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Can Zediva DVD-Streaming Service Go Toe-To-Toe With MPAA?

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Zediva launched just a few weeks ago and quickly produced some buzz among copyright lawyers and tech geeks who debated its legality. Now it’s been sued by a group of movie studios, who, unsurprisingly, argue that the service is clearly illegal and want a court to order it shut down.

Zediva, founded by Venkatesh Srinivasan, streams DVDs over the internet-but says it doesn’t need a license to do so, because it’s dealing in physical DVDs and DVD players. Because it’s renting one DVD, in one DVD player, to one customer at a time, Srinivasan argued it’s more like a DVD rental store than a service such as Netflix (NSDQ: NFLX). The MPAA calls that comparison “disingenuous” in its complaint, filed yesterday in Los Angeles federal court (embedded below).

The service allows users to rent movies just released to DVD for $2 per rental. Users are then able to go back anytime during a 14-day period and finish watching the movie if they didn’t do it the first time. Srinivasan created a software system that allowed Zediva users to control the physical DVD player they had rented-stacked closely together with other DVD players in Zediva’s facility in Sunnyvale, California-remotely, from their homes.

Even before this lawsuit, there was some indication that Zediva had hit physical and technical limitations for its service. It stopped accepting new customers shortly after its mid-March launch, instead putting them on to a waiting list to join.

James Grimmelmann, a professor at New York Law School, said shortly after Zediva’s launch that the company was trying to exploit a “loophole” in copyright law that didn’t exist. “Zediva is about to get pounded by the movie studios, and hard,” Grimmelmann wrote on his personal blog. Grimmelmann notes an earlier ruling about a DVD store called Maxwell’s that offered DVD rentals in private viewing booths. But despite the private booth, courts found that Maxwell’s was offering public performances, since any member of the public could walk in to one of those small private theaters.

Shortly after Zediva’s launch, I spoke to Jason Schultz of UC Berkeley Law School, who had a somewhat different take than Grimmelmann, and said there was some precedent for a service like Zediva being ruled legal. When Cablevision (NYSE: CVC) created plans to offer customers a “remote DVR,” it was sued by television networks; but an appeals court ruled that the service is legal, because customers can only access shows that they’ve recorded on their own sort of “cloud DVR.” That was a private performance, and the content owners didn’t have a right to demand a licensing fee for it. “Congress and the Supreme Court have been very clear that copyright owners have no control over private performances,” said Schultz.

Other cases from the 1980s and 1990s would seem to favor the movie studios. Hotel networks that have tried to create their own in-house VOD services have generally lost in court, says Schultz; even though the shows are being viewed in private rooms, hotels were seen to be places of business, and thus their VOD systems were engaging in a “public performance.”

In any case, the legal niceties of this case may be largely academic. The MPAA is going after Zediva, a five-person company, with considerable legal resources at its disposal, and it’s questionable whether Zediva will be able to defend itself vigorously. But if Srinivasan is able to mount a serious defense, it could be an interesting copyright case. Contacted this morning, a Zediva spokesman said the company just heard about the lawsuit and is still reviewing it.

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MPAA v. Zediva (complaint)