Hollywood Studios Win Injunction Against Streamer VidAngel

The Hollywood Sign - Getty - H 2016
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Warner Bros, Disney and 20th Century Fox have scored a significant legal success by convincing a California federal judge to issue a preliminary injunction against VIdAngel. The order from U.S. District Judge Andre Birotte Jr. came late Monday and represents a huge setback for an upstart tech service that has rallied many in the social conservative community and raised about $10 million for its legal costs from thousands of investors.

VidAngel has touted itself as being a family-friendly streamer that gives users the ability to filter language, nudity and violence from films and television shows. But its business model — selling new movies to customers for $20, buying them back for $19  — caught the attention and wrath of big studios who asserted that VidAngel was operating as an "unlicensed VOD streaming service." Worse, because some of its films like Star Wars: The Force Awakens weren't yet on Netflix, the studios feared VidAngel could undercut its windowing system.

The defendant reacted aggressively to the studios' lawsuit filed in June. It hired a Hollywood insider as its general counsel, and brought counterclaims alleging antitrust violations on the part of the studios.

On Monday, Birotte concludes that the studios have demonstrated a likelihood of prevailing on their claims as well as shown the prospect of irreparable harm. The judge also finds that a preliminary injunction would also serve the public interest.

In coming to his conclusions, Birotte analyzes the provision of the Digital Millennium Copyright Act that prohibits circumvention of access-control along with VidAngel's acknowledgement of using software to remove restrictions on DVDs and Blu-Rays. The judge finds no support to the argument that all VidAngel is doing is "space-shifting" or "format-shifting" in a fair use way.

He writes that multiple courts as well as the Librarian of Congress have declined to adopt exemptions allowing for circumvention for the purpose of allowing viewership of lawfully acquired works on different platforms. The judge also doesn't think the Family Home Movie Act of 2005 provides an exemption to essentially hack DVDs and Blu-Rays.

As for the copyright claims, the analysis gets most interesting on the topic of public performance rights — an issue that recently went to the Supreme Court in the Aereo case.

"Assuming arguendo that VidAngel’s buy/sellback service creates a valid ownership interest in a DVD, this ownership would only apply to the physical DVD, not the digital content that VidAngel streams to paying subscribers," writes Birotte. "Subscribers view a stream from a master copy stored on a server, not a DVD temporarily 'owned' by the user. Furthermore, lawful ownership of a DVD only conveys authorization to view the DVD, not to decrypt it for the purpose of viewing it on an alternative platform. Therefore, VidAngel’s customers are not lawful 'owners or possessors' of the digital content that is streamed via VidAngel’s service. Finally, VidAngel’s argument that Aereo holds that the public performance right is not infringed when the user pays for something other than the transmission of copyrighted works, is unsupported."

The judge later returns to the Family Home Movie Act and explains why it doesn't give VidAngel a pass.

"The statute clearly requires that a performance or transmission of filtered content must come from an 'authorized copy' of the motion picture," writes the judge. "The digital content that VidAngel streams to its customers is not from an authorized copy."

Here's the full ruling where Birotte also explores the contention that filtering naughty bits from Hollywood films is a fair use of copyrighted material. That proposition is rejected as the judge says that omitting objectionable portions is hardly the same as adding something in a transformative way.

Birotte orders the plaintiffs to put up a $250,000 bond, and in return, enjoins VidAngel from the circumvention, copying, streaming activity that has prompted the lawsuit.

In reaction to the ruling, VidAngel implies it is prepared to go the distance.

"Hollywood studios have followed a repeated pattern in their decades-long campaign to put movie filtering services out of business by seeking a shut-down decision in trial court," said VidAngel chief Neal Harmon. "Previously, such a decision has signaled the end of the legal battle. As such, while we are extremely disappointed — for the countless people who rely on our service regularly to enjoy movies using filters — our customers have given us not just the mandate to fight this battle all the way to the Supreme Court, but the financial resources as well. We will aggressively pursue an appeal and take this case to a higher level where we have always believed we will ultimately prevail.”