Most DVD's sold commercially employ a copy-protection called CSS to prevent you from making a copy of the DVD. From a technical standpoint, it's a trivial matter to bypass this. However, there is an ongoing debate about the legality of doing so.
Kaleidescape, Inc. was one of the first companies to offer a media server that allowed the user to store all his DVD's on the server and play them back without requiring the physical disk. Although the company claims to have obtained all the proper permission from and paid licensing fees to the DVD consortium, the DVD consortium has filed a lawsuit against the company nonetheless and is trying to halt the sale of media servers that permit storage of DVD's.
The courts will need to work out whether storing a DVD on a media server is permitted according to the "Fair Use" laws, or is illegal because of the "Digital Millenium Copyright Act".
Until this matter is resolved, LinuxMCE has decided to stay away. It is not in the company's interest, nor that of our customers, if we offer a product that stores DVD's on the server, as does the Kaleidescape, and then the courts order that the company can no longer support it, and customers must stop using it.
The LinuxMCE that ships out of the box has a DVD player and DVD storage built-in, however it only works with DVD's that are not copy-protected with the CSS system. Admittedly this means most commercial DVD's will not work. You can insert a non-CSS encrypted DVD, play it, watch it, hit the 'copy' button to copy it to the server, and then watch it from the server without the physical disk.
If you determine that is legal in your area to do the same thing with encrypted DVD's, there are widely available software add-ons that bypass the CSS copy protection so that encrypted DVD's work just the same as non-encrypted DVD's. You can search the internet for "LinuxMCE libdvdcss" and find links to them, including instructions for Add Software
On March 29, 2007, after a seven-day trial, Judge Leslie C. Nichols of the Santa Clara Superior Court in California ruled that Kaleidescape is in full compliance with the DVD Copy Control Association's license to the Content Scramble System, the method used to encrypt video and audio data on DVDs. As part of his statement of decision, Judge Nichols noted Kaleidescape’s good faith in its efforts to ensure that its products were fully compliant. The DVD CCA announced that it "strongly disagrees with the trial court's decision" and appealed the Court's ruling on June 5, 2007.
On May 29, 2007, some of the members of the Board of Directors of the DVD CCA asked a subcommittee of the DVD CCA called CPAC ("Content Protection Advisory Council”) to consider a possible amendment to the CSS License at their meeting of June 20, 2007.
On June 15, 2007, Michael Malcolm, founder and CEO of Kaleidescape, Inc., sent a letter to the members of CPAC asking them to reject the proposed amendment and noting that it would harm consumers because it would suppress competition in the market for DVD playback devices, block the development of new and innovative products that give consumers new ways to enjoy the DVDs they own, and interfere with the ability of consumers to exercise their fair use rights under copyright law. Malcolm’s letter also pointed out that any member of CPAC who voted for the proposed amendment would expose themselves, their employer, and the DVD CCA to serious and substantial antitrust liability. The United States Supreme Court has made clear that those who use a standards-setting organization to engage in anticompetitive activity and harm competitors can be held liable under the antitrust laws.
At the CPAC meeting of June 20, 2007, the members who had proposed the amendment withdrew their request, and CPAC did not consider the proposed amendment at that meeting. If CPAC were to consider such an amendment at a future meeting and if all three industry groups within CPAC were to vote in favor of the proposed amendment, then the DVD CCA would begin a lengthy process aimed at bringing the amendment into force about two years after such a CPAC vote, Kaleidescape would vigorously oppose such action by the DVD CCA, and that opposition would likely result in years of litigation.
***Not sure how this affects LinuxMCE/Plutohome, but though I'd post the information anyway. Also, Kaleidescape is a closed system, the media on the system has no access to the internet; this may be the main reason why they prevailed in the lawsuit against the DVD CCA.***