Court of Appeals Rules VidAngel Is Really The Devil in Disguise

Stephen Carlisle September 1, 2017

On August 24, 2017, the 9^th Circuit Court of Appeals drove what should be the final stake in the heart of movie streaming service VidAngel. In sweeping terms, the Court upheld the broad injunction put in place against VidAngel by the District Court, which prevented “VidAngel from copying and ‘streaming, transmitting, or otherwise publicly performing or displaying any of Plaintiff’s copyrighted works,’ ‘circumventing technological measures protecting Plaintiff’s copyrighted works,’ or ‘engaging in any other activity that violates, directly or indirectly,’ [sections] 1201(a) or 106 of the copyright act. ¹

Terry Hart, over at the Copyhype website, noted that this was “another case involving a ‘Rube Goldberg-like contrivance’ hoping a laundry list of cute legal theories could allow it to provide on-demand streaming of film and television episodes without authorization.” ² “VidAngel might be considered one of the latest companies to engage in legal parlor tricks, creating a service that was functionally the same as an infringing service but purportedly sticks to the letter of the law. Other examples include MP3.com, Zediva, Aereo, and ReDigi.” ³

For those of you unfamiliar with this description, Rube Goldberg was a cartoonist whose specialty was (in the words of Webster’s New World Dictionary) creating a “comically involved, complicated invention, laboriously contrived to perform a simple operation.” ⁴

Here is an example:

So, if you’re VidAngel, and you want to stream movies, your first step would be to contact the movie studios who own the copyrights to the movies and try to negotiate a license, right?

Let’s not be naïve, here. This is the internet we’re talking about! Any tech start-up worth its venture capital funding knows that the first step is to try to figure out a way NOT to pay for the content that makes your service attractive in the first place.

So, hold on while we detail VidAngel’s horribly convoluted plan to get around the Copyright Act:

• Buy several copies of a DVD.
• Use a software program to defeat the encryption on only ONE disc, so that it can be uploaded to a computer.
• Convert the files into HTTP Live Streaming Format.
• Break the segments into 80 different categories of “objectionable content” that can be filtered out of the stream.
• Make sure that two of the choices for “objectionable content” are the opening and closing credits.
• Encrypt those segments (you wouldn’t want anyone to copy them would you?) and store them in cloud based servers.
• Offer these movies to consumers for $20. Offer to buy them back for $19, creating effectively a $1 streaming charge.
• Keep all discs “on behalf of the purchaser” in VidAngel’s possession, unless customer requests the discs. (Only four ever did so.)
• Allow consumers to select “automatic sellback.”
• Market yourself as a “$1 streaming service.” ⁵

And there you go! A movie streaming service that has no authority or license to stream movies. And pays no fees or royalties either, allowing them to severely undercut the price charged by, say…NetFlix. By the time suit was filed, VidAngel had 10,000 active monthly users. ⁶

The kicker here is that VidAngel is trying to hide behind section 110 (11) of the Copyright Act, known as the “Family Movie Act of 2005.” This provides that it is not an infringement of copyright by:

“…making imperceptible, by or at the direction of a member of a private household, of limited portions of audio or video content of a motion picture, during a performance in or transmitted to that household for private home viewing, from an authorized copy of the motion picture…”

Supposedly, VidAngel is now streaming “family friendly” movies by allowing “consumers to skip objectionable audio and video content in motion pictures without committing copyright infringement.” ⁷

But let’s take a step back. What exactly is being filtered out? Disney, the lead Plaintiff here, is upset that one of the films made available by VidAngel is “Star Wars: The Force Awakens.” ⁸ I am a big Star Wars fan. I have seen “The Force Awakens” twice. Therefore, I can report with first-hand knowledge:

