Disney Enterprises, Inc., et al v. VidAngel, Inc.

Filing 36

Filed Appellant VidAngel, Inc. motion to seal portions of appellant's appendix, Vol 3 And Appellees' supplemental appendix Vol 5 UNDER SEAL. Deficiencies: None. Served on 01/18/2017. (Court-Entered filing of motion submitted under seal at [28] [10282874] (WL) [Entered: 01/27/2017 11:07 AM]

No. 16-56843
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
VIDANGEL, INC.,
Defendant-Appellant,
v.
DISNEY ENTERPRISES, INC.; LUCASFILM LTD. LLC;
TWENTIETH CENTURY FOX FILM CORPORATION; AND
WARNER BROS. ENTERTAINMENT, INC.,
Plaintiffs-Appellees.
On Appeal from the United States District Court
for the Central District of California
Hon. André Birotte Jr.
No. 2:16-cv-04109-AB-PLA
APPELLANT’S APPENDIX
VOLUME 3 OF 3
(Pages 573-749)
Brendan S. Maher
Daniel L. Geyser
Douglas D. Geyser
STRIS & MAHER LLP
6688 N. Central Expy., Suite 1650
Dallas, TX 75206
Telephone: [phone]
Facsimile: [phone]
December 30, 2016

Peter K. Stris
Elizabeth Rogers Brannen
Dana Berkowitz
Victor O’Connell
STRIS & MAHER LLP
725 S. Figueroa St., Suite 1830
Los Angeles, CA 90017
Telephone: [phone]
Facsimile: [phone]
[e-mail]

Counsel for Defendant-Appellant VidAngel, Inc.

171964.5

TABLE OF CONTENTS
Date

Description

Page

12/29/16

[ECF No. 167] Declaration of David Quinto .................................... A.1

12/29/16

[ECF No. 166] [In Chambers] Order DENYING
Defendant’s Ex Parte Application to Stay Preliminary
Injunction Pending Appeal Or Alternatively, Pending
Decision by the Ninth Circuit On Stay Pending Appeal
........................................................................................................... A.4

12/22/16

[ECF No. 161] Plaintiffs’ Ex Parte Application for an
Order to Show Cause Why VidAngel Should Not Be
Held in Contempt for Violating the Preliminary
Injunction Order ................................................................................ A.9

12/21/16

[ECF No. 158] Declaration of Neal Harmon in Support
of VidAngel, Inc.’s Ex Parte Application to Stay
Preliminary Injunction Pending Appeal or, Alternatively
Pending Decision by the Ninth Circuit on Stay Pending
Appeal.............................................................................................. A.22

12/14/16

[ECF No. 149] VidAngel, Inc.’s Notice of Appeal from
Order Granting Motion for Preliminary Inunction;
Representation Statement ................................................................ A.30

12/14/16

[ECF No. 148] VidAngel, Inc.’s Notice of Appeal from
Order Granting Motion for Preliminary Injunction;
Representation Statement ................................................................ A.36

12/14/16

[ECF No. 147] VidAngel, Inc.’s Ex Parte Application to
Stay Preliminary Injunction Pending Appeal or,
Alternatively, Pending Decision by the Ninth Circuit on
Stay Pending Appeal ....................................................................... A.42

12/14/16

[ECF No. 145] Reporter’s Transcript of Proceedings on
Monday, November 14, 2016 ......................................................... A. 66

12/12/16

[ECF No. 144] Order Granting Plaintiffs’ Motion for
Preliminary Injunction................................................................... A.190

10/27/16

[ECF No. 117-2] Exhibit A to Plaintiffs’ Ex Parte
Application to File Supplemental Request for Judicial
Notice in Support of Motion for Preliminary Injunction .............. A.212

10/17/16

[ECF No. 110] Supplemental Declaration of Neal
Harmon in Opposition to Motion for Entry of
Preliminary Injunction (with exhibits) .......................................... A.291

10/17/16

[ECF No. 109] Declaration of William J. Aho in
Support of VidAngel, Inc.’s Opposition to Motion
for Entry of Preliminary Injunction............................................... A.354

9/16/16

[ECF No. 77] Amended Answer and First Amended
Counterclaims ................................................................................ A.359

9/12/16

[ECF No. 45-1] Excerpts from Videotaped Deposition
of Tedd Cittadine ........................................................................... A.419

