Disney Enterprises, Inc. et al v. Redbox Automated Retail, LLC
Filing
120
ORDER GRANTING PLAINTIFFS' MOTION FOR PRELIMINARY INJUNCTION by Judge Dean D. Pregerson: For the reasons stated above, Disney's Motion for Preliminary Injunction is GRANTED. Redbox and all of its officers, directors, agents, servan ts, and employees, and all persons in active concert or participation or in privity with any of them, ARE HEREBY RESTRAINED AND ENJOINED from: 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 packagingModified on 8/30/2018 (yl).
Case 2:17-cv-08655-DDP-AGR Document 120 Filed 08/29/18 Page 1 of 21 Page ID #:2424
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UNITED STATES DISTRICT COURT
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CENTRAL DISTRICT OF CALIFORNIA
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DISNEY ENTERPRISES, INC.;
BUENA VISTA HOME
ENTERTAINMENT, INC.;
LUCASFILM LTD., LLC, MVL
FILM FINANCE LLC,
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Plaintiff,
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v.
REDBOX AUTOMATED RETAIL,
LLC,
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Defendants.
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Case No. CV 17-08655 DDP (AGRx)
ORDER GRANTING PLAINTIFFS’ MOTION
FOR PRELIMINARY INJUNCTION
[Dkt. 86, 116]
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Presently before the court is Plaintiffs Disney Enterprises,
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Inc., Buena Vista Home Entertainment, Inc., Lucasfilm Ltd., LLC,
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and MVL Film Finance LLC (collectively, “Disney”)’s Motion for
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Preliminary Injunction.
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parties and heard oral argument, the court grants the motion and
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adopts the following Order.
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I.
Having considered the submissions of the
Background
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As explained in further detail in this Court’s prior Order
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(Dkt. 74), Disney owns the copyrights to several well-known movies,
including Coco, Beauty and the Beast, Star Wars: The Last Jedi, and
Case 2:17-cv-08655-DDP-AGR Document 120 Filed 08/29/18 Page 2 of 21 Page ID #:2425
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Black Panther.
Disney distributes its films in physical formats,
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such as DVD and Blu-ray discs, as well as via streaming and digital
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download services.
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Packs,” which contain a DVD and/or Blu-ray disc version of a
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particular Disney movie and a piece of paper containing an
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alphanumeric code (a “download Code” or “Code” ).
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inputted or redeemed at RedeemDigitalMovies.com or
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DisneyMoviesAnywhere.com (“Movies Anywhere”) (collectively, the
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“redemption sites” or “download sites”) to allow a user to stream
Among Disney’s product offerings are “Combo
The Code can be
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and/or download the same Disney movie contained on the physical
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discs.
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Defendant Redbox Automated Retail, LLC (“Redbox”) rents and
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sells movies to consumers via automated kiosks that dispense DVD
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and Blu-ray discs.
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disassembled Combo Packs, then rented or sold the physical discs
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therein to Redbox customers.
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offering Combo Pack download Codes for individual sale at Redbox
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kiosks.
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Redbox has, for many years, purchased and
In late 2017, Redbox also began
Soon after, Disney filed this suit and sought a preliminary
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injunction enjoining Redbox from offering standalone Disney Codes
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for sale.
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Pack Codes (1) constituted contributory copyright infringement (2)
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breached a contract Redbox enters into when it purchases Combo
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Packs, (3) interfered with Disney’s contractual relations, and (4)
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violated California false advertising and unfair competition laws.
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This court denied Disney’s motion for a preliminary injunction,
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concluding that, in light of the specific language printed upon
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Combo Pack boxes and used within the redemption sites’ Terms of
Disney’s Complaint alleged that Redbox’s resale of Combo
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Use, Disney could not show a likelihood of success on the merits of
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its breach of contract or contributory copyright infringement
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claims.
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Disney subsequently changed the language on its Combo Pack
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boxes, changed the download sites’ Terms of Use, and amended its
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Complaint.1
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Panther is the first to reflect changes implemented after this
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Court’s denial of Disney’s first motion for a preliminary
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injunction.
Disney’s Combo Pack packaging for the movie Black
The front of Black Panther Combo Pack boxes indicates
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that the Combo Packs include a “Digital Code.”