• There is no profanity. There are no “swear words” at all beyond two uses of “hell” and one use of “damn.” ⁹
• There is no nudity. There is nothing sexual or suggestive in the film, except for in the final scene, Rey’s top is alleged to be “low cut.” ¹⁰ Nothing even close to Princess Leia’s bikini in “The Return of the Jedi.”
• There is violence (it’s Star WARS, after all), but only of the most cartoonish sort, with any bloodshed being kept to a minimum. A dying Stormtrooper does leave a bloody handprint on Finn’s helmet (BTW he’s a good guy in the end) but this is mainly a plot device so you can distinguish him from the other Stormtroopers. Nothing like the severed arm from the original Star Wars.
• The MPAA’s rating: PG-13 for “sci-fi action violence,” whatever that means. ¹¹

This is why one of the “objectionable” things VidAngel would filter out for you is the closing credits. ¹² I mean, imagine how a young child might be traumatized by having to sit through 5 minutes of a list of special effects technicians. Needless to say, after the suit was filed, VidAngel amended their policy that a consumer must elect at least one “non-credits filter.” ¹³ So, in the case of “The Force Awakens,” we lose two “hells” and one “damn.”

Has anyone been scandalized by the utterance of the word “damn” since “Gone with the Wind”?

But I digress.

The problem for VidAngel is that the curated stream has to come from an “authorized copy.” VidAngel does not used authorized copies. It uses copies it made by stripping the DVD of the copy protection designed to prevent copying in the first place. VidAngel tries to avoid this problem by saying they did buy the initial copy. The Court disagrees with this, ruling:

“…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 at some point. But, virtually all piracy of movies originates in some way from a legitimate copy. If the mere purchase of an authorized copy alone precluded infringement liability under the FMA, the statute would severely erode the commercial value of the public performance right in the digital context, permitting, for example, unlicensed streams which filter out only a movie’s credit.” ¹⁴

Next up for VidAngel, are the all too familiar cries of “fair use.” It concedes (as it should) that the “nature of the copyright work” (commercial motion pictures) and the “amount and substantiality of the portion used” (damn near all of it) (oops…there goes a damn) weigh against a finding of fair use. But it claims that what it does is “highly transformative” and that is because “omissions can transform a work,” affirming “[r]eligious convictions and parental views.” ¹⁵

Precisely how would the omission of two “hells” and one “damn” “highly transform” “The Force Awakens”? Damned if I know. (Oops)

The Court again sees no merit to this argument.

“The district court found, however, that ‘VidAngel’s service does not add anything to Plaintiff’s works. It simply omits portions that viewers find objectionable,’ and transmits them for the ‘same intrinsic entertainment value’ as the originals. This factual finding was not clearly erroneous. Although removing objectionable content may permit a viewer to enjoy a film, this does not necessarily “add something new” or change the “expression, meaning, or message” of the film.” [Citation omitted] ¹⁶

As for the final factor, market harm, the evidence before the District Court was that 49% of VidAngel’s customers would watch the movies without the filters.

All factors weigh against VidAngel. The fair use defense falls flat.

As far as VidAngels defense to the intentional circumvention of the DVD encryption, it claims that as a “lawful purchaser” of the DVD, it is authorized by the studios to decrypt the DVDs in order to view them.

But this is not what the law says. The Court pulls no punches:

“The argument fails. Section 1201(a)(3)(A) exempts from circumvention liability only “those whom a copyright owner authorizes to circumvent an access control measure, not those whom a copyright owner authorizes to access the work.” ¹⁷

The Court further points out in an endnote that AnyDVD HD, the software used by VidAngel to de-crypt the DVDs:

“… is sold by RedFox, a Belize-based company run by former employees of a company convicted overseas for trafficking in anti-circumvention technology and identified by the United States Trade Representative as selling software that facilitates copyright violations.” ¹⁸

Plus, in spite of the injunction, which has never been stayed, VidAngel continued to stream the Plaintiff’s movies, and added at least three more works to its catalog. They have been held in contempt of court by the District Court for violating the terms of the injunction. ¹⁹

Not exactly very “angelic” of you, is it VidAngel? More “devilish,” I’d say.