ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Wednesday, March 7, 2018

Where There's a Will There's a Way

Disney and Redbox are the subjects of a recent legal dispute involving the sale of Disney’s movies. Redbox - the video rental kiosk you see at virtually every Wal-Mart and 7-Eleven around the nation - found a unique way to work around Disney’s waiting period regarding the release of Disney movies to the rental giant. Back in 2013, Redbox tried to work out a vendor deal with the movie-making giant. However, with Redbox seeing a drop in sales of physical movies and offering movies at such discounted prices, the terms were not great for Redbox. Disney stated that it would not make movies available to Redbox until 28 days after the initial release date. With Disney having some of the biggest blockbuster films almost every year, Redbox needed to be able to capitalize on these movies to remain relevant.

Enter Redbox’s lawyers and a copyright principle known as the “first sale doctrine.” Under this doctrine, Redbox is allowed to resell the copyrighted movies as long as they don’t make a copy. So, when the movies hit store shelves, Redbox buys up the bundled copies and puts the DVDs and Blu-Rays in their kiosks. However, it is the digital copies that come in most bundle packs on which the Disney complaint focuses. Redbox, in an effort to undercut the competition, sells the digital movie copies for less than other retailers who do have a vendor agreement with Disney. Disney’s claim is that this resale of digital movies is different than renting the movies because it makes a new copy and is not reselling an existing copy. According to Disney, Redbox is facilitating illegal duplication of its films.

Giants wiggling around contractual terms or fair dealing… time will tell!  As of Tuesday February 21, 2018, the Ninth Circuit has denied Disney’s request for a preliminary injunction.

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