Ninth Circuit Affirms Injunction Against VidAngel’s “Family Friendly” Video Filtering Service, Halting Long-Running Dispute with Hollywood Movie Studios

On August 24, 2017, the Ninth Circuit Court of Appeals affirmed a district court’s issuance of a preliminary injunction barring Utah-based content filtration company VidAngel from filtering and streaming any content owned by a group of Hollywood movie studio plaintiffs, who opposed VidAngel’s editing of their content (to omit “objectionable” material) and distribution without permission.

Background:

The movie studio plaintiffs (“Studios”) produce and distribute copyrighted motion pictures and television shows through many sources, including through DVD and Blu-ray sales and various online channels.  To protect against unauthorized access to and copying of their works, the Studios employ technological protection measures (“TPMs”), which allow consumers to use players from licensed manufacturers to playback (but not copy) content.

In 2014, VidAngel launched an online service which eliminated objectionable content from movies and television shows using a software program that removed the TPMs, allowing VidAngel to copy content, and tag it for over 80 categories of “inappropriate” material.   To remove the objectionable content, VidAngel would purchase a physical disc containing the copyrighted movie or television show, “rip” a digital copy to a computer, and stream the filtered version of the work to its customers through any VidAngel-supported device, including Roku, Apple TV, mobile phones and tablets, and desktop or laptop computers.  Customers using VidAngel’s streaming service paid $1 to $2 to view the work with whatever type of objectionable content they chose to omit.  In certain cases, this was well below the price offered by the Studios to view unfiltered copies of the movie or television shows.   

When the Studios filed suit in the U.S. District Court for the Central District of California, VidAngel offered more than 2,500 movies and television episodes to its customers, over 80 of which were copyrighted works of the Studios.  The Studios sought injunctive relief, alleging violations of their exclusive rights under the Copyright Act to reproduce and publicly perform their copyrighted works, and circumvention of the TPMs in violation of the Digital Millennium Copyright Act (“DMCA”).  VidAngel raised the affirmative defense of fair use and alleged that its system was protected by the Family Movie Act of 2005 (“FMA”) safe harbor, which makes it lawful for a person who is watching a copyrighted work in the privacy of his or her own home to use software that filters out certain types of content that the person would prefer not to see or hear.

Finding that the Studios had demonstrated a likelihood of success on the merits of both claims, the district court preliminarily enjoined VidAngel from streaming, transmitting, or otherwise publicly performing or displaying any of the Studios’ copyrighted works, circumventing technological measures protecting the Studios’ copyrighted worked, or engaging in any other activity in violation of the Copyright Act.  The district court held that “the purpose and character of the use” and the “effect of the use upon the potential market for or value of the copyrighted work” weighed against fair use, and that the FMA requires a filtered transmission to come from an “authorized copy” of the work; since VidAngel’s “ripped” digital copies of the works were created without authorization, the FMA would not apply.

On Appeal:

On appeal, VidAngel argued that, because it “begins its filtering process with an authorized copy,” any subsequent filtered stream is also “from” that authorized copy.  The Ninth Circuit, reading the exact language of the FMA, pointed out that the filtering process must be “from” an authorized copy of the work, not “beginning from” or “indirectly from” an authorized copy, as VidAngel’s interpretation would permit.  The Ninth Circuit opined that “VidAngel’s interpretation would create a giant loophole in copyright law, sanctioning infringement so long as it filters some content and a copy of the work was lawfully purchased as some point,” which would “severely erode the commercial value of the public performance right in the digital context.”

 The Ninth Circuit also agreed with the district court’s fair use assessment.  Under the first factor analysis, VidAngel’s filtering did not “add something new or change the expression, meaning or message of the film”; the court explained that “Star Wars is still Star Wars, even without Princess Leia’s bikini scene.”  Under the fourth factor, the appeals court rejected VidAngel’s argument that its service expands the audience for the works to viewers who would not watch them without filtering, citing surveys suggesting that 49% of VidAngel’s customers would watch the movies without filters.

In rejecting VidAngel’s argument that, under the DMCA, a lawful purchaser of a digital work is authorized by the copyright holder to circumvent encryption because it receives an implied permission to view the content on a DVD, the Ninth Circuit noted that the DMCA exempts only entities whom a copyright owner authorizes to “circumvent an access control measure, not those whom a copyright owner authorizes to access the work.” (Emphasis added).  VidAngel offered no evidence that the Studios had given it authorization to circumvent the encryption technology, so the Ninth Circuit affirmed the district court’s holding with respect to the DMCA claim.

Further Developments:

In June, about two months before the Ninth Circuit’s ruling, and while enjoined from operating its service, VidAngel launched a new version of the service which works in tandem with conventional movie and TV streaming services like Amazon and Netflix and purports to filter content without having to decrypt it.  During the pendency of the appeal, VidAngel filed a motion to clarify the district court’s injunction order, claiming that the new version was not in violation of the original injunction.  VidAngel’s motion was denied, and the Ninth Circuit’s ruling on appeal followed.

Most recently, on August 31, 2017, VidAngel filed suit against affiliates of the Studios in Utah federal court, attempting to relitigate the issues already adjudicated by the Ninth Circuit, perhaps hoping for a more favorable outcome in its home state.  The Studios involved in the California litigation have publicly stated that they will challenge the Utah suit on res judicata grounds.  With responsive pleadings due in early October 2017, the clash over VidAngel’s service continues, despite VidAngel’s numerous losses.

Cowan, DeBaets, Abrahams & Sheppard LLP submitted an amicus brief, filed on behalf of the Copyright Alliance, in support of certain Studios (Disney Enterprises, Inc., LucasFilm Ltd., LLC, Twentieth Century Fox Film Corporation, and Warner Bros. Entertainment, Inc.), urging the Ninth Circuit to affirm the district court’s ruling and to reject VidAngel’s attempt to create an unwarranted loophole in copyright law.