UPDATE:  Well…it seems as though that little “loophole” that start-up movie service Zediva was relying on for their business model may not be big enough to fit it. As you may recall from my previous posting here, Zediva launched on online movie rental service a few moths ago to compete with Netflix and others.  Zediva relied upon an interpretation of the first sale doctrine to allow its registered users to access the DVD content, unconstrained by the licensing agreements entered between its competitors and the studios that require the rental provider to delay offering DVD titles for rent after initial commercial release (see here).  Essentially, Zediva thought that purchasing a DVD, reserving it to a single user while streaming the video to them, then releasing it for viewing by another would circumvent copyright restrictions.  Apparently not – as recently reported by cnet news, U.S. District Judge John Walter of the Central District of California slapped a preliminary injunction on Zediva, specifically stating the following:

“Defendants’ service threatens the development of a successful and lawful video-on-demand market and, in particular, the growing Internet-based video-on-demand market. The presence of Defendants’ service in this market threatens to confuse consumers about video-on-demand products, and to create incorrect but lasting impressions with consumers about what constitutes lawful video-on-demand exploitation of Plaintiffs’ copyrighted works.”

Needless to say, it seems like curtains for Zediva.  From my perspective, there may be a limitation on who can watch a single DVD at a time, but there is no limitation on how many different customers can ultimately view a transmission of the DVD over the lifetime of Zediva’s ownership of the lawfully made copy – a fact that flies in the face of the plaintiffs’ exclusive rights.  Honestly, I thought that the technical issues and related costs would impact Zediva more quickly, but it seems the MPAA and the court took out a legal Vaudeville cane to pull Zediva from the stage. SO…if you are thinking about competing with Netflix and entering the video-on-demand streaming marketplace, you might want to take a different approach…one that avoids that cane altogether…

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