Did the SCOTUS just change the rules?

[Calm-One]

Before the forum lost some content I had posted a question about the applicability of the Magnuson–Moss Warranty Act and how Kaleidescape seemed to navigate around this Act by insisting that only HDDs from Kaleidescape only be installed into Kaleidescape equipment. At the time I mentioned that other vendors did not prevent this by citing Dish and DirectTV DVRs and gaming consoles provided by Microsoft and Sony.

The responses to that post were not favorable. My hopes that a clever someone would figure out how to offer economical third party replacement or upgraded storage option which was compliant with EULAs and other legal compliance for me were dashed.

A recent SCOTUS case of Impression Products, Inc. v. Lexmark International, Inc., Case No. 15-1189 , the Supreme Court at the end of last month ruled 7-1 against Lexmark preventing a third party from reselling printer cartridges for Lexmark devices. This SCOTUS case attracted alot of attention and "on behalf of" from a variety of interested parties.

The implications of this case seem to be larger that printer cartridges based on the outpouring of articles in a wide range of industry posts on this.

With many of the forum leaders appearing to have legal occupations, any comment on if this this ruling affects our Kaleidescape relationship? Is the possibility of third party HDDs being used legally within a Kaleidescape drive chassis now possible?

Just curious.

Cheers

 

[JohnJ]

Since the Impression Products, Inc. v. Lexmark International, Inc. case was about Patent Infringement, I don't see that this would have a baring on Kaleidescape and hard drives as I wouldn't think that they have filed for patents related to the drives. However, I could be wrong about this.

However, the bigger question would be: What is the business case?

For Lexmark, they have had tens of millions of printers in the field. Also the ink cartridges are consumable products that are designed to run out of ink every 3 to 6 months. This means that there is a potential market for cartridge re-sellers of a hundred million cartridges per year. This provides a big incentive to spend the time and money for the research to come up with a way to defeat the encryption/lock-out mechanism in order to sell into this market.

Then there is Kaleidescape. The hard drives are not consumables in the traditional sense. They fill up and you might need to add another drive but only if you have space in a server. So say there are thousands of K servers out there and every now and then someone needs to add another drive for space reasons or has a drive fail that needs to be replaced. However, as far as I know, Kaleidescape no longer sells servers that are only partially filled with drives. So that mainly leaves drives that fail.

So maybe at most a few HUNDRED drives might be sold a year. Not anywhere near the quantify that would justify the reverse-engineering effort to break the encryption that is use to lock out non-Kaleidescape drives.

And that does not even get to the point of what if you did do the work to break the lock out and then find out Kaleidescape changed their method of lock out....

OK, now I am wondering why I spent the time to write such a long winded response. I guess it's a slow day.......

John

 

[Calm-One]

To the last post, while now dated, I did not want to get the group misinterpreting "would figure out how to offer economical third party replacement or upgraded storage option which was compliant with EULAs" with "reverse-engineering effort to break the encryption"; that is not the point of this thread.

I am not sure if there is encryption involved when it comes to disk binding - initialization to the server - array, I really doubt it, I would suspect a firmware lock, using a ATA/SATA command to bind a disk to an array. Encryption would be for content stored on the drives higher up the stack.

None the less, another interesting article that invokes the Magnuson-Moss Warranty Act has caught my newsfeed's attention. This time a focus is on the "do not break the warranty sticker" and associated applicability under the Magnuson-Moss act.

The article is at: https://www.pcgamer.com/ftc-warns-c...-if-removed-stickers-are-potentially-illegal/

Of special note is that the article reports that the FTC says "it is illegal to condition warranty coverage on the use of specified parts or services."

Also mentioned was that the FTC did issue complaints, in the form of letters, in which the agency provided three examples of what it deems to be "questionable provisions" found on different products. Including:

The use of [company name] parts is required to keep your . . . manufacturer’s warranties and any extended warranties intact.
This warranty shall not apply if this product . . . is used with products not sold or licensed by [company name].
This warranty does not apply if this product . . . has had the warranty seal on the [product] altered, defaced, or removed.

As the 3U server and each drive within has those type of stickers based on my experience, this equipment, seems to have the potential to be affected by items described in the article.

Is it too late for the Premier line to become more of an open-system in light of items like the above?

Cheers

 

[Montucky]

My guess would be that it will never happen due to the MPAA and such. Whereas the products mentioned above have lots of possible fair-use possibilities, the explicit purpose of Kaleidescape systems is to play movies. Thus, K had to jump through a LOT of legal hoops to make this happen and make the studios (begrudgingly) on board. If my memory serves me correctly, I'm pretty sure that one of the contingencies necessary to allow K to exist is them agreeing to pretty much keep the encryption under lock and key, and one component of that being proprietary hard drives. I could be wrong, though. Could anybody clarify or expand on that for me?

