Disney Loses First Battle in Lawsuit Against Redbox

Posted Fri Feb 23, 2018 at 08:00 PM PST by

Disney's motion for a preliminary injunction against Redbox has been denied.

Disney has been dealt a major blow in its legal battle against Redbox. As reported back in December, the studio is suing the rental kiosk company for reselling digital copy codes of its films. And now a California federal judge has rejected Disney's motion for a preliminary injunction to stop Redbox on the grounds of copyright misuse by Disney itself.

Redbox first began selling digital copy codes for Disney films in October for around $5 - $15 per title. The company obtains the codes from inserts that are included with the retail discs it buys for its DVD and Blu-ray rental kiosks. The selection of movies includes many popular titles like Star Wars: The Force AwakensGuardians of the Galaxy Vol. 2The Jungle BookMoana, Frozen, and more. After buying a code, users can pick-up a printout with details on how to use it from one of Redbox's kiosks. The codes can then be used to redeem a digital copy of the selected movie through various supported services and devices.

As part of its lawsuit, Disney is claiming that by reselling these codes Redbox is violating the studio's contracts and copyrights since Disney clearly states that these codes are not for sale on its packaging. As such, Disney was seeking an injunction on the sale of its digital codes through Redbox, but now that injunction has been denied in court. California federal judge Dean Pregerson based his ruling on copyright misuse by Disney itself.

According to Disney's licensing terms, individuals who redeem digital copy codes from combo packs must also be the owners of the physical disc the code came with -- and it's here where the studio is actually running into trouble. You see, as part of copyright law's first sale doctrine, customers are allowed to resell copyrighted discs that they have purchased. But by requiring buyers of a combo pack to retain ownership of a physical disc they bought in order to redeem a download code, Disney is effectively forcing buyers to waive away their right to resell the disc. As far as the judge is concerned, this type of restriction and leveraging goes beyond the ordinary rights given to the studio by copyright law, which means Disney has been engaging in copyright misuse.  

And though Disney is free to appeal the decision, if the ruling is upheld it could have a huge impact on the future of digital combo packs and copyright law itself. According to copyright scholar James Grimmelmann speaking to Ars Technica, if the copyright misuse sticks it could actually prevent Disney from enforcing any of its copyrights on combo pack titles until the misuse stops. In other words, films like The Force Awakens and Frozen could suddenly lose their copyright protection altogether until Disney stops bundling the download codes or somehow finds a way to lawfully reword the fine print on its packaging to avoid the misuse. As such, the ruling could potentially force Disney and other studios to stop selling combo packs with download codes entirely in order to maintain enforcement of their copyrights. Likewise, video games and other products that come with similar redemption codes or bundled software could also be impacted by the ruling. 

With these wide-ranging ramifications in mind, however, it's very unlikely that this conclusion will be maintained on appeal. The next step is set for March 5, when a hearing will be held to consider Redbox's motion to dismiss Disney's case entirely. 

Sources: Ars Technica, The Hollywood Reporter, Engadget, Document Cloud

Tags: Disney, Redbox (all tags)