
Disney loses bid to stop Redbox from selling its digital download codes - IntronExon
https://www.theverge.com/2018/2/21/17036932/disney-redbox-lawsuit-star-wars-marvel-pixar-digital-downloads
======
Groxx
> _But in a Tuesday ruling, US District Judge Dean D. Pregerson denied the
> studio’s request for an injunction, arguing that the warning that “Codes are
> not for sale or transfer” on the DVD and Blu-ray packaging did not
> constitute a binding contract. Furthermore, he wrote that the licensing
> agreements that Disney utilizes on the Movies Anywhere and
> RedeemDigitalMovie websites improperly forced consumers to give up some of
> their basic ownership rights._

Well now. That's quite a nice result. I wonder how well this will extend into
other "basic ownership rights" in other digital fields.

~~~
jimktrains2
I wonder how this affects textbooks that require codes to access online
content required for the course.

~~~
ng-user
Or food products that contain a label "Not for resale"... I know a lot of
Costco products have this because they sell large quantities, but how is that
actually enforced?

~~~
nitrogen
Isn't it just the lack of a UPC/barcode?

~~~
83457
I think it is more of an issue with individually sold items must have
ingredients and nutritional info.

~~~
gtowey
Right. From what I remember the language on most foods says "This item is not
labeled for individual sale," or words to that effect.

------
comex
And here's the full ruling, since (as usual for news sites) The Verge didn't
bother to attach a copy:

[https://drop.qoid.us/031127591204.pdf](https://drop.qoid.us/031127591204.pdf)

edit: actually, The Verge's article links to a Hollywood Reporter article as
its source, which does have a copy. So I should have looked harder. Still...

~~~
spike021
Slightly off-topic but The Verge hasn't been thorough for years.. Unfortunate
since at the very beginning I thought they knew what they were doing.

Thanks for linking that, comex.

~~~
PascLeRasc
I thought that for a long time too but recently I've been impressed by their
research articles, like: [https://www.theverge.com/2017/10/10/16447264/prison-
hacker-r...](https://www.theverge.com/2017/10/10/16447264/prison-hacker-
recycled-computer-fraud-ohio-marion-transkiy)
[https://www.theverge.com/2017/6/13/15782200/one-device-
secre...](https://www.theverge.com/2017/6/13/15782200/one-device-secret-
history-iphone-brian-merchant-book-excerpt)

And their coverage of the Waymo lawsuit was great too. I think they just have
a few subpar writers.

------
Scaevolus
Disney only lost the preliminary injunction. Redbox can continue to sell codes
pending the completion of the full trial (plus appeals, if Disney loses).

~~~
nikanj
This case will go on until Redbox goes bankrupt, settles, or is bought by
Disney.

Lords, even IBM vs SCO is still going strong. Huge cases like this just never
really end, a curious feature of the US legal system.

~~~
adrianN
It's only a failure if you're not a lawyer.

~~~
josteink
The legal system was designed by lawyers. Obviously it works for them.

~~~
amorphid
If there's one lawyer in town, they drive a Chevrolet. If there are two
lawyers in town, they both drive Cadillacs.

------
NKCSS
There's the downside to litigation like this. Loads of people who've never
heard of RedBox (like me), now do and have a cheap alternative for Disney
movies.

~~~
whoisjuan
Wow I'm surprised that you didn't know about RedBox.

I have seen their kiosks in almost every major supermarket for years.

~~~
NKCSS
I'm not from the states :) (.nl here)

~~~
whoisjuan
Ohh! Gotcha. That makes sense.

------
NKCSS
Tried to visit redbox.com, but get an access denied:
[https://imgur.com/a/QoVUJ](https://imgur.com/a/QoVUJ)

> Access Denied You don't have permission to access
> "[http://www.redbox.com/"](http://www.redbox.com/") on this server.
> Reference #18.18a9645f.1519288990.4e3b07

~~~
qilo
I think it's because you are probably visiting the site not from US, because
I'm not from US too, and was never able to visit redbox.com since the first
time I read about this dispute with Disney.

~~~
felipelemos
Exactly. It's the basic Akamai error for: Your IP range are blacklisted, and
it's probably because you are visiting from outside of US.

------
mlazos
So how does RedBox actually sell the code for such a discount and make profit?
Is it because when they buy the physical copy they essentially get two copies?
(One physical and one digital) and then they rent the physical one and make
profit from that?

~~~
mfrommil
Let's assume redbox buys a single bluray for $20, and there's rental demand
for each movie for 1 year. If variable cost = $1/physical disc per month, then
redbox profit per disc would be something like:

P = (# of rentals * $1) - $32

where $32 = the $20 disc cost + monthly var cost

If redbox rents the movie once per week, their per disc annual profit is $20

But, if redbox can now sell the virtual download code for $8 online
(essentially $0 variable cost for holding digital inventory), and digital
sales has little impact on physical rentals, then the equation would be:

P = (# of rentals * $1) - $32 + $8

With annual profit per disc in the 1x/wk rental case now $28, or a 40% gross
margin increase. All #s are just napkin math/assumptions, but it's easy to see
the benefit here for redbox.

