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Central District of California Grants Preliminary Injunction Against Streaming ''Movie Rental'' Website

Thursday, August 18, 2011

Warner Bros. Entertainment Inc. v. WTV Systems, Inc., No. 11-CV-02817, 2011 BL 213000 (C.D. Cal. Aug. 1, 2011) The U.S. District Court for the Central District of California granted a preliminary injunction prohibiting the activities of Zediva, an online streaming "movie rental" website. The court concluded that even though Zediva subscribers may view motion pictures in non-public forums such as their own homes, defendants' actions constituted a violation of plaintiffs' public performance rights.

The Zediva Service

Plaintiffs are motion picture studios that release their feature films in various distribution "windows," ranging from theatrical to broadcast television releases. Each motion picture studio has its own strategy for the release of its works, including varying licensing restrictions and fees associated with the right to view the films and for each distribution window. The defendants provide an online DVD "rental" service called Zediva. To operate Zediva, defendants purchased hundreds of DVD players and DVDs. Zediva subscribers request a DVD, and in response, defendants physically start the play process on one of their DVD players. Zediva converts the analog signal to digital and then streams the film for the subscriber's viewing on a custom Zediva viewer. The studios sought to enjoin Zediva. Defendants argued that they were not infringing the works because they merely rented the DVDs to consumers and did not publicly perform the works via the Internet.

Likelihood of Success on the Merits

To establish a claim of copyright infringement, a plaintiff must prove ownership of a valid copyright and that the defendant infringed at least one of the exclusive rights granted to copyright owners under 17 U.S.C. § 106. One such right is the right to publicly perform the work. A performance is "public" if the place where the performance occurs is open to the public or is where a substantial number of people outside of the "normal circle of a family and its social acquaintances is gathered." 17 U.S.C. § 101(1). A public performance is transmitted when it is communicated "by any device or process whereby images or sounds are received beyond the place from which they are sent." Id. The court determined that defendants initiated the transmission of a public performance and used single copies of a work to transmit a public performance to consumers. Defendants contended that they were not transmitting the works, but merely renting them to consumers. The court, noting several analogous decisions, rejected defendants' position. See On Command Video Corp. v. Columbia Pictures Industries, 777 F. Supp. 787 (N.D. Cal. 1991); Columbia Pictures Industries, Inc. v. Redd Horne, Inc., 749 F.2d 154, 160 (3d Cir. 1984). The court reasoned that while Zediva subscribers may be viewing the works in a location that is not defined as public, the subscriber is part of the viewing "public." Warner Bros. at 6-7. Furthermore, the court noted a subscriber could be viewing the work on a laptop while sitting in a public place. "Defendants' transmissions are 'to the public' because the relationship between Defendants, as the transmitter of the performance, and the audience . . . is a commercial, 'public' relationship regardless of where the viewing takes place." Id. at 7. The court distinguished the instant case from the facts in Cartoon Network LP, LLLP v. CSC Holdings, Inc., 536 F.3d 121 (2d Cir. 2008), and Columbia Pictures Industries, Inc. v. Professional Real Estate Investors, Inc., 866 F.2d 278 (9th Cir. 1989) ("PRE"), explaining that the reasoning in those cases was consistent with On Command and Redd Horne, but produced different outcomes due to different facts. In Cartoon Network, each subscriber used a copy of a work made by that particular subscriber. The use of a distinct copy of a copyrighted work instead of the same copy over and over again, the court reasoned, was a distinction that made a difference in determining what constitutes a transmission. In PRE, consumers checked out videodiscs in the lobby of a hotel and took them back to their rooms for private viewing—activities that did not meet the definition of transmitting to the public. Accordingly, the court found that plaintiffs were likely to succeed on the merits of their copyright infringement claim on the basis of unauthorized public performances of their works.

Irreparable Harm, Balance of Hardships, and the Public Interest

The court agreed with the movie studios that defendants' actions interfere with the plaintiffs' exclusive rights and their ability to license those rights, creating the threat of irreparable harm. The court noted that the plaintiffs charge licensing fees which vary based on factors such as the level of exclusivity of the distribution window. The unauthorized public performance by a competitor in that distribution window would irreparably harm plaintiffs' ability to demand those fees. In addition, the defendants do not utilize the quality control methods required by the plaintiffs in their licenses with authorized licensees. Defendants' lack of quality control methods would irreparably harm the goodwill associated with the plaintiffs, their works, and the video on demand experience in general. Finally, while the defendants argued that an injunction would ruin their business, "[d]efendants cannot complain of the harm that will befall [them] when properly forced to desist from [their] infringing activities." Warner Bros. at 11 (internal quotations and citations omitted). Furthermore, the court found it in the best public interest to protect the rights of copyright owners.
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