Disney Enters., Inc. v. Redbox Automated Retail, LLC
Disney Enters., Inc. v. Redbox Automated Retail, LLC
Opinion of the Court
Presently before the court is Plaintiffs Disney Enterprises, Inc., Buena Vista Home Entertainment, Inc., Lucasfilm Ltd., LLC, and MVL Film Finance LLC (collectively, "Disney")'s Motion for Preliminary Injunction. Having considered the submissions of the parties and heard oral argument, the court grants the motion and adopts the following Order.
I. Background
As explained in further detail in this Court's prior Order (Dkt. 74), Disney owns the copyrights to several well-known movies, including Coco , Beauty and the Beast , Star Wars: The Last Jedi , and Black Panther . Disney distributes its films in physical formats, such as DVD and Blu-ray discs, as well as via streaming and digital download services. Among Disney's product offerings are "Combo Packs," which contain a DVD and/or Blu-ray disc version of a particular Disney movie and a piece of paper containing an alphanumeric code (a "download Code" or "Code"). The Code can be inputted or redeemed at RedeemDigitalMovies.com or DisneyMoviesAnywhere.com ("Movies Anywhere") (collectively, the "redemption sites" or "download sites") to allow a user to stream and/or download the same Disney movie contained on the physical discs.
Defendant Redbox Automated Retail, LLC ("Redbox") rents and sells movies to consumers via automated kiosks that dispense DVD and Blu-ray discs. Redbox has, for many years, purchased and disassembled Combo Packs, then rented or sold the physical discs therein to Redbox customers. In late 2017, Redbox also began offering Combo Pack download Codes for individual sale at Redbox kiosks.
Soon after, Disney filed this suit and sought a preliminary injunction enjoining Redbox from offering standalone Disney Codes for sale. Disney's Complaint alleged that Redbox's resale of Combo Pack Codes (1) constituted contributory copyright infringement (2) breached a contract Redbox enters into when it purchases Combo Packs, (3) interfered with Disney's contractual relations, and (4) violated California false advertising and unfair competition laws. This court denied Disney's *1150motion for a preliminary injunction, concluding that, in light of the specific language printed upon Combo Pack boxes and used within the redemption sites' Terms of Use, Disney could not show a likelihood of success on the merits of its breach of contract or contributory copyright infringement claims.
Disney subsequently changed the language on its Combo Pack boxes, changed the download sites' Terms of Use, and amended its Complaint.
A visitor to RedeemDigitalMovie.com now sees a pop-up text box stating,
All digital movie codes are owned by [Disney]. Digital codes originally packaged in a combination disc + code packages (sic) may not be sold separately and may be redeemed only by an individual who obtains the code in the original combination disc + code package .... Digital codes are not authorized for redemption if sold separately. You may use digital movie codes to obtain licensed access to digital movies only as specifically authorized under these terms and conditions, the "Help" section of this website, the Disney Terms of Use, and the terms and conditions of Movies Anywhere or any participating provider of digital content ....
(Declaration of Kelly Klaus, Ex. B.) The far lengthier Movies Anywhere Terms of Use state, within a "Copyright License Grant and Restriction" section, that "[t]he purchase of a license to stream or download any Movies Anywhere Content does not create an ownership interest in the licensed Content." (Klaus Decl., Ex. D at 17.) The terms of use further state that users will not "redeem an unauthorized ... digital code," and "For combination packs: By redeeming a digital code ... you are representing that you ... obtained the code in an original ... package and the code was not purchased separately. Your representation is a condition of redemption ...." (Id. ) Before a consumer can view digital content, he or she must enter a Code on a webpage that displays a similar message and requires the user to affirmatively click a "Redeem" button. (Klaus Decl. Exs. B, C.)
Disney's First Amended Complaint ("FAC") alleges a single cause of action *1151against Redbox for contributory copyright infringement. Disney now renews its motion for a preliminary injunction enjoining Redbox from selling Disney's download Codes.
