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Every now and then, Hollywood confronts an upstart touting itself as being family-friendly by offering users the ability to filter language, nudity and even violence from films and television shows. In past years, the studios have gone up against ClearPlay and CleanFlicks, fighting over their use of copyrighted material. Now, VidAngel is the latest to step in the ring, launching a counter-complaint on Tuesday that accuses the studios of violating antitrust law and participating in a “conspiracy to restrain the market for online filtering services.”
The move is in reaction to a lawsuit filed this past June by Disney, 20th Century Fox and Warner Bros. Entertainment, who went after VidAngel not because of its filtering technology per se, but rather because of a business model the studios posed as disrupting the home video market.
“You buy a movie for 20 dollars,” VidAngel explains to potential customers. “Don’t worry, it ends up being one dollar. Since you own the movie, you can legally set your filters. Now watch your movie. Then, with the click of a button, sell it back to us for 19 dollars of credit. That means each movie is only one dollar. It’s that simple. Buy for 20, set filters, watch it, sell it back for 19. Enjoy your one dollar movie.”
The studios don’t see this as simply a “rental” service. Rather, they contend that VidAngel is operating an “unlicensed VOD streaming service.”
In court papers filed on Tuesday, VidAngel is attempting to hold up the “first sale” doctrine” — which allows purchasers of authorized copies to sell or dispose of their copies without the permission of the copyright holder — to both legitimize its service and frame the studios as impermissibly restraining trade. The defendant says that it spends over a third of its gross revenues on lawfully purchasing thousands of DVD and Blu-ray discs, and that the sales would not occur but for its filtering service. It says that each disc purchased is assigned an individual bar code, and once a VidAngel customer purchases a disc, that disc is no longer available for sale.
But the fight now involves ample discussion around the Family Entertainment and Copyright Act of 2005, which VidAngel says protects filtering technologies like the one it has been offering. The studios anticipated that VidAngel would go this route by talking in its complaint about how the law requires that any copy or performance made be otherwise “authorized.”
VidAngel responds, “In asking this Court to impose a consent requirement on VidAngel’s filtering service, Plaintiffs are effectively asking that the Court repeal a federal statute enacted to protect American families.”
The studios are now being charged with having a “hostility toward filtering” by long advocating a director’s “moral right” to have final edit as VidAngel attempts to connect a guild agreement to the dispute at hand.
According to VidAngel, “In 2014, the studios entered into an agreement with the Directors Guild of America. That agreement prohibits the studios from entering into distribution agreements that allow secondary editing or filtering of movies or television programs, save for a few narrow exceptions. Those exceptions include editing video content to fit certain aspect ratios and editing for in-flight exhibitions of motion pictures or television programs. Notwithstanding that the FMA was enacted years earlier, the 2014 DGA Agreement did not permit individuals to use online filtering services to control content viewed within individuals’ homes.”
The counter-complaint contends that this agreement was “part of a concerted effort to prohibit” filtering, and that the studios were aware or should have been aware that its agreement with directors “could be used in an anticompetitive manner to restrict or extinguish the market for online filtering services within the United States.”
Plus, says VidAngel, the studios have entered into licensing agreements with Google Play and other digital content distributors and “have inserted provisions into their license agreements that prohibit these distributors from implementing filtering services for digital content applications available on modern mobile devices, including smartphones and remote streaming devices.”
In raising claims under the Sherman Act and the Clayton Act, VidAngel asserts that the studios have pressured Google Play into not entering into a partnership with VidAngel and “orchestrated this boycott of VidAngel to further their own commercial profit, artificially raise prices, and force VidAgnel out of business.”
VidAngel, represented by Ryan Baker at Baker Marquart, is also claiming tortious interference.
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