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Silicon Valley DVD-rental company Zediva has suffered a major blow to its business, which is on the wrong end of an injunction from the District Court in Los Angeles.

Zediva was sued by the MPAA for the unauthorized streaming of movies after it began taking “rental” orders for DVDs which its employees would pick off a shelf and stream online to the customer that had “rented” it.   That way, argued Zediva, it was only providing a physical rental, which doesn’t require permission provided that the physical copy being rented has been lawfully made and purchased.  The parties have settled the dispute, but not on terms that will please Zediva’s investors, with the result that if Zediva wants to continue streaming movies it will have to obtain streaming licenses, and, presumably, compensate the movie studios for past infringements.

None of this is surprising, and this is the only conclusion the Court could have reached.  Unlike the Italian escort website, no doubt, though, there will be some tough questions being asked by Zediva’s investors.

Movie studios win the lawsuit against Zediva.