II. Legal Standard
A private party seeking a preliminary injunction must show that: (i) it is likely to succeed on the merits; (ii) it will suffer irreparable harm in the absence of preliminary relief; (iii) the balancing of the equities between the parties that would result from the issuance or denial of the injunction tips in its favor; and (iv) an injunction will be in the public interest. Winter v. Natural Resources Def. Council,
III. Discussion
A. Likelihood of Success on the Merits
i. Contributory Copyright Infringement
The FAC's sole cause of action alleges that Redbox customers who purchase a Disney Code from Redbox violate Disney's copyright when they redeem the Code because Redbox customers must first represent, as a condition of obtaining a license to download and reproduce content via the redemption sites, that they did not obtain the Code separately from the Combo Pack. Any such representation by a Redbox customer, Disney alleges, is necessarily false, resulting in an unauthorized download and copyright infringement. Disney alleges that Redbox is contributorily liable for that infringement because it knows that customers will make unauthorized downloads and contributes to those improper downloads by selling Codes and instructing Redbox customers to redeem them.
As explained in this Court's prior Order, a copyright owner has the exclusive right to reproduce the copyrighted work.
*1152A restrictive license exists where the copyright owner "(1) specifies that the user is granted a license; (2) significantly restricts the user's ability to transfer the software; and (3) imposes notable use restrictions." Vernor v. Autodesk, Inc.,
Disney responds that the redemption site license agreement is "indisputably enforceable" because it is a "clickwrap" agreement that requires affirmative assent. (Reply at 5.) As this Court has explained, a valid contract requires capable, consenting parties, a lawful object, and sufficient cause or consideration.
A "clickwrap" agreement, in contrast, requires users to affirmatively manifest assent to terms on a website or software installation screen by, after being presented with the terms, clicking on some version of an "I agree" button. Nguyen v. Barnes & Noble Inc., Nguyen v. Barnes & Noble Inc.,
Furthermore, although Disney is correct that courts often find clickwrap agreements enforceable, there is "no per se rule of validity or invalidity ...." In re Facebook,
Thus, notwithstanding the existence of clickwrap agreements on the redemption sites, the court's analysis of whether the terms of those agreements are likely enforceable cannot be entirely divorced from consideration of the Combo Pack packaging's disclosures. That analysis is complicated to some degree because both parties' arguments about the existence of a restrictive license suffer from imprecision regarding the particular language at issue. Disney bases its arguments on the Black Panther packaging language, even though the packaging of other movies named in the FAC differed significantly, as discussed in this Court's prior Order. Redbox's Opposition largely cites examples of language from packaging predating this Court's prior Order and Disney's Black Panther revisions. Having discussed this disconnect at oral argument, and having afforded Redbox the opportunity to file supplemental briefing regarding the Black Panther disclosures, the court limits its consideration to the revised language present on the Black Panther Combo Packs.
*1154Taking that language into consideration, the court concludes that Disney has shown that it is likely to succeed on the merits of its contributory infringement claim. At argument, Redbox contended that it can only be liable for contributory infringement if it had the subjective intent to be a contributory infringer. Redbox is incorrect. See Louis Vuitton Malletier, S.A. v. Akanoc Sols., Inc.,
It is also undisputed that Redbox knows that customers who purchase standalone Disney Codes from Redbox kiosks do in fact proceed to violate the clickwrap terms and redeem the Codes. Indeed, Redbox affirmatively instructs its customers to visit the redemption sites, "[e]nter the digital movie code ...," and "[f]ollow the on-screen prompts and enjoy the show!" (Klaus Decl., Ex Z.)
If, however, the clickwrap terms are unenforceable, downloaders do not directly infringe upon Disney's copyright by violating those terms, and Redbox's actual knowledge will not be sufficient to render Redbox liable for contributory copyright infringement. Redbox therefore argues that, notwithstanding the revised terms displayed on the Black Panther packaging, Combo Pack purchasers obtain an ownership interest in a digital download, and not merely a limited license to access or view digital content. This argument is not persuasive. Redbox's argument fails, in large part, because it attempts to characterize the Black Panther language as a deficient "boxtop" license agreement. As this Court has explained, the Ninth Circuit analyzed a purported boxtop agreement, where all license terms are printed on the outside of a product package, in Arizona Cartridge Remanufacturers Association, Inc. v. Lexmark International, Inc.,
Please read before opening. Opening of this package or using the patented cartridge inside confirms your acceptance of the following license agreement. The patented cartridge is sold at a special price subject to a restriction that it may be used only once. Following this initial use, you agree to return the empty cartridge only to Lexmark for remanufacturing and recycling. If you don't accept these terms, return the unopened package to your point of purchase. A regular price cartridge without these terms is available.
