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The San Francisco Chronicle reports that Zediva - an online DVD rental service that challenged traditional business models - has suspended operations because of a copyright infringement lawsuit.

According to the story, “Zediva, which launched in March, bought new DVD movies when they were released to the home market, then placed them in a bank of Web connected DVD players. Customers would then rent and playback the DVD over the Internet.

“Company officials believed they were protected under previous copyright rulings. But members of the Motion Picture Association of America sued Zediva claiming the company was illegally streaming movies without obtaining licenses from the movie studios.”

In a letter to Zediva users this week, the company wrote:

Dear Zediva Member,

You may have heard by now that we're having to lay off our DVD-changing monkeys... 🙂

A couple of years ago we came up with an idea for the next generation of DVD rentals. It seemed to us logical and evolutionary that if a customer was able to rent and play a DVD in his home, there should be no reason why he or she could not do that from the Internet cloud. After all, you can do that with a DVR, so why not with a DVD player?

Well, it turns out to have been a little more complicated than that ...

We are suspending Zediva's operations to comply with an order by the United States District Court for the Central District of California.

While we hope to be back online soon, we don't know when (or whether) that will happen. We are disappointed by this turn of events, and that we are not permitted to serve you.

We are quite aware that some of you have unused credits with us and appreciate your patience as we figure out our next steps. Stay tuned for more information via email.

Thank you again for your great support. It has been a blast serving you.

KC's View:
Listen, I have no idea whether what Zediva was doing was legal.

And ultimately, I’ve heard plenty of stories from people who had trouble with the Zediva service.

But I respect the effort to change the model ... to play the game a different way.

When I first wrote about Zediva in an Eye-Opener last March, I started the story this way:

There is a scene in “Pirates of the Caribbean: Curse of the Black Pearl” in which Johnny Depp’s Captain Jack Sparrow defeats Will Turner (Orlando Bloom) in a sword fight, and Turner says, “You;’d never beat me in a fair fight.”

To which Captain Jack responds, “Hardly an incentive for me to fight fair.”

I still feel that way.