9/12/16

[ECF No. 44-4] Exhibit D to Declaration of Jamie
Marquart in Support of VidAngel’s Memorandum of
Points and Authorities In Opposition to Preliminary
Injunction Motion .......................................................................... A.436

9/12/16

[ECF No. 44-5] Exhibit E to Declaration of Jamie
Marquart in Support of VidAngel’s Memorandum of
Points and Authorities In Opposition to Preliminary
Injunction Motion .......................................................................... A.442

9/12/16

[ECF No. 43-1] Exhibit A to Declaration of Neal
Harmon in Support of VidAngel’s Memorandum of
Points and Authorities In Opposition to Preliminary
Injunction Motion .......................................................................... A.503

9/12/16

[ECF No. 43-2] Exhibit B to Declaration of Neal
Harmon in Support of VidAngel’s Memorandum of

Points and Authorities In Opposition to Preliminary
Injunction Motion .......................................................................... A.505
9/12/16

[ECF No. 43-3] Exhibit C to Declaration of Neal
Harmon in Support of VidAngel’s Memorandum of
Points and Authorities In Opposition to Preliminary
Injunction Motion .......................................................................... A.509

7/12/16

[ECF No. 11-1] Exhibits A & B to VidAngel, Inc.’s
Answer and Affirmative Defenses to Complaint; And
Counter-Complaint ........................................................................ A.452

6/9/16

[ECF No. 1] Complaint for Copyright Infringement and
Violation of Digital Millennium Copyright Act .......................... A. 514

Documents filed under seal (Volume 3):
10/3/16

Plaintiffs’ Reply in Support of Motion for Preliminary
Injunction....................................................................................... A.573

9/21/16

Excerpts from Videotaped Deposition of Tedd Cittadine ............. A.599

9/21/16

Declaration of Sigurd Meldal in Support of VidAngel’s
Memorandum of Points and Authorities in Opposition
to Preliminary Injunction Motion .................................................. A.613

9/21/16

Declaration of Neal Harmon in Support of VidAngel’s
Memorandum of Points and Authorities in Opposition
to Preliminary Injunction Motion .................................................. A.636

9/12/16

VidAngel’s Memorandum of Points and Authorities
in Opposition to Motion for Preliminary Injunction ..................... A.661

7/22/16

Plaintiffs’ Notice of Motion and Motion for Preliminary
Injunction; Memorandum of Points and Authorities in
Support Thereof ............................................................................. A.705

1 GLENN D. POMERANTZ (SBN 112503)
[e-mail]
2 KELLY M. KLAUS (SBN 161091)
[e-mail]
3 ROSE LEDA EHLER (SBN 296523)
[e-mail]
4 ALLYSON R. BENNETT (SBN 302090)
[e-mail]
5 MUNGER, TOLLES & OLSON LLP
355 South Grand Avenue, Thirty-Fifth Floor
6 Los Angeles, California 90071-1560
Telephone: [phone]
7 Facsimile: [phone]
8 Attorneys for Plaintiffs
9

UNITED STATES DISTRICT COURT

10

CENTRAL DISTRICT OF CALIFORNIA

11

WESTERN DIVISION

12 DISNEY ENTERPRISES, INC.,
LUCASFILM LTD. LLC,
13 TWENTIETH CENTURY FOX FILM
CORPORATION and WARNER
14 BROS. ENTERTAINMENT INC.,
Plaintiffs and Counterclaim
Defendants,

15
16
17

vs.
VIDANGEL, INC.,

18
19

Defendant and CounterClaimant.

Case No. 16-cv-04109-AB (PLAx)
UNREDACTED VERSION OF
DOCUMENT PROPOSED TO BE
FILED UNDER SEAL
PLAINTIFFS’ REPLY IN SUPPORT
OF MOTION FOR PRELIMINARY
INJUNCTION
Judge: Hon. André Birotte Jr.
Date: October 31, 2016
Time: 10:00 a.m.
Crtrm.: 4

23

Filed concurrently herewith:
(1) Decl. of Allyson Bennett
(2) Supp. Decl. of Robert Schumann
(3) Request for Judicial Notice
(4) App. to File Under Seal
(5) Resps. to VidAngel’s Objections
(6) Plts’ Evid. Objections

24

Trial Date:

20
21
22

None Set

25
26
27
28

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TABLE OF CONTENTS

1

Page

2
3
4
5

INTRODUCTION ....................................................................................................... 1 
ARGUMENT ............................................................................................................... 2 
I. 

