Disney loses bid to stop Redbox from selling its digital download codes
theverge.com
theverge.com
Well now. That's quite a nice result. I wonder how well this will extend into other "basic ownership rights" in other digital fields.
The manufacturer can and will make the device more and more difficult to tear apart, and less modular.
This can partly be a design choice, but also affects the possibility of repairing...
Still, I am not a lawyer but I don’t see how a judge could enforce internal design choices...
The company built the thing. There are tools, parts, and instructions that tell someone how to put it together. There are also tools, parts, and instructions that tell someone how to take it apart.
It may require special tools and parts, but for any mass-market item it won't be difficult with the right tools and the knowledge of how to do it.
The reason for this is that the company will lose more money by making it difficult to repair for themselves than they will ever lose to a DIY repairman.
My solution for DIY repairs:
- Official, real service manual made available. If you allow the company to provide a "monkey" version they certainly will.
- All neccesary parts and tools available at cost, or the cost of their generic equivalent in case of things like proprietary screwdrivers etc.
>Do not try to repair a faulty device. Replace it with a new one in which you transfer the customers data. The device is filled with epoxy glue- disassembly equals destruction.
When I repair it saves me $500 but when the manufacturer repairs it only saves them $10.
1. The government makes a law saying companies have to let you repair.
2. No laws, companies can make it hard to repair, and you can try to repair.
3. The government makes it illegal to repair (because of DRM). This is the current situation.
It would be nice to go from 3 to 2.
The farming tractor repairs are 'reasonably' priced at the moment (according to the company selling it).
Currently I'm looking for a toothed belt for a bread-maker - best price I can find is a quarter of the cost of a new bread-maker (15€ delivered), that seems a bit ridiculous to me.
The belt was in crumbs, locked behind security screws. How many functional devices have been dumped for want of a simple belt replacement I wonder.
The other aspect is, who decides what price components must be sold for?
I usually find myself arguing against people with what O think is a bit of a blinkered faith in market forces solving all and regulation being the work of the devil. But in this case, unless there really is a demonstrable monopoly position that’s being abused, it should be up to customers to decide if after market parts availability is something they care about in their purchasing decision.
If you have an internal ERP product code for the spare part in question, it is swappable.
If the repair shop asks for a single IC chip instead of a complete PCB or ECU, they obviously have the skills and need to replace it, making it a valid spare part request.
If you need software or specialized tools to configure or install a part, you obviously cannot withhold said tools from the repair shop.
These are actual examples from my business: I have part numbers for raw powders that I have not yet sintered into ceramics. I have part numbers for parts that go into a welded and inseparable sub-assemblies. I have part numbers for components that are bonded together with glass seals that cannot be repaired if separated.
It is easy to see how you cannot just use the BOM to determine the list of spare parts and it is easy to see how a manufacturer could simply pot their whole unit in epoxy for "structural" reasons and prevent any individual spare part or sub-assembly from being useful.
We have a lot of embedded systems written in assembly for an 8-bit CPU that is no longer made. The electronics are easy (I'm not an EE) but it will be years before we can replace the software that currently has been running in the field with zero known bugs - I'd love to get those CPUs that work perfectly made again. Instead we bought a warehouse worth, and we hope it is enough to satisfy all our warranty needs.
The important thing is that identical inputs yield identical outputs. The rest of the vehicle doesn't care what's in the black box.
Then you wouldn't have to warehouse old, obsolete parts. You just have to warehouse old, obsolete embedded-software developers. That's probably cheaper if you have enough volume.
Also, if your company is still programming in assembly instead of a higher-level language, such as C, which has been available for 45 years now, I can safely say you are all hoist on your own petard. If you really want reliability, there's always Ada. You can't expect the 80196 to stick around forever.
The vehicle does not care what is in the black box, but that is only true once input/outputs are actually identical. It is .01 volts different has killed us in random failures. It is 1ms faster, is that better or now - in some cases that 1ms slower was depended on and we didn't know it anymore.
We don't program anything new in assembly. However for a lot of old embedded controllers if it works don't break it. There are no known bugs with the old code. Suddenly the CPU isn't available and we have to create a new one. Marketing can't come up with any new feature that a new CPU would enable so it is strictly and engineering exercise.
