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Judge Rules Against DVD Copy System

Sunnyvale, Calif. – Home entertainment server developer


has filed an appeal of a
California Superior Court judge’s ruling on March 8 that Kaleidescape’s allegedly
secure system of digitally copying DVD movies onto its home entertainment
servers violates the licensing agreement for CSS copy protection.

William J. Monahan of the California Superior Court ruled

in favor of the
DVD CCA, the CSS licensing agent, and placed an injunction on Kaleiscape from
further marketing the offending equipment. The ruling completed “the third
chapter” of the consortium’s legal proceedings against Kaleidescape.

In filing its appeal, Kaleidescape said it believes that “under
California law the injunction order should not come into effect unless the
California Court of Appeal affirms Judge Monahan’s decision.”

Kaleidescape said in a statement on the ruling that it is “confident
that when the Court of Appeal reviews the facts of this case, particularly in
light of the complete absence of any harm to the DVD CCA or its members, that
it will reverse the trial court decision.”

The company said the appeal process “may take one to two years,”
by which time DVDs will be a much smaller factor in the home entertainment

Kaleidescape CEO and founder Michael Malcolm said the ruling was
“extremely disappointing,” adding that “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 DVD CCA, which licenses the DVD copy control technology
called CSS, is a corporation controlled by the six major motion picture studios
in concert with the largest consumer electronics and computer companies.

Eleven-year-old Kaleidescape has been fighting its battle to
place full and exact digital copies of DVD content on its servers with copy
protection intact. The capability is said to deliver convenience to users in
distributing that content through in-home networks and making movies easier to
find and playback.

Kaleidescape has carefully designed its products to protect the
rights of content owners. The hard-disk copy of each DVD retains all of the DVD
CCA’s scrambling and adds more encryption. The Kaleidescape System is a closed
system that prevents DVDs from being copied to the Internet, to writeable DVDs,
or to computers or mobile devices.

The company said that every Kaleidescape customer must agree to
copy only the DVDs that he rightfully owns, and must reaffirm this agreement
upon copying each DVD.

Kaleidescape Systems identify rental discs and prevents them from
being imported, the company said.

It has developed a different system for Blu-ray Discs that
requires a physical copy of the disc be placed in the server’s disc vault
before the digital copy can be played. This approached has yet to be challenged
by movie studios.

“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,” observed Malcolm. “Imagine a world where Apple
wasn’t allowed to build the iPod because Sony wanted a ‘level playing field’
for the Walkman.”

The average Kaleidescape family owns 506 movies on Blu-ray and
DVD, the company said.

Kaleidescape won its first trial in 2007 when Judge Leslie C.
Nichols of the California Superior Court found that Kaleidescape’s products comply
with the CSS license agreement. The DVD CCA appealed to the California Court of
Appeal, who in 2009 sent the matter back to the California Superior Court for a
second trial.