because who is going to continue putting time, effort and money investing into a technology or system that has been deemed illegal? Yeah, no one.

It’s also fairly stupid and pointless. At this point, DVDs are well on their way out. If DVDs were people, they would be well past the Golden Years of their life; wandering around a group home wearing ill-fitting robes, taking paper cups filled with pills and medicine, eating soft, overly salted food and repeating themselves. “Remember that time I kicked DIVX in the ass! Ha! I was invincible! And why is it so cold in here?!”

Also, I think that they teach “cracking the CSS” in like the second week of kindergarten now. That “code” has been broken / hacked / cracked / disseminated-amongst-the-people for years now. I just Googled “Copy a DVD” and got 350 million results. The first one literally being a Wiki “how-to” walk-thru. So, if you want to break the CSS and copy movies, go right ahead. It’s easy. (Here’s a blog I wrote on the conundrum of it. The conundrum being that while it is amazingly simple to do, it IS actually illegal to do it.) Then burn a copy for friends, put it on a hard drive for playback by any myriad of media streamers, or transcode it for an iPhone/Touch/Pad, whatever. Because it’s easy. And this lawsuit is not going to do a single thing to stop that.

Now I can totally empathize with what the CSS is meant to do. Part of the General Specification states that CSS is “intended to prevent casual users from unauthorized copying of copyrighted materials recorded in [DVDs].” So, yeah, cool. I’m down with that. But I think at its heart, it was trying to prevent the guy from cranking out mass copies of movies and then selling them on the corner or over the Internet or just giving them out to friends as gifts. “Here, I made you a copy of The Tree of Life. Enjoy, sucker!” But people that are purchasing Kaleidescape systems—systems that routinely sell for $20-30,000—are not “casual users.” These people are not spending that kind of money to set up a Netflix rent-rip-return outfit in their living room.

And far from harming the movie industry, people that purchase Kaleidescape systems are often some of the most voracious film collectors—and purchasers—out there. Whether this is because movie lovers migrate to Kaleidescape because it’s the best solution or because Kaleidescape owners discover how easy it is to manage and enjoy a collection of movies and continue adding to their experience is a chicken-and-egg question. But according to Kaleidescape, the average Kaleidesecape customer has 387 movies and 154 albums in their library; however, many have collections well into the thousands of titles.

Kaleidescape has been fighting this fight for eight years now. Consider that the company released its first product in 2003, and it’s apparent that they have been dealing with this suit almost every day that they’ve been around. Think what other cool things they might have been able to do if they could have allocated all of that litigation time, money and distraction into just making their system even more awesome…

Shortly after the tentative ruling was released, Kaleidescape’s CEO and Founder, Michael Malcolm, sent a letter to all Kaleidescape dealers. Below is an excerpt of the letter. As Malcolm writes, Kaleidescape plans on appealing if the tentative ruling stands as written, so this will likely find its ultimate resolution in a higher court. Here’s to sticking to the fight, and hopefully coming out victorious sooner than later.

As the statement of decision is still tentative, we do not know exactly what the final decision will be or when the Court will issue it.

The DVD CCA, controlled by the six large movie studios in concert with some of Kaleidescape’s competitors, objects to the convenience and innovation of the movie server, and claims that their license prohibits playback of DVDs from hard disk unless the DVD is present. Kaleidescape won its first trial in 2007 when Judge Leslie C. Nichols of the California Superior Court found that our products comply with the CSS license agreement. This matter was sent back to the California Superior Court by the California Court of Appeal in 2009 for a second trial.

Over the course of the 2011 trial, Kaleidescape again presented evidence that its products fully comply with the DVD CCA license agreement, have caused no damage to the DVD CCA or the motion picture industry, and accelerate the purchase of DVDs by making movies easier to enjoy and more entertaining. Judge Monahan tentatively disagreed. We were surprised, because when Judge Nichols considered the evidence four years ago, he found that Kaleidescape was in full compliance with the agreement. Moreover, in his statement of decision, Judge Nichols noted our good faith efforts to ensure that our products were fully compliant.

Kaleidescape operates with a very high degree of integrity. We work meticulously to comply with each and every agreement that we sign. In light of this, the tentative ruling is extremely disappointing. We have always believed, and continue to believe, that our products comply with the CSS license agreement, and in court we will continue to fight the DVD CCA’s allegations to the contrary.

The Kaleidescape movie server is not the first innovative technology the studios have tried to stifle in the courts. When Sony developed the VCR in the 1970s, Hollywood was afraid that it would keep people away from the theaters and sued to keep it off the market. In 1981, the US Court of Appeals for the Ninth Circuit ruled in favor of Hollywood and suggested damages and an injunction. Sony appealed that ruling to the US Supreme Court. Fortunately for us all, the US Supreme Court ultimately ruled against Hollywood and in favor of Sony, and for the protection of the consumer’s fair use rights. This ruling ushered in the era of home video entertainment. Ironically, the sale of movies on VHS and later DVD would drive an era of unprecedented prosperity for Hollywood.

Kaleidescape has filed objections to the tentative decision and if those objections are not successful, we plan to appeal.

It is very important to us that our dealers have the latest information about this matter. When a final decision is handed down, we will provide you with another update.

Michael Malcolm
Chairman, Founder and CEO
Kaleidescape, Inc.