If you don't maintain it, you are allowing it to break through neglect. That's like saying if the old oil works in an engine, you shouldn't bother changing it. It works great, right up until it doesn't, and then you have a bigger problem.
Software development is an incurable disease. Once you start, you can't ever stop.
There would be a great incentive to warehouse and sell "spare parts". And they would have to be every individual discrete part, and every subassembly that can be handled as a unit. If you just sold engines, you might end up with an unusable nearly-engine because someone came along and picked just the parts they needed off of it. If you just sold engine parts, you might end up with an unusable nearly-car because someone picked a whole, assembled engine out of it.
So every type of screw, nut, bolt, and washer. Every type of transmission assembly and engine assembly. Every passenger seat. Every floor mat. Every light bulb and every plastic housing. Every wiring harness. Every radio and CD player.
This is itself a great incentive to use COTS parts, reduce number of unique parts, and adhere to standards. Maybe you use a #6 bolt somewhere instead of trimming weight and cost a tiny bit by using a #5 there. Maybe you standardize the dimensions and mount points of your engine compartments, so that 20 years from now, replacement engines can be diverted from the supply chain for newer cars rather than pulled from a warehouse stockpile that has been taking space and gathering dust that whole time. Or maybe you set up your spare parts facility to do on-demand manufacturing or assembly.
It is a big can of worms. But I'd argue that not opening it now would be allowing it to grow even bigger and wormier as time goes on.
"Fixing" lots of appliances means wholesale replacement of the entire "board" (i.e. component representing 90% of the total electronics) which likely never makes the device as good as new but costs almost as much as a replacement unit.
For smaller devices like cell phones it becomes much more difficult due to a combination of miniaturization, specialized parts not available on the general market, and secret schematics that can't easily be derived from the complex multilayer PCBs in use.
Seems very similar to this “Codes are not for sale or transfer” thing.
No, they've just had no legal effect. They aren't illegal; that would mean merely placing them on a product would incur some civil or criminal liability for the illegal act.
It doesn't require on one piece of evidence in isolation, or even the totality of the evidence, only permitting one possible interpretation.
Why should we permit deliberate misinformation of consumers?
Written contracts that purport terms blatantly at odds with prevailing law would be a good target, too.
It is good to see though that the giants cannot bully the little ones and the plane is somewhat levelled, even if this one is a short-lived victory.
Yes, you can create a burner e-mail for this, but you get the point.
Edit: after reading online, I think you are probably right but it seems like a dumb deterrent and inconsistently applied.
[1] https://www.fda.gov/Food/GuidanceRegulation/GuidanceDocument...
They can ask if they want, but they have no legal leg to stand on.
The issue at hand here seems to be Redbox selling the access codes separately from the DVDs, whereas Disney wants them to be bundled together.
I don't think people buying a new textbook and reselling the bundled access code is a big concern for the publishers - the online content is supplemental to, not duplicative of, the textbook content.
Access codes are really what publishers are banking on for lock-in, and they will happily sell students one sans textbook. It ensures the publisher gets a piece of the pie, regardless of the used and rental markets, or piracy.
It won't, because this is almost entirely about the right of first sale, a doctrine of basic ownership rights in physical items embodying a copyright-protected work. While slips of paper with digital download codes are involved and disks with digital content are involved, it's not really about “digital fields” but physical goods.
https://drop.qoid.us/031127591204.pdf
edit: actually, The Verge's article links to a Hollywood Reporter article as its source, which does have a copy. So I should have looked harder. Still...
Thanks for linking that, comex.
And their coverage of the Waymo lawsuit was great too. I think they just have a few subpar writers.
Lords, even IBM vs SCO is still going strong. Huge cases like this just never really end, a curious feature of the US legal system.
It's a specialization that not many people are in, yet which is in high demand.
Even if true, Disney is still nothing near a monopoly, so this whole subthread is just silly.
I have seen their kiosks in almost every major supermarket for years.
(I know, this fact doesn't make the digital rental any cheaper...)
Either RedBox is losing money on each rental, or....
The world of physical rental - at least in the US, not commenting globally - can rely on the First Sale Doctrine, which dramatically alters the economics.
They can stop selling the retail copies with the code included. That would pinch off Redbox, but upset customers.
They could stop offering download codes and instead allow people to register their retail copy to the streaming service with a copy of their receipt. Again, not very consumer friendly, but Disney is big enough to possibly get away with it.
