MPAA Goes After DVD Streaming Service Zediva

Surprise! Zediva, the online video rental place that launched last month, is being taken to court for copyright infringement. The Motion Pictures Association of America (MPAA) Monday filed suit on behalf of six Hollywood studios, claiming Zediva illegally streams their films over the Internet without licensing the content from rights holders.

Warner Bros., (s TWX) Columbia Pictures, (s SNE) Disney Enterprises, (s DIS) Paramount, (s VIA) 20th Century Fox (s NWS) and Universal (s CMCSA) are all represented in the suit against WTV Systems, parent company of Zediva, and CEO Venkatesh Srinivasan. At issue is Zediva’s business model, which is predicated on streaming DVDs over the Internet for as little as $1 each. The startup argues that since its service is driven by a number of DVDs and DVD players in its data center, it doesn’t need to pay licensing fees for its streaming service.

Not surprisingly, the Hollywood studios disagree. From the lawsuit:

“Unlike Netflix and other licensed online services, [Zediva’s] business is based on infringing Plaintiffs’ rights. Defendants transmit performances of Plaintiffs’ copyrighted works to members of the public without Plaintiffs’ authorization. Defendants thereby infringe Plaintiffs’ exclusive rights to perform their works publicly.”

In their complaint, the studios differentiated Zediva’s streaming business model with Netflix, (s NFLX) Apple’s iTunes, (s AAPL) Amazon Video On Demand, (s AMZN) Microsoft Xbox Live, (s MSFT) Blockbuster On Demand, CinemaNow (s SNIC) and the Sony Playstation Network (s sne), all of which pay licensing fees for rights to stream their movies over the Internet. Furthermore, the complaint throws some cold water on Zediva’s characterization of an online rental store, saying that even if that were the case, it would still need to license the studios’ content:

“Defendants’ comparison of the Zediva service to a rental store is disingenuous, and Defendants are attempting to rely on technical gimmicks in an effort to avoid complying with U.S. Copyright Law. Defendants operate an online VOD service, not a neighborhood rental store. Unlike Zediva, rental stores do not transmit performances of movies to the public “over the Internet using streaming technologies. A rental store or any other establishment would also need a license to do so.”

In addition to shutting down the service, the studios are seeking $150,000 in damages for each act of violation of copyright infringement.