jcb
always emerging from hibernation
- Joined
- Apr 28, 2007
In a decision that is anything but clear, the federal court hearing Disney's dispute with Redbox denied Disney request for a preliminary injunction. Disney sued Redbox for repackaging the "download code" that Disney sold with the DVD/Blu-Ray combo packs.
The first part of the decision addressed Disney's contract claims, holding Disney had not used sufficiently clear language on the outside of the combo pack to give the purchaser notice that the purchaser had to agree to the contract terms. Disney can correct this in future sales so look for the fine print on Blu-Ray boxes to increase.
The bizarre part of the decision concerned Disney's copyright claim. The court denied Disney's request for an injunction finding Redbox might be able to prove "copyright misuse" which is a defense to a copyright infringement claim. Copyright misuse arises out of a copyright holder’s attempt to unfairly claim rights broader than those granted by the copyright itself. As I said on the podcast, copyright misuse is rarely ever asserted and even more rarely successful. Disney's conduct fit, even arguably, none of the common descriptions of copyright misuse.
Instead, the court said Disney may have engaged in copyright misuse when it tried to enforce its exclusive right to sell the copyrighted work against people who had purchased the copy and wanted to resell the digital movie. Here is the court's explanation (with citations to other decisions omitted):
It seems to me that the court is saying the right to resell the physical copy of a work means the end purchaser must also have the right to separately sell the digital copy of the work (of course, the digital copy has to be first lawfully obtained, typically by buying it with the physical DVD or BluRay). As I understand it, this is known as the "first sale" doctrine. If you buy a book that is copyrighted, you can sell the book without violating the copyright laws. For more: https://www.justice.gov/usam/crimin...54-copyright-infringement-first-sale-doctrine
The court's discussion of copyright misuse seems to rest entirely on its finding that Disney engaged in copyright misuse by trying to circumvent the first sale doctrine. I don't agree with the court's conclusions because I don't understand how a copyright holder (Disney) engages in misuse by preventing resales of copies of their product (the digital movie) when that product is divorced from the physical medium (the DVD or BluRay).
But what makes this decision very hard (if not impossible) for me to understand is that, after saying Disney may have engaged in copyright misuse by trying to circumvent the first sale doctrine as to the downloaded movie, the court then says "it appears to the court that the first sale doctrine is not applicable to this case" and, further, rejected Redbox's attempt to apply the first sale doctrine to digital copies: "Because no particular, fixed copy of a copyrighted work yet existed at the time Redbox purchased, or sold, a digital download code, the first sale doctrine is inapplicable to this case."
The decision does not decide whether Disney actually engaged in copyright misuse. Procedurally, it merely decided Disney was not entitled to an injunction. The decision nevertheless seems to indicate that this federal judge might very well ultimately find that Disney engaged in copyright misuse. You can bet Disney will appeal as soon as it can. Procedurally, Disney can ask an appeals court to review this decision. The stakes are enormous. According to one article published by the American Bar Association (https://apps.americanbar.org/litiga...ctual-property-copyright-misuse-overview.html):
The first part of the decision addressed Disney's contract claims, holding Disney had not used sufficiently clear language on the outside of the combo pack to give the purchaser notice that the purchaser had to agree to the contract terms. Disney can correct this in future sales so look for the fine print on Blu-Ray boxes to increase.
The bizarre part of the decision concerned Disney's copyright claim. The court denied Disney's request for an injunction finding Redbox might be able to prove "copyright misuse" which is a defense to a copyright infringement claim. Copyright misuse arises out of a copyright holder’s attempt to unfairly claim rights broader than those granted by the copyright itself. As I said on the podcast, copyright misuse is rarely ever asserted and even more rarely successful. Disney's conduct fit, even arguably, none of the common descriptions of copyright misuse.
Instead, the court said Disney may have engaged in copyright misuse when it tried to enforce its exclusive right to sell the copyrighted work against people who had purchased the copy and wanted to resell the digital movie. Here is the court's explanation (with citations to other decisions omitted):
The Copyright Act gives copyright owners the exclusive right to distribute copies of the copyrighted work. 17 U.S.C. § 106(3); Adobe Sys., Inc. v. Christenson, 809 F.3d 1071, 1076 (9th Cir. 2015). That right is exhausted, however, once the owner places a copy of a copyrighted item into the stream of commerce by selling it. Id.; 17 U.S.C. § 109(a); Vernor v. Autodesk, 621 F.3d 1102, 1107 (9th Cir. 2010). In other words, once a copyright owner transfers title to a particular copy of a work, the transferor is powerless to stop the transferee from redistributing that copy as he chooses.
