Video-streaming startup company Zediva can no longer stream videos or provide any services at all.
After violating copyright laws, Zediva was slammed with a permanent injunction on Friday, prohibiting the company from continuing its service.
The Motion Picture Association of America sued Zediva's parent company, WTV Systems, and founder and CEO Venkatesh Srinivasan in April when Zediva founders uncovered an alternative, illegal way around online video-streaming. Zediva allowed their customers to "rent" digital copies of movies for $1.99 each at their data centers in the Silicon Valley.
While this may not seem like such a bad idea, Zediva's actions were illegal. Here are the rules: Companies can rent physical copies of DVDs without consent from the movie studios. When it comes to online video streaming however, movie studios require companies to pay separate payments for Internet streaming rights in fear that licensing newly released movies online will hinder DVD sales.
By allowing customers to rent DVDs, Zediva illegally avoided paying royalties and fees, and waiting for license deals from the movie studios.
The movie studios, including Time Warners Inc.'s Warner Bros. Entertainment, and Walt Disney Co.'s Disney Enterprises, claimed that Zediva violated copyright laws by publicly performing movies.
After spending two years developing its technology, Zediva was forced to shut down its operations and agreed to pay the movies studios $1.8 million.