6
7

THE FMA PROVIDES NO DEFENSE FOR VIOLATING THE
DMCA OR PLAINTIFFS’ EXCLUSIVE REPRODUCTION AND
PUBLIC PERFORMANCE RIGHTS............................................................... 2 
A. 

VidAngel’s Argument Contradicts The FMA’s Clear Language ........... 2 

B. 

The FMA’s Legislative History Makes Clear That The Statute
Does Not Immunize VidAngel’s Conduct .............................................. 4 

C. 

8

VidAngel’s Interpretation Of The FMA Leads To Absurd
Results ..................................................................................................... 5 

9
10
11

II. 

12

VIDANGEL’S NON-FMA DEFENSES ARE MERITLESS .......................... 6 
A. 

VidAngel Has No Defense For Its DMCA Violation ............................. 6 

B. 

VidAngel Cannot Defend Its Infringement Of The Reproduction
Right By Calling Its Copies “Intermediate” And “Personal” ................. 8 

C. 

Aereo Provides No Defense To VidAngel’s Infringement Of
Plaintiffs’ Public Performance Right ...................................................... 9 

D. 

VidAngel’s Unauthorized Conduct Is Not Fair Use ............................. 11 

E. 

13

VidAngel’s Antitrust Allegations Provide No Defense........................ 14 

14
15
16
17
18

III. 

19

PLAINTIFFS FACE AN IMMINENT AND INCREASING RISK OF
IRREPARABLE HARM ................................................................................. 15 

20

A. 

Plaintiffs Filed Suit And Sought An Injunction When It Was
Clear VidAngel Posed A Viable Threat Of Harm ................................ 15 

B. 

Plaintiffs’ Harms Are Not Speculative ................................................. 17 

C. 

Money Damages Are Inadequate To Redress Plaintiffs’ Harms .......... 18 

D. 

VidAngel, Not The FMA, Causes Plaintiffs’ Harm ............................. 19 

21
22
23
24
25
26
27
28

IV. 

THE LEGITIMATE HARDSHIPS WEIGH IN PLAINTIFFS’ FAVOR ...... 19 

V. 

THE PUBLIC INTEREST STRONGLY FAVORS AN INJUNCTION ....... 20 

VI. 

MINIMAL SECURITY SHOULD BE REQUIRED...................................... 20 

CONCLUSION.......................................................................................................... 20 
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1
2

TABLE OF AUTHORITIES
Page(s)

3 FEDERAL CASES
4 321 Studios v. Metro Goldwyn Mayer Studios, Inc.,
307 F. Supp. 2d 1085 (N.D. Cal. 2004).............................................................. 6, 7
5
6 A&M Records, Inc. v. Napster, Inc.,
239 F.3d 1004 (9th Cir. 2001) .............................................................................. 13
7
8 Advanced Access Content Licensing Adm’r, LLC v. Shen,
No. 14-CV-1112 (VSB), Dkt. No. 87 (S.D.N.Y. Mar. 16, 2015) .......................... 8
9
Am. Broad. Cos. v. Aereo, Inc.
10
2012 WL 3854042 (S.D.N.Y. Jul. 11, 2012).................................................. 15, 16
11
Am. Broad. Cos. v. Aereo, Inc.,
12
2014 WL 5393867 (S.D.N.Y. Oct. 23, 2014) .................................................. 1, 15
13
Am. Broad. Cos. v. Aereo, Inc.,
14
134 S. Ct. 2498 (2014) ..................................................................................... 9, 10
15 Arc of Cal. v. Douglas,
757 F.3d 975 (9th Cir. 2014) ............................................................................ 1, 15
16
17 Campbell v. Acuff-Rose Music, Inc.,
510 U.S. 569 (1994) ............................................................................................. 13
18
19 Capitol Records, LLC v. ReDigi Inc.,
934 F. Supp. 2d 640 (S.D.N.Y. 2013) ................................................................ 4, 8
20
21 Clean Flicks of Colorado, LLC v. Soderbergh,
433 F. Supp. 2d 1236 (D. Colo. 2006) ..................................................... 11, 13, 20
22
Crow Tribe of Indians v. Racicot,
23
87 F.3d 1039 (9th Cir. 1996) .................................................................................. 7
24
Elvis Presley Enters., Inc. v. Passport Video,
25
349 F.3d 622 (9th Cir. 2003) ................................................................................ 12
26 Fox Broad. Co. v. Dish Network, L.L.C.,
905 F. Supp. 2d 1088 (C.D. Cal. 2012), aff’d, 747 F.3d 1060 (9th
27
Cir. 2013) ........................................................................................................ 18, 19
28
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1
2