In its first motion for a preliminary injunction, Disney did argue that earlier versions of Combo Pack boxes, which stated only that "Codes are not for sale or transfer[,]" were analogous to the packaging in Lexmark, and that Redbox agreed to later-disclosed license conditions simply by opening Combo Packs. This Court rejected that argument, concluded that Disney's packaging was insufficient to create either a boxtop or shrinkwrap license, and denied Disney an injunction. Notably, however, Disney's instant motion does not contend that even the revised Black Panther box, with its more thorough language, constitutes a boxtop license. Although, as discussed above, the court also disagrees with Disney's current position that only the redemption site language is relevant, the pertinent question is whether Disney can likely show that Combo Pack purchasers obtained a restrictive digital license rather than an ownership right.
As discussed above, the circumstances here bear characteristics of shrinkwrap and clickwrap agreements. See Savetsky,
Furthermore, although not explicitly set forth on either the Black Panther packaging or the redemption sites, Plaintiff represented to the court at oral argument that purchasers who do not accept the terms of the digital license may return Combo Packs to the retailer.
At this stage, the court need not make a determination whether Combo Pack purchasers enter into a shrinkwrap, clickwrap, or other type of agreement, nor precisely delineate the terms of any such agreement. It appears from the record currently before the court that neither Redbox nor any other Combo Pack purchaser could (or did) reasonably believe that, notwithstanding the Black Panther licensing language on the box itself, the Combo Pack included unrestricted ownership rights to any digital content. See Vernor,
ii. Defenses
As it did in response to Disney's first motion for a preliminary injunction, Redbox raises defenses of copyright misuse and the first sale doctrine. As this Court explained, the first sale doctrine allows the "owner of a particular copy or phonorecord lawfully made under [the Copyright Act] ... to sell or otherwise dispose of the possession of that copy or phonorecord," without the permission of the copyright holder. UMG v. Augusto,
Nevertheless, Redbox again raises the first sale defense, relying upon new expert testimony and arguing that Plaintiff misrepresented the nature of its server technology. (Opp. at 16.) Even accepting Redbox's expert's testimony at face value, however, the court's analysis is unchanged. Redbox's expert opines that when a consumer redeems a Code, Disney must create a discrete digital copy of the content in a particular user's virtual, cloud-based "locker." (Declaration of Seth Nielson ¶ 6.2.) At argument, however, Redbox conceded that even if such a "particular copy" exists on Disney's servers, the user's computer would have "ultimately the same albeit a second copy," or "another copy" of the user's discrete copy. These inherent contradictions illustrate that the circumstances here do not involve a single, discrete, particular copy to which the first sale doctrine could apply. See Capitol Records, LLC v. ReDigi Inc.,
Redbox also argues that Disney's changes to the redemption sites' terms of use do not cure Disney's prior copyright misuse. Copyright misuse is an affirmative defense that "prevents copyright holders from leveraging their limited monopoly to allow them control of areas outside the monopoly," and extends to any situation implicating "the public policy embodied in the grant of a copyright." A&M Records, Inc. v. Napster, Inc.,
As set forth above, however, Disney has now changed the terms of use on the redemption sites. Downloaders no longer need affirm that they possess the physical discs, to which first sale rights would apply. Instead, RedeemDigitalMovie.com now states that Codes may not be sold separately and may only be redeemed "by an individual who obtains the code" in a Combo Pack. Movies Anywhere states, "For combination packs: By redeeming a digital code ... you are representing that you ... obtained the code in an original ... package and the code was not purchased separately. Your representation is a condition of redemption ...." These revised terms do not encroach upon disc owners' alienation rights or improperly expand Disney's power beyond the sphere of copyright. Under the revised terms, Combo Pack purchasers and recipients continue to enjoy digital access regardless whether they keep or dispose of the physical discs.
Redbox contends that such terms nevertheless continue to constitute misuse because "the digital code is rendered worthless" unless a Combo Pack owner foregoes the first sale rights associated with the physical discs. (Opp. at 12.) That statement is not accurate. Under the old terms, a Combo Pack owner who disposed of the discs was indeed left with a worthless code because continued possession of the discs was a condition of digital access. Now, however, digital access is conditioned not on possession of the discs, but on the manner of Code acquisition. A Combo Pack owner who disposes of the discs is left with the same digital access rights he or she always possessed. Although Redbox is correct that, because Codes are not separately transferable, a Combo Pack owner cannot transfer a Code if he or she disposes of the discs first, the right to transfer a separate Code is not protected by the first sale doctrine or any unconditional ownership rights, as discussed above. A copyright misuse defense, therefore, is unlikely to succeed.
