Redbox Accuses Disney Of Attempting to Stifle Competition With Lawsuit

Ross Dettman/AP Images for Redbox

Redbox accuses Disney of attempting to stifle competition through a lawsuit that seeks to halt the sale of digital movie codes to the automated kiosk service’s customers.

In a response to Disney’s copyright infringement suit, Redbox argues that the Burbank entertainment giant is engaging in anti-consumer and anti-competitive behavior in seeking to halt a service that its customers like — and that it invested the better part of a year and more than $700,000 to develop.

At issue is Redbox’s sale of the digital download codes that Disney bundles in a “combo pack” that also includes a Blu-ray disc and a DVD of the same film. The studio says it offers the bundle at a discount from the price a consumer would otherwise pay if they purchased the individual discs and digital copy separately. Each package contains a label that expressly notes that these codes “are not for sale or transfer.”

Redbox disassembles these combo packs and sells the digital version at a discount — promoting them as a “smart buy” or low-price alternative to other digital services. Disney asked the federal district court to stop this practice through a preliminary injunction, saying the kiosk service is contributing to copyright infringement by enabling its customers to download copies of Disney films without authorization.

The kiosk service countered in its response that Disney is attempting to rewrite seven words — “codes are not for sale or transfer” — into an after-the-fact, restrictive license that violates a principle of contract law known as the “first sale doctrine,” which limits certain rights after a copyrighted work is sold.

“Redbox has the right to transfer the code if it is transferred along with a rest of the Combo Pack,” the company argues in Tuesday’s court filing. “[Disney’s] sole complaint is that Redbox should be preliminarily enjoined from separately selling the codes Redbox lawfully purchases, and thus the digital movie corresponding to it, at a lower cost than what Plaintiffs would like.”

The service argues that Disney’s is simply attempting to derail a cheaper alternative to other digital services — including those that the entertainment conglomerate plans to launch.

“By this motion, [Disney] seek[s] to stifle competition to more smoothly launch Disney’s own digital content streaming service, maximize the price other services like iTunes and Amazon (and their customers) pay for Disney movies, and secure a greater market share for Hulu—the viewing service Disney will control as part of its $52 billion acquisition of 21st Century Fox,” Redbox says in its filing.

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