A gift from Zediva

Copyright If online “DVD rental” outfit Zediva didn’t exist, incoming MPAA chairman and CEO Chris Dodd might have wanted to invent it. Having taken on a nearly impossible job riding herd over a membership that has trouble agreeing on where to order lunch during board meetings, Zediva has handed him, for his first major project, a nearly gift-wrapped opportunity to rally his members around a righteous and beloved cause: suing the bejeesus out of start-up for copyright infringement.

All six of the major studios that make up the membership of MPAA are named plaintiffs in the complaint against Zediva and its CEO, Venkatesh Srinivasan, filed Monday in federal district court in California. The MPAA then put out a press release trumpeting the lawsuit, which no doubt felt good.

As well it should. I doubt the MPAA could have come up with a better case to bring had it tried. While Zediva claims that its DVD streaming service is legally no different from a brick-and-mortar video store, and therefore doesn’t need the permission of the studios to operate, it looks more like a sitting duck. Even if it could afford to defend itself against the combined might of the studios, its legal position seems pretty shaky to my non-lawyer eyes.

As New York Law professor James Grimmelmann put it last month, long-before the MPAA’s lawsuit was filed:

Clever twists on the law ordinarily make me happy. But it makes me sad when entrepreneurs sink their time and money into a business that basic due diligence should have told them is all but doomed from the start. Zediva’s supposed “loophole” in copyright law doesn’t exist. Zediva is about to get pounded by the movie studios, and hard.

Grimmelmann goes on to recount the extensive case-law, going back to the early days of the video rental business, strongly suggesting that enabling sequential viewings of the same copy of movie from Zediva’s own facilities would not qualify as a distribution of that copy — which would be governed by the first sale doctrine — but rather would be considered a public performance of the work, which would not be governed by first sale and would need to be licensed by the copyright owner.

That’s more or less precisely the argument the studios make in their complaint, in fact.

Yet the case might not be completely without drama, should it go to trial. As Grimmelmann and others have pointed out, Zediva could try to raise a defense based on Cartoon Network v. CSC Holdings, otherwise known as the Cablevision RS-DVR case. In that case the Second Circuit Court of Appeals in New York found that the cable operator’s remote recording service did not infringe broadcasters’ performance right, despite the recordings being transmitted back to subscribers over a network. The studios, in fact, make reference to the case in their complaint, at least implicitly acknowledging its relevance to their suit against Zediva.

The facts in the two cases are very different, however. In the Cablevision case, each recording initiated by a subscriber resulted in a discrete copy of the program being made on Cablevision’s server. That copy was then the only one accessible to the subscriber, and only the subscriber that had initiated that recording could view it.

Zediva, on the other hand, doesn’t follow that one-copy/one-viewer standard. Each DVD at its facility could in theory be viewed by multiple renters. According to the studios’ complaint, that makes Zediva more like a video-on-demand service than a network-enabled DVR service.

The studios, of course, came out on the losing side of the Cablevision case, and would no doubt love to see it overturned, or at least circumscribed to a narrow range of facts. They would particularly love to see it undercut in a different federal circuit, increasing the odds that the Supreme Court might one day consider reviewing the Second Circuit’s ruling in Cablevision.

If they achieve that with Zediva, the case would indeed be a big win for the studios, and a big feather in the MPAA’s cap.