 

[cinelife]

One major difference with the printer case, from a practical, not legal standpoint, is the continuing support for systems (KEAOS updates) provided by K, as opposed to no continuing support from the printer company. The user agreement, created as part of the agreement with content owners to insure the security of their content being stored as a persistent copy, restricts what can be used with, and what modifications can be done to, a kaleidescape system. The more restrictive K is with their "closed proprietary" system, the more comfortable content owners are with allowing K to "work" the content into the form that we see when using our systems. K was able to show that they control all aspects of a systems operation, including all the hardware being used.

Being a lawyer, I know that there are certainly arguments that can be made against some of these practices, but if challenged, would they really hold up in court? If a system is deemed to be in violation of the User Agreement (not warranty), and K decided to no longer support that system (easy to do), is that within their contractual right (not warranty)? After spending whatever $$$ and/or time fighting K on this, would an owner prevail?

Then there is the support of the company argument. After purchasing a K system, from a relatively small niche company, do we really want to look for ways to reduce their operational income stream. Do we want product improvement, frequent software and content updates, bookmarking, support, and other functions to be available, current, and timely?

Of course this is just one viewpoint, and from a dealer, an unapologetic, biased Kaleidescape supporter. As we often say in the law, reasonable minds may differ.


Jim

 

[JerryL]

I'm with you on this one Jim. Even if it were allowed by function of law, why in the world would I want to use non- K approved drives? Just seems like it could be penny-wise and pound-foolish. I look at the system as a proprietary closed system as opposed to a DYI PC that you slap in whatever bits you want.

 

[David23]

Even if it were allowed by function of law, why in the world would I want to use non- K approved drives?

I don't have a horse in this race but you could ask the same question about printer cartridges. Who wouldn't want to use genuine OEM ink cartridges? Well plenty of people opt for the lower priced generic ink & toner. There is just about always a market for cheaper, generic alternatives. As long as a non-K HDD met the proper specifications, I wouldn't see any cause for concern.

 

[cinelife]

I don't think Calm is advocating anything in the posts, more just asking a logical question given the results of the case he cited, the question is legit, and reasonable minds may differ on its application.


Jim

 

[Calm-One]

As said before, encryption is not the point though this has been used as a red herring distraction a few times now. If a consumer wants to replace the power supply and can locate a suitable replacement that consumer should be able to without concern of voiding the full device warranty or welcoming a legal wrath by potentially violating a user agreement due to "use of encryption". $995 for a Kaleidescape issued power supply and a couple fan trays is IMHO ridiculous. Not as bad as a Denon AK-DL1 $500 Ethernet cable, but in the same category from the realm of A/V.

Of course I feel the same way for new or replacement hard disks.

An argument of "Do we want product improvement, frequent software and content updates, bookmarking, support, and other functions to be available, current, and timely?" is made. Who would oppose that seemingly heart felt pro-Kaleidescape argument?

I would. Apple can be the example. Apple decided to update their PC warranty a few years ago to allow any user-replaceable components as long as the component and its replacement has been approved by Apple after years of denying this. Apple justified this as this allowed them to focus even more on innovation. Why would you not want Kaleidescape to behave the same way in the modern marketplace especially in the face of upcoming challengers pushing streaming and their content libraries? Apple still protects Mac OS after all, provides patches/support and makes revenue on Apple Care. More importantly, individual dealers/VARs can offer upgrades using approved parts to recognize more revenue and demonstrate value as a service to their customer base. A win-win scenario.

Lastly, a point was made of can a owner prevail. In our courts I would hope so, but also regrettably acknowledge reality. In the pcgamer article I provided, it is the FCC being involved, not a single owner. Should the FCC decide to send a letter or get involved legally with Kaleidescape over warranty stickers; spend that could have been used for innovation, to get you your "product improvement, frequent software and content updates, bookmarking, support, and other functions to be available, current, and timely" would instead be used for legal. A lose-lose scenario.

Just my two cents.

 

[JerryL]

I don't have a horse in this race but you could ask the same question about printer cartridges. Who wouldn't want to use genuine OEM ink cartridges? Well plenty of people opt for the lower priced generic ink & toner. There is just about always a market for cheaper, generic alternatives. As long as a non-K HDD met the proper specifications, I wouldn't see any cause for concern.

I agree you could. Ironically, I used to build my own PCs. And I used to use the 3rd party toner/ ink. But these days I just don't have the time for that stuff. I just use the official toner and expect if any problems arise I will have a smoother path to resolution. If you say it should not be like this, but it is like this. I have bigger battles to fight and I suspect many will feel the same way.