~~~
jermaustin1
The license on the Bluray and DVDs that RedBox buys (Rental Licensed)
typically require paying out royalties from the rental fee. As with all
royalties, these are negotiated, but I have heard from people who ran their
own DVD rental store fronts (when that was still a thing) that they could be
as much as $5 per rental on.

Also the disk is usually a LOT more expensive (up to $100 for a new
blockbuster release). DVD store fronts were already so low margin, it didn't
take much disruption before they started to go under.

~~~
qilo
I was under impression that those direct deals with distributors are better
deals for RedBox than buying discs in retail. Because if they don't get a good
deal, they can always buy discs in retail for $20-ish something, and have no
restrictions on renting or resaling them, and with no royalties or fees,
because of "first sale doctrine".

~~~
RobAley
Yes, but then they only get them once they are on general retail sale, and so
don't get the newest (to-rental) movies. They pay more when they have an
agreement, but the theory is they make it back from increased rentals (because
people can't just buy themselves a copy at the supermarket, and enough people
are lazy enough to spend a bit more so they don't have to return it).

------
_justinfunk
My initial response was that Disney should have won this. It seems to me that
Disney gets to control the distribution of it's copyrighted materials. They
bundle a physical and digital version of the movie. So, 1 purchase = 1
"household" can watch the media privately.

What Redbox is doing is constituting 1 purchase = 2 households can watch the
media privately (the renter of the DVD and the purchaser of the code).

I'm not an expert on the First Sale Doctrine, but it seems like the end result
is that Disney would sell fewer copies of it's content (i.e. damages) in
respect to RedBox's actions.

(not a lawyer)

~~~
Tactic
When you purchase something you have the right to resell it. You aren't
purchasing a license, you are purchasing an item, in this case two items: a
DVD and a Digital Copy. So just like if I buy a living room set I can now sell
the couch and the chair separately.

Disney wants to treat the sticker as a legal license. I too, am not a lawyer,
but I think they are on shaky ground.

~~~
neuland
I'm also not a lawyer. But, isn't digital ownership more complex than that (if
they were to have a better contract)? I don't think you can re-sell your
iTunes library or transfer it to a friend.

Though, I'll agree that you _should_ be able to transfer digital goods.
Audible supports this for example.

~~~
opencl
I think the key point here is that Redbox did _not_ buy a digital license from
Disney. They bought a box with a DVD and a piece of paper with a code that can
be redeemed for a digital license. They rent out the DVD and sell the piece of
paper. Both of these are allowed under the first sale doctrine. Disney tried
to tack on additional conditions to using the code on the piece of paper which
the judge called "improper leveraging of Disney’s copyright in the digital
content to restrict secondary transfers of physical copies".

~~~
neuland
That's a good point. When I was reading about this, I didn't put too much
stock in the fact that the code was on a piece of paper in the box. But, it
seems that this is a very narrow ruling based on that fact.

Once someone redeems the code, they presumably have to have a Disney account
and agree to some kind of terms of service.

~~~
qilo
And these Disney's digital copy's redemption "terms of service" _is_ the
subject of judge's ruling. Because those terms force consumers to acknowledge,
that they own the physical copy, which means that these terms put restrictions
on the resale of physical copy (i.e. basically forbids reselling), and it's
not ok for the judge.

~~~
neuland
I get that this ruling is focused on the piece of paper before it's redeemed
and it's really good that a sticker isn't enough to limit your ability to
resell something.

I'm wondering about after someone has redeemed the code. Once someone redeems
the code, they presumably have to sign up for an account and agree to a long
terms of service, which is (to my understanding) more accepted as a contract.
It seems like this ruling doesn't significantly advance the issue of digital
ownership.

------
Buge
Looking at Redbox's website, it looks like you have to buy a physical thing
containing the code and pick it up at the box. I assume directly telling you
the code digitally would be more legally troubling.

~~~
ROFISH
They shuck thousands of videos bought at hundreds box stores. It’s just faster
and easier to put the code slip in the machine the same time as the disc
rather than type all the codes by hand and maybe get it wrong.

Bonus points for that slip having redemption instructions.

------
mholt
> _The case results from Redbox’s lack of an existing business arrangement
> with Disney. The rental service has distribution deals in place with major
> studios like Warner Bros., which allow Redbox to purchase physical DVDs and
> Blu-rays of popular movies that it then offers for rental at its standalone
> kiosks. Disney has struck no such deal, so Redbox purchases retail copies of
> the films and rents those discs, instead._

That's basically what VidAngel did -- a physical retail copy for each
simultaneous rental -- but the courts shut VidAngel down.

