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Starz Entertainment Sues Disney

Premium cable network Starz Entertainment made a play to protect its digital turf Thursday, filing suit against Disney subsidiary Buena Vista Television (BVT) for copyright infringement and breach of contract regarding Disney movies that Buena Vista is selling through online stores run by Apple and Wal-Mart.

Starz, which filed the suit in the US District Court for the Central District of California, contends that Disney is now using Apple's iTunes and Wal-Mart's Wal-Mart Video Downloads to "sell for transmission over the Internet the same movies that Disney licensed exclusively to Starz."

Under the terms of the 1993 and 1999 Starz-BVT agreements, extended by BVT in 2005, "Disney is prohibited from selling its films for transmission over the Internet prior to Starz’s first exclusive license period and during all of Starz’s exclusive license periods," according to Starz. Starz's suit states that over the life of the contract Starz has paid “over one billion dollars” for periods of exclusive rights to the films.

“Disney has been a great partner," said Starz Entertainment CEO and Chairman Robert B. Clasen in a statement. "We hope to continue our relationship. But our agreements clearly prohibit them from selling their movies by electronic download over the Internet while they are exclusive to Starz. If Disney is permitted to violate our contract in this manner, it will undermine the integrity of copyright in general, which is a cornerstone of our industry.”

By selling movies within the same windows that Starz has paid the rights for, Disney is breaking its contract, says Starz spokesman Tom Southwick, a problem that arose last year when Disney began selling movies through iTunes; Disney had already been selling TV shows from its ABC network on iTunes since October 2005. Disney then launched movie sales on Wal-Mart's online store when that service was unveiled early last month.

Starz, which launched its own Internet streaming and download service called Vongo in January 2006, has spoken to Disney about its concerns since Disney started selling movies through iTunes, says Southwick, and has sent numerous cease-and-desist letters.

"We have gotten no response," says Southwick.

Disney disputed Starz's claims with the following statement, issued by Buena Vista Television:

"We believe Starz misreads its agreement with Buena Vista Television and that its claim is without merit. BVT retained and has the right to sell its motion pictures in a wide range of mediums."