Disney sued in December and sought an injunction to bar Redbox from distributing digital download codes for Disney films. Redbox does not have a distribution agreement with Disney. Instead, it buys up DVD and Blu-ray combo packs, which include codes to download the films, and then sells those codes separately through its network of kiosks.
Disney contends that Redbox is violating the terms of sale of the combo packs, which — at least in some instances — include specific language stating that “Codes are not for sale or transfer.” Redbox offers digital downloads at a significant discount from the download prices available on other services.
Redbox, however, argues that the codes should not be treated any differently than the physical discs, which Redbox is entitled to distribute just as if it were any other video rental business. In its argument opposing Disney’s request for an injunction, Redbox invokes the “first sale doctrine,” which holds that a copyright owner cannot prohibit a purchaser from reselling a copy of a work, such as a used book.
The key question is whether selling the download codes and allowing customers to download a copy of a movie, constitutes “reproduction” under federal copyright law. Disney contends that it does, and that Redbox is infringing on its exclusive right to distribute its works. Redbox argues that customers are not creating a new copy of the film — they are simply redeeming the copy that has already been sold to Redbox.
Redbox also argues that Disney is seeking to clear the field of rivals to its own forthcoming streaming service.
“Plaintiffs seek to stifle competition to more smoothly launch Disney’s own digital content streaming service, maximize the price other services like iTunes and Amazon (and their customers) pay for Disney movies, and secure a greater market share for Hulu — the viewing service Disney will control as part of its $52 billion acquisition of 21st Century Fox,” argued Michael A. Geibelson, Redbox’s attorney. “These anti-consumer and anti-competitive ends do not support a preliminary injunction, and neither do the plaintiffs’ evidence or applicable law.”
Redbox says it has invested $700,000 in launching its digital download service, which would be squandered should an injunction be issued. Disney’s motion for an injunction is set to be heard on Feb. 5 before Judge Dean Pregerson in Los Angeles federal court.
The suit comes as Disney and the other major studios, along with Netflix and Amazon, are also seeking to stamp out streaming devices that use Kodi software to enable streaming of copyrighted works.