Ruling clouds Kaleidescape's plans

A California appeals court on Wednesday tossed a trial judge’s ruling in favor of Kaleidescape Inc., a company that makes high-end home theater servers that copy and store movies from DVDs for later playback, handing a victory to the DVD Copy Control Assn. and putting the future of Kaleidescape’s entertainment servers in doubt.

The ruling comes a day after a federal district court handed the major studios and the DVD Copy Control Assn. a win in a similar lawsuit against RealNetworks, barring the company from selling its DVD copying software RealDVD and a DVD copying device in development that it had modeled after Kaleidescape.

Both rulings centered on CSS License Agreements the companies were granted by the DVD CCA. CSS is the copy protection technology used on commercial DVDs to prevent copying and the agreements govern devices that play back CSS-protected discs. One of the requirements is that DVDs be in a device’s disc drive during movie playback.

The Kaleidescape system lets consumers copy any DVD to their home server for playback without the disc, potentially allowing consumers to rent, rip and return movies, the studios have argued.

In the Kaleidescape case, a trial judge had ruled in 2007 that Kaleidescape’s system did not breach the CSS license agreement because the “General Specifications” section of the design specs at issue in the case weren’t part of the license agreement at the time Kaleidescape signed it. But the California Sixth Circuit Court of Appeal reversed that decision today, ruling that the General Specifications are part of the agreement, writing that when Kaleidescape made the license agreement with the DVD CCA it agreed to “build its system according to specifications that DVD CCA would later provide.”

A trial court must now rule on whether Kaleidescape is in breach of its DVD CCA agreement.

The DVD CCA said in a statement following the ruling that it will seek an injunction to force Kaleidescape to comply with the CSS License Agreement. The group said it welcomed the decision. “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.”

A Kaleidescape rep didn’t immediately respond to an email seeking comment.

(Jennifer Netherby is a reporter for Daily Variety sister publication Video Business.)

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