Zediva Tries To Beat Netflix To The DVDs By Invoking Same Doctrine That Will Make It More Expensive For Netflix.
The many avid readers of this blog will no doubt remember our in depth discussion of the "first sale" doctrine as it relates to the inability of Netflix to rely on such doctrine for the streaming 
of videos, since there is no "sale" involved. We surmised that this would increase costs because Netflix would have to license the videos from the copyright holders rather than just buy the DVD and rent it out.
Now, another service is trying to side step the issue and offer streaming DVD videos in a time frame well in advance of when Netflix can offer the video. Zediva went from beta to production last week and is offering streaming videos as soon as the DVD is available for purchase. Zediva's legal reasoning on this (we believe) is that they are buying the DVDs and physically taking delivery of the DVDs and actually playing them on a DVD player somewhere in their data center. The particular DVD and the player on which it is playing are leased to the subscriber for four hours, during which no other subscriber can access either that DVD or that player. The technology employed by Zediva allows that DVD and player to
stream the video over the internet to the subscriber's device. So, according to Zediva, it is like renting the DVD and player and the player just has a really long cord (with the cord serving as a metaphor for the cloud). Surely, says Zediva, that must be allowed under the "first sale" doctrine. If DVD copyright holders take umbrage at this arrangement, they might say that the "first sale" doctrine requires physical transfer of the medium and "Don't call me Shirley". (gratuitous Leslie Nielsen homage)
The roll out of this bears watching. Zediva's website today says it is down while they get more capacity. Recently, another company thought they fit into an exception of the Copyright Act. ivi TV was retransmitting television broadcasts and claimed they were a virtual "cable company" and therefore entitled to transact their business under Sec. 111 of the Copyright Act, although they didn't get retransmission consent nor qualify as a cable company under the Communications Act. The US Court for the Southern District of New York granted a preliminary injunction that ceased their operation until further adjudication.
As new technology challenges the present state of the law, we close this post as we almost always do. Stay tuned.
