Media Wonk

Dodging the fair use bullet - June 18, 2007

For how much longer can the studios forestall a fair use reckoning on DVD format shifting?

Perhaps not much longer if they keep pursuing their case against Kaleidescape Systems.

The DVD Copy Control Assn. sued Kaleidescape in 2004, accusing the Mountain View, Calif.-based maker of high-end home media servers of violating the CSS license governing the design of DVD drives.

DVD-CCA was created at the dawn of the DVD era to administer the CSS license covering use of the encryption system (barely) protecting commercial DVDs and is comprised of the major studios and a handful of technology and consumer electronics company.

The studios object to Kaleidescape’s servers because they allow a copy of a DVD to be stored permanently—in encrypted form—on the server’s hard drive so it can be access and streamed over a home network.

But they didn’t charge the start-up company with copyright infringement with respect to the hard drive copy. Instead, through DVD-CCA, they charged Kaleidescape only with violation of the CSS license, which the studios assert prohibits licensed devices (such as Kaleidescape’s servers) being designed to allow “persistent” copies of CSS-encrypted content to be made.

Why go after Kaleidescape on the license instead of infringement? Probably for fear that a federal court might well rule that consumers have a fair use right to copy their own DVDs to their own hard drives. In which case it wouldn’t matter what the CSS license says.

Sloppy drafting of the license agreement, however, led California Superior Court Judge Leslie C. Nichols to rule in March that the asserted prohibitions on persistent copies are not properly part of the CSS license and therefore no breach occurred.

DVD-CCA has appealed the ruling. But in the meantime Warner, Disney, Intel and Toshiba are seeking to modify the license to plug the Kaleidescape loophole.

A vote by DVD-CCA on the proposed amendment to the license is scheduled for this week, during the org’s regular meeting in LA.

Kaleidescape is now threatening antitrust action against DVD-CCA if it goes ahead with the amendment, however.

“There is no valid business justification for the proposed amendment,” Kaleidescape CEO Michael Malcolm wrote in a June 15^th letter sent to DVD-CCA members and copied to U.S. and European antitrust regulators. “The real purpose of this proposed amendment is to put Kaleidescape out of business by excluding the Kaleidescape System from the DVD playback devices authorized by the CSS License Agreement. You should be aware before you vote on the proposed amendment that you expose yourself, your employer and the DVD CCA to serious and substantial antitrust liability if you vote for this amendment.”

That’s probably enough to stop a vote at this week’s meeting (it will take everyone’s lawyers some time to review the situation). Whether it’s enough to stop the studios from continuing to try to dodge the fair use question is anyone’s guess.

Malcolm’s assessment of the situation isn’t quite on target, I suspect. The studios’ real purpose isn’t to put Kaleidescape out of business but to assert control over personal-use copying so they can charge consumers for the right to do it.

Still, there’s something fundamentally absurd about the DVD-CCA’s campaign against Kaleidescape. Device makers from Shanghai to South Bend have been merrily violating the CSS license for years, with little action from DVD-CCA. Some never even bothered with a license in the first place.

To now seek to enforce the license against Kaleidescape—an American company that actually signed a license, pays its royalties and designed its system to ensure that its “persistent” copies never leave the hard drive unencrypted—makes no sense except as a sneaky attempt to use contract law to trump a fair use analysis.

If DVD-CCA loses its appeal, and it cannot pass the amendment due to antitrust concerns, the studios would have no option but to charge Kaleidescape—a very sympathetic defendant—with copyright infringement and to take their chances with fair use.

My guess is they won’t take it that far, at least not yet. Instead, they’ll continue pushing for some sort of “managed-copy” amendment to the CSS license to bring devices like Kaleidescape’s servers within its scope, and hope to delay the day of reckoning still further.

But that day is coming.

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