Analyst Weighs in on Redbox-Uni Suit

27 May, 2009 By: Chris Tribbey

Universal Studios Home Entertainment may have no choice but to settle the lawsuit Redbox filed against the studio in October, according to an analyst with investment firm Roth Capital Partners.

Writing to investors in a research note about Blockbuster Inc., while discussing the rollout of Blockbuster DVD rental kiosks, analyst Richard Ingrassia wrote, “We believe application of the First Sale Doctrine (17 U.S.C. Sec. 109) will prompt Universal Home Entertainment to settle its content dispute with Redbox, clearing the way for more rapid expansion.”

Redbox sued Universal in October 2008 over the studio’s new revenue-sharing terms, which would prohibit Redbox from selling Universal DVDs until 45 days after they the original street date; limit the number of Universal DVDs Redbox could stock; and require Redbox to destroy Universal DVDs after their lives as rental product with Redbox were finished.

The First Sale Doctrine establishes that a copyright owner loses control of a lawfully made copy of a copyrighted work once it has been sold, with the new owner able to rent or sell that copy, as long as no additional copies are made.

The Doctrine reads, in part, that “the owner of a particular copy … lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy.”

In 2007, how the law was applied to DVDs came up in the National Entertainment Buying Group’s (NEBG) suit against The Weinstein Co. NEBG alleged that DVDs released under TWC’s rental agreement with Blockbuster would contain language that implied renting Weinstein titles from sources other than Blockbuster was against the law.

That suit was dismissed, since TWC ended up not distributing titles with the warning.

While Redbox has continued to stock Universal DVDs during the suit, both Redbox and the studio have told the judge in their suit that they are willing to discuss a settlement.