TABLE OF AUTHORITIES
(continued)

Page(s)

3 Fox Television Stations, Inc. v. BarryDriller Content Sys., PLC,
915 F. Supp. 2d 1138 (C.D. Cal. 2012) .............................................. 17, 18, 19, 20
4
5 Fox Television Stations, Inc. v. FilmOn X LLC,
966 F. Supp. 2d 30 (D.D.C. 2013)............................................................ 17, 19, 20
6
Griffin v. Oceanic Contractors, Inc.,
7
458 U.S. 564 (1982) ............................................................................................... 5
8
Kelly v. Arriba Soft Corp.,
9
336 F.3d 811 (9th Cir. 2003) .................................................................................. 8
10
MDY Indus., LLC v. Blizzard Entm’t, Inc.,
11
629 F.3d 928 (9th Cir. 2010) .................................................................................. 7
12 Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd.,
518 F. Supp. 2d 1197 (C.D. Cal. 2007) ................................................................ 18
13
14 Overstreet v. United Brotherhood of Carpenters and Joiners,
409 F.3d 1199 (9th Cir. 2005) ................................................................................ 7
15
16 Perfect 10, Inc. v. Amazon.com, Inc.,
508 F.3d 1146 (9th Cir. 2007) .............................................................................. 11
17
18 Realnetworks, Inc. v. DVD Copy Control Ass’n,
641 F. Supp. 2d 913 (N.D. Cal. 2009)................................................................ 7, 8
19
Rent-A-Ctr., Inc. v. Canyon Television & Appliance Rental, Inc.,
20
944 F.2d 597 (9th Cir. 1991) ................................................................................ 19
21
Sega Enters. Ltd. v. Accolade, Inc.,
22
977 F.2d 1510 (9th Cir. 1992) ................................................................................ 8
23 Sony Computer Entm’t, Inc. v. Connectix Corp.,
203 F.3d 596 (9th Cir. 1999) .................................................................................. 8
24
25 UMG Recordings, Inc. v. MP3.com, Inc.,
92 F. Supp. 2d 349 (S.D.N.Y. 2000) .......................................................... 8, 11, 13
26
27 United States v. Elcom Ltd.,
203 F. Supp. 2d 1111 (N.D. Cal. 2002).................................................................. 9
28
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1

TABLE OF AUTHORITIES
(continued)

2

Page(s)

3 United States v. Gonzales,
520 U.S. 1 (1997) ................................................................................................... 4
4
5 Universal City Studios, Inc. v. Corley,
273 F.3d 429 (2d Cir. 2001) ................................................................................... 6
6
Warner Bros. Entm’t Inc. v. WTV Sys., Inc.,
7
824 F. Supp. 2d 1003 (C.D. Cal. 2011) ........................................................ passim
8
WPIX, Inc. v. ivi, Inc.,
9
691 F.3d 275 (2d Cir. 2012) ............................................................................. 1, 15
10
FEDERAL STATUTES
11
17 U.S.C. § 106.................................................................................................... 1, 3, 4
12
17 U.S.C. § 110(11) ............................................................................................ passim
13
14 17 U.S.C. § 504(c) ..................................................................................................... 18
15 17 U.S.C. § 1201(a)(1)(A) ....................................................................................... 6, 8
16 17 U.S.C. § 1203(b)(1) ................................................................................................ 7
17
17 U.S.C. § 1203(c)(3) .............................................................................................. 18
18
FEDERAL REGULATIONS
19
20 80 Fed. Reg. 65944-01 (Oct. 28, 2015) ....................................................................... 7
21 LEGISLATIVE MATERIALS
22 150 Cong. Rec. S.11852-01 ......................................................................................... 5
23 H.R. 4586, Serial No. 94 (June 17, 2014) ............................................................. 3, 11
24
H.R. Rep. 109-33(1) ................................................................................................ 3, 6
25
26
27
28

