A ruling against Disney in a court battle with Redbox could have far-reaching implications for the future of download codes. The ruling, a copyright scholar has suggested, could be an “atomic bomb” for copyright in general.
The court case hinged on Disney’s disapproval of the resale of digital download codes (specifically in regards to Star Wars movies) by Redbox, the DVD rental kiosk company. Disney’s claim is that the code sales violate the terms of the digital versions-- as the DVD cases indicate that “codes are not for sale or transfer.” The judge ruled that because of the long-standing ‘first sale’ doctrine, which allows a consumer to resell a DVD after buying it, Disney’s complaint constituted a case of copyright misuse. A copyright misuse ruling comes with a complete unenforceability of Disney’s copyright-- meaning that if upheld after an imminent appeal, Disney could no longer enforce a copyright on their movies at all, including: unauthorized merchandising, charging admission for unauthorized screenings of Disney movies, or even bootleg DVDs being sold.
The news of the potentially cataclysmic ruling was reported by Ars Technica. Redbox has a history of purchasing copies of DVDs from traditional retail stores for any company that it does not have a rental licensing agreement with, including Disney. In response Redbox has taken the download codes bundled with the Disney discs it buys and resold them to consumers for a reduced price to add revenue.. The codes, seen as a convenience to consumers by Disney, allow the owner of the DVD to watch their movie digitally by use of their Movies Anywhere service. The Ars Technica piece offers commentary from Cornell Law School copyright scholar James Grimmelmann, who makes mention that copyright misuse is a little-known and little-used invocation of the court, and that it is likely the judge is unaware of “how big of a genie it has potentially let out of a bottle.”
Grimmelmann is confident Disney will appeal, and most likely have the ruling reversed. Should the ruling be upheld, it will basically ban the idea of tying a download code to physical ownership, and would likely cause companies to discontinue offering codes with purchase. This would not stop with just DVDs and Blu-Rays, and cause video game companies to change how they sell and distribute download codes as well. It is pointed out that the judge considered the text also on Disney DVD cases that state “this product cannot be resold or rented individually” as being factually inaccurate due to first-sale, thereby invalidating any other similar text on the cases as legally binding.
As Grimmelmann says, it is unlikely the copyright misuse ruling is upheld. The concept of digital ownership after getting rid of physical ownership is a thorny issue. As entertainment moves more towards digital ownership, this is something that will have to be navigated sooner than later. This could result in a sea change of how digital ownership works-- potentially leading to the loss of digital movies when selling the physical product, or more likely, the ability to resell digital copies even after redemption.
Source: Ars Technica, reddit