Can't Redbox just go to a store and buy the movie and put it in their boxes?
But they won't, because Disney is the 800 lb. gorilla that can get whatever it wants by beating its chest and charging...
...the lobbying and litigating costs to its colossumongous IP protection budget.
> Access Denied You don't have permission to access "http://www.redbox.com/" on this server. Reference #18.18a9645f.1519288990.4e3b07
P = (# of rentals * $1) - $32
where $32 = the $20 disc cost + monthly var cost
If redbox rents the movie once per week, their per disc annual profit is $20
But, if redbox can now sell the virtual download code for $8 online (essentially $0 variable cost for holding digital inventory), and digital sales has little impact on physical rentals, then the equation would be:
P = (# of rentals * $1) - $32 + $8
With annual profit per disc in the 1x/wk rental case now $28, or a 40% gross margin increase. All #s are just napkin math/assumptions, but it's easy to see the benefit here for redbox.
The easy answer is "they get more money if they sell the code as well as the disc, instead of just selling the disc".
Also the disk is usually a LOT more expensive (up to $100 for a new blockbuster release). DVD store fronts were already so low margin, it didn't take much disruption before they started to go under.
Redbox rents out DVDs/Blurays from physical kiosks. Normally they buy the discs straight from the studios (or whoever the studios go through). As a fallback, they'll literally buy them from Walmart or whoever, which I'm pretty sure is how they originally started before they were big enough to get the deals going. They still don't have a deal with Disney, so they buy them at retail from some unnamed vendor.
Disney retail movies come with a download code for digital copies, which Redbox has no use for, so they sell that code for cheap and everyone wins (besides Disney). They could literally throw the code away and still profit.
Does that help? You were basically on target.
What Redbox is doing is constituting 1 purchase = 2 households can watch the media privately (the renter of the DVD and the purchaser of the code).
I'm not an expert on the First Sale Doctrine, but it seems like the end result is that Disney would sell fewer copies of it's content (i.e. damages) in respect to RedBox's actions.
(not a lawyer)
Disney wants to treat the sticker as a legal license. I too, am not a lawyer, but I think they are on shaky ground.
Though, I'll agree that you should be able to transfer digital goods. Audible supports this for example.
Once someone redeems the code, they presumably have to have a Disney account and agree to some kind of terms of service.
I'm wondering about after someone has redeemed the code. Once someone redeems the code, they presumably have to sign up for an account and agree to a long terms of service, which is (to my understanding) more accepted as a contract. It seems like this ruling doesn't significantly advance the issue of digital ownership.
I'd guess this case settles though, far too much for Disney to lose and not enough for them to gain; I'd expect that they'll beef up their labeling.
Unfortunately, the judge (and really, the existing case law) gives them basically a recipe to do what they want to: full license terms on the box top (via the referenced Lexmark case).
Bonus points for that slip having redemption instructions.
As such, it'd presumably be identical to sell the codes digitally vs physically, in the court's eyes.
That's basically what VidAngel did -- a physical retail copy for each simultaneous rental -- but the courts shut VidAngel down.
Also, the courts didn't shut VidAngel down; VidAngel is still in operation—for a while apparently defying court orders, now using a different mechanism to achieve a similar effect, though also excluding movies from the studios which sued it.
The Crux of the legal argument lies in equating Redbox to a regular end-consumer, which is inaccurate. Can any lawyers comment on this.
What's the difference? If I buy a hammer at Home Depot, is there any question that I can rent or loan it to somebody else? Why should intellectual property be any different?
1. Hammers cannot be trivially cloned and mass ditributed digitally for free
2. Every hammer is the same, while every new digital creation (not copy) is possibly the blood , sweat & tears of hundreds of people whose sole source of living is the creation of digital content.
HN has an aversion to DRM & paying for soft goods. I'm assuming you're a software developer. How would you like your creation to be ruthlessly copied and mass distributed, killing the potential revenues it would have brought you, and in extreme cases driving you out of business?
You're right though that HN does have an aversion to DRM. How many movies has it successfully kept off of pirate sites?
In my opinion, the courts have this wrong on 2 fronts:
1. Redbox != Regular end customer, especially when the good in question contains DRM-ed digital content
2. Redbox doesn't have the authority to sell digital content they haven't produced, just like an iTunes user doesn't have the right to sell an MP3 purchased off iTunes.
