Zediva, the video service that attempted to build a business by exploiting loopholes in copyright law, suffered a serious setback today when a federal judge granted a preliminary injunction against the service.

U.S. District Judge John Walter has ruled that Zediva violates copyright law and granted a preliminary injunction motion made by the Motion Picture Association of America for Zediva to be shut down. The judge is waiting a week for a legal technicality before officially issuing the injunction, but Zediva's fate is sealed.

Zediva billed itself as a DVD rental service that enabled users to rent physical DVDs and DVD players, both of which would never leave the company's facilities. The secret sauce was that customers would control the DVD players via the Internet. "It's just like a DVD player with a really long cable attached," was the way the company often described itself. As a rental service, Zediva argued that it was immune from copyright claims. The judge disagreed.

"Judge Walter's decision is a great victory for the more than 2 million American men and women whose livelihoods depend on a thriving film and television industry," the MPAA said in a statement.

A Zediva spokesman said the company plans to carry on the fight.

"Today's ruling represents a setback for the hundreds of thousands of consumers looking for an alternative to Hollywood-controlled online movie services," Zediva said in a statement. "Zediva intends to appeal, and will keep fighting for consumers' right to watch a DVD they've rented, whether that rental is at the corner store or by mail or over the Internet."

In April, I wrote that lots of better loophole-business models have come along that appeared to have a better claim on legality than this operation and those too were sued into oblivion. Some of those include RealDVD and ivi.TV, a streaming-video service.

Zediva's argument that the service isn't really transmitting copyrighted movies over the Internet but is more akin to one person lending a physical DVD to another--just using the Web to accomplish that task--was rejected by Walter.

"The Zediva service transmits performances of Plaintiffs' copyrighted works 'directly under the language of the statute,' Walter wrote.

Walter added: "Defendants' service threatens the development of a successful and lawful video-on-demand market and, in particular, the growing internet-based video-on-demand market. The presence of Defendants' service in this market threatens to confuse consumers about video-on-demand products, and to create incorrect but lasting impressions with consumers about what constitutes lawful video-on-demand exploitation of Plaintiffs' copyrighted works."