Published by LawTechie - March 16, 2011 - LawTechie

Movie streaming newcomer Zediva allows users to watch newly released DVDs at $2 per “rental” despite failing to secure any copyright license with Hollywood studios. Zediva fills a market gap left open by streaming services, such as Netflix, by streaming brand new TV and movie releases which Netflix cannot do as per its copyright license with Hollywood studios. Wired reports:

So how [does Zediva] get away with it?

Quite simply — the company literally rents you a DVD and a DVD player, with your computer, tablet or Google TV as the remote control. Unlike the other streaming movie services, Zediva doesn’t turn a movie into a file on their servers that they can serve to as many users as care to see it at once.

Instead, Zediva’s servers have DVD drives and actual DVDs. So when you rent a movie, that disc goes out of circulation until you release it back to the company, just like in one of those increasingly rare real-world video stores.

Zediva makes clever use of the Copyright First-Sale doctrine which allows a buyer of a copyrighted work to sell or lend (e.g., “rent”) that work; copyright law is not violated in this way since Zediva does not make an unauthorized copy of the work but merely transfers (or lends) ownership of that single purchase. (Contrast with Netflix, which makes copies of the files on its server to stream to multiple users simultaneously.)

Potential Flaw

Zediva’s loophole is very similar to what Cablevision did in Cartoon Network LP, LLLP v. CSC Holdings, Inc., 536 F. 3d 121 (2nd Cir. 2008), where it argued that streaming DVR recordings to cable subscribers did not violate copyright law. In Cartoon Network, the studio argued that DVR streaming violated its copyrights because Cablevision had to copy the programs into its buffer memory for transmission to the viewers’ televisions. The Court held that there was no copying as per the Copyright Act because such data buffering occurred for no longer than “transitory duration” as per 17 U.S.C. § 101. The Court contrasted this with MAI Systems Corp. v. Peak Computer Inc., 991 F.2d 511 (9th Cir.1993), which found copyright infringement where a computer program was loaded into RAM because computer RAM buffering could potentially hold a copy for a prolonged period (e.g., until the computer is turned off).

Following Cartoon Network’s reasoning, Zediva’s streaming could potentially constitute unauthorized copying precisely because Zediva streams to users’ computers which have RAM and which could potentially store those streamed videos in their RAM for a “fixed duration.” This would, of course, be predicated on a theory of contributory infringement.

LawTechie is a blog focusing on trends in tech and digital media. Areas covered include intellectual property, cyberlaw, venture capital, transactions and litigation as they relate to the emerging sectors. The blog is edited by the firm's partner Tim Bukher with contributions from the firm's experts in their respective areas of law.

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