If you go out and buy a movie on Blu-ray today, chances are there’s a code inside which also allows you another way to watch the movie. Disney offers such codes with its physical disc releases, but what it doesn’t like is the fact rental service Redbox is taking the codes and repackaging them for sale in its kiosks.
As The Hollywood Reporter explains, Disney sued Redbox back in December over the practice. Redbox was purchasing so-called “combo packs” containing the discs and codes from retailers. It meant Redbox could then offer download versions of movies including Beauty and the Beast, Frozen, Star Wars: Episode VIII: The Force Awakens, and Guardians of the Galaxy Vol. 2 and make some extra cash.
Disney argued such a practice interfered with its branding, relationship with customers, and deals with licensees. It asked the court to enforce a preliminary injunction against Redbox to stop them selling the codes. Unfortunately for Disney, U.S. District Court Judge Dean Pregerson didn’t agree.
Redbox argued Disney was engaging in copyright misuse. By attempting to limit use of the codes, Disney is trying to “leverage their limited monopoly to allow them control of areas outside the monopoly.” In this case in order to protect the streaming service the company is launching. The judge agreed and pointed out that Disney loses the right to exclusively distribute copies of its work as soon as that work is placed “into the stream of commerce.”
The judge also pointed out that the code doesn’t exist as a material object until it is redeemed, so Redbox isn’t actually selling a “fixed copy of a copyrighted work” but instead the option to create one as provided by Disney through the presence of a code. Therefore the first sale doctrine doesn’t apply. If it did apply, that would actually help Redbox, but it’s interesting to note how digital codes are viewed by the court.
Redbox seemingly won the case not just because of the copyright misuse claim against Disney, but because of the way the codes are offered. Disney states that codes are not for sale or transfer, but there is no clear indication you are accepting additional license restrictions when taking the shrink wrap off the Blu-ray you purchased, therefore it can’t really be applied.
For now, Disney has lost its battle against Redbox. However, this is unlikely to be the end of the matter. Disney could update its combo pack offerings to make licensing restrictions clear on the outer packaging. It could also simply remove the download codes from the packs and come up with some other, redbox-unfriendly solution.