Kaleidescape loses; DVD copying falls again

Update 4:15 p.m.: To include comments from Kaleidescape.

For the second time in two days, Hollywood has racked up another major legal victory over DVD-copying devices the studios charge are illegal.

Kaleidescape, which had won a rare court victory over the film industry two years ago, saw a California appeals court overturn the ruling on Wednesday. The decision comes a day after a federal court placed a preliminary injunction on the sale of RealDVD. Both Kaleidescape and RealDVD enable users to make digital copies of movies and store them to a hard drive.

In 2004, Kaleidescape was accused in a lawsuit by the DVD Copy Control Association (DVD CCA), of agreeing to abide by the terms of the Content Scramble System (CSS) license, which it said forbade the copying of DVDs.

Kaleidescape argued there was nothing in the license that banned copying and Judge Leslie C. Nichols agreed in a ruling issued in March 2007. RealNetworks, which makes RealDVD, also argued that there was nothing in the DVD CSS license that prevented them from designing a DVD-copying feature.

"We're obviously disappointed by the court's decision"" said Michael Malcolm, Kaleidescape's CEO. "Our plan is to go to the Supreme Court of California. We're confident that were not in breach of our contract with the DVDCCA and until then our products remain fully legal and licensed."

The film industry has always maintained that the Digital Millennium Copyright Act of 1998 was designed to protect innovation as well as the rights of content creators. A balance was sought and in pursuit of that, provisions were made to protect antipiracy controls, such as DVD CSS, from being circumvented.

Apparently, the only good news to come out of this for those in favor of fair use is that U.S. District Judge Marilyn Hall Patel, in her RealDVD decision, did leave open the question of whether consumers have the legal right to make copies of their DVDs for their own personal use.

"It may well be fair use for an individual consumer to store a backup copy of a personally owned DVD on that individual's computer," Patel wrote, "a federal law (the DMCA) has nonetheless made it illegal to manufacture or traffic in a device or tool that permits a consumer to make such copies."

What this says to consumers is that if you want to make a digital backup of a DVD, no problem. Go ahead. But beware if you build a tool that actually helps people make those copies. In that case you're breaking the law.

The one-two punch in the courts is likely to rock the technology community. Techies had already begun bitterly criticizing the decision by Patel to halt sales of RealDVD and the Kaleidescape-like player from Real, code named Facet.

Fred von Lohmann, senior attorney for the Electronic Frontier Foundation, an advocacy group for Internet users and technology firms, said late Tuesday evening that Patel's decision is a setback for innovators and consumers.

"This is yet another example of the way the DMCA harms innovation without doing anything to stop what the studios call piracy," von Lohmann said. "This enables the studios to take consumers' fair use rights and sell them back to them one DVD at a time.

"And if you're an innovator," he continued, "where DVDs are concerned, it's very dangerous to innovate without asking the studios' permission first."

In a statement, the DVD CCA said: "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."