Is it legal to lend out DVDs for profit?
 

I want to know if it is legal to lend other people my collections (just like Netflix or BlockBuster) for a fee. If not, where can I buy the rights to lend out movies?

I would say it's illegal to loan out DVDs or any type of merchandise for personal profit, because it's the same as renting. you are being paid a fee, which legally required a license in regards to operating a business.
You may have to go to your local authorities to get all the info you need concerning this situation, if you are contemplating on renting your DVDs for monetary gain, and to avoid prosecution, which can lead to serious repercusssion.

I would assume you need some sort of license in order to do this....as it sounds like it would be illegal without one

No you do not have to go to your local authorities to find this out. You also do not need a license. It is called the first sale doctrine in Copyright Law. Once they have sold that DVD the first time (generally to the store that sold it to you), the maker of that DVD has absolutely no say in what anyone does with it after the fact. You can resell, rent it, destroy it. This only refers to the actual disc. This does not mean you can copy it or repoduce it. The doctrine only applies to the right to distribute the actual copy of the movie, album, whatever.

P.S. this first sale doctrine does not apply to renting Audio discs (CD's, albums, tapes, etc.) or computer software (actual software, PC games). It does however apply to stand alone video games for stand alone consoles (X-Box, PS2, Gamecube).

The first sale doctrine is why we have used CD stores. Believe me, the record companies would absolutely love to get rid of this doctrine making it so they can control all sales of CD's.

Congress made renting these out illegal because people were renting them, copying them and returning them to the stores. Hell, the stores used to let you copy them right there in the store.

Stand alone video games were exempt because Congress wanted to punish Japan in the 80's. There was a wave of anti-Japanese feelings, thus Congress did not protect stand alone video games. This is why you can rent video games, but not ones made for PC's.

This is also why it is perfectly legal to sell your lawfully purchased copy on Ebay. So long as it was not stolen and is not a bootleg, there is nothing movie studios or record companies can do to stop you from selling on Ebay.

By the way, this is Section 109 of the Copyright Act of 1976.

wow sherm you make me want to be a lawyer. lol

Right. And I'll just add that the reason "secondary rental markets" aren't legal for audio CDs and computer software only is because of the threat of bootlegging. The OP can rent out DVDs for profit as he wishes without a license.

Hmmm...I'm pretty sure the IRS is gonna want to know about your little venture somehow.

Well, the IRS is a completely different matter.

It's kind of funny to think, but there used to be actual stores that rented out record albums. They would rent out the album for a fee, sell you a blank tape, then direct you to a record player with a tape recorder attached so you could "listen" to the album right there in the store.

It's no surprise that practice was stopped pretty quickly.

Okay, I'm curious... are you thinking of opening a store or are you going to charge to lend out movies to family/friends?

Sherm is right. However, if there is copying involved it's another story. For example, if you rent your DVDs to someone with the knowledge that they intend to copy them, then you may be contributorily liable for infringement.

Wow, I should open up a DVD renting store. Being how I have more movies then my local video store.

Shit, if I did that, I'd put Blockbuster and the local M&P down the street from me out of fucking business.

And after five or so rentals the disc will become unplayable due to scratches or cracks. Goodbye profits!

Here's an interesting sub-question that bugs me occasionally:

The legal thing at the beginning of the movie also prohibits public exhibition of the movie. If I ran a restaurant, for example, and wanted to attract business by perhaps announcing a "movie night," but not charging customers to watch the movie (just normal charges for food), what's it hurting?

Yes, this would be a violation of the right of public performance. What you're essentially doing is free-riding on someone else's work to make some money. You can do this, but you have to get a license first. Alternatively, you can make your own movie and show it.

I am going to disagree with Sherm's interpretation of the first sale doctrine. BBV/HV/MG/etc. have licensing agreements to rent videos built into the price of their purchase with the studios. In my mind, your renting the DVDs is no different than making a copy and selling it. You can dispose of the DVD however you like, but renting would not be one of them. However, I am just a litigator and not a copyright attorney. I could be wrong. But even if I am, what kind of person charges people he knows to borrow a DVD from them?

All I know is that I am coming from having just finished Copyright Law as a class. We spent extensive time on the First Sale Doctrine. Just because the big chains have contracts and licenses does not mean they need them. The studios probably forced many retailers into some licenses or sharing in exchange for cheaper prices on the tapes and DVDs.

Think about this. It was really the small places that began renting DVD's first. Way before Blockbuster and the others. The studios were scared of this because they were raping video stores by selling cassettes at about $99.00 each during the "rental window." DVD's offered an opportunity for some places to rent out a movie that cost the a fraction of the price. There was nothing that the studios could do short of no longer releasing DVDs or creating an artificial "rental window" where DVD's would cost about $100. This was talked about for a bit, but Warner holding the patent in DVD refused to suport a rental window and they brought several studios with them. If those studios that wanted a rental window could have just stopped DVD's from being rented, I am certain they would have.