When it comes to Kaleidescape I think you have to just consider its a small proprietary system and their choice of drives is not just likely an income generator for them but also I think its a way for them to cut down on problems.

All that said I'm with Jim that reasonable minds can disagree and I don't think its unreasonable to look at this like its ink-cartridges. But it's just as reasonable to look at it like I do.

 

[cinelife]

As said before, encryption is not the point though this has been used as a red herring distraction a few times now. If a consumer wants to replace the power supply and can locate a suitable replacement that consumer should be able to without concern of voiding the full device warranty or welcoming a legal wrath by potentially violating a user agreement due to "use of encryption". $995 for a Kaleidescape issued power supply and a couple fan trays is IMHO ridiculous. Not as bad as a Denon AK-DL1 $500 Ethernet cable, but in the same category from the realm of A/V.

Of course I feel the same way for new or replacement hard disks.

An argument of "Do we want product improvement, frequent software and content updates, bookmarking, support, and other functions to be available, current, and timely?" is made. Who would oppose that seemingly heart felt pro-Kaleidescape argument?

I would. Apple can be the example. Apple decided to update their PC warranty a few years ago to allow any user-replaceable components as long as the component and its replacement has been approved by Apple after years of denying this. Apple justified this as this allowed them to focus even more on innovation. Why would you not want Kaleidescape to behave the same way in the modern marketplace especially in the face of upcoming challengers pushing streaming and their content libraries? Apple still protects Mac OS after all, provides patches/support and makes revenue on Apple Care. More importantly, individual dealers/VARs can offer upgrades using approved parts to recognize more revenue and demonstrate value as a service to their customer base. A win-win scenario.

Lastly, a point was made of can a owner prevail. In our courts I would hope so, but also regrettably acknowledge reality. In the pcgamer article I provided, it is the FCC being involved, not a single owner. Should the FCC decide to send a letter or get involved legally with Kaleidescape over warranty stickers; spend that could have been used for innovation, to get you your "product improvement, frequent software and content updates, bookmarking, support, and other functions to be available, current, and timely" would instead be used for legal. A lose-lose scenario.

Just my two cents.

To be clear, I'm referring to hard drives, not power supplies. Not sure where the exaggerated $995 price came from but those Service kits are $595. Perhaps a dealer is trying to make extra $$.


Jim

 

[cinelife]

By the way, I don't think I'd compare Apple's ability to trade off revenue with K's ability to do the same. (I would normally say it's an apple and oranges comparison, but in this case more like an Apple and a Blueberry (a very small Blueberry)).


Jim

 

[cinelife]

A couple more considerations. Any component that is under warranty is repaired or replaced by K if it should experience a failure, so no need for the owner to shop for a 3rd party part. If a component fails outside of warranty the owner is free to do whatever they want with regard to replacing the defective part with whatever substitute exists in the marketplace, with the caveat that the owner obviously assumes any risk associated with that 3rd party part. At that point, no one cares if the warranty sticker is removed, and K doesn't care if you want to shop for a power supply replacement, or BR drive replacement, etc.. So not really any different than Apple in that regard (except that as far as I know Apple's warranties are not as long as K's without an additional warranty extension expense).

I understand that the main sticking point is probably the hard drives, and that is what my comment above was addressing when I mentioned the revenue issue. I know just about everyone complains about hard drive pricing, likely because the price of a similar sized non-K drive is significantly cheaper. While I certainly understand this expense is significant for some owners, K has the right to price them based on their contribution the to the company's hardware and operational costs. There are no surprises here, K's drives have always been priced high. They didn't wake up one day and say "let's double our drive prices." When we bought into K we knew these potential expenses existed, and we accepted this when we wrote the check, and agreed to the User Agreement. Every person gets to assess whether they accept these costs, or would rather buy an alternative product, with whatever compromises that brings. If a person doesn't agree with K's terms of ownership, or cost of ownership, it's simple, don't buy the system, but it's unfair (IMO) to buy K and then complain about their policies, or pricing.


Jim

 

[Montucky]

^^
Excellent points. Another thing that many people don't realize when it comes to pricing is that this is commercial grade stuff. Just as in the regular computing world, there are numerous differences between the much cheaper consumer-grade products and the commercial gear that companies utterly depend on. Product support chief among them.

I've built home servers and HTPCs in the past, and I can say with some authority that there is NO way that I, personally, could build a home server with the level of quality that my Terra server has. Not only is the build quality absolutely top notch, but the internal components are as well. And let's say I could build one just as good...well, then it sure wouldn't be cheap either.

