Disney scores victory in legal fight with Redbox over digital download codes for new movies

Walt Disney Co. has prevailed in its effort to stop kiosk rental company Redbox from reselling digital download codes for new movies such as “Black Panther” — as long as they include the right fine print.

U.S. District Judge Dean Pregerson this week granted Disney’s request for a preliminary injunction against Redbox, which has drawn the Burbank entertainment giant’s scorn by selling numerical codes that allow customers to download digital copies of its movies.

Disney sued Oakbrook Terrace, Ill.-based Redbox last year, accusing the company of contributing to copyright infringement and breach of contract by selling codes for such films as “Beauty and the Beast” and “Guardians of the Galaxy Vol. 2.”

Redbox, which has a history of clashing with studios because of its cheap rentals, does not have a licensing agreement with the studio. To get around that issue, Redbox acquired the digital download codes by buying DVD and Blu-ray combo packs at retail outlets, which include a paper slip with the numerical code.

The company repackaged the codes and sold them at its red kiosks for as little as $7.99, starting late last year. Customers could then redeem the codes at websites such as Movies Anywhere.

Disney claimed Redbox violated its terms and conditions by reselling the codes, because its combo packs are marked with the phrase “codes are not for sale or transfer.”

Redbox argued that it was protected by the “first-sale doctrine,” a part of copyright law that says someone who buys a copyrighted work is allowed to resell it or give it away, as long as they don’t make their own copies to sell.

It has not been an easy fight for Disney. The judge rejected Disney’s initial request for a preliminary injunction in February, determining that the language on the packaging did not create an enforceable contract.

Disney subsequently changed the language on packages for its movies to meet the judge’s standards by making the restrictions more explicit, starting with Marvel’s superhero hit “Black Panther,” according to legal filings.

Pregerson, in a 21-page order filed Wednesday, said Redbox could not sell codes from packages with the revised language.

“Taking that language into consideration, the court concludes that Disney has shown that it is likely to succeed on the merits of its contributory infringement claim,” Pregerson said in his ruling.

Redbox, in a statement, said that the decision does not reverse the earlier ruling that allowed it to continue selling codes for movies packaged with the vaguer disclosures.

“Redbox remains free to sell codes for those prior titles,” Redbox said. “The court’s decision once again maintains Redbox’s stance as an advocate for the consumer.”

New York private equity firm Apollo Global Management acquired Redbox in 2016 as the company struggled to adapt to a home entertainment market increasingly dominated by streaming video.

ryan.faughnder@latimes.com

Twitter: @rfaughnder