Home Theater Maker Kaleidescape Hit with Copyright Suit

The DVD Copy Control Association (DVD CCA) has filed a suit against Kaleidescape, alleging misuse of the association’s proprietary copy protection technology, known as the Content Scramble System (CSS).

Mountain View, Calif.-based Kaleidescape is developer of a home audio video network that enables users to access movie DVDs from anywhere in their homes. A basic system sells for US$27,000 and can hold as many as 160 movies, while a more extensive system can hold up to 500 movies. Multiple films can be viewed simultaneously in different rooms through players connected to the network. The company is licensed to use CSS.

The DVD CCA acknowledged that Kaleidescape has a license for CSS but claims its system does “precisely what the license and CSS are designed to prevent — the wholesale copying of protected DVDs.”

Kaleidescape Surprised

The suit came as a surprise to the privately held company. “We’ve been very careful to get all the licenses we needed to build this product,” said Kaleidescape chairman, co-founder and CEO Michael Malcolm. “With the DVD CCA in particular, we were absolutely anal about complying with everything.”

While the company had no warning of the impending suit, Malcolm said the association had contacted Kaleidescape a year ago with a request for information. “We responded and provided them with a significant amount of information. They never said they were going to sue us.”

Malcolm surmised that the action may have been prompted not by content owners — but rather, by hardware competitors.

“There are three contingents within the DVD CCA — Hollywood studios, consumer electronics manufacturers, and computer manufacturers,” he said. “I can only speculate about motive, but it might not be the content owners who are behind this. We may be posing a threat to those other groups, because we’re way ahead of them in applying a solution for home video. We’re the first company to offer a successful product that allows you to serve movies throughout the home.”

Careful To Comply

Malcolm maintained that his company is “very respectful of intellectual property, and we have extensive agreements that our dealers and customers have to sign before we’ll even ship our product.”

He said many Hollywood producers, directors, and actors have purchased his system and have become enthusiastic supporters. Customers and dealers, learning of the lawsuit, have shown their support with a deluge of e-mails to the firm.

Mike McGuire, Research Director for Gartner, called the suit evidence that copyright laws need to be updated. “We really need some legislative assistance in this area in order to codify the elements of fair use,” he said. “Right now, it’s decided on a case-by-case basis.”

At the same time, McGuire said Gartner’s research indicates that U.S. consumers have certain expectations as to what fair use really is. “When we’ve surveyed teens and adults, we’ve found that at least 60 percent of both groups think that making a copy of a DVD or a CD for a personal backup or use in another device is legal.

Considering Countersuit

“When we’ve asked them about making a copy to give to a friend, the numbers nearly reverse, and only 30 percent of both groups think it’s legal. So at least in the United States, most people are inherently fair users,” he said. “The DVD CCA is going to have to come to grips with the expectations that users have about making copies for their own use. After all, DVDs are delicate, and one scratch can make them unplayable.”

In the meantime, Kaleisdescape’s Malcolm vowed to vigorously fight the lawsuit and is considering a countersuit as well. As for the lawsuit’s demand that product sales be halted, he responded: “We don’t intend to lose a single sale over this, and so far, we haven’t.”

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