Any licensing agreement is probably voluntary and outside of Copyright Rights. The licenses are probably to buy in bulk and even more importantly probably to get licenses to show the movies in the stores to promote their rentals. Just as outlined above, even showing a movie in a video store is generally considered a public performance. A license to play a video at blockbuster, a place open to the public, would be required.

You note that renting it is like making a copy and selling it. This could not be more wrong. As we learned, Copyright Law is very anal about what is and is not making a copy of something. Further evidence that Rentals are part of the First Sale Doctrine is the simple fact that Congress had to actually pass special Amendments taking away rental rights for Audio Recordings and Computer Software. If rental was not considered part of the First Sale Doctrine, Congress would never have needed to make special Amendments exempting them from Rental.

Can you tell I am still in finals mode? Just finished Wednesday. I should really point my professor to this thread to see if I am right.

I remember up until a few years ago Hastings would rent PC games.
And a couple of stores would sell used PC games too.
Both types of services aren't found anymore...

I think we are losing site of the real question here, WHO are you renting to? If your renting to friends thats just not right, either lend them out to family and trusted friends or just stop letting them freeload on you. If your talking about lending them out to second hand friends or strangers. People WONT respect your late fees and your DVD collection will proabably slim down pretty quick. People return DVD's to Blockbuster becuase they have thier credit card on file!

I'm going to agree with sherm's interpretation, and I'm an attorney who graduated law school with a concentration in Intellectual Property Law. FWIW.

What's in your mind is, thankfully, very different from what's in the U.S. Copyright Act. The First Sale Doctrine, as embodied in 17 USC § 109(a), states the following:

"[T]he owner of a particular copy or phonorecord lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord."

This has always been read to allow for rental and it forms the legal basis of video rental stores, not licensing agreements. This is why studios created "rental pricing" and sold videos for a certain window of time exclusively for a price beyond what a consumer would be likely to be pay: to create a means of forcing rental stores to pay exhorbitant amounts of money so that studios could recoup money they felt was lost in sales by the rental industry. After the rental period was over, the videos were usually marked down by the studio to a "priced to own" level. If rental was illegal without licensing, there would never have been any need for the rental pricing window; instead, they would presumably be able to sell a cheap version meant for sale and an expensive version that came with a rental license. Since no such option for a sale-with-rental-license existed, the rental price exclusivity window was necessitated. Compare the US rental market, for example, with the British rental market (ever since the Designs and Patents Act of 1988), in which only those copies specifically created for rental can be rented out and the videos offerred for rental are not the normal retail versions.

If further statutory analysis is any helpful, as sherm pointed out, § 109(b)(1)(A) contains a restriction on the classic First Sale situation for sound recordings and computer programs by disallowing owners to "dispose of, or authorize the disposal of, the possession of that phonorecord or computer program (including any tape, disk, or other medium embodying such program) by rental, lease, or lending..." Thus, rental/lease/lending is specifically listed as a means of "disposing" contemplated by § 109(a).

DJ

No, sorry, but Sherm is right. If you have a store, you can buy DVDs from anywhere (often they are cheaper to buy at Wal-mart, etc. on week of release than they are from a distributor), there is no "licencing" price that has to be included in the DVDs a store buys to rent. The first sale doctrine completely allows renting of original prerecorded DVDs by anyone. Of course, other countries have different laws. I believe the UK has separate releases for rental and for home use (only the rental discs can be rented out, but they are more expensive). The US used to have something like this with VHS, with initial "rental" pricing, followed by cheaper "sell through" pricing later, but this wasn't based on any law, but rather, a system set up by the studios and accepted by all. Most of the studios really fought for initially higher "rental pricing" in the US for DVDs too, but by the time people got used to paying low prices for new release DVDs, it was really too late to change (and some studios, like Warner, wouldn't have went along with it anyway).

You certainly can charge your friends for renting a movie, as sherm42 correctly pointed out.

I guess I'll stick with corporate litigation :) Lost to a bunch of law students, that's a new shame :) Good job guys.

Don't worry. I thought the same thing as you. Corporate/tax law warps my brain. :)

I started (charging my friends that is). They were taking advantage of my generosity. Especially back when DVDs were expensive and my collection was bigger than BlockBusters (I think it might still be better if not bigger).

I dropped the policy when the freeloaders understood I was pissed and stopped abusing me. I added a new policy recently, if I find out you borrow a movie and burn a copy, you loose all privlages of borrowing or even watching at my home. I had friends that stopped borrowing - one in particular works in the media (would think of all people he would respect copyright law).