The back of the
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boxes state, in some of the largest print displayed, “Digital Code
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Included*[.]” The asterisk directs the reader to a discrete text
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box at the bottom of the package, which states, in smaller, all-
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capitalized text, “Digital code redemption requires prior
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acceptance of licence terms and conditions.
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personal use by recipient of this combination package or family
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member.
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15, 2023.”
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section of the packaging reads, “The digital code contained in this
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package may not be sold separately and may be redeemed only by the
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recipient of this combination package or a family member.
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MoviesAnywhere.com, RedeemDigitalMovie.com, and
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disneytermsofuse.com for code redemption and other applicable terms
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and conditions.”
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contains a similar statement and also reads, “This digital code is
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part of a combination package and may not be sold separately,” and
Codes only for
Digital movie code . . . subject to expiration after May
Smaller type in a more central, fine print-type
Visit
The paper Code insert within the Combo Pack
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Disney does not concede that the changes were necessary.
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“Digital code redemption is subject to prior acceptance of license
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terms and conditions.”
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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 . . . .
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(Declaration of Kelly Klaus, Ex. B.)
The far lengthier Movies
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Anywhere Terms of Use state, within a “Copyright License Grant and
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Restriction” section, that “[t]he purchase of a license to stream
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or download any Movies Anywhere Content does not create an
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ownership interest in the licensed Content.”
(Klaus Decl., Ex. D
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at 17.)
The terms of use further state that users will not “redeem
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an unauthorized . . . digital code,” and “For combination packs: By
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redeeming a digital code . . . you are representing that you . . .
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obtained the code in an original . . . package and the code was not
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purchased separately.
Your representation is a condition of
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redemption . . . .”
(Id.)
Before a consumer can view digital
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content, he or she must enter a Code on a webpage that displays a
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similar message and requires the user to affirmatively click a
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“Redeem” button.
(Klaus Decl. Exs. B, C.)
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Disney’s First Amended Complaint (“FAC”) alleges a single
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cause of action against Redbox for contributory copyright
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infringement.
Disney now renews its motion for a preliminary
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injunction enjoining Redbox from selling Disney’s download Codes.
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II.
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Legal Standard
A private party seeking a preliminary injunction must show
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that: (i) it is likely to succeed on the merits; (ii) it will
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suffer irreparable harm in the absence of preliminary relief; (iii)
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the balancing of the equities between the parties that would result
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from the issuance or denial of the injunction tips in its favor;
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and (iv) an injunction will be in the public interest.
Winter v.
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Natural Resources Def. Council, 555 U.S. 7, 20 (2008).
Preliminary
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relief may be warranted where a party: (i) shows a combination of
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probable success on the merits and the possibility of irreparable
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harm; or (ii) raises serious questions on such matters and shows
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that the balance of hardships tips in favor of an injunction.
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Arcamuzi v. Continental Air Lines, Inc., 819 F.2d 935, 937 (9th
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Cir. 1987). “These two formulations represent two points on a
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sliding scale in which the required degree of irreparable harm
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increases as the probability of success decreases.”
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both formulations, the party must demonstrate a “fair chance of
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success on the merits” and a “significant threat of irreparable
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injury” absent the issuance of the requested injunctive relief.2
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Id.
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III. Discussion
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Id.
See
Under
A. Likelihood of Success on the Merits
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i.
Contributory Copyright Infringement
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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, 632 F.3d 1127, 1135 (9th Cir. 2011).
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The FAC’s sole cause of action alleges that Redbox customers
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who purchase a Disney Code from Redbox violate Disney’s copyright
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when they redeem the Code because Redbox customers must first
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represent, as a condition of obtaining a license to download and
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reproduce content via the redemption sites, that they did not
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obtain the Code separately from the Combo Pack.
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representation by a Redbox customer, Disney alleges, is necessarily
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false, resulting in an unauthorized download and copyright
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infringement.
Any such
Disney alleges that Redbox is contributorily liable
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for that infringement because it knows that customers will make
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unauthorized downloads and contributes to those improper downloads
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by selling Codes and instructing Redbox customers to redeem them.
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As explained in this Court’s prior Order, a copyright owner
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has the exclusive right to reproduce the copyrighted work.
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U.S.C. § 106.
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must prove two elements: ‘(1) ownership of a valid copyright, and
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(2) copying of constituent elements of the work that are
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original.’”
