Kaleidescape Will Appeal Ruling Forcing Shutdown of DVD-Storage Business

After eight years of litigation, a California Superior Court has ordered that DVD-storage service Kaleidescape be permanently enjoined from doin business. But the battle isn't over, as the company is vowing another appeal.

Kaleidescape was founded in 2001 with the aim of allowing consumers to put their entire DVD and Blu-ray collections onto one centralized storage server. The product was touted as giving users a convenient way to manage and enjoy their purchased discs on any TV in a household and often without having to go through previews and anti-piracy warnings.

To make this happen, though, Kaleidescape needed to circumvent anti-piracy measures on DVDs, which prompted a standards organization within the entertainment industry to file a lawsuit for breaching a license on the Content Scramble System (CSS).

Kaleidescape was initially successful at a jury trial in 2007, which found that it hadn't breached the CSS license. But the decision was reversed by an appeals court in 2009 and remanded back to a state court for another jury trial.

This time, Kaleidescape lost. A permanent injunction against the company became official on March 8. The company joins other losing outfits such as RealNetworks' RealDVD, which went toe-to-toe with Hollywood and ended up being ordered to shut down for bypassing copyright protections built into home-entertainment discs.

Kaleidescape now says that it intends to pursue an appeal, challenging whether the plaintiffs legitimately showed harm in allowing consumers personal convenience. The company points out that as a result of its technology, its customers purchased significantly more DVDs than non-customers. “Imagine a world where Apple wasn’t allowed to build the iPod because Sony wanted a ‘level playing field’ for the Walkman,” said Michael Malcolm, Kaleidescape’s chairman, founder, and CEO in a statement.

Hollywood has its own plans to allow consumers the ability to create libraries of purchased movies. Last year, a studio consortium launched its Ultraviolet initiative to give consumers a cloud-based digital rights management system that would allow purchased digital content to be played on any supported device, app or service.

Kaleidescape expects the appeals process to take another two years, which regardless of the company's success, could allow the Ultraviolet initiative time to establish itself in the market. Wall Street analysts call Hollywood's cloud plans "critical" to revitalizing the industry's home entertainment business.

E-mail: eriqgardner@yahoo.com

Twitter: @eriqgardner

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