I think Redbox has a chance here because they aren't selling digital content. They are selling a code. That digital content is transferred by Disney to the purchaser and Redbox is never in the middle.
DRM really isn't involved in any way here - the existence (or lack) of DRM would not change this situation in any way at all.
Nothing in the decision rests on Redbox being a “regular end consumer”; it rests of first-sale, a legal doctrine which generally stands in direct opposition to the idea of “end consumer” as a role to which a seller can restrict goods.
> Redbox doesn't have the authority to sell digital content they haven't produced
The first sale doctrine gives them the right to disassemble and resell the physical items in the box they purchase, which is what they are doing.
Even Disney isn't arguing that Redbox is illegally selling digital product or violating copyright directly, instead they are claiming that Redbox is contributing to infringement by the end purchasers who are violating the copyright license by using a download code without owning the disk, and that Redbox is violating a purchase contract with Disney entered into by the act of purchasing the package at retail that prohibits separating the physical components notwithstanding the right of first sale.
The judge here upheld the right of first sale against that assault and also stated that the license terms Disney is asserting that end purchasers would violate are themselves an abuse of copyright, because they would prevent the exercise of the right of first sale.
As an open source guy: I would fucking love it.
Just because our economic system doesn't match reality doesn't mean we need to try and patch reality to fit. It means we need to adjust our economic system.
They can "mean for" retail copies to be used by individuals buying and watching them at home, but they don't get to enforce that intention.
Redbox is equal to a regular end-consumer. Because all customers are equal. Everyone has the right to buy something and then sell part of it to someone else if they want.
The line would be crossed if Redbox was copying the CDs to new media that was not sold to them in the original sale. That's obviously infringement. Also, I assume that if Disney tried to make you sign an agreement when you download the digital version that you do in fact also own and possess the physical copy would violate the first sale doctrine. (I am not a lawyer)
So I see no problem with what they're doing.
No, the crux of the legal argument lies in the doctrine of first sale, which applied to any purchaser of physical goods, not just an “end consumer”.
In fact, the doctrine of first sale serves to prevent restraint of trade through trade practices which reduce purchasers to the role of “end consumer.”
Let's understand this really damaging verdict by using an app as an example.
1. Disney puts out an app that can either be bought as a disk at Walmart or as a download on the app store
2. A third party app store that doesn't have a re-seller/partner agreement with Disney buys a disk, and claims that the legal purchase of the disk now entitles it to re-distribute the app as it deems fit, including selling DIGITAL copies of the app on it's own app store.
Does this seem logical or fair to you guys?
The logical fallacy here is in equating the third-party app store to a regular end-user. Additionally, the third-party app store selling the app digitally is equivalent to Spotify streaming content it hasn't licensed under the guise of owning CDs of the said content.
This is wrong and dangerous for the digital economy. If this verdict holds, I should be able to buy MP3s off iTunes and "rent" it to whom-so-ever I want!!
Good luck with that.
Totally. They did what anyone can do, at scale, and calling them “third party App Store” really changes nothing. They have no agreement with Disney and so pay retail for their product and don’t get pre-releases. Fair.
The logical fallacy here is in equating the third-party app store to a regular end-user. Additionally, the third-party app store selling the app digitally is equivalent to Spotify streaming content it hasn't licensed under the guise of owning CDs of the said content.
Not even a little. It would be like Spotify buying physical media and selling one copy of it digitally to one person per purchase.
This is wrong and dangerous for the digital economy. If this verdict holds, I should be able to buy MP3s off iTunes and "rent" it to whom-so-ever I want!!
Yep. Next you’ll tell me that mix tapes and bootlegs were killing physical media.
And lest you forget, piracy is always out there waiting for people like you to put ineffective hurdles in front of fair use.
They aren't selling anything that wasn't in the package they bought (unlike your hypothetical) and isn't selling additional copies of anything.
They are violating language on the packaging, in splitting the items, but the judge has found the limitations attempted to be imposed by that language to be illegal.
> If this verdict holds, I should be able to buy MP3s off iTunes and "rent" it to whom-so-ever I want!!
No, this decision turns entirely on the doctrine of first sale with regard to the physical product Disney is selling. While someone might argue that a first-sale principle should apply to digital products on similar terms with physical ones, that's not either the current law or the decision in this case.