It can be (depending on country) if you reverse engineer it (which is the only real way this could have been done, apart from a leak directly from MS). More so when (if?) it is protected through the use of encryption.
MS have made it pretty clear that they have hardware and software safeguards in place. If this is true and they have been broken, they certainly would have a case."With Kinect, Microsoft built in numerous hardware and software safeguards designed to reduce the chances of product tampering. Microsoft will continue to make advances in these types of safeguards and work closely with law enforcement and product safety groups to keep Kinect tamper-resistant."
Decrypting a DVD is childs play (You can do it in about 7 lines of code IIRC), but it doesn't mean it's legal to do so.


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