Judge Says Disney Misused Marvel, Star Wars, And Frozen Copyrights In Redbox Lawsuit

The current lawsuit between Disney and Rebox has now taken a very unexpected turn.

On Tuesday California Federal Judge Dean Pregerson sided with Redbox on one particular aspect of Disney's current lawsuit against them. Pregerson denied Disney's motion for a preliminary injunction against Redbox, which would have prevented them from selling digital codes to Disney's movies. Pregerson also said that Disney had committed copyright misuse (via THR).

For context, Disney filed a lawsuit in December against Redbox. That lawsuit has to specifically do with Redbox going into retail stores and buying combo packs, which typically include a Blu-ray, DVD, and digital code. Redbox did this for movies like Beauty and the Beast, Star Wars: Episode VIII - The Force Awakens, Frozen, and Guardians of the Galaxy Vol. 2, and after buying they would remove the packaging and sell each one in its Redbox kiosks, including the digital codes.

Disney points to the labels on the packaging that says codes are not for sale or transfer", but Redbox countered by referencing the copyright misuse doctrine, which states that copyright holders are not permitted to leverage their limited monopoly to allow them to control areas outside of their monopoly.

"The copyright misuse defense, however, is not so narrow as Disney would have it," writes Pregerson. "Indeed, copyright misuse need not even be grounded in anti-competitive behavior, and extends to any situation implicating the public policy embodied in the grant of a copyright. The pertinent inquiry, then, is not whether the digital download services' restrictive license terms give Disney power over some entirely unrelated product, but whether those terms improperly grant Disney power beyond the scope of its copyright."

Pregerson essentially said that once the copy of any item is put out into the world for commerce and sold, they cannot stop it from being redistributed.

"There can be no dispute, therefore, that Disney's copyrights do not give it the power to prevent consumers from selling or otherwise transferring the Blu-ray discs and DVDs contained within Combo Packs," states the opinion. "Disney does not contend otherwise. Nevertheless, the terms of both digital download services' license agreements purport to give Disney a power specifically denied to copyright holders.... Combo Pack purchasers cannot access digital movie content, for which they have already paid, without exceeding the scope of the license agreement unless they forego their statutorily-guaranteed right to distribute their physical copies of that same movie as they see fit. This improper leveraging of Disney's copyright in the digital content to restrict secondary transfers of physical copies directly implicates and conflicts with public policy enshrined in the Copyright Act, and constitutes copyright misuse. Accordingly, Disney has not demonstrated a likelihood of success on the merits of its contributory copyright infringement claim."

Redbox attempted to use the doctrine of First Sale to take the victor in the download code aspect of all this, but Pregerson doesn't necessarily believe that applies.

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"Even assuming that the transfer is a sale and not a license, and putting aside what Disney's representations on the box may suggest about whether or not a 'copy' is being transferred, this court cannot agree that a 'particular material object' can be said to exist, let alone be transferred, prior to the time that a download code is redeemed and the copyrighted work is fixed onto the downloader's physical hard drive. Instead, Disney appears to have sold something akin to an option to create a physical copy at some point in the future. Because no particular, fixed copy of a copyrighted work yet existed at the time Redbox purchased, or sold, a digital download code, the first sale doctrine is inapplicable to this case."

This is far from the last thing fans will see come from this case, and it could hold some wide ranging ramifications depending on the result. We'll keep you psosted.