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F.3d 841, 846 (9th Cir. 2012) (citing Feist Publ’ns, Inc. v. Rural
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Tel. Serv. Co., 499 U.S. 340, 361, (1991)).
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contributorily liable for copyright infringement if he has
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“intentionally induced or encouraged direct infringement.”
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Indus., LLC v. Blizzard Entm’t, Inc., 629 F.3d 928, 937 (9th Cir.
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2010) (internal alterations and quotation marks omitted).
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copyright licensee infringes upon a copyright if he exceeds the
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scope of his license.
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1085 (9th Cir. 1989) (“To prevail on its claim of copyright
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infringement, [the copyright owner] must prove . . . ‘copying’ of
“To establish copyright infringement, a plaintiff
L.A. Printex Indus., Inc.v. Aeropostale, Inc., 676
A defendant is
MDY
A
S.O.S., Inc. v. Payday, Inc., 886 F.2d 1081,
6
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protectable expression by [the accused infringer] beyond the scope
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of [the] license.”)
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A restrictive license exists where the copyright owner “(1)
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specifies that the user is granted a license; (2) significantly
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restricts the user’s ability to transfer the software; and (3)
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imposes notable use restrictions.”
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F.3d 1102, 1111 (9th Cir. 2010).
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the language on the redemption sites imposes significant use
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restrictions and forbids the user from transferring copyrighted
Vernor v. Autodesk, Inc., 621
Here, there is no dispute that
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movies.
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of sale, Disney does not adequately specify that it is granting the
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purchaser only a limited license to view digital content, as
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opposed to an unfettered ownership right to a digital copy.
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(Opposition at 3.)
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purchase restrictions listed on the redemption sites are
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unenforceable, and this case continues to turn on whether a
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contract was formed at the point of sale.
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Redbox’s primary contention, however, is that at the time
Thus, Redbox argues, the subsequent, post-
(Id.)
Disney responds that the redemption site license agreement is
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“indisputably enforceable” because it is a “clickwrap” agreement
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that requires affirmative assent.
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explained, a valid contract requires capable, consenting parties, a
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lawful object, and sufficient cause or consideration.
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Code § 1550;
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1186 (E.D. Cal. 1998).
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constitute acceptance of an offer.”
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Am., LLC, 845 F.3d 1279, 1284 (9th Cir. 2017) (quoting Golden Eagle
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Ins. Co. v. Foremost Ins. Co., 20 Cal. App. 4th 1372, 1385 (1993).
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Even a party that has accepted an offered benefit cannot be deemed
(Reply at 5.)
As this Court has
Cal. Civ.
Janda v. Madera Community Hosp., 16 F. Supp. 2d 1181,
In general, “silence or inaction does not
7
Norcia v. Samsung Telecomm.
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to have accepted a contract if the offeree did not have reasonable
2
notice that an offer had been made.
3
Inc. v. Collins & Aikman Corp., 25 Cal. App. 3d 987, 993 (1972)).
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In Norcia, for example, the Ninth Circuit held that where product
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packaging bore no indication that opening the box would constitute
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acceptance of further terms set forth inside the box, a party could
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not be deemed to have accepted those contract terms simply by
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opening the box.
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Id. (citing Windsor Mills,
Id. at 1287.
A “clickwrap” agreement, in contrast, requires users to
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affirmatively manifest assent to terms on a website or software
11
installation screen by, after being presented with the terms,
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clicking on some version of an “I agree” button.
13
& Noble Inc., Nguyen v. Barnes & Noble Inc., 763 F.3d 1171, 1176
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(9th Cir. 2014).
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mere existence of a clickwrap agreement does not render the terms
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of such agreement “indisputably enforceable.”
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the representations made at the point of sale would be immaterial,
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even if Combo Pack boxes were totally blank “mystery boxes,” so
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long as purchasers later affirmatively agreed to a clickwrap
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agreement restricting the use of digital content.
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matter, the situation here is not a classic clickwrap arrangement,
22
wherein a prospective customer must manifest assent.
23
v. Pre-Paid Legal Servs., Inc., No. 14-03514 SC, 2015 WL 604767 at
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*3 (N.D. Cal. Feb. 12, 2015).