There can be no dispute, therefore, that Disney’s copyrights do not give it the power to prevent consumers from selling or otherwise transferring the Blu-ray discs and DVDs contained within Combo Packs. Disney does not contend otherwise. Nevertheless, the terms of both digital download services’ license agreements purport to give Disney a power specifically denied to copyright holders by § 109(a). RedeemDigitalMovies requires redeemers to represent that they are currently “the owner of the physical product that accompanied the digital code at the time of purchase,” while the Movies Anywhere terms of use only allow registered members to “enter authorized . . . Digital Copy codes from a Digital Copy enabled . . . physical product that is owned by [that member].” Thus, Combo Pack purchasers cannot access digital movie content, for which they have already paid, without exceeding the scope of the license agreement unless they forego their statutorily-guaranteed right to distribute their physical copies of that same movie as they see fit. This improper leveraging of Disney’s copyright in the digital content to restrict secondary transfers of physical copies directly implicates and conflicts with public policy enshrined in the Copyright Act, and constitutes copyright misuse.
There can be no dispute, therefore, that Disney’s copyrights do not give it the power to prevent consumers from selling or otherwise transferring the Blu-ray discs and DVDs contained within Combo Packs. Disney does not contend otherwise. Nevertheless, the terms of both digital download services’ license agreements purport to give Disney a power specifically denied to copyright holders by § 109(a). RedeemDigitalMovies requires redeemers to represent that they are currently “the owner of the physical product that accompanied the digital code at the time of purchase,” while the Movies Anywhere terms of use only allow registered members to “enter authorized . . . Digital Copy codes from a Digital Copy enabled . . . physical product that is owned by [that member].” Thus, Combo Pack purchasers cannot access digital movie content, for which they have already paid, without exceeding the scope of the license agreement unless they forego their statutorily-guaranteed right to distribute their physical copies of that same movie as they see fit. This improper leveraging of Disney’s copyright in the digital content to restrict secondary transfers of physical copies directly implicates and conflicts with public policy enshrined in the Copyright Act, and constitutes copyright misuse.
It seems to me that the court is saying the right to resell the physical copy of a work means the end purchaser must also have the right to separately sell the digital copy of the work (of course, the digital copy has to be first lawfully obtained, typically by buying it with the physical DVD or BluRay). As I understand it, this is known as the "first sale" doctrine. If you buy a book that is copyrighted, you can sell the book without violating the copyright laws. For more: https://www.justice.gov/usam/crimin...54-copyright-infringement-first-sale-doctrine
The court's discussion of copyright misuse seems to rest entirely on its finding that Disney engaged in copyright misuse by trying to circumvent the first sale doctrine. I don't agree with the court's conclusions because I don't understand how a copyright holder (Disney) engages in misuse by preventing resales of copies of their product (the digital movie) when that product is divorced from the physical medium (the DVD or BluRay).
But what makes this decision very hard (if not impossible) for me to understand is that, after saying Disney may have engaged in copyright misuse by trying to circumvent the first sale doctrine as to the downloaded movie, the court then says "it appears to the court that the first sale doctrine is not applicable to this case" and, further, rejected Redbox's attempt to apply the first sale doctrine to digital copies: "Because no particular, fixed copy of a copyrighted work yet existed at the time Redbox purchased, or sold, a digital download code, the first sale doctrine is inapplicable to this case."
The decision does not decide whether Disney actually engaged in copyright misuse. Procedurally, it merely decided Disney was not entitled to an injunction. The decision nevertheless seems to indicate that this federal judge might very well ultimately find that Disney engaged in copyright misuse. You can bet Disney will appeal as soon as it can. Procedurally, Disney can ask an appeals court to review this decision. The stakes are enormous. According to one article published by the American Bar Association (https://apps.americanbar.org/litiga...ctual-property-copyright-misuse-overview.html):
Where the affirmative defense of copyright misuse has been proven, the copyright holder is prevented from enforcing its copyright until it demonstrates that it has purged the misuse by abandoning the inappropriate conduct, and in cases where the misuse had actual anticompetitive consequences, the rights holder must prove that those consequences have dissipated.[6] If this isn’t shown, the copyright can’t be enforced.
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