New technologies allow “to rent DVD” through the Internet

Group of entertainment companies sued owners of Zediva service. Why? They provide what they describe as a DVD “rental” service available at www.zediva.com. To operate this service, defendants have purchased hundreds of DVD players and installed them in cabinets at a data center they lease. They also have purchased copies of plaintiffs’ copyrighted works on DVD, and place those DVDs in their DVD players, with each DVD remaining in its respective DVD player while it is transmitted to service’ customers on multiple occasions.

When a customer requests a particular copyrighted work, defendants, through their Zediva service: (1) start the play process on a particular DVD player holding the requested copyrighted work; (2) convert the analog video signal from the DVD player into a digital signal using a video adapter; (3) feed the digital signal into a DVD control server which converts the digital signal to a form suitable for streaming across the Internet; (4) convert the digital signal to a format that can be viewed in the player created by defendants and used on their website; (5) transmit the performance via the internet to the customer; and (6) provide the customer with a custom viewer necessary to view the video stream.

To begin this process, the customer “presses” a virtual button on defendants’ website. Defendants’ system then sends a request to their control server, which then begins a series of actions on various servers created and controlled by defendants. Customers never have physical access to the DVDs or the DVD players. In fact, the customers do not know which particular DVD player or DVD is used by defendants to transmit the requested copyrighted work. In addition, the customers cannot access all the other features available on the DVD, such as deleted and extra scenes, or other special DVD features. Defendants maintain exclusive control of their servers, and the customers have no control whatsoever over the various servers that defendants use to direct traffic among their stacks of DVD players.

Defendants describe their service as allowing customers to “rent” a particular DVD and DVD player for 14 days. The content of the DVD is streamed to a customer for a maximum period of four hours, provided that the customer does not pause it for more than one hour during that time. After four hours of total “rental” time or an hour-long pause, whichever occurs first, defendants use the DVD player containing the same DVD to transmit the copyrighted work to a different customer. When the first customer makes a request to resume viewing, the transmission may be sent from a different DVD or a different DVD player than the one originally used to transmit the copyrighted work in the earlier “rental” period. According to defendants’ website, if all of the copies of a particular copyrighted work are “rented out” when a customer wants to view it, that customer “can request to be notified, via email, when it becomes available.”

Service’ owners are not licensed or otherwise authorized by plaintiffs to distribute or perform any of plaintiffs’ copyrighted works. Defendants derive several benefits from performing plaintiffs’ copyrighted works without a license. For example, performances of copyrighted works can be offered at below-market prices. Defendants also have an availability advantage over licensed internet video on demand services because, those services must take certain copyrighted works off the market during exclusivity periods that certain plaintiffs may have granted to subscription cable television channels while defendants can continue to offer those copyrighted works during the exclusivity period. In addition, defendants have a durational access advantage in that they offer access to a particular copyrighted work for 14 days for a single fee, whereas licensed video on demand services may be required by contract to offer a more limited viewing period, such as 48 hours. In addition, defendants use images from plaintiffs’ copyrighted works in their advertising without permission.

In this case, defendants are violating plaintiffs’ exclusive right to publicly perform their copyrighted works by transmitting those copyrighted works to the public over the internet, without a license or plaintiffs’ permission, through the use of Zediva service. The fact that Zediva’s customers initiate the transmission by turning on their computers and choosing which of plaintiffs’ copyrighted works they wish to view is immaterial. Moreover, it does not matter that defendants’ customers are viewing the transmissions at different times and in different places.

Defendants claim that an injunction would significantly harm, if not destroy, their business. In light of the concerns expressed by defendants that the issuance of an injunction in this action may cause them severe financial hardship, the court ordered plaintiffs to post a bond of $50,000, which is “an amount that the court considers proper to pay the costs and damages sustained by any party found to have been wrongfully enjoined or restrained.”