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State appeals court rules against Kaleidescape in DVD case

August 13, 2009 |  2:24 pm

Ie8u2kkfKALEIDESCAPE

For the second time this week, a court has dealt a blow to technologies capable of making and storing copies of DVDs.

The state Court of Appeal for the Sixth Appellate District Wednesday reversed a trial court decision in favor of Kaleidescape Inc., the maker of a home entertainment system, in a contract dispute with the group that administers DVD licenses.

The DVD Copy Control Assn. sued Kaleidescape in December 2004 for breach of contract. The group took issue with a feature of the Kaleidescape device, which extracts a movie off a DVD disc and keeps a permanent copy on the device. The video could subsequently be played back without needing to reinsert the DVD.

The Kaleidescape cannot distinguish between a user's own movies and those that have been rented or borrowed -- raising the specter that consumers could amass a large DVD library without purchasing a single disc. DVD-CCA sued, claiming this constituted a breach of the licensing agreement, which requires a physical disc to be present in the device when a movie is played.

The trial court found in favor of Kaleidescape, ruling that this requirement, while contained in device specifications, was not a part of the license agreement. As a result of the ruling, the DVD-CCA was not entitled to an injunction against Kaleidescape, because it had suffered no harm.

The appellate court ruled that the trial court erred in its interpretation of the license agreement and ordered the lower court to determine anew whether Kaleidescape was in breach, and, if so, the nature and extent of the harm.

The ruling comes a day after a federal court judge found that the RealDVD software, which enables users to copy DVDs and store digital duplicates on a hard drive, violates U.S. copyright law.

The Motion Picture Assn. of America, which had filed a friend of the court brief in the case, hailed the twin rulings.

“Both the Kaleidescape decision today and yesterday’s RealDVD decision affirm an important principle of law: that all parties that sign the CSS License are bound by all of its terms and that they may not selectively pick and choose what terms of the license to honor," the MPAA said in a statement.

Michael Malcolm, Kaleidescape's chairman and chief executive, said the decisions are disappointing and a blow to consumers.

 "The major motion picture studios have always opposed any any kind of technological innovation," Malcolm said. "They want to have absolute control over innovation and keep it from happening, because they always feel that their current business model is threatened by whatever the new technology is."

-- Dawn C. Chmielewski

Photo: Michael Malcolm of Kaleidescape has built his businesses on storage devices.
Credit: Anne Dowie / For The Times

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