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Kaleidescape Files Appeal and Continues to Build Legal Products


Sunnyvale, CA - March 12, 2012 - After a four-week trial that commenced on November 14, 2011, Judge William J. Monahan of the California Superior Court ruled in favor of the DVD CCA, marking the end of the third chapter of the consortium's legal proceedings against Kaleidescape. Kaleidescape has filed notice of appeal.

"Kaleidescape operates with a very high degree of integrity, and we work meticulously to comply with each and every agreement that we sign, so this ruling is extremely disappointing," said Michael Malcolm, Kaleidescape's chairman, founder, and CEO. "We have always believed, and continue to believe, that our products comply with the CSS license agreement, and in court we will continue to fight the DVD CCA's allegations to the contrary."

The DVD CCA is a corporation controlled by the six major motion picture studios in concert with the largest consumer electronics and computer companies. The DVD CCA licenses the copy control system used on DVDs.

Kaleidescape was founded in 2001 to bring consumers a fantastic experience for enjoying their movie collections. The Kaleidescape movie server makes digital copies of DVDs and Blu-ray Discs to hard disk drives so families can play back their movies instantly from any room of their home. A movie starts directly from the beginning, without forcing the family to endure advertisements, trailers, and confusing menus. With the company's wide-ranging innovations, customers can jump directly to the greatest scenes and songs in movies and concerts, and small children can start their movies all by themselves.

Kaleidescape has carefully designed its products to protect the rights of content owners. The hard-disk copy of each DVD retains all of the DVD CCA's scrambling and adds more encryption. The Kaleidescape System is a closed system that prevents DVDs from being copied to the Internet, to writable DVDs, or to computers or mobile devices. Furthermore, you cannot download a pirated movie from the Internet to a Kaleidescape System.

Every Kaleidescape customer must agree to copy only the DVDs that he rightfully owns, and must reaffirm this agreement upon copying each DVD. Kaleidescape Systems identify rental discs and prevent them from being imported. This combination of business practices and technology has been so effective that after years of searching for evidence that Kaleidescape's customers use their systems to steal content, the DVD CCA admitted in writing that Kaleidescape has done no harm to any of the motion picture studios, and was unable at trial to show any harm to the DVD CCA itself.

Over the years, Americans have amassed over 13 billion DVDs and Blu-ray Discs – about 110 per household. This means that many American families have a few thousand dollars tied up in a library of movies they hoped to enjoy over and over. However, with collections that size, families soon realize that it takes so long to find what they're looking for that it just isn't worth buying more discs. This frustration has led to a well-publicized 58% decline in revenues from the sale of DVDs since 2006.

The Kaleidescape System eliminates that frustration. Because it's so easy and fun for Kaleidescape customers to enjoy their movies, they start buying movies again, and with a bigger appetite. The average Kaleidescape family owns 506 movies on Blu-ray and DVD.

"For the past 8 years, we've been baffled about why this lawsuit ever happened, since our products don't encourage piracy, but do increase sales of movies. Maybe it's because the large CE companies in Japan and the big computer companies in the USA, on the board of the DVD CCA, are afraid that Kaleidescape is building a better way to enjoy DVDs and Blu-ray Discs than they are," observed Malcolm. "Imagine a world where Apple wasn't allowed to build the iPod because Sony wanted a 'level playing field' for the Walkman."

Kaleidescape won its first trial in 2007 when Judge Leslie C. Nichols of the California Superior Court found that Kaleidescape's products comply with the CSS license agreement. The DVD CCA appealed to the California Court of Appeal, who in 2009 sent the matter back to the California Superior Court for a second trial.

Judge Monahan entered his statement of decision and injunction order on March 8, 2012. Kaleidescape filed its appeal on March 9, 2012. Kaleidescape believes that under California law the injunction order should not come into effect unless the California Court of Appeal affirms Judge Monahan's decision. Kaleidescape is confident that when the Court of Appeal reviews the facts of this case, particularly in light of the complete absence of any harm to the DVD CCA or its members, that it will reverse the trial court decision. The appeal process may take one to two years.


About Kaleidescape
Kaleidescape designs and manufactures the world's leading DVD and Blu-ray movie servers, products that deliver the premier movie-watching experience for your home. The Kaleidescape System, renowned for its intuitive user interface, presents your entire collection of movies on any TV in any room, and forever changes the way you enjoy movies. Kaleidescape's innovative products and services are protected by 67 patents issued and pending. Founded in 2001 and headquartered in Sunnyvale, California, Kaleidescape sells its movie servers through custom audio and video installers throughout the world.

For more information, please visit www.kaleidescape.com.

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