Disney Fights Over the Meaning of "KMPW8WJ7YW6"

Beauty and the Beast Still - Publicity - H 2017
Courtesy of Walt Disney Pictures

It's perhaps the brain-twisting legal fight of the year in the entertainment industry. We're talking about Disney v. Redbox, soon to offer a judge's analysis of "KMPW8WJ7YW6," Disney's example of a code that can be used by consumers to download a movie like Beauty and the Beast.

Just what is a movie download code?

The high-stakes question relates to Disney "combo packs," which include a Blu-ray disc, a DVD and a download code which can be redeemed through authorized digital outlets. After Redbox bought these "combo packs," then disassembled them to sell codes separately to consumers, Disney sued. The case is now on a rocket docket thanks to Disney's motion for a preliminary injunction against Redbox

In an attempt to fend off the injunction, Redbox says Disney is attempting to stifle competition and is committing copyright misuse in the distribution market. Redbox's big argument, though, is that a movie code like "KMPW8WJ7YW6" is more than a means to a copy of a movie. Rather, Redbox contends, it essentially is a copy.

That's important, because copyright law's first sale doctrine allows someone who lawfully acquires a copyrighted work to sell or dispose of their particular copy. So in Redbox's eyes, "KMPW8WJ7YW6" is no different than a used book in a secondhand bookstore. 

In the digital era, however, the first sale doctrine is running into some trouble. A legal battle over "used" song downloads, currently pending at the 2nd U.S. Circuit Court of Appeals, makes that clear. This case between Disney and Redbox presents another angle.

In a reply brief filed on Tuesday (read it here), Disney says its lawsuit has nothing to do with stifling competition or requiring consumers to pay higher prices. Disney slams the copyright misuse charge as the "last redoubt of all mass pirates." But it's the arguments over the first-sale defense that will draw careful attention from the judge.

"Redbox confuses the underlying act of infringement by arguing that this is a claim about distribution," state Disney's court papers. "Redbox’s copyright liability, however, arises because of its customers’ unauthorized exercise of Disney’s reproduction right when they download movies. Because Plaintiffs allege that Redbox violates the reproduction right, the first sale defense is inapplicable."

Disney reiterates its position that codes are not copies. They are keys to open up a copy, says Disney, repeating the words of one Redbox executive.

And how about treating the sale of the code as the equivalent of Redbox using the code itself to download a copy of Beauty and the Beast before reselling that copy?

"But Redbox is not downloading the digital copies onto physical media and then selling the portable memory devices," continues Disney attorney Kelly Klaus. "If Redbox were distributing devices, the customers would be acquiring copies. Here, the Codes may enable end-users to make copies but they are not copies themselves."

Disney tackles another Redbox argument.

"Redbox also argues the Court should treat the Code as 'a particular copy' of a movie because the Code authenticates the delivery of a single digital copy of the movie," states the reply brief. "That argument is factually baseless. There is no 'particular' digital copy of a movie that is sitting on a server, corresponding to, e.g., the Code 'KMPW8WJ7YW6.' Nor does a Code limit the user to a single digital copy. Depending on the license terms of a specific download service or a particular subscription plan, an end-user is often able to make multiple copies of the underlying content on different devices. For example, the iTunes terms provide that authorized users may download content to as many as 10 devices logged in with the same Apple ID; each of those downloads involve the creation of a separate copy... A  Code cannot represent 'a particular copy' when it may be redeemed to make multiple copies, on different devices and even by different end-users."

The situation becomes even more convoluted from there. Because Disney is arguing that a code is not a copy, it can't argue that Redbox is committing copyright infringement by selling a code. Instead, Disney alleges that Redbox is committing contributory copyright infringement, which shifts some of the analysis to the legality of what consumers are doing with movie download codes.

In its opposition brief, Redbox attempts to argue that Disney had not specified any license agreement between Disney and the user of the code who purchased it through an intermediary, and that any shrink wrap that states "codes are not for sale or transfer" amounts to an after-the-fact license that's unenforceable.

Disney replies that Redbox is misreading the law.

First, Disney says Redbox knows and understands perfectly well what is meant by "codes are not for sale or transfer."

And second, Disney says it's not quite true that anybody is free to use the codes to make downloads.

"Redbox’s customers’ downloads are not authorized because the licenses they must enter into to download the movies are conditioned on the end-user owning the discs that were sold along with the Code in the Combo Pack," states the reply brief. "Redbox asserts that 'there is no license and even Plaintiffs do not claim that one was created.' But this assertion erroneously presumes that Disney is claiming the end-user downloads are somehow controlled by a license between Disney and Redbox. Disney is not claiming that the packaging and online terms of service create a license between Disney and Redbox controlling the download of a digital copy. Disney’s claim is that the relevant licenses for Redbox’s contributory infringement liability are the licenses entered into by the end-user redeeming the Code to make a downloaded copy of the movie."

The debate will continue on Feb. 5 when U.S. District Judge Dean Pregerson holds a hearing on the matter.