Redbox Demands Disney Lose Right to Enforce Movie Copyrights

RedBox DVD Rental Kiosks - H - 2009
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Redbox is striking back at Disney after being hauled into court for unbundling movie "combo packs" and selling download codes separately. On Friday, Redbox filed its own lawsuit against Disney alleging copyright misuse, tortious interference, false advertising and unfair competition. One of Redbox's demands is that Disney no longer be able to enforce any copyright while engaging in illegal acts in the distribution market.

The fact that Redbox — which operates movie-rental kiosks in retail stores throughout the country — is bringing a new action rather than making counterclaims in the existing lawsuit will probably be challenged from the get-go. Getting past that, the lawsuit expands what's under consideration by attempting to draw attention to various ways that Disney is allegedly stifling competition to prop up various "direct to consumer" streaming services either coming or already under the Mickey Mouse giant's thumb.

The unbundled movie codes are addressed (read more on that here), but so is an alleged orchestrated campaign to prevent Redbox from purchasing enough Disney titles to meet its consumer demand. 

"For example, on information and belief, Disney’s own distribution company, Defendant BVHE, has placed provisions into its contracts with retailers prohibiting them from selling copies of Disney movies to Redbox," states the complaint. "On information and belief, BVHE has also taken the extraordinary step of reducing the number of movie copies it allocates to distributors believed to sell to Redbox to prevent them from fulfilling Redbox’s orders."

And there's more.

"In addition, BVHE and Movies Anywhere have falsely stated or implied on their products, packaging, and websites, as well as to the press, that Redbox’s rental and sale of Disney titles is unlawful," continues the complaint. "Specifically, BVHE and Movies Anywhere falsely state that a purchaser may not rent or resell the individual components of the Combo Pack — including the discs — and that Redbox’s sales of the digital movies are unauthorized and violate Disney’s contracts and copyrights. On information and belief, for at least the past five years, every Combo Pack distributed by BVHE, including for Beauty and the Beast, Cars 3, and Frozen, contains the following language on the back of the jewel case: 'This product is authorized for private use only. It is prohibited for any other use and cannot be resold or rented individually. All other rights reserved. Unless expressly authorized in writing by the copyright owner, any copying, exhibition, export, distribution or other use of this product or any part of it is prohibited.'”

But Redbox says this representation is false given copyright law's first sale doctrine, which allows someone who lawfully acquires a copyrighted work to sell or dispose of their particular copy.

"Disney’s attempt to control the disposition of the Combo Pack components, even after Disney sells the DVD, Blu-ray disc, and digital movie to a Disney-authorized distributor or a retailer, is an illegal abuse of its copyrights and dominant position in the industry," continues the complaint.

In motion papers in the first lawsuit, Disney has denied attempting to stifle competition and has also argued that there's a licensing transaction that's happening — one that's conditioned upon the end-user owning both the discs and the download codes. The argument, though, was mainly put forward to explain how Redbox was committing contributory copyright infringement when consumers use download codes sold by Redbox to access movies. Now, a judge is being asked to address the transfer restrictions on the physical media in those combo packs.

Redbox alleges that Disney sees it as a threat and wants to rid the market of low prices by interfering with Redbox's relationships with retailers and misleading consumers. The plaintiff emphasizes how Disney is moving "further into the post-theatrical distribution space" and how its recent proposed acquisition of 21st Century Fox assets is indicative of these aims.

The lawsuit calls for an injunction over allegedly false statements being made plus a declaration that Disney and its subsidiaries "may not enforce any copyright in a motion picture while illegally purporting to prohibit resale or rental of copies of those works or by interfering with supply vendors’ ability to sell copies of those works to Redbox and/or other resell or rental outlets; and (ii) that the misleading statements from Defendants’ packaging and websites outlined above are unenforceable and shall not be included on Defendants’ packaging."

That's a big ask — perhaps an unprecedented one.

Redbox also seeks damages, profits and further restitution. Here's the full complaint.

A Disney spokesperson responds, “This countersuit is nothing more than Redbox's attempt to distract attention from its unauthorized sale of our digital codes as we have set forth in our lawsuit. We are confident in our position and, unlike Redbox, want the court to resolve this matter quickly."