LOS ANGELES (Legal Newsline) – Redbox has sued Disney as the two companies argue over DVDs and digital codes, but its petition has been consolidated with Disney's earlier lawsuit against the movie-rental company.

Redbox filed a complaint for declaratory judgment against Disney Enterprises and others on Jan. 26 in the U.S. District Court for the Central District of California. It states in its complaint that "defendants cannot enforce their attempts to restrict rental and resale of their products."

The complaint stems from the case Disney Enterprises Inc. v. Redbox Automated Retail LLC, a December lawsuit that stated Redbox had unlawfully acquired Disney Combo Packs, which are DVD and Blu-ray discs that have a code imprint allowing access to digital download, and stripped them down to sell at its kiosks and website.

“Redbox says that the digital code is the same as a physical DVD or Blu-ray," entertainment lawyer Jody Simon told Legal Newsline. “Disney says it’s not.”

Simon is a partner with Los Angeles-based Fox Rothschild LLP. Redbox's petition for declaratory relief was, however, transferred to Disney's case, where a preliminary injunction motion is pending.

“In its complaint, Redbox is painting itself as a plucky interloper being strong-armed by Disney so that Disney can maintain high prices for its movies,” Simon said. 

“Redbox claims that Disney intends to push aside middlemen like itself and Netflix and distribute directly to consumers, through the subscription channel it has already announced, and also through Hulu, of which it will own a majority of once the Fox acquisition goes through.”

Simon discussed the difference between what constitutes a digital copying and distribution of copyrighted works.

“From the copyright owner’s standpoint, a movie purchased on disc is qualitatively different from one purchased digitally,” Simon said. 

“Physical media can only be shared one at a time, which builds enough friction into the transaction as to limit potential harm to the copyright owner.”

However, digital downloads can be shared an unlimited number of times virtually seamlessly.

“Studios can address this vulnerability in a number of ways,” Simon said. “In some cases, digital rights management tools limit the consumer’s ability to download or transfer the file at all.”

He explained that if a studio decides to permit consumers to download a movie for unrestricted use, they will have built into their pricing the possibility of file sharing.

“In Disney’s case, it is willing to sell download codes in a bundle with a DVD and Blu-ray at a lower price than it would be willing to sell the codes on a stand-alone basis,” Simon said. “As I see it, it doesn’t make sense to pretend that a download code is the same as a physical copy.”

The world of media and entertainment is being transformed by the internet at a rapid pace, he said.

“Markets, companies and institutions are being challenged to adapt,” Simon said. “This transformation is also testing the boundaries of copyright law, the basic concepts of which are a century old.”

It’s all coming down to semantics, according to the attorney.

“Words like 'copying,' 'sale' (and) 'distribution' that seem to have clear meanings become less clear when applied to bits of data,” Simon said. 

“The Disney/Redbox case addresses one relatively narrow issue, but apart from the precedential effect it may have in clarifying first-sale doctrine, it will add a brick to the overall understanding of how to apply a 20th century statute to 21st century problems.”

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