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Kaleidescape vs DVDCCA – the arguments

Paddy Baker 20 August 2009
Kaleidescape vs DVDCCA - the arguments

Video server manufacturer Kaleidescape has said that it will continue to fight in its long-running legal dispute with the DVD Copy Control Association, despite the ruling last week that reversed its earlier victory. Paddy Baker looks at the arguments on each side of the case.

The continuing legal dispute between video server manufacturer Kaleidescape and the DVD Copy Control Association took another turn last week, when the Californian Court of Appeal overturned the decision of the original trial court and found in favour of the DVDCCA.

Kaleidescape’s systems (including its Mini system, pictured) enable users to store copies of their own DVDs on a central server. Using metadata and cover art, users can browse through their collection on screen and choose a title to watch. They can also resume watching a title from where the previous viewing left off, and bookmark favourite clips.

The question at the heart of the case is this: does the Kaleidescape system fall outside the terms of the agreement made between the manufacturer and DVDCCA? DVDCCA is the organisation, backed by the Hollywood movie studios, that administers the Content Scramble System (CSS) – the technology that is designed to prevent DVDs from being ripped. CSS is licensed to manufacturers of DVD players – both standalone players and DVD drives in computers – in order for their products to be able to play CSS-protected DVDs.

DVDCCA’s position is that, because the Kaleidescape system enables playback of DVD material without the disc being present, it breaks the terms of the licence agreement. Kaleidescape’s argument is firstly that the document that DVDCCA cites, the ‘General Specifications’, did not form part of the agreement; and secondly that its system does not breach the terms of that document in any case.

DVDCCA argues that Kaleidescape has breached two parts of the General Specifications. Section 1.5 states that CSS “is intended to prevent casual users from the unauthorized copying of copyright materials recorded on [DVD].” Kaleidescape’s position is that this text is ‘informative’ (giving background information) rather than ‘normative’ (establishing a norm by prescribing rules). In the words of its expert witness Daniel Harkins, “There are no key words in here that would guide an implementor into what he must, should or may do. It merely specifies the reasoning behind having something like the DVD video content scramble system.”

The other disputed passage of the General Specifications is Section 2.1.2. This describes how two types of device – broadly, standalone DVD players and computer DVD drives – use CSS technology to access DVD data in order to play the content. The two sides took differing views as to which type of device the Kaleidescape system is. DVDCCA argued that it falls into the latter category, but does not comply with the requirements of this section as it does not read the video title key and video disc key from hidden areas of a DVD – as the disc is not present during playback. For its part, Kaleidescape said its system does not fall into either category.

Kaleidescape argues that it is not bound by the General Specifications because they were not referenced in the licence agreement. These specifications were among the confidential material that DVDCCA did not disclose to Kaleidescape until after the manufacturer had signed the licence agreement. However, it is clear from memos that were presented during the original trial that Kaleidescape had been aware of the possibility that the licence terms might require the disc to be present during playback.

The Court of Appeal reversed the finding of the trial court, and ruled that the Kaleidescape is bound by the General Specifications. It stated in its ruling: “We conclude that the mutual intent of the parties was that DVDCCA would grant Kaleidescape permission to use CSS in exchange for Kaleidescape’s promise to build its system according to the specification the DVDCCA would later provide.”

However, because the trial court did not rule on whether or not the Kaleidescape system breached the General Specifications (and hence the licence agreement), the Court of Appeal has referred the case back to that court in order for this question to be judged.

Kaleidescape has appealed this decision. If the appeal is allowed, the two sides will face each again in California’s Supreme Court. If not, it will be in the original trial court.

DVDCCA expressed satisfaction with the outcome. It said in a statement: “The Appellate Court recognized what we have maintained all along[:] Kaleidescape had agreed to a complete contract that mandated certain requirements with which devices must conform in order to be Content Scramble System (CSS) compliant. We look forward to returning to the trial court to obtain an injunction requiring Kaleidescape to comply with its contractual obligations under the CSS License Agreement and Specifications.”

Kaleidescape said it was “surprised and disappointed by the Court of Appeal’s decision and by their rejection of existing California contract law.” It stressed that it was business as usual in terms of its existing products and new product development.

“The new proceedings by the trial court will likely take place in a year or two, unless the California Supreme Court agrees to review the Court of Appeal’s decision. Kaleidescape will continue to fight, and we expect to prevail. However, it may take many years for this issue to be fully and finally resolved,” it said in a statement.

“In the meantime, Kaleidescape Systems remain 100% licensed and legal. We will continue selling Kaleidescape Systems, developing innovative products and technologies, and providing excellent service to our customers.”

www.kaleidescape.com
www.dvdcca.org

 

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