Disney Fixes Its Sketchy DVD Rental License, Wins Injunction Against Redbox Over Digital Downloads

from the copyright-as-blocking-innovation dept

Earlier this year we wrote about Disney's silly lawsuit against Redbox. If you don't recall, Redbox, whose main business was renting DVDs out of kiosks started also offering digital download codes that could be purchased at their kiosks. What Redbox did, was it would buy Disney "combo packs" (that came with both a DVD and a download code) and would offer up just the slip of paper with the code out of its kiosks. This seems like perfectly reasonable first sale rights. A legitimate code was purchased, and then resold.

When we wrote about the case back in February, it involved the court smacking down Disney, and even saying that the company was engaged in "copyright misuse" in overclaiming what copyright allowed the company to do. Later in that ruling, the court also rejected Disney's claim that Redbox was in breach of a contract by saying that the text Disney prints on the box (at the time: "codes are not for sale or transfer") was not actually a contract. Of course, as we noted at the time, the court's language made it clear that slightly different language could fix this. From the ruling:

The phrase “Codes are not for sale or transfer” cannot constitute a shrink wrap contract because, like the box at issue in Norcia, Disney’s Combo Pack box makes no suggestion that opening the box constitutes acceptance of any further license restrictions.... Although Disney seeks to analogize its Combo Pack packaging and language to the packaging and terms in Lexmark, the comparison is inapt. The thorough boxtop license language in Lexmark not only provided consumers with specific notice of the existence of a license and explicitly stated that opening the package would constitute acceptance, but also set forth the full terms of the agreement, including the nature of the consideration provided, and described a post-purchase mechanism for rejecting the license. Here, in contrast, Disney relies solely upon the phrase “Codes are not for sale or transfer” to carry all of that weight. Unlike the box-top language in Lexmark, Disney’s phrase does not identify the existence of a license offer in the first instance, let alone identify the nature of any consideration, specify any means of acceptance, or indicate that the consumer’s decision to open the box will constitute assent. In the absence of any such indications that an offer was being made, Redbox’s silence cannot reasonably be interpreted as assent to a restrictive license.

So my prediction following that was: "this almost certainly means that Disney is quickly reprinting the packaging on all its Combo Pack DVDs to make this language more legalistic to match the Lexmark standard."

And... bingo. That's exactly what happened. In a new ruling, the court has now granted a preliminary injunction against Redbox all because of the new "contract" language Disney has put on its DVDs (though amusingly, in a footnote, the court notes "Disney does not concede that the changes were necessary.")

Disney subsequently changed the language on its Combo Pack boxes, changed the download sites’ Terms of Use, and amended its Complaint. Disney’s Combo Pack packaging for the movie Black Panther is the first to reflect changes implemented after this Court’s denial of Disney’s first motion for a preliminary injunction. The front of Black Panther Combo Pack boxes indicates that the Combo Packs include a “Digital Code.” The back of the boxes state, in some of the largest print displayed, “Digital Code Included*[.]” The asterisk directs the reader to a discrete text box at the bottom of the package, which states, in smaller, allcapitalized text, “Digital code redemption requires prior acceptance of licence terms and conditions. Codes only for personal use by recipient of this combination package or family member. Digital movie code . . . subject to expiration after May 15, 2023.” Smaller type in a more central, fine print-type section of the packaging reads, “The digital code contained in this package may not be sold separately and may be redeemed only by the recipient of this combination package or a family member. Visit MoviesAnywhere.com, RedeemDigitalMovie.com, and disneytermsofuse.com for code redemption and other applicable terms and conditions.” The paper Code insert within the Combo Pack contains a similar statement and also reads, “This digital code is part of a combination package and may not be sold separately,” and “Digital code redemption is subject to prior acceptance of license terms and conditions.”

It actually goes on from there. Basically, in response to the earlier ruling, Disney slapped legal warnings and language basically everywhere possible. Some of us would suggest that this -- again -- represents clear copyright abuse, trying to use copyright in restraint of first sale, but the court notes that under the Lexmark standard, it's all groovy. The court does still seem a bit perturbed at Disney's actions, and has a somewhat fascinating discussion on the differences between shrinkwrap, clickwrap, and other types of agreements (while arguing that Disney is arguing things that are not accurate about what constitutes a contract), but does conclude that with Disney pasting legalese everywhere, Redbox is on notice:

At this stage, the court need not make a determination whether Combo Pack purchasers enter into a shrinkwrap, clickwrap, or other type of agreement, nor precisely delineate the terms of any such agreement. It appears from the record currently before the court that neither Redbox nor any other Combo Pack purchaser could (or did) reasonably believe that, notwithstanding the Black Panther licensing language on the box itself, the Combo Pack included unrestricted ownership rights to any digital content.... Because Redbox did not obtain an ownership right to any digital content when it purchased Combo Packs, Disney has adequately shown that it is likely to succeed on its claim that Redbox encouraged Redbox customers to infringe Disney’s copyrights by redeeming Codes in violation of the license terms set forth on the redemption sites.

As in the earlier ruling, the court is not impressed by Redbox's First Sale argument, noting that it was basically killed off due to the awful ReDigi ruling that killed off reselling MP3s.

This is, of course, silly. Everyone recognizes that Redbox has every right to buy physical DVDs and then resell them. In what world does it make sense that it can't also buy up a piece of paper with a download code and resell that as well? Apparently, the one we live in. I've seen some copyright extremists online cheering on this ruling, which is not surprising, but ridiculous. Cheering on a ruling like this is cheering on monopolistic practices that limit innovation and the spread of culture.

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Filed Under: clickwrap, contracts, copyright, downloads, dvd rentals, first sale, licenses, movies, rentals, shrinkwrap
Companies: disney, redbox


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  1. icon
    Anonymous Anonymous Coward (profile), 31 Aug 2018 @ 4:44pm

    Re: The end of first sale is just the tip of the iceberg!

    I wouldn't put it past them. On the other hand, this is only one court, and not an appellate court. What happens down the road is what we need to watch.

    The right of first sale impacts a lot of things. The ability to repair, customize, edit, fair use rights. One hopes that the right overcomes the anal right of control for the seller, after sale.

    The right to, for example, customize ones car is very long standing. Changing it now would subvert a lot of history. Not that the companies that want the change care, but courts are a different story.

    The real question then becomes, will the attorneys who file the suit ask the right questions, or in another way make the right arguments.

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