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1

INTRODUCTION

2

VidAngel’s overarching defense is that it should be entirely exempt from

3 “liability under any provisions of the Copyright Act” because it filters. Opp. 15.
4 That is absurd. VidAngel’s tortured reading of the Family Movie Act (“FMA”)
5 contradicts the law’s plain language and on-point legislative history, and requires a
6 finding that Congress, in passing a narrow exemption, intended to upend the
7 Copyright Act entirely. If VidAngel were right, then any service could rip, copy
8 and stream content from DVDs and Blu-ray discs (“Discs”) with impunity—simply
9 by offering users the option to filter out mere seconds of that content. Relying on its
10 sweeping interpretation of the FMA, VidAngel argues the Court should allow it to
11 continue to rip Discs, and then copy and stream Plaintiffs’ works to an active user
12 base of nearly [100,000] (and growing).
The case for injunctive relief is overwhelming. VidAngel’s violations of

13

14 §§ 106 and 1201 are clear, and its legal defenses are meritless.1 All of the equitable
15 factors weigh decisively for an injunction. Courts consistently hold that
16 unauthorized streaming services like VidAngel cause immediate and irreparable
17 harm to copyright owners. See, e.g., WPIX, Inc. v. ivi, Inc., 691 F.3d 275, 286 (2d
18 Cir. 2012); Am. Broad. Cos. v. Aereo, Inc., 2014 WL 5393867, at *27-28 (S.D.N.Y.
19 Oct. 23, 2014); Warner Bros. Entm’t Inc. v. WTV Sys., Inc., 824 F. Supp. 2d 1003,
20 1012-14 (C.D. Cal. 2011) (“Zediva”). VidAngel’s argument that Plaintiffs waited
21 too long to sue for an injunction contradicts Ninth Circuit authority and the facts.
22 Arc of Cal. v. Douglas, 757 F.3d 975, 990-91 (9th Cir. 2014).
VidAngel’s attempt to portray itself as a victim is belied by VidAngel’s

23

24 strategy of seeking forgiveness instead of permission. VidAngel ripped and
25 infringed content, in the words of its CEO, Mr. Harmon, to get “a lot bigger” before
26 trying to “get licensing from Hollywood.” Ehler Decl. Ex. DD at 366. In other
27

1

Unless otherwise noted, all statutory cites are to 17 U.S.C.; all emphases are
28 added; and quotations and citations within quotations are omitted.
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1 words, VidAngel deliberately violated Plaintiffs’ rights to have better leverage in
2 negotiating for licenses. Moreover, despite VidAngel’s contrary insinuations,
3 VidAngel did not ask Plaintiffs to discuss a streaming license until after this lawsuit.
4 And even that request was a transparent attempt to create evidence for opposing this
5 motion or supporting VidAngel’s baseless antitrust counterclaim. In arguing against
6 an injunction, VidAngel asks the Court to reward its deceitful tactics.
7

Contrary to VidAngel’s rhetoric, Plaintiffs are not trying to stop lawful

8 filtering. This case simply is not about filtering. Plaintiffs’ claims are aimed at
9 VidAngel’s unauthorized and illegal ripping, copying and streaming to the public of
10 Plaintiff’s copyrighted works. The legitimate streaming services with which
11 VidAngel claims to compete all have licenses from copyright owners for the works
12 they stream. VidAngel does not, and the fact that it offers filtering in connection
13 with its streaming service does nothing to excuse the need to obtain such licenses.
14 Notably, VidAngel omits to tell the Court that another filtering service, ClearPlay,
15 has continued to operate for more than a decade since the FMA was passed, or that
16 it offers filtering to Google Play users who access authorized streams from Google
17 Play’s licensed service.2 A company that wants to filter lawfully does not have to
18 violate the DMCA and infringe copyright to do so.
19

ARGUMENT

20 I.
21

THE FMA PROVIDES NO DEFENSE FOR VIOLATING THE DMCA
OR PLAINTIFFS’ EXCLUSIVE REPRODUCTION AND PUBLIC
PERFORMANCE RIGHTS

22

A.

23

The FMA does not authorize a party that filters to circumvent access controls,

VidAngel’s Argument Contradicts The FMA’s Clear Language

24 to copy movies and TV shows, or to stream them. Rather, the FMA exempts only
25
2

Bennett Decl. Ex. A (ClearPlay users can apply filters to content streamed on
computers or on their televisions, using Google’s Chromecast, Apple’s Air Play or
27 an HDMI cable). VidAngel distinguishes ClearPlay in part because it offers only
standard definition (SD) and not high definition (HD) resolution, but over [
] of
28 VidAngel’s users choose SD over HD. See Ehler Decl. Ex. Z at 296.
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1 the act of “making imperceptible . . . limited portions of audio or video content.”
2 § 110(11).3 VidAngel’s argument is impossible to square with the FMA’s text.
First, the FMA does not address DMCA violations or create an exemption