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somewhat more akin to the “money now, terms later” characteristics
26
of a “shrinkwrap” agreement, where notice of the existence of a
27
license agreement is provided on product packaging, the full terms
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are contained within the package, and acceptance is demonstrated
Nguyen v. Barnes
Contrary to Disney’s suggestion, however, the
By Disney’s logic,
As an initial
See Savetsky
Rather, the circumstances here are
8
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not by purchase, but rather by post-purchase silence.3
2
also In re Facebook Biometric Info. Privacy Litig., 185 F. Supp. 3d
3
1155, 1165 (N.D. Cal. 2016)(characterizing clickwrap and
4
“browsewrap” agreements as opposite ends of a spectrum of assent).4
5
Furthermore, although Disney is correct that courts often find
Id.; See
6
clickwrap agreements enforceable, there is “no per se rule of
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validity or invalidity . . . .”
8
1165.
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otherwise.
In re Facebook, 185 F.Supp.3d at
The other authorities cited by Disney do not suggest
In Tompkins v. 23andMe, Inc., for example, the Ninth
10
Circuit did enforce an arbitration clause contained in a post-
11
purchase clickwrap agreement.
12
1016, 1021 (9th Cir. 2016).
13
nothing to do with assent or adequacy of notice, but rather turned
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on the lack of substantive unconscionability.
15
Indeed, the district court found the provision in question
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procedurally unconscionable, in part because the clickwrap terms
17
provided only “minimal” notice of the provision, were displayed
18
only after purchase, and may not have been accompanied by a right
19
to reject the terms and receive a full refund.5
Tompkins v. 23andMe, Inc., 840 F.3d
The court’s decision, however, had
Id. at 1024.
Tompkins v.
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23
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25
26
27
28
3
In Vernor v. Autodesk, Inc., 621 F.3d 1102, 1104 (9th Cir.
2010), disputed license terms were presented both on-screen during
software installation and on physical packaging. Vernor, 621 F.3d
at 1105.
4
“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, 185 F.Supp.3d at 1165. Like a
shrinkwrap agreement, a browsewrap agreement does not require
affirmative assent, and considers continued use of a website, like
continued use of a shrinkwrapped product, as assent to the terms of
use. Id.; See also Savetsky, 2015 WL 604767 at * 3 (arranging
clickwrap, shrinkwrap, and browsewrap agreements on a spectrum of
most to least affirmative manifestations of assent.)
5
Redbox has not asserted an unconscionability defense in
response to Disney’s motion for a preliminary injunction.
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23andMe, Inc., No. 5:13-CV-05682-LHK, 2014 WL 2903752, at *15 (N.D.
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Cal. June 25, 2014).
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whether a customer agreed to the terms had nothing to do with
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whether the terms were enforceable.
5
Fitbit, Inc., No. 3:16-CV-00036-JD, 2018 WL 1913832
6
Jan. 24, 2018) (distinguishing questions of contract formation and
7
contract validity).
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not appeal the district court’s finding that the clickwrap
9
provision at issue was
10
11
The district court further observed that
Id.; See also McLellan v.
(N.D. Cal.
As the Ninth Circuit noted, the defendant did
procedurally unconscionable.
Tompkins, 840
F.3d at 1024 n.2.
Thus, notwithstanding the existence of clickwrap agreements on
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the redemption sites, the court’s analysis of whether the terms of
13
those agreements are likely enforceable cannot be entirely divorced
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from consideration of the Combo Pack packaging’s disclosures.
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analysis is complicated to some degree because both parties’
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arguments about the existence of a restrictive license suffer from
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imprecision regarding the particular language at issue.
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bases its arguments on the Black Panther packaging language, even
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though the packaging of other movies named in the FAC differed
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significantly, as discussed in this Court’s prior Order.
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Opposition largely cites examples of language from packaging
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predating this Court’s prior Order and Disney’s Black Panther
23
revisions.
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having afforded Redbox the opportunity to file supplemental
25
briefing regarding the Black Panther disclosures, the court limits
That
Disney
Redbox’s
Having discussed this disconnect at oral argument, and
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its consideration to the revised language present on the Black
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Panther Combo Packs.6
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Taking that language into consideration, the court concludes
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that Disney has shown that it is likely to succeed on the merits of
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its contributory infringement claim.
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that it can only be liable for contributory infringement if it had
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the subjective intent to be a contributory infringer.
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incorrect.
9
Inc., 658 F.3d 936, 943 (9th Cir. 2011) (citing A & M Records, Inc.
