The movie studios have seen the online movie rental service Zediva and filed their thumbs-down review of the site in federal court Monday, asking for monetary damages and an immediate shutdown.
Zediva.com, which officially launched in mid-March, rents new release movies without permission from the studios, by letting its customers rent a DVD player and disk from afar. Only one person can rent a given disk at a time. That, the company argues, puts it in the same legal bucket as a traditional video rental store.
Clearly the movie studios think differently.
Fox, Warner Bros., Disney, Twentieth Century Fox, Paramount and Universal jointly sued the five-person Sunnyvale start-up, alleging the company had no right to stream their movies without permission. The suit seeks temporary and permanent injunctions, all profits, and $150,000 for every movie Zediva streamed.
The suit also names the company's CEO Venkatesh Srinivasan, who is singled out for having come up with the idea for the service.
Competing services like Amazon, Netflix and iTunes all negotiate rights to stream movies online, and get to make a digital copy that can be streamed immediately to any number of viewers. But Hollywood studios hold off on releasing those rights for new movies until after the first month or so of their release on DVD, in order to maximize DVD sales. Netflix has even agreed not to rent movies from some studios in that first month, as a way to get the rights to more movies in the studio's back catalog.
Zediva just learned of the suit and had no immediate comment.
However, in a Wired piece examining the legality of the service, UC Berkeley law professor Jason Schultz argued the company had some good defenses.
"The first sale [doctrine] allowed Netflix and Redbox to come into existence and a court might be sympathetic because Zediva is trying to respect one-copy limitations,” Schultz said. “If the company is buying legitimate copies they could rent out in a physical world, why not let them rent it out digitally with each rental tied to a physical copy with only one person using it at a given time? The economics are quite similar."
But James Grimmelmann, an associate law professor at New York Law School who specializes in online legal issues, predicted this suit would be coming and that Zediva is doomed.
"Zediva’s supposed ‘loophole’ in copyright law doesn’t exist," Grimmelmann wrote in a blog post after Zediva launched. "Zediva is about to get pounded by the movie studios, and hard."
Schultz had hoped that the studios might strike a licensing deal with Zediva, instead of filing suit. That's a longshot with Hollywood, which tends to react quickly to perceived threats to its business model, including a suit filed against Sony in the 1980s to kill off the VCR. That suit made its way all the way to the Supreme Court, which ruled the devices were legal, creating a massively profitable new market for the studios.
The complaint was filed in the U.S. District Court in Los Angeles.
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