B. Remaining Factors
A party seeking a preliminary injunction must also show that it will suffer irreparable harm in the absence of an injunction. Winter,
Redbox's Supplemental Opposition argues that, if the court's consideration is limited to the Black Panther language, there is no irreparable harm, and indeed no ripe case or controversy, because Redbox has not sold Black Panther Codes and has no intention of doing so.
IV. Conclusion
For the reasons stated above, Disney's Motion for Preliminary Injunction is GRANTED. Redbox and all of its officers, directors, agents, servants, and employees, and all persons in active concert or participation or in privity with any of them, ARE HEREBY RESTRAINED AND ENJOINED from:
(1) selling or otherwise transferring Plaintiffs' standalone Codes originally included within Combo Packs bearing license terms identical or substantially similar to those displayed upon Plaintiffs' Black Panther Combo Pack packaging;
(2) inducing, encouraging, or contributing to the infringement of Plaintiffs' exclusive rights under the Copyright Act,17 U.S.C. § 106 ; and
(3) inducing, encouraging, or contributing to its customers' infringement of Plaintiffs' copyrighted works.
The Court orders Plaintiffs to post security, within 7 days of the date of this Order, in the amount of $100,000 to compensate Redbox for its losses in the event this injunction is reversed or vacated.
This injunction shall expire ninety days after the date of its issuance, absent a showing by Disney that it clearly and prominently indicates, on physical packaging and/or online, that Combo Pack purchasers who do not agree to later-disclosed digital license terms may, with reasonable restrictions, return Codes or Combo Packs for a refund.
IT IS SO ORDERED.
Disney does not concede that the changes were necessary.
Even under the "serious interests" sliding scale test, a plaintiff must satisfy the four Winter factors and demonstrate "that there is a likelihood of irreparable injury and that the injunction is in the public interest." Alliance for the Wild Rockies v. Cottrell,
In Vernor v. Autodesk, Inc.,
"Browsewrap" refers to terms of use that are mentioned on a website but posted in full on a separate webpage accessible via hyperlink. In re Facebook,
Redbox has not asserted an unconscionability defense in response to Disney's motion for a preliminary injunction.
Disney's Request to Strike Portions of Redbox's Supplemental Opposition is GRANTED, in part. The court has not considered those portions of the supplemental opposition that exceed the scope of the court's leave and discuss topics other than the Black Panther packaging. The passages identified by Disney, however, are overbroad. Exhibit I to the Supplemental Geibelson Declaration, for example, is referenced on the Black Panther box.
Plaintiff further represented at argument that whether a customer's return to a retailer is recognized as a valid return is an issue between the retailer and Disney, not the purchaser.
The record does cast some doubt upon the accuracy of Plaintiff's claim. Neither the RedeemDigitalMovies.com nor Movies Anywhere clickwrap makes any mention of a right to return. Furthermore, the latter contains an integration clause stating that the Terms of Use, which do not mention a right of return, constitute the entire agreement with Code redeemers. (Klaus Decl., Ex. D § 9(q).) In addition, disneytermsofuse.com, referenced on the Black Panther box, contains a subsection regarding "return of goods," albeit in connection with "physical goods," which may or may not apply to Codes or Code-containing Combo Packs, that states that purchasers do not have the right to return unsealed physical media such as video recordings and DVDs. (Supplemental Geibelson Decl., Ex. I § 4.) For purposes of this motion, the court takes at face value Plaintiff's representation that Combo Pack purchasers do have the right to return. Given the lack of clarity regarding the issue, however, the injunctive relief ordered herein shall terminate after ninety days, absent a showing by Disney that it has clearly and prominently indicated that purchasers who wish to reject license terms disclosed after purchase may, with reasonable restrictions, return Codes or Combo Packs for a refund.
Redbox makes only passing reference to equities in the introduction to its Opposition, and does not discuss the equities in the body of its memorandum.
Redbox's Opposition does not address this factor.
Redbox repeated this representation at oral argument.
Reference
- Full Case Name
- DISNEY ENTERPRISES, INC. Buena Vista Home Entertainment, Inc. Lucasfilm Ltd., LLC, MVL Film Finance LLC v. REDBOX AUTOMATED RETAIL, LLC
- Cited By
- 3 cases
- Status
- Published