At argument, Redbox contended
Redbox is
See Louis Vuitton Malletier, S.A. v. Akanoc Sols.,
10
v. Napster, 239 F.3d 1004, 1020 (9th Cir.2001) (“Contributory
11
liability requires that the secondary infringer ‘know or have
12
reason to know’ of direct infringement.”)).
13
Redbox has actual knowledge of the redemption sites’ clickwrap
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terms, which do appear to create a restrictive license.
15
specify that the user is only granted a license rather than
16
ownership.
17
digital movie codes to obtain licensed access to digital movies
18
only as specifically authorized . . .[,]” and the Movies Anywhere
19
terms refer to a “Copyright License Grant” and state that “[t]he
20
purchase of a license to stream or download any Movies Anywhere
21
Content does not create an ownership interest in the licensed
22
Content.”
23
transfer of the digital content.
It is undisputed that
Both sites
The RedeemDigitalMovie.com terms state, “You may use
These and other terms restrict downloaders’ use or
See Vernor, 621 F.3d at 1111.
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25
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6
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.
11
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It is also undisputed that Redbox knows that customers who
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purchase standalone Disney Codes from Redbox kiosks do in fact
3
proceed to violate the clickwrap terms and redeem the Codes.
4
Indeed, Redbox affirmatively instructs its customers to visit the
5
redemption sites, “[e]nter the digital movie code . . .,” and
6
“[f]ollow the on-screen prompts and enjoy the show!”
7
Ex Z.)
8
9
(Klaus Decl.,
If, however, the clickwrap terms are unenforceable,
downloaders do not directly infringe upon Disney’s copyright by
10
violating those terms, and Redbox’s actual knowledge will not be
11
sufficient to render Redbox liable for contributory copyright
12
infringement.
13
revised terms displayed on the Black Panther packaging, Combo Pack
14
purchasers obtain an ownership interest in a digital download, and
15
not merely a limited license to access or view digital content.
16
This argument is not persuasive.
17
part, because it attempts to characterize the Black Panther
18
language as a deficient “boxtop” license agreement.
19
has explained, the Ninth Circuit analyzed a purported boxtop
20
agreement, where all license terms are printed on the outside of a
21
product package, in Arizona Cartridge Remanufacturers Association,
22
Inc. v. Lexmark International, Inc., 421 F.3d 981 (9th Cir. 2005).
23
The Lexmark court held that a party did assent to a license by
24
opening a package that read,
25
26
27
28
Redbox therefore argues that, notwithstanding the
Redbox’s argument fails, in large
As this Court
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
12
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2
accept these terms, return the unopened package to your
point of purchase. A regular price cartridge without these
terms is available.
3
Id. at 983-984.
4
enforceable because, by its own terms, it gave notice of the
5
existence of a license, set forth the conditions of sale of that
6
license, afforded the consumer the opportunity to read the terms of
7
the contract before deciding whether to accept them, and provided
8
consideration in the form of a reduced price, thus supporting the
9
conclusion that a consumer who opened the box accepted the terms
10
11
printed upon it.
The court explained that the contract was
Id. at 987-88.
In its first motion for a preliminary injunction, Disney did
12
argue that earlier versions of Combo Pack boxes, which stated only
13
that “Codes are not for sale or transfer[,]” were analogous to the
14
packaging in Lexmark, and that Redbox agreed to later-disclosed
15
license conditions simply by opening Combo Packs.
16
rejected that argument, concluded that Disney’s packaging was
17
insufficient to create either a boxtop or shrinkwrap license, and
18
denied Disney an injunction.
19
motion does not contend that even the revised Black Panther box,
20
with its more thorough language, constitutes a boxtop license.
21
Although, as discussed above, the court also disagrees with
22
Disney’s current position that only the redemption site language is
23
relevant, the pertinent question is whether Disney can likely show
24
that Combo Pack purchasers obtained a restrictive digital license
25
rather than an ownership right.
26
This Court
Notably, however, Disney’s instant
As discussed above, the circumstances here bear
27
characteristics of shrinkwrap and clickwrap agreements.
28
Savetsky, 2015 WL 604767 at * 3; In re Facebook, 185 F.Supp.3d at
13
See
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1165.
Prospective Combo Pack purchasers are presented with
2
relatively visible language stating, “Digital code redemption
3
requires prior acceptance of licence terms and conditions.
4
only for personal use by recipient of this combination package or
5
family member.