Lastly, K's a pretty small company. For them to be able to properly support their own products, I imagine they have to control 100% of the components within their products. They simply don't have the manpower or multiple buildings full of IT support staff to help customers with problems that could be related to components that were not supplied by the company. As a guy who did A/V tech work out in the field, I understand this all too well. I can't tell you how many times a customer's issue had nothing to do with the gear that we installed, but they were insistent it was our equipment. Really difficult to explain how their internet service going down causing their Netflix to not work has nothing to do with the equipment. Or how when DirecTV was having issues (error code 771 or whatever). They'd try to tell me that the TV we installed was broken. Ugggh. I'd always help them work with their ISP or cable/sat provider to get the problem resolved, but it still annoyed me when they'd think it was our equipment. Now imagine if K was dealing with the same thing. Customer installs a 3rd party drive. Drive goes bust or causes a weird issue. Kaleidescape and the customer could go rounds and rounds trying to problem solve. However, when all is K provided, then all is K supported. Their customer service is superb, and to me, that is part of the "value" with a more expensive product. Just like buying a commercial server. Part of the much higher costs is baked into the FAR superior product support you receive.

 

[JerryL]

I think you guys make great points.

I guess the real world question is who would use a 3rd party drive in their K system if they had the technical ability to do so.

I wouldn't.

 

[David23]

I think you guys make great points.

I guess the real world question is who would use a 3rd party drive in their K system if they had the technical ability to do so.

I wouldn't.

You do realize that millions of non-K HDDs are used every day for just about every task imaginable? There is nothing that special about the K drives, especially with the new Encore systems. With the K Store, there is really no concern with using non-K drives. If they fail, you just replace it and download your content again.

If K sold an enclosure that would accept any hard drive, I would buy it without a second thought. I just bought a regular 4TB HDD for my PC for $70.

The reality is that K simply sells the drives at a mark-up to provide additional revenue. Nothing wrong with that but that's just the fact.

 

[o0OBillO0o]

I don’t agree with you Billy. While the drives might start out as a WD Red drive or the like, one simply can not hot swap. QC has to certify these drives so users are not trading drives or cloning. Its not a simple as we all want it.

 

[20hertz]

An alternate point I have is, K is the perfect mass market product. Sell terra and stratos at a decent profit and make lots on movie purchases. If the Terras and Stratos sold for say cost + 15% for K +30% for dealers, the sales would be awesome.

Given K interface and the ease of downloading movies legally, they could sell a ton of the units and the only place to buy the movies is the movie store. They will take over the entire market that rip movies they own, but want digital copies.

Cha-Ching! Make money on every movie copy sold through the store. To help offset expenses for bookmarking, titles, cover art etc.. charge $100 to $200 a year or so.

This would move more people into the K world, which in turn will help give them negotiating leverage with studios. I just don’t understand why this needs to be a niche product. Seems to be an intentional decision to keep it niche rather than mass market.

With this model they don’t need to charge an arm and a leg for disks, servers or players.

Given the numerous patents and K experience, if they decided to make this a mass market product, they can become a huge company with a very profitable and lucrative revenue stream.

Not sure why they do not want this!

 

[JerryL]

Yes Billy I understand that. I don't think K has any magic pixie dust- Yet, Bill said my response. I also think (but dont know) they test these drives for reliability. It kind of reminds me of my mechanic very carefully picking out a new car battery for me. I said- aren't these all the same- and he said, some are fresher, its almost like picking fruit at the fruit stand...

Of course you could take your point to its logical conclusion and build your own media server with off the shelf parts. And I did just that. And it worked pretty well, but it wasn't Kaleidescape.

@20hertz, they do sell the products at a decent profit (probably more than decent). As much as I love my Kaleidescape, I don't think they are anything close to a mass market company. Mass market is more like the free Roku/ Amazon/ Google streamers built into "smart" TVs. Or the little Roku/ Apple / Google/ Amazon black boxes. The simple fact of the matter is Kaleidescape only makes sense for the following people:

1. Must have maximum resolution

2. Internet connection is difficult. This covers people in very rural places, or those who use the system in cars, yachts, or planes. But even this is changing. Internet is becoming more and more available and I know several installers who have done some really interesting with streaming high bit rate video and audio into cars

I am in that first category.

 

[20hertz]

I don’t agree with you Billy. While the drives might start out as a WD Red drive or the like, one simply can not hot swap. QC has to certify these drives so users are not trading drives or cloning. Its not a simple as we all want it.

Actually I don’t think K drives can be cloned at all, even by K, based on what I heard. Also, should not be that difficult to imprint drive content to owner accounts. So if someone does end up swapping drives, it would not match their account. Moreover it is no different than what it is today.