The Price of Innovation
Kaleidescape pays its dues in court to keep its video digital server legal
By Joe Paone
The Kaleidescape system, the next logical step after a DVD jukebox, allows users to rip—the company prefers the term "import"—countless DVDs to its enormous hard drive, and then view content, or segments of content, whenever and wherever they want in their homes. Once a DVD is uploaded, the user doesn't really need it anymore.
What would stop a user from renting DVDs from Netflix or another rental service, importing them, and returning them to Netflix? What about users who buy discs, import them, and then resell them on eBay? Hollywood, one would imagine, wouldn't be too happy about such things.
"Who's going to buy a $30,000 system and use it for going down to Blockbuster or fiddling with their Netflix and piecemeal-loading pirated content?" maintains Michael Malcolm, Kaleidescape's co-founder, CEO and chairman. "I just don't think our customers have any interest in that."
In the ever-paranoid world of digital content, however, we aren't the only ones asking questions about Kaleidescape's gaping anti-piracy hole.
In December, the DVD Copy Control Association (DVD CCA) filed a breach of contract lawsuit against Kaleidescape, claiming it violated its license for the Content Scramble System, the method used to encrypt audio and video on DVDs. Kaleidescape filed a demurrer, hoping the "baseless" case would be dismissed, but last month, its motion was rejected. Early this month, Kaleidescape filed its answer and cross-complaint, saying DVD CCA did not participate in its own mandated ombudsman process to settle the dispute in good faith. The legal wrangling continues.
"We believe we haven't done anything wrong," says Malcolm. "We're in full compliance with the agreement, and we think the DVD CCA was well aware of that when they filed their complaint."