This lawsuit is just complete bullshit. There is an incredible opportunity here for the DVD-CCA and the movie studios they represent to profit by extending the tail of the DVD market by licensing K's IP. But first, I wanted to post thoughts on potential real-world rulings in this lawsuit, as I have been studying a lot of contract law lately... for the bar this month. It's scary to type those last two words, so please forgive me for my rambling, incoherent study break.
Regarding the possibility of past servers being suddenly rendered obsolete, I do not think it will happen because this is a contract dispute between Kaleidescape and the DVD-CCA. Contract disputes are not generally decided in a way to "punish" the breaching party, only to compensate the non-breaching party to the position they were prior to the breach.
1. DVD-CCA asks for relief in the form of K's existing servers being prevented from playing copied DVDs. Essentially, they ask for a mandatory software update to be made by K that goes out as soon as any server "phones home" to K.
WON'T HAPPEN, as the contract dispute is between K and DVD-CCA, not K's customers and DVD-CCA. Eliminating the functionality of existing customer servers does not do anything to return DVD-CCA to the position they were prior to the breach as there are better alternatives and the systems have already been sold with expectations to existing customers. It would also piss off a lot of wealthy, powerful people who watch a shiz load of movies. On jets and yachts.
2. DVD-CCA asks for relief in the form of forcing all future K servers sold require DVDs to be present in a disk vault just the same as Blu-Rays are now. This is not applied to past server sales as a software update for DVDs copied from that point forward for the same reason as #1 above. So essentially, the Vault becomes mandatory for everything except CDs in new sales...
LIKELY IF NO SETTLEMENT IS REACHED, because it is the reasonable legal remedy that the court can order and K can comply with that does not punish K beyond stopping the activity DVD-CCA has alleged infringes on their contract. K will potentially lose profit from customers who want to use the system without a vault to play DVDs, and those people don't really exist as new customers...
3. DVD-CCA asks for relief in addition to #2 above (unless their lawyers are idiots and go for this alone) in the form of monetary damages as compensation for the damages they sustained for their contract being breached. The term of the contract that they are fighting about is implemented by DVD-CCA to prevent piracy that will occur by customers either copying rental disks or reselling and continuing to enjoy DVD disks without the physical DVD that represents the "license" of the viewer to watch the movie. If the user does not possess the disk, they should not watch it, and K allows them to watch it without the disk.
NOT GOING TO HAPPEN, because DVD-CCA will have to show damages with reasonable certainty to the court. The DVD-CCA would have to show that K's customers are pirating disks, the amount of piracy, and the damages from that piracy with reasonable certainty. I just do not see it happening. K's average customer is too wealthy or too much of an enthusiast to pirate. And although K could actually provide- based on the information their own servers collect as they are all tied to their customers' K systems- an accurate and complete list of DVDs copied to their customer's systems, it would simply not be possible to show that those DVD disk copies represent an actual, tangible theft of intellectual property. I think this would be the ultimate "show down" between the 'rights-holder' and 'fair use' camps over this issue. What would the DVD-CCA do- claim they had "checked out the basements and garages" of a sample of K's customers and they couldn't find any DVD disks in boxes? This would force a judicial finding on whether the purchase of a DVD disk and subsequent copying by a consumer, even if facilitated by K, is still fair use. It's a loser argument- it simply cannot hold up. The DVD-CCA could not prove, with certainty, that piracy in any amount has actually occurred to subsequently calculate damages from. And it would, I believe, expand the legal rulings on what fair-use is to include decryption, in conflict with the DMCA. (I'm fuzzy on the details here, if anyone wants to clarify)
Here is what I think could actually pan out on this if the DVD-CCA removes their head from their ass, then gets an injunction forcing K to require Vaults to store copied DVDs, or agrees to settle first with that looming threat, and why K's continued appeals are so valuable to them of the ruling is so valuable to them:
The DVD-CCA uses the injunction or threat of injunction as a bargaining chip to license K's tech and the right to re-license it to consumer electronics manufacturers for DVD-only servers.
