Movie

Zediva — a new online movie service that gets around the need for studio licensing deals by renting users a physical disk and DVD player from afar — has proven to be a hit with consumers, who have stormed the startup since its launch last week.

While Zediva’s popularity with public is clear, the legality of the service — and the movie industry’s opinion of the company — couldn’t be murkier.

Zediva buys physical copies of new-release movies, and plays them one at a time on physical DVD players located at the company’s servers; customers rent a player for $2, and the user’s computer acts as the remote. Only one customer can watch a given DVD at a time, which the company says gives them legal cover since it makes them not really different from a traditional video-rental store or Netflix’s DVD-by-mail service.

But James Grimmelmann, an associate law professor at New York Law School who specializes in online legal issues, says the company is all but doomed, anyway.

Copyright law gives movie studies the sole ability to license “public performances” of movies — such as a movie theater screening a film. Grimmelmann says he assumes that Zediva thinks streaming a DVD player to a customer is a private performance, and thus not an infringement.

But the courts have ruled otherwise, according to Grimmelmann, who cites a 1984 case in which a video store rented movies for customers to watch in booths within the store. The company was sued, and ultimately found liable for copyright infringement.

“Although Maxwell’s has only one copy of each film, it shows each copy repeatedly to different members of the public, ” the court ruled. “This constitutes a public performance.”

But Jason Schultz, an associate professor at Berkeley Law School, disagrees that the progonosis for Zediva is quite so grim.

“I think they are in gray zone, ” Schultz said. “In the modern world of innovation and copyright you are never in the clear, and they are taking huge risks.”

If Zediva is sued, the real question will come down to which cases from the 1980s and ’90s the judges choose to apply, and what panel of judges on California’s 9th U.S. Circuit Court of Appeals wind up handling the inevitable appeal, according to Schultz.

Zediva has two defenses that might be compelling, Schultz says.

One focuses on the “first sale” doctrine of copyright law, which allows those who buy a copyrighted work to re-sell it and even to do things like compile books into a package, modify the cover art and repair a book, so long as the copy was legitimately purchased.

“The first sale [doctrine] allowed Netflix and Redbox to come into existence and a court might be sympathetic because Zediva is trying to respect one-copy limitations, ” Schultz said. “If the company is buying legitimate copies they could rent out in a physical world, why not let them rent it out digitally with each rental tied to a physical copy with only one person using it at a given time? The economics are quite similar.”