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DVD-CCA postpones Kaleidescape vote - June 21, 2007

As expected, DVD-CCA's Copy Protection Advisory Council (CPAC) postponed a planned vote Wednesday on a proposed amendment to the CSS license that would have reversed the court's ruling in the Kaleidescape case, a studio source confirmed.

The amendment, which would add language to the license agreement prohibiting DVD playback devices from being designed to allow a persistent copy of a disc's contents to be made, or enabling playback without the original disc being present in the device's DVD drive, had the backing of at least some consumer electronics and IT companies, in addition to the studios.

But Kaleidescape CEO Michael Malcolm sent a letter to the council on June 15th, threatening legal action against DVD-CCA and its member companies if the amendment were approved.

Malcolm said Thursday that he was relieved but not surprised by the postponement.

"It's basically what I'd hoped would happen," he said. "The purpose of sending the letter was to try to stop any vote from taking place. I guess we'll just have to wait and see what happens now."

Officially, the vote on the amendment has been postponed until the next CPAC meeting in July, but that's pending review by everyone's legal departments. 

"The next meeting will be the 'what now?' meeting," a studio source said.

If CPAC ultimately approves the amendment it would then go to the full DVD-CCA for final enactment. Were it to get that far, Malcolm said, Kaleidescape would seek an injunction stopping it from taking effect and would also seek to enlist the help of antitrust regulators. 

If no vote takes place, the stymied amendment could complicate DVD-CCA's appeal of trial court's ruling. Although new evidence cannot be introduced in an appeal, a victory by DVD-CCA would likely result in the case being remanded to the trial court for further proceedings on the question of whether Kaleidescape in fact breached the license agreement.

At that point, additional evidence regarding the proposed amendment could be introduced. The problem for DVD-CCA is that the amendment stands as a tacit acknowledgment that the license agreement signed by Kaleidescape does not in fact proscribe persistent copies.

"I think the only reason they introduced the amendment is because they knew they had a weak case," Malcolm said. "I don't think they ever expected it to get this far. I think they expected us to just fold and go out of business when they filed the suit because that's the way it usually works. They never really had a plan for the litigation."

Malcolm said privately held Kaleidescape has been profitable for the past 18 months, despite set-asides for extraordinary expenses related to the litigation.

"I think the litigation probably slowed down some dealer orders, but it also probably kept some competitors on the sidelines who were waiting to see how this would shake out," Malcolm said. "It might have even increased some consumer orders because a lot of people heard about us from reading about the case."




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