Remote DVD rental startup Zediva sued by movie studios

A movie streaming start-up that offers remote rentals of DVD players and discs may be in some serious legal trouble from several film studios who don’t agree with their business model.

Zediva launched their unique service last month on the premise that rented streams of DVD movies the company had purchased was really no different than renting a physical copy from Blockbuster or another traditional rental business. The business claimed that only one renter per physical DVD was allowed at the same time. Unlike other movie rental businesses, however, Zediva did not consult studios for permission or licensing agreements before their launch.

Remote DVD rental startup Zediva sued by movie studios

Columbia, Disney, Twentieth Century Fox, Paramount, Universal, and Warner Bros. have now filed a joint lawsuit against the California-based company for streaming films without their permission. The studios are seeking a restraining order to cease Zediva operations, along with all of the profits the company has made so far plus an additional $150,000 for each title the service has streamed.

“Defendants’ comparison of the Zediva service to a rental store is disingenuous, and Defendants are attempting to rely on technical gimmicks in an effort to avoid complying with U.S. Copyright Law,” wrote prosecuting attorney Glenn Pomerantz in the official complaint filed Monday in the Central District of California Court. “Defendants operate an online VOD [Video on Demand] service, not a neighborhood rental store. Unlike Zediva, rental stores do not transmit performances of movies to the public over the Internet using streaming technologies. A rental store or any other establishment would also need a license to do so.”

At this point things look pretty grim for Zediva, but Berkely Law School assistant professor Jason Schultz believes that there is a chance that the company may be able to strike a deal with the studios.

“The first sale [doctrine] allowed Netflix and Redbox to come into existence and a court might be sympathetic because Zediva is trying to respect one-copy limitations,” Schultz told Wired. “If the company is buying legitimate copies they could rent out in a physical world, why not let them rent it out digitally with each rental tied to a physical copy with only one person using it at a given time? The economics are quite similar.”

If the company were to strike a deal with the studios, it would likely involve waiting periods following DVD releases similar to what Netflix and Redbox have agreed to implement. Currently, Zediva offers to stream movies the day the DVD is released.

Scorned movie studios are clearly a force to be reckoned with, however it may actually be to Zediva’s advantage that they started their business and waited (a mere 3 weeks) for the studios to cry foul rather than consulting them first. Of course, the court could also lack sympathy and slap the company with a mandatory shutdown and millions of dollars in fines. This will definitely be an interesting case to watch unfold over the next few months.