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Hollywood intellectual property dispute erupts over digital codes

In the two corners of a Hollywood dispute is a pair of heavyweights: the largest DVD rental firm in the U.S., Redbox, and the much, much bigger Walt Disney Co.; a colossus so large that it recently announced that it plans to gobble up much of 21st Century Fox for $52.4 billion.

Disney recently filed a motion for a preliminary injunction to stop Redbox from selling digital codes that unlock digital copies of its movies. The entertainment giant filed a lawsuit late last month in which it alleged that Redbox is disassembling Disney combo packs and selling off the pieces.

The packs include a digital code, a Blu-ray disc and a DVD. Disney claims both its contract with Redbox and its copyrights have been violated, stating in court documents that Redbox has breached the terms of its licensing agreement.

According to a news article, the Disney combo packs include warnings that the digital "codes are not for sale or transfer" and that customers who use the codes improperly are infringing on the entertainment giant's copyrights.

In its claim filed in court, Disney says Redbox's "unauthorized sale of codes" is a form of encouragement of "infringing downloads." Disney swats at an anticipated Redbox first sale doctrine defense. The doctrine essentially gives a buyer of a copy of a copyrighted work the right to sell that particular copy.

"The Code is not 'a particular copy' of a work," Disney argues. "The Code is just that -- a Code that, when redeemed in accordance with the applicable terms of service, allows an authorized user of the Code to obtain a digital download."

We don't know how this dispute will be resolved, but we do know that disagreements over intellectual property can often be settled with the help of an experienced entertainment law attorney before costly litigation begins.

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