The 9th U.S. Circuit Court of Appeals on Thursday reinstated a $600,000 damages award won by motion-capture technology firm Rearden LLC, which had accused Disney of misusing its proprietary software in the 2017 live-action remake of Beauty and the Beast.
The three-judge panel overturned a ruling by U.S. District Judge Jon Tigar, who had previously set aside the jury’s verdict in favor of Disney. In its decision, the appeals court found that there was sufficient evidence to support the jury’s conclusion that Disney could have acted to prevent or limit the misconduct of its contractor, Digital Domain 3.0, which allegedly used stolen technology belonging to Rearden.
Rearden, founded by former Apple scientist Steve Perlman, first sued Disney in 2017, alleging that a former employee had stolen its Mova Contour facial-capture technology and taken it to Digital Domain. The company claimed Disney then worked with Digital Domain on Beauty and the Beast, thereby infringing on its copyrights.
While Rearden had sought monetary damages, including a share of profits from the Disney blockbuster — which grossed more than $1.25 billion worldwide — the appeals court on Thursday affirmed that Rearden was not entitled to any portion of the film’s revenues.
A California jury in 2023 had originally sided with Rearden, awarding the company nearly $600,000 in damages. Judge Tigar, however, overturned that verdict last year, reasoning that Disney was not directly involved in the animation process that relied on Rearden’s technology and therefore could not have recognized or policed any infringement by its contractor.
The appeals court disagreed, reviving the jury’s award. “There was sufficient evidence to support the jury’s finding that Disney could have stopped or limited Digital Domain’s misconduct,” the panel wrote.
The case, Rearden LLC v. Walt Disney Pictures, is docketed as No. 24-3970 in the 9th U.S. Circuit Court of Appeals. Rearden is represented by Mark Carlson of Hagens Berman Sobol Shapiro, while Disney is represented by Kelly Klaus of Munger, Tolles & Olson.
What the ruling could mean for Hollywood
The revived verdict, though modest in dollar value compared to the film’s billion-dollar gross, carries significant weight for the entertainment industry. The appeals court has reinforced the principle that studios may bear responsibility for monitoring how their contractors source and use third-party technologies by siding with Rearden. Legal analysts say this could set a precedent that forces major film companies to conduct deeper due diligence in outsourcing deals.
For Hollywood, where reliance on external VFX houses and tech startups has become routine, the ruling could mean stricter vetting of software licenses, audits of contractor practices, and potentially higher production costs. Some intellectual property attorneys believe it’s a wake-up call for studios, warning that future disputes could trigger damages far beyond $600,000.
Rearden’s partial victory also highlights the growing value of proprietary visual effects technologies, which underpin much of the industry’s push into photorealistic animation and live-action remakes. As competition intensifies in the era of generative AI and advanced graphics, ownership battles over such tools are likely to become more frequent.
Against this backdrop, some believe that if the decision prompts studios to become more conservative in their contracting, smaller VFX firms may face tighter compliance requirements and higher legal risks. Some could struggle with the added burden, consolidating the market in favor of larger, well-capitalized players.
For Disney, the ruling is unlikely to dent its financial position given the relatively small damages, but it may expose the company to reputational scrutiny as it continues to lean heavily on remakes and visual effects-heavy projects. A prolonged legal fight could also embolden other tech firms to pursue claims if they believe their tools have been misused by contractors tied to big studios.
In a broader sense, the case underscores the fragility of Hollywood’s reliance on outside innovation, raising questions about whether studios will begin bringing more VFX development in-house to mitigate liability risks. Should that happen, the balance of power between tech startups and the film giants could shift dramatically.
