In November, Walt Disney Co. sued Redbox in an attempt to stop the DVD rental company from selling digital copies of its movies. At the center of the suit are movie download codes that can be used to download a digital copy of a Disney movie and are included with a Blu-ray disc and a DVD in each “combo pack” Disney sells. Disney filed a motion for a preliminary injunction against Redbox after Redbox began disassembling the “combo packs” it purchased from Disney and selling the codes separately to consumers.

To bolster its contributory copyright infringement claim, Disney points to fine print on its DVD boxes that states, “codes are not for sale or transfer.” Disney said in the complaint that Redbox is selling the digital codes “in blatant disregard of clear prohibitions against doing so and in violation of Plaintiffs’ copyrights.”

Redbox filed its own lawsuit in response, alleging Disney is attempting to stifle competition and is committing copyright misuse in the distribution market, among other things. However, Redbox’s central argument is that a movie code like “KMPW8WJ7YW6” is a copy of a movie, rather than a means to a copy of a movie. Under the Copyright Act’s first sale doctrine, a copyright owner cannot prohibit a purchaser from reselling a particular copy of a work. To Redbox, a movie download code is no different than a used book in a secondhand bookstore.

Disney claims, “Redbox confuses the underlying act of infringement by arguing that this is a claim about distribution. Redbox’s copyright liability, however, arises because of its customers’ unauthorized exercise of Disney’s reproduction right when they download movies. Because Plaintiffs allege that Redbox violates the reproduction right, the first sale defense is inapplicable.” Disney further reiterates that codes are not copies. “It is an alphanumeric passcode printed on a piece of paper that, as Redbox puts it, is merely a ‘key to unlock the movie that’s stored’ elsewhere. As Redbox readily admits, ‘[t]here’s no movie on the piece of paper.’”

Redbox further contends that a code should be treated as “a particular copy” of a movie as the code authenticates the delivery of a single copy of a movie. Disney shoots this argument down. “There is no ‘particular’ digital copy of a movie that is sitting on a server, corresponding to, e.g., the Code ‘KMPW8WJ7YW6.’ Nor does a Code limit the user to a single digital copy. Depending on the license terms of a specific download service or a particular subscription plan, an end-user is often able to make multiple copies of the underlying content on different devices.” Authorized iTunes users, for example, are allowed to download content to as many as ten devices logged in with the same Apple ID. Disney explains, “each of those downloads involve the creation of a separate copy.”

To further complicate the issue, it is not clear that the first sale doctrine has survived the digital age. ReDigi’s pending case at the 2nd U.S. Circuit Court of Appeals involving the right of consumers to resell their legally acquired digital media under the doctrine of first sale illustrates this point. ReDigi, which filed for bankruptcy in August 2016, offered a service whereby consumers could sell their “used” iTunes music in a secondary market for digital files. Federal Judge Richard Sullivan concluded in a 2013 ruling that the first sale defense is limited to material terms that the copyright owner put into the stream of commerce such as records. Disney and Redbox’s battle presents another angle to this ongoing debate.

It is still unclear what the outcome of these cases will be, but it is safe to say the rulings could potentially have a large impact not only on the motion picture and recording industries, but also on the publishing industry. The Association of American Publishers has expressed fear that legalizing services like ReDigi would enable a secondary market for cheaper “used” e-books to overpower the industry’s primary market.

A hearing on the Disney v. Redbox matter is scheduled for February 5th before Judge Dean Pregerson of the Central District of California.

Barrett Lingle

 

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