3

4 through silence. The FMA is clear that it provides a defense only to § 106 rights,
5 which are different from § 1201 rights. The latter impose a prohibition on
6 circumvention of access control measures. If Congress intended the FMA to excuse
7 a DMCA violation, it would have said so. In fact, Congress considered explicitly
8 stating that the FMA would not be a defense to an anti-circumvention claim, but the
9 Register of Copyrights told it that doing so was unnecessary since, as a rule,
10 statutory exceptions to § 106 rights do not apply to § 1201. See Hearing on H.R.
11 4586, Serial No. 94 at 84, 89 (June 17, 2014) (RJN Ex. E at 236, 241).
Second, VidAngel is wrong that the FMA “expressly provides” that VidAngel

12

13 can “transmit” performances of movies as long as “a fixed copy of the altered
14 content is not created.”4 Opp. 12 (emphasis VidAngel’s). The FMA provides an
15 exemption only for the narrow act of “making imperceptible” portions of an
16 audiovisual work during a performance of such work. Nothing in the language
17 authorizes the performance itself or the copying of those works. The acts of
18 publicly performing (transmitting) and copying copyrighted works are different (and
19 fundamental) rights of a copyright owner. If Congress had intended to limit the
20 reproduction or public performance rights, it would have said expressly that copying
21
3

22
23
24
25
26
27
28

Congress intended the FMA to resolve disputes in then-pending litigation about
whether filtering that did not result in the creation of a fixed copy infringed the
exclusive rights to create derivative works and distribute copies. H.R. Rep. 10933(1) at 6-7, 69-72 (Minority Views) (Apr. 12, 2005) (RJN Ex. K at 483-85, 50002). This case, in contrast, does not involve either of those rights.
4
VidAngel does not comply with the FMA requirement that no altered copy be
fixed. As Plaintiffs demonstrated, and VidAngel does not dispute, altered portions
of Plaintiffs’ movies are [fixed—i.e., copied—to servers and stored there for up to
24 hours]. Schumann Decl. ¶¶ 11-12; Mot. 22 n.11. VidAngel argues that it does
not fix “complete” copies, Opp. 15-16, but the FMA forbids the copying of any
“altered version,” which does not have to be the entirety of the work.

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1 and transmitting works are exempt when done by a service that filters.
2

VidAngel argues that it streams from “authorized copies” because it uses

3 “authorized (not bootlegged) copies of physical discs” from “the legal market.”
4 Opp. 13. This is irrelevant because VidAngel has no right to stream Plaintiffs’
5 content at all. In any event, VidAngel’s argument is wordplay. The Disc that
6 VidAngel acquires contains an authorized copy. When VidAngel illegally
7 circumvents access-controls and copies content from the Disc to a computer or
8 server, VidAngel creates a new copy. This copying violates the reproduction right.
9 Capitol Records, LLC v. ReDigi Inc., 934 F. Supp. 2d 640, 649-50 (S.D.N.Y. 2013)
10 (“the reproduction right is necessarily implicated when a copyrighted work is
11 embodied in a new material object”). And the new copy that VidAngel makes, and
12 “from” which it streams to thousands of users, is not authorized.
13

Third, VidAngel’s interpretation of the FMA is foreclosed by the statute’s

14 savings clause, which directs that courts shall not construe the FMA “to imply
15 further rights under section 106 . . . or to have any effect on defenses or limitations
16 on rights granted under any other section” of Title 17. § 110 (last sentence).
B.

17
18
19
20
21
22
23
24
25
26
27
28

The FMA’s Legislative History Makes Clear That The Statute
Does Not Immunize VidAngel’s Conduct

Recognizing that the FMA’s text does not support its argument, VidAngel
relies overwhelmingly on selected portions of the FMA’s legislative history that
speak generally about filtering. (VidAngel cites to the history 39 times, while citing
the text just four times.) There is no reason to resort to legislative history when
statutory language is unambiguous. United States v. Gonzales, 520 U.S. 1, 6 (1997).
The FMA is unambiguous: it exempts filtering, but not circumventing, copying or
publicly performing. But even if the Court finds the FMA ambiguous, the history
proves VidAngel’s reading of the FMA is wrong.
First, the on-point legislative history could not be more direct in addressing
the concrete claims at issue and showing the FMA is not a defense here:

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1 

DMCA Violation: The FMA “does not provide any exemption from the