DVDs are a dying format. Blu-Rays are taking over, and as they do DVDs become less and less relevant. If you are an organization that solely exists to promote and license a media format, you have a limited time of relevancy because all physical media formats are eventually made obsolete. What is your ONLY business motivation? Maintain your product's relevancy in the market as long as possible! That is how everyone makes money. The studios do not care if BluRay takes over the market except for rebuys- in fact, they would probably PREFER to extend DVD sales as long as possible- costs are lower, licensing fees are lower to the people who hold rights to DVD technologies, (and not a 'bag of hurt' as Steve Jobs described Blu-Ray's to be) and they want to collect revenue as long as possible from something that is not controlled by Apple- or another company that has created a download ecosystem and therefore demands terms that are less profitable to the studios. Electronics manufacturers would love this, as the costs of DVD playing components have plummeted to the point that systems built to play DVD disks can be made extremely cheaply.
So why would the DVD-CCA not pursue a settlement that includes a licensing agreement for K's technology regarding DVDs? The K system is a closed system- you cannot copy from it. It is a system that can support the downloading of movies. By negotiating with K over licensing their IP for DVD systems the DVD-CCA and movie studios could profit from the seeding of systems that would support downloadable movies directly from the studios. By marketing to consumers that they can watch their existing DVDs with more convenience and without investing in new disks, they could get something in to the average consumer's living room that can bypass Apple, Netflix, whoever and sell HD movies as downloads as people are ready. AND K WOULD BENEFIT- What K does is their IP, whether they are allowed to do it is based on a licensing scheme controlled by the DVD-CCA. Licensing it to other manufacturers to produce DVD-only systems would not hurt or diminish K in the marketplace as K's customers are moving towards BluRay. K would stay at the top of the market as they own the IP that allows them to play BluRays from a server, and the BluRay consortium licenses them to play BluRays in any format.
K gets to profit from the licensing arrangement because other electronics manufacturers would love to jump in to the market K created and is now leaving in terms of the DVD market. K could also profit from the licensing of their metadata directly to the system manufacturers. I can imagine LG or Vizio being able to produce a client-server system that functionally does what K does with 90% of its polish and probably 90% of its reliability, but with 10% of its customer support (LGScapeOwners.com would take care of the majority of that) at a price Walmart and Costco shoppers would pay.
Sure, these systems won't be installed on any oil-billionaires' yachts, but they are enjoying Kaleidescape with BluRay so we do not have to worry about them.
DVD-CCA gets to continue the DVD revenue stream. Can you imagine how many people will stop caring immediately that they are not getting BluRay's "1080P picture and Dolby TrueHD Lossless audio cinema experience" in their living room, if they had the convenience of not switching disks and K's UI? Most people SIMPLY DO NOT KNOW THE DIFFERENCE. Once you no longer had to "Be Kind and Rewind," most people were pretty much placated with DVD's convenience. BluRay has had a huge marketing effort to get it to this point, and DVDs exist in everyone's house. I think that a purely Dvd-playing K clone system would sell, even in 2012, because of what K adds to the movie watching experience- convenience. Switching disks is the new "rewind."
With every system sold, licensing fees are collected from the manufacturers that are split between K, the DVD-CCa, and movie studios in whatever way they negotiate.
Movie studios would probably love it for the licensing revenue, as they have to be included in the negotiations as the DVD-CCA guarantees them certain protections against piracy by not allowing copying. If they leave out the vaults in K-like licensed systems, they would have to address that. And to continue DVDs in the market, they would have to leave the vaults out for cost and complexity reasons.
Movie studios would also love it because it would be another salvo against Apple and the iTunes / Apple TV ecosystem that is becoming more powerful each day. Apple's negotiating strength on the terms by which it licenses movies and media will continue to grow. A new market of K clones that play only DVDs would be beneficial to movie studios in fighting Apple simply because it represents the convenience Apple is marketing but is not Apple. And- if these systems could be upgraded to download movies from an online store it would bypass the iTunes ecosystem as well, sending movies directly to consumers. K could be involved, the DVD-CCA could be along for the ride collecting licensing fees... who knows- but no matter what it gives the Studios a new outlet to sell movies around Apple. And K's technology of a closed system and tamper-proof software would prevent piracy from downloaded movies.
Basically, I keep hearing everyone saying "Who cares, DVDs are a dying technology," and this includes myself. So if the DVD-CCA wants to profit from this conflict, they have to negotiate with K. And the longer K holds out, the less and less valuable DVD-CCA's asset becomes. They have a chance to really change the market through licensing arrangements and not continuing to fight, as what started out as a dispute over the DVD-CCA trying to defend something of value is starting to look more and more like the DVD-CCA is a dung beetle protecting a rabbit pellet.
I'll be employable to set this negotiation up in a couple months- K and DVD-CCA, feel free to pm me!
(Although I doubt I am treading on any new ground!)
