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DVD group, Kaleidescape clash on digital media security

Posted: 05 Jul 2007 ?? ?Print Version ?Bookmark and Share

Keywords:digital media security? DVD CCA? Keleidescape system?

The latest chapter in the dispute between the DVD Copy Control Association (DVD CCA) and Kaleidescape Inc. asks a simple question: In the emerging era of digital media, how much security is enough?

A Superior Court judge ruled in late March that Kaleidescape did not violate provisions of its contract with the DVD CCA, in part because that contract was worded and administrated in a confusing manner. The decision opened a door for others interested in creating systems that copy DVD movies to hard disks.

In an effort to close that door, the DVD CCA on June 5 filed an appeal of the decision. It is also internally debating a one-paragraph change to its contract that would explicitly forbid any licensee from making a persistent copy of a movie or decoding a movie if a physical DVD is not present in the player.

The DVD CCA is a broad group of studios, computer makers and CE companies that licenses the security technology for accessing encrypted video on DVDs.

Video jukebox
The Kaleidescape system acts like a high-end video jukebox, storing copies of movies from hundreds of disks on an array of hard drives for later playback. At least one other company has been exploring similar products since the ruling in Kaleidescape's favor.

"The judge did not understand our contract. He missed the whole point of it," said Bill Coates, an attorney with White & Case LLP, representing the DVD CCA.

In its appeal, the DVD CCA also argues that the judge misconstrued California law by saying it would not allow an injunction against the Kaleidescape system. No case law backs up such a determination, the appeal states. Coates expects the court to make a determination on the appeal within a year.

Coates recalled that Judge Leslie C. Nichols related a story during the non-jury trial about a company that had lost a civil suit because the court determined its contract was unclear. "I think that anecdote had a purpose to it," said Coates, explaining the DVD CCA's move to update its license agreement.

If the group is successful on either front, it could put Kaleidescape out of business. More broadly, such an action could send a chill through startupsand their venture backersseeking to push the limits in digital media. On the other hand, such entrepreneurs could be spurred on if the DVD CCA fails.

Breaking down the case

Sense of security
Backers of the DVD CCA say the group has served to create a sense of industrywide security that has encouraged Hollywood studios to release digital versions of high-definition movies. A dismantling of the group's efforts could stall the rollout of content in the future, backers warn.

On Kaleidescape's side of the fence, a loss on appeal or the passage of the DVD CCA contract amendment "wouldn't be good for us," acknowledged Michael Malcolm, founder and CEO. "But when you are an entrepreneur you don't give up."

If the amendment passes, he said, Kaleidescape will file an antitrust action against the DVD CCA and seek an injunction against the amendment.

"This proposed amendment, if enacted, will harm consumers because it will suppress competition in the market for DVD playback devices, block the development of new and innovative products that will give consumers new ways to enjoy the DVDs they own, and interfere with the ability of consumers to exercise their fair use rights under copyright law," Malcolm wrote in a June 15 letter.

Copies were sent to three members of Congress; the U.S. Federal Trade Commission; several members of the U.S. Department of Justice; the European Commission; and presidents of many of the key DVD CCA member companies, including Disney, Fox, HP, Intel, Microsoft, Sony, Toshiba and Universal.

"They would have to prove we have hurt the industry, but the court decision in March said we did no harm," said Malcolm.

The roughly 25 members of the DVD CCA's Content Protection Advisory Council are debating whether to put the amendment up for a vote at their late-July meeting. If they approve the measure, it would go out for a wider review in the DVD CCA before it is brought to the group's board for a final vote. It could take a further 18 months for the amendment to become effective if it passes.

The amendment would become part of the group's so-called procedural specification. "There was no question in the judge's mind that our procedural spec is something the licensees have to follow," Coates said.

'Unclear wording'
By contrast, the judge determined that the group's general specification was not officially a part of its contract, because of unclear wording in the documents. The irony is that the general specification is the most explicit of the DVD CCA's specs in terms of wording that bars the copying or decoding of a movie when no disk is present.

Malcolm downplayed the impact of the latest round of legal issues on his startup. "This is a pretty small cloud compared to the one we were under in February," he said.

Kaleidescape now has 120 employees, and shipments of its video jukebox are rising at about 10 percent a month. The company has been profitable for a year, he said.

"It's a robust business," he added. "We were on that 10 percent growth course before the court decision, but we did see a small increase in orders after the decision, from some people who had been on the fence."

The issue of who has what rights to digital media has reared its head repeatedly. Since the Kaleidescape decision in March, Apple chief executive Steve Jobs posted an open letter on the company's Website calling for the elimination of digital rights management (DRM) software.

In May, Apple started releasing songs on its iTunes Website that have no DRM restrictions, under an agreement with EMI Music. The songs use a higher form of encoding and come at a slight premium over digitally protected music. Apple has yet to convince studios to release any movies without DRM protection.

In this climate, the seesaw ride between the digital media rights of owners and users is likely to see many more ups and downs before anyone strikes a clear balance.

- Rick Merritt
EE Times

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