M+E Daily

by Terence Keegan

Hollywood studios view the UltraViolet cloud service as a make-or-break marketing effort to rejuvenate packaged media sales in an access-everywhere era. However, the response from consumers who remain faithful to buying Blu-rays and DVDs — but who have no use for UV access to movies — is raising new legal questions of consumer “ownership.”

From the launch of UltraViolet value-adds with Blu-ray and DVD packages last October, industry analysts have warned that an online secondary market for access codes to digital copies of films could quickly develop, creating a new headache for Hollywood (see GigaOm). The issue resurfaced this week, when The Consumerist reported that eBay had taken down a consumer auction of an unused UltraViolet code from a copy of new Paramount release “Mission: Impossible – Ghost Protocol.”

According to the report, eBay cited copyright infringement as the reason for the takedown — obviously irksome to the bona fide Blu-ray purchaser, who believes the digital copy of the movie is “his.”

Unbundling

It’s long been accepted that consumers are not violating U.S. copyright law when they sell Blu-ray discs that they previously purchased. But is it legal for consumers to keep the discs they bought and sell the UltraViolet access codes that come with them?

Probably not, says Jim Burger, an attorney who specializes in intellectual property and entertainment content licensing. As a consumer, says Burger, “the UV access codes represent the purchase of a bundle of rights to download copies of movies for playback on authorized devices or to stream the movies.”

Essentially, he continues, “use of the UV code is governed by the UV license, [which] permit[s] the owner of the disc to access digital content in the cloud and does not allow resale of the service.” Unlike with used discs and other packaged media, the transfer of such a license is likely not protected under the “first sale doctrine” in U.S. copyright law, says Burger, who is a member of the Washington, DC law firm Dow Lohnes.

Sellers of UltraViolet codes also may be in violation of the “shrinkwrap license” that they agree to when they purchase the UltraViolet titles, Burger says. Meanwhile, the buyers of the codes on eBay could be theoretically liable for copyright infringement, as their downloading of movies using the codes would be unauthorized by the studio.

Given all this, says Burger, it’s not surprising that eBay is being “super-cautious” in removing UV code auctions from its site.

How Big A Problem?

One comment to the April 18 Consumerist story observed that there were only 39 listings for UV codes on eBay at the time. Yet other comments maintain that download code auctions are much more numerous, with most ending soon after they begin to elude takedown — and few mentioning “UltraViolet” by name.

A handful of auctions for UltraViolet digital copy codes — as well as for download codes from CD and video game packages —  were live on eBay Friday afternoon. No UV code auctions were fetching more than $6, and none had more than three bids.

For UltraViolet marketers, the legal questions surrounding “first sale” issues of digital copy codes may mount. But it seems likely that for now, simply introducing consumers to UltraViolet, and selling them on the benefits of the system, will remain studios’ biggest challenges.