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Starz Sues Disney for Copyright Violations

22 Mar, 2007 By: Erik Gruenwedel

The Walt Disney Co.'s burgeoning practice of selling content on the Internet through third-party electronic marketers such as Apple Inc.'s iTunes and Wal-Mart.com, among others, could be in jeopardy.

Starz Entertainment LLC, March 22 filed a lawsuit in U.S. District Court of Los Angeles against Disney subsidiary, Buena Vista Television (BVT), alleging breach of contract and copyright infringement.

Starz (and sister unit Encore), which is a subscription-based cable and broadband movie service owned by Liberty Media Corp., said it has a long-standing $1+ billion license agreement (beginning in 1993) with BVT for exclusive distribution rights (prior to the Internet) to all Disney movies and TV programming.

The agreements exclude DVD rental and sellthrough, and Disney's option to offer its contetn separately on pay-per-view (PPV), video-on-demand (VOD) and on-demand basis.

The complaint cited 50 Disney movies, including Pirates of the Caribbean: Dead Man's Chest, Enemy of the State, The English Patient, The Guardian, Herbie Fully Loaded, Eight Below, The 13th Warrior, The Shaggy Dog, The Waterboy and Cars.

“… Our agreements clearly prohibit them from selling their movies by electronic download over the Internet while they are exclusive to Starz,” said Robert Clasen, Starz chairman and CEO. “If Disney is permitted to violate our contract in this manner, it will undermine the integrity of copyright in general, which is the cornerstone of our industry.”

Clasen, who called Disney a great partner and said he hopes to continue “our relationship” with the media giant, said Starz is a pioneer in digital distribution having invested millions of dollars in its own Internet-based movie delivery systems.

“We want to encourage consumers to have every opportunity to access a wide array of films over the Internet,” Clasen said. “But we cannot allow Disney to sell those rights to us on an exclusive basis and then sell the same rights to other parties.”

The suit seeks a jury trial and all profits Disney has realized from alleged infringing activities, in addition to an injunction against further infringement.

“Disney said it made between $50 million and $70 million licensing content to iTunes in the first year,” said Starz spokesperson Tom Southwick. “We'll start with that.”

A Disney spokesperson said the company does not comment on pending litigation.

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