Disney has lost a bid to stop movie rental company Redbox from reselling download codes for its films.
Redbox bought Disney movies on DVD to offer for rental in its kiosks. The DVDs were often bundled with a code to download a copy of the film.
Disney requested an injunction to stop the practice, saying that Redbox had no business arrangement with it.
A California federal judge accused Disney of “copyright misuse”.
Redbox rents and sells movies via tens of thousands of automated kiosks that dispense DVD and Blu-ray discs.
It purchases retail copies of Disney movies that include a piece of paper printed with a digital download code, which Redbox then removes to resell in its own packaging.
Disney said this constituted copyright infringement because the language on the packaging made it clear that codes were not for sale or transfer.
In a 26-page order, Judge Pregerson said that the wording on the packaging did not create an enforceable contract.
He also sided with Redbox’s argument that Disney was misusing its copyrights by trying to restrict the reselling of copies of its movies after they had already been sold.
The next hearing, on 5 March, will address Redbox’s motion to dismiss the case.