In December, Disney sued Redbox for copyright infringement and breach of contract for reselling digital download codes for its movies. A federal judge in California denied Disney's motion to stop Redbox from selling the digital download codes originally offered by Disney.
This ruling could have a massive effect on the entire lawsuit, and allows Redbox to keep selling the said download codes.
Disney's lawsuit also includes the charges of tortious interference with Disney's contracts with customers, false advertising, and unfair competition. Redbox doesn't have a distribution deal with Disney for the company to feature its films at kiosks found nationwide. Instead, it has to buy physical copies of Disney films, these discs may include the code for the digital download.
The physical copies also come as combo packs that include the Blu-ray and DVD discs along with the digital download code. Disney says that Redbox "disassembles" these combo packs and then rents the discs. Redbox is also selling the digital download codes from the kiosks.
Redbox offers these download codes for between $7.99 and $14.99 at the kiosks. This includes Disney films such as "Cars 3," "Guardians of the Galaxy Vol. 2," and "Star Wars: The Force Awakens." Disney sells digital copies of those movies on Apple's iTunes store for $19.99.
Disney's suit fights against Redbox's right to sell these codes by arguing that the packaging of the combo packs says the codes may not be transferred or resold.
However, in the ruling issued by the US District Court Judge Dean Pregerson, the judge sided with Redbox saying that its actions do not constitute a breach of contract because there is no binding contract in the first place.
"This improper leveraging of Disney's copyright in the digital content to restrict secondary transfers of physical copies directly implicates and conflicts with public policy enshrined in the Copyright Act, and constitutes copyright misuse," said Pregerson in the ruling.
Pregerson added that seven words don't make a contract between Disney and consumers purchasing the combo pack.
"Disney's Combo Pack box makes no suggestion that opening the box constitutes acceptance of any further license restrictions," said Pregerson in the ruling.
Pregerson adds that Disney is engaging in copyright misuse. Using the example of Disney's websites Movies Anywhere and RedeemDigitalMovies require consumers to have the physical copies they came with. Pregerson hits Disney with "copyright misuse" for this practice for not letting consumers sell their physical copy without being able to keep the digital copy.
This lawsuit is seen as an attempt by Disney to shore up its digital content before it launches its own streaming service next year.