MPAA Sues Movie-Streaming Service Zediva

UPDATED: It files a copyright infringement suit, claiming Zediva illegally streams movies to its customers without obtaining required licenses from the movie studios.

The MPAA is taking action against one of the hottest, if legally questionable, online streaming services, Zediva, which has gained a boisterous following since its launch earlier this year by going places that Netflix won't -- streaming relatively recent films like The Fighter, The Social Network and Black Swan

Zediva claims its business model is innovative yet completely legitimate. The company rents its users a DVD player and a DVD, and customers use their computers like remote controls, playing a movie from afar. Streaming 10 movies costs users only $10, a cheap enough price that consumers, perhaps looking for piracy alternatives, have been signing up in growing numbers.

The question, though, is whether Zediva needs a studio's license before exhibiting these films to audiences.

Zediva believes itself to be akin to a traditional brick-and-mortar rental company like Blockbuster in the 1990s. It points out that when a customer "rents" a movie, that film is taken out of circulation. Zediva doesn't create a digital copy. Instead, it's just playing a video remotely at a customer's bequest in what it deems to be a private exhibition.

In a federal copyright lawsuit filed Monday in California District Court, the MPAA disputes the private nature of the streaming service. Instead, the movie industry believes that Zediva is infringing its "exclusive rights to perform their works publicly."

According to the complaint, Zediva's comparison of its service "to a rental store is disingenuous, and Defendants are attempting to rely on technical gimmicks in an effort to avoid complying with U.S. Copyright Law. Defendants operate an online VOD service, not a neighborhood rental store."

Zediva will likely hope a court will see this issue similar to how the Second Circuit Court of Appeals saw a plan a couple years back from Cablevision to begin offering its customers remote storage DVR capabilities for television programming. In that lawsuit, studios sued on the ground that Cablevision was violating its copyrights and its exclusive authority over public performances, and similarly to the latest lawsuit, claimed Cablevision had created "an unauthorized video-on-demand service."

The Second Circuit disagreed, ruling that Cablevision had no control over what programs were being delivered and saying that a single customer transmitting to oneself wasn't any more public than a customer recording a program with his or her own DVR.

However, television is a different bulwark than movies. By the time Cablevision's remote-DVR plan had hit the court, services like Tivo and Slingbox had already established itself on the marketplace without much legal challenge. Cablevision was merely asking a court to let it take a step a few mere inches forward.

In contrast, movie studios are arguing that Zediva's plans will upend their business model and relationships with iTunes, Amazon, Netflix, and others, and can point to its own body of favorable case law on the subject.

Copyright scholar James Grimmelmann, for one, points to several cases that will work against Zediva, including one involving a brick-and-mortar rental store named Maxwell’s, which rented videotapes to customers, along with private 4’x6’ exhibition booths in the rear of the store. Similar to how Zediva operates, Maxwell’s customers reserved a so-called "private exhibition" of these movies as the video stores' clerks queued up the videos from afar. A court later found this operation to be "not distinguishable in any significant manner from the exhibition of films at a conventional movie theater." 

It was, in the court's opinion, a "public performance."

The MPAA is claiming maximum statutory damages in the amount of $150,000 per infringement for Zediva's alleged copyright violations.

Zediva hasn't yet issued a response to the movie industry's claims.