~~~
dragonwriter
No, it's not what VidAngel did; VidAngel bought and ripped DVDs, Redbox buys
DVDs and rents the DVDs it buys, which is unmistakably protected under the
First Sale doctrine (the sale of the digital download codes that are sold with
the physical media was disputed, but renting the physical media is non-
controversial.)

Also, the courts didn't shut VidAngel down; VidAngel is still in operation—for
a while apparently defying court orders, now using a different mechanism to
achieve a similar effect, though also excluding movies from the studios which
sued it.

------
mankash666
Any lawyers here? This doesn't seem fair - retail copies were meant for end
consumers, not for another company to hawk and rent out.

The Crux of the legal argument lies in equating Redbox to a regular end-
consumer, which is inaccurate. Can any lawyers comment on this.

~~~
criddell
> retail copies were meant for end consumers, not for another company to hawk
> and rent out

What's the difference? If I buy a hammer at Home Depot, is there any question
that I can rent or loan it to somebody else? Why should intellectual property
be any different?

~~~
mankash666
Because:

1\. Hammers cannot be trivially cloned and mass ditributed digitally for free

2\. Every hammer is the same, while every new digital creation (not copy) is
possibly the blood , sweat & tears of hundreds of people whose sole source of
living is the creation of digital content.

HN has an aversion to DRM & paying for soft goods. I'm assuming you're a
software developer. How would you like your creation to be ruthlessly copied
and mass distributed, killing the potential revenues it would have brought
you, and in extreme cases driving you out of business?

~~~
criddell
The Redbox thing isn't about copyright infringement as far as I can tell.
That's basically what the judge said, right? If I understand it, Redbox was
selling unused licenses rather than infringing copies.

You're right though that HN does have an aversion to DRM. How many movies has
it successfully kept off of pirate sites?

~~~
mankash666
Did you read the article. It's very much about copyright, and I suspect this
will get appealed.

In my opinion, the courts have this wrong on 2 fronts:

1\. Redbox != Regular end customer, especially when the good in question
contains DRM-ed digital content

2\. Redbox doesn't have the authority to sell digital content they haven't
produced, just like an iTunes user doesn't have the right to sell an MP3
purchased off iTunes.

~~~
dragonwriter
> Redbox != Regular end customer

Nothing in the decision rests on Redbox being a “regular end consumer”; it
rests of first-sale, a legal doctrine which generally stands in direct
opposition to the idea of “end consumer” as a role to which a seller can
restrict goods.

> Redbox doesn't have the authority to sell digital content they haven't
> produced

The first sale doctrine gives them the right to disassemble and resell the
physical items in the box they purchase, which is what they are doing.

Even _Disney_ isn't arguing that Redbox is illegally selling digital product
or violating copyright directly, instead they are claiming that Redbox is
_contributing_ to infringement by the _end purchasers_ who are violating the
copyright license by using a download code without owning the disk, and that
Redbox is violating a purchase contract with Disney entered into by the act of
purchasing the package at retail that prohibits separating the physical
components notwithstanding the right of first sale.

The judge here upheld the right of first sale against that assault and also
stated that the license terms Disney is asserting that end purchasers would
violate are themselves an abuse of copyright, because they would prevent the
exercise of the right of first sale.

------
mankash666
HN has an illogical aversion to anything DRM. This particular case is harmful
to anyone producing digital good (apps, music, movies, blogs, etc).

Let's understand this really damaging verdict by using an app as an example.

1\. Disney puts out an app that can either be bought as a disk at Walmart or
as a download on the app store

2\. A third party app store that doesn't have a re-seller/partner agreement
with Disney buys a disk, and claims that the legal purchase of the disk now
entitles it to re-distribute the app as it deems fit, including selling
DIGITAL copies of the app on it's own app store.

Does this seem logical or fair to you guys?

The logical fallacy here is in equating the third-party app store to a regular
end-user. Additionally, the third-party app store selling the app digitally is
equivalent to Spotify streaming content it hasn't licensed under the guise of
owning CDs of the said content.

This is wrong and dangerous for the digital economy. If this verdict holds, I
should be able to buy MP3s off iTunes and "rent" it to whom-so-ever I want!!

~~~
CaptSpify
I'd say the logical disconnect is the idea that we should charge for digital
goods after they are already made. The costs to duplicate digital goods are so
low that they should be treated as free.

~~~
mankash666
No - there's ZERO logic in selling items as a function of the cost of creation
or distribution. Pricing has everything to do with the VALUE it offers
customers versus the cost that it takes to create it!!

~~~
CaptSpify
That's an outdated way of thinking about goods and services, and it's why
things like piracy are doing so well.

Good luck with that.

