The legal concept of copyright exists expressly because history has taught us that in order to have a culture rich with art, literature, and other forms of media, content creators need to have the opportunity to monetize their work, and prevent others from copying and distributing their work without permission or compensation. This is why copyright infringement is taken so seriously by the courts—otherwise, the literal and figurative value of these rights would be eroded.
However, copyrights are not absolute. It is necessary to balance the legal rights of rightsholders with the rights of the individuals purchasing their work. When rightsholders attempt to incorporate rights and protections not bestowed by copyright protections, this is referred to as ‘copyright misuse.’
Claims of copyright abuse are often raised by defendants in copyright infringement cases, as copyright misuse is an affirmative defense to infringement.
Copyright misuse a more than adequate defense to copyright infringement—that is, a defendant may admit to copyright infringement, but still win the case if the plaintiff engaged in misuse. This type of defense is known as an ‘affirmative defense,’ meaning that unlawful acts by a defendant are more than offset by the unlawful actions of a plaintiff.
To show that copyright abuse has occurred, a defendant must show that the plaintiff has used their copyright to secure an exclusive copyright or monopoly that exceeds the bounds of the rights granted by the copyright, and which is contract to typical public policy.
In short, a rightsholder cannot require that a buyer give up key rights in order to access the material they have purchased. For instance, Netflix cannot ban subscribers from also using Hulu, as this would stifle competition in the marketplace. Other common forms of copyright misuse include:
- Exaggerating the legal penalties for copyright infringement to intimidate buyers into behaving themselves.
- Prohibiting a buyer from creating a similar product or piece of work to stifle competition.
- Incorporating elements of works in the public domain into your work, and failing to disclose that those elements are not part of your original copyrighted work.
- Requiring software buyers to only run the software on computer systems and equipment also sold by the software seller.
Copyright misuse is rare. But it does happen. As it so happens, Redbox may be in the process of showing that Walt Disney Co. misused its copyright.
Recently, Walt Disney sued Redbox, the company which owns and operates the movie rental kiosks ubiquitous in shopping centers and gas station parking lots. In their complaint, Disney accused Redbox of copyright infringement. But to understand their argument, it’s necessary to backtrack a bit.
In recent years, you may have purchased a DVD or Blu-Ray “combo pack” which included a code for a downloadable version of the film on the disc, which can be played on computers, tablets, phones, and other digital devices.
What you may not have realized is that, in the case of Disney films, the company includes legal language in the packaging which states that in order to download the digital copy, you must currently own the corresponding disc. Basically, Disney forces you to surrender your right to resell the DVD or Blu-Ray in order to access the digital version you have paid for.
Redbox does not have a special distribution agreement with Disney—the company actually purchases retail copies of Disney’s films. When Disney began releasing their films in combo packs, Redbox found a creative—yet obvious—means of monetizing the digital downloads: they offered the codes for sale. This gave Redbox customers the option of buying permanent digital copies of new Disney films, rather than renting a disc temporarily. By selling the bundled codes, Redbox was able to sell the digital downloads at prices far lower than offered through dedicated digital outlets like iTunes or Google’s Play Store.
Disney filed suit against Redbox in December 2017, alleging that Redbox had violated packaging language which stated that the digital codes were “not for sale or transfer.”
In its defense, Redbox claimed that (1) the movie codes were physical products, and thus subject to the first sale doctrine that allows for the resale of used video and music media, and (2) that Disney had engaged in copyright misuse in order to undermine Redbox’s rental business. Hoping to stop Redbox in its tracks as quickly as possible, Disney requested a preliminary injunction against Redbox, which would require Redbox to immediately cease sales of movie codes while the case progressed.
Instead, the court denied Disney’s request. While U.S. District Court Judge Dean Pregerson did not agree with Redbox’s main argument about the first sale doctrine applying, his opinion made it clear that Redbox has a case when it comes to copyright misuse.
Pregerson pointed out that the simple statement “codes are not for sale or transfer” on Disney’s packaging wasn’t sufficient to serve as a contract binding buyers to Disney’s licensing terms. In part, this was because:
[T]he presence of other, similarly assertive but unquestionably non-binding language on the Combo Pack boxes casts further doubt upon the argument that the phrase “Not for Sale or Transfer” communicates the terms or existence of a valid offer. The packaging also states, for example, that “This product… cannot be resold or rented individually.” …This prescription is demonstrably false, at lease insofar as it pertains to the Blu-ray disc and DVD portions of the Combo Pack. The Copyright Act explicitly provides that the owner of a particular copy “is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of the possession of that copy.” …Thus, the clearly unenforceable “cannot be resold individually” language conveys nothing so much as Disney’s preference about consumers’ future behavior, rather than the existence of a binding agreement.
In addition, Pregerson noted the sites on which consumers could redeem codes for digital downloads had legal language indicating that they must currently own the corresponding physical disc in order to receive their download. However, as Pregerson pointed out above, purchasers have the right to resell a copyrighted product. Thus, Disney is unlawfully blocking buyers from fully realizing their licensee rights.
Thus, Pregerson writes, “This improper leveraging of Disney’s copyright in the digital content to restrict secondary transfers of physical copies directly implicates and conflicts with public policy enshrined in the Copyright Act, and constitutes copyright misuse.”
Pregerson’s strongly worded opinion makes it pretty clear that Redbox’s case is in good shape, even if their “first use” argument fails.
This case is a perfect example of how a copyright owner may undermine their ability to enforce their copyright against infringement by being too aggressive and exaggerating the protections afforded by copyright.
If you are the defendant in a copyright infringement case, and you believe the plaintiff has engaged in copyright misuse, or you are a rightsholder who wishes to avoid such misuse, the Law Office of Michael O’Brien can help. To learn more, contact us today by calling (916) 760-8265, or sending us a message using our contact form.