6
after May 15, 2023.”
7
albeit in smaller type, that “applicable terms and conditions” can
8
be found at the redemption sites.
9
sites even prior to purchase.
Codes
Digital movie code . . . subject to expiration
Prospective purchasers are also informed,
Those terms can be viewed on the
Post-purchase, the redemption sites
10
present the terms and require an affirmative manifestation of
11
assent in the form of a button click.
12
Furthermore, although not explicitly set forth on either the
13
Black Panther packaging or the redemption sites, Plaintiff
14
represented to the court at oral argument that purchasers who do
15
not accept the terms of the digital license may return Combo Packs
16
to the retailer.7
Such a right to return is critically important.8
17
7
18
19
20
21
22
23
24
25
26
27
28
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.
8
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
(continued...)
14
Case 2:17-cv-08655-DDP-AGR Document 120 Filed 08/29/18 Page 15 of 21 Page ID
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1
A person who has paid money for a product, subject to later-
2
disclosed licensing terms, cannot possibly be considered to have
3
meaningfully assented to those terms if he or she never had the
4
opportunity to reject the terms by returning the product for a
5
refund.
6
contract where terms explicitly instructed purchaser to return item
7
to point of purchase if the purchaser rejected post-sale terms);
8
See also ProCD, Inc. v. Zeidenberg, 86 F.3d 1447, 1452 (7th Cir.
9
1996) (holding, in a shrinkwrap case, that “[a]ny buyer finding
Cf. Lexmark, 421 F.3d at 984, 988 (finding valid boxtop
10
[unacceptable post-sale license terms] can prevent formation of the
11
contract by returning the package, as can any consumer who
12
concludes that the terms of the license make the software worth
13
less than the purchase price.”).
14
At this stage, the court need not make a determination whether
15
Combo Pack purchasers enter into a shrinkwrap, clickwrap, or other
16
type of agreement, nor precisely delineate the terms of any such
17
agreement.
18
that neither Redbox nor any other Combo Pack purchaser could (or
19
did) reasonably believe that, notwithstanding the Black Panther
20
licensing language on the box itself, the Combo Pack included
21
unrestricted ownership rights to any digital content.
22
621 F.3d at 1112 (holding that licensee who did not receive title
23
to software could not pass ownership to others).
24
did not obtain an ownership right to any digital content when it
25
purchased Combo Packs, Disney has adequately shown that it is
It appears from the record currently before the court
See Vernor,
Because Redbox
26
27
28
8
(...continued)
reject license terms disclosed after purchase may, with reasonable
restrictions, return Codes or Combo Packs for a refund.
15
Case 2:17-cv-08655-DDP-AGR Document 120 Filed 08/29/18 Page 16 of 21 Page ID
#:2439
1
likely to succeed on its claim that Redbox encouraged Redbox
2
customers to infringe Disney’s copyrights by redeeming Codes in
3
violation of the license terms set forth on the redemption sites.
4
5
ii.
Defenses
As it did in response to Disney’s first motion for a
6
preliminary injunction, Redbox raises defenses of copyright misuse
7
and the first sale doctrine.
8
sale doctrine allows the “owner of a particular copy or phonorecord
9
lawfully made under [the Copyright Act] . . . to sell or otherwise
As this Court explained, the first
10
dispose of the possession of that copy or phonorecord,” without the
11
permission of the copyright holder.
12
1180 (9th Cir. 2011) (quoting 17 U.S.C. § 109(a)); Bobbs-Merrill
13
Co. v. Strauss, 210 U.S. 339, 341 (1908).
14
that because no particular fixed copy of a copyrighted work yet
15
exists at the time Redbox purchases or sells a Code, the first sale
16
doctrine is inapplicable to this case.
17
UMG v. Augusto, 628 F.3d 1175,
This court concluded
Nevertheless, Redbox again raises the first sale defense,
18
relying upon new expert testimony and arguing that Plaintiff
19
misrepresented the nature of its server technology.
20
Even accepting Redbox’s expert’s testimony at face value, however,
21
the court’s analysis is unchanged.
22
when a consumer redeems a Code, Disney must create a discrete
23
digital copy of the content in a particular user’s virtual, cloud-
24
based “locker.”
25
however, Redbox conceded that even if such a “particular copy”
26
exists on Disney’s servers, the user’s computer would have
27
“ultimately the same albeit a second copy,” or “another copy” of
28
the user’s discrete copy.
(Opp. at 16.)
Redbox’s expert opines that
(Declaration of Seth Nielson ¶ 6.2.)
At argument,
These inherent contradictions illustrate
16
Case 2:17-cv-08655-DDP-AGR Document 120 Filed 08/29/18 Page 17 of 21 Page ID
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1
that the circumstances here do not involve a single, discrete,
2
particular copy to which the first sale doctrine could apply. See
3
Capitol Records, LLC v. ReDigi Inc., 934 F. Supp. 2d 640 (S.D.N.Y.
4
2013)
5
Redbox also argues that Disney’s changes to the redemption
6
sites’ terms of use do not cure Disney’s prior copyright misuse.
7
Copyright misuse is an affirmative defense that “prevents copyright
8
holders from leveraging their limited monopoly to allow them
9
control of areas outside the monopoly,” and extends to any
10
situation implicating “the public policy embodied in the grant of a
11
copyright.”
12
1026 (9th Cir. 2001);
13
776 F.3d 699-700 (9th Cir. 2015)(Wardlaw, J. concurring).
14
At the time of Disney’s first motion, the redemption sites’ terms
15
of use required downloaders to affirm that they currently possessed
16
the physical DVD and Blu-ray discs that, along with the Code,
17
constitute a Combo Pack.
18
restriction improperly intrudes upon a purchaser’s right, secured
19
by the first sale doctrine and 17 U.S.C. § 109(a), to dispose of
20
physical DVDs and Blu-ray discs as he or she sees fit.
21
concluded that such an attempt to leverage copyright in digital
22
content to control downstream distribution of physical discs
23
constituted copyright misuse.
24
A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004,
Omega S.A. v. Costco Wholesale Corporation,
This Court concluded that such a
This Court
As set forth above, however, Disney has now changed the terms
25
of use on the redemption sites.
Downloaders no longer need affirm
26
that they possess the physical discs, to which first sale rights
27
would apply.
28
may not be sold separately and may only be redeemed “by an
Instead, RedeemDigitalMovie.com now states that Codes
17
Case 2:17-cv-08655-DDP-AGR Document 120 Filed 08/29/18 Page 18 of 21 Page ID
#:2441
1
individual who obtains the code” in a Combo Pack.
2
states, “For combination packs: By redeeming a digital code . . .
3
you are representing that you . . . obtained the code in an
4
original . . . package and the code was not purchased separately.
5
Your representation is a condition of redemption . . . .”
6
revised terms do not encroach upon disc owners’ alienation rights
7
or improperly expand Disney’s power beyond the sphere of copyright.
8
Under the revised terms, Combo Pack purchasers and recipients
9
continue to enjoy digital access regardless whether they keep or
10
Movies Anywhere
These
dispose of the physical discs.
11
Redbox contends that such terms nevertheless continue to
12
constitute misuse because “the digital code is rendered worthless”
13
unless a Combo Pack owner foregoes the first sale rights associated
14
with the physical discs.
15
accurate.
16
the discs was indeed left with a worthless code because continued
17
possession of the discs was a condition of digital access.
18
however, digital access is conditioned not on possession of the
19
discs, but on the manner of Code acquisition.
20
who disposes of the discs is left with the same digital access
21
rights he or she always possessed.
22
that, because Codes are not separately transferable, a Combo Pack
23
owner cannot transfer a Code if he or she disposes of the discs
24
first, the right to transfer a separate Code is not protected by
25
the first sale doctrine or any unconditional ownership rights, as
26
discussed above.
27
unlikely to succeed.
28
B.
(Opp. at 12.)
That statement is not
Under the old terms, a Combo Pack owner who disposed of
A Combo Pack owner
Although Redbox is correct
A copyright misuse defense, therefore, is
Remaining Factors
18
Now,
Case 2:17-cv-08655-DDP-AGR Document 120 Filed 08/29/18 Page 19 of 21 Page ID
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1
A party seeking a preliminary injunction must also show that
2
it will suffer irreparable harm in the absence of an injunction.
3
Winter, 555 U.S. at 20.
4
that Redbox’s Code sales are damaging Disney’s relationships with
5
its licensees.
6
relief.
7
F.3d 832, 841 (9th Cir. 2001); Rent-A-Ctr., Inc. v. Canyon
8
Television & Appliance Rental, Inc., 944 F.2d 597, 603 (9th Cir.
9
1991).
Disney has presented extensive evidence
This evidence is sufficient to warrant injunctive
See Stuhlbarg Int'l Sales Co. v. John D. Brush & Co., 240
Redbox does not identify any compelling interests that
10
would tilt the balance of equities in its favor, notwithstanding
11
its infringing activities and the attendant irreparable harm to
12
Disney.9
13
protecting its copyright would be in the public interest.10
14
Disney Enterprises, Inc. v. VidAngel, Inc., 869 F.3d 848, 867 (9th
15
Cir. 2017)
16
Disney has also adequately shown that an injunction
See
Redbox’s Supplemental Opposition argues that, if the court’s
17
consideration is limited to the Black Panther language, there is no
18
irreparable harm, and indeed no ripe case or controversy, because
19
Redbox has not sold Black Panther Codes and has no intention of
20
doing so.11
21
Supplemental Opposition at 1-2.)) Although there appears to be no
22
dispute that Redbox is not selling Black Panther Codes, Redbox’s
23
motivations are unknown to the court.
24
position on the instant motion, it is clear that Redbox does not
(Supplemental Declaration of Michael Chamberlain ¶ 4;
In light of Redbox’s
25
26
27
28
9
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.
10
Redbox’s Opposition does not address this factor.
11
Redbox repeated this representation at oral argument.
19
Case 2:17-cv-08655-DDP-AGR Document 120 Filed 08/29/18 Page 20 of 21 Page ID
#:2443
1
concede that it cannot sell Black Panther codes without
2
contributorily infringing upon Disney’s copyrights.
3
Redbox’s motive, “[u]nder the voluntary cessation exception [to the
4
mootness doctrine], a defendant’s decision to stop a challenged
5
practice generally does not deprive a federal court of its power to
6
determine the legality of the practice.” Akina v. Hawaii, 835 F.3d
7
1003, 1010 (9th Cir. 2016) (per curiam) (internal quotation marks
8
omitted).
9
merely because the conduct complained of was terminated, if there
Whatever
“[A]n action for an injunction does not become moot
10
is a possibility of recurrence, since otherwise the defendant[]s
11
would be free to return to their old ways.”
12
Media, 179 F.3d 1228, 1237 (9th Cir. 1999) (internal quotations and
13
alterations omitted).
14
possible that Redbox would begin selling Black Panther Codes
15
alongside all of the other Disney Codes Redbox already sells.
16
Redbox’s voluntary decision not to sell certain Codes up to this
17
point in time does not demonstrate a lack of irreparable harm.
18
IV.
19
F.T.C. v. Affordable
Absent injunctive relief, it seems quite
Conclusion
For the reasons stated above, Disney’s Motion for Preliminary
20
Injunction is GRANTED.
21
agents, servants, and employees, and all persons in active concert
22
or participation or in privity with any of them, ARE HEREBY
23
RESTRAINED AND ENJOINED from:
24
Redbox and all of its officers, directors,
(1) selling or otherwise transferring Plaintiffs’ standalone
25
Codes originally included within Combo Packs bearing
26
license terms identical or substantially similar to those
27
displayed upon Plaintiffs’ Black Panther Combo Pack
28
packaging;
20
Case 2:17-cv-08655-DDP-AGR Document 120 Filed 08/29/18 Page 21 of 21 Page ID
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1
(2) inducing, encouraging, or contributing to the infringement
2
of Plaintiffs’ exclusive rights under the Copyright Act,
3
17 U.S.C. § 106; and
4
(3) inducing, encouraging, or contributing to its customers’
5
6
infringement of Plaintiffs’ copyrighted works.
The Court orders Plaintiffs to post security, within 7 days of
7
the date of this Order, in the amount of $100,000 to compensate
8
Redbox for its losses in the event this injunction is reversed or
9
vacated.
10
This injunction shall expire ninety days after the date of its
11
issuance, absent a showing by Disney that it clearly and
12
prominently indicates, on physical packaging and/or online, that
13
Combo Pack purchasers who do not agree to later-disclosed digital
14
license terms may, with reasonable restrictions, return Codes or
15
Combo Packs for a refund.
16
17
18
IT IS SO ORDERED.
19
20
Dated: August 29, 2018
DEAN D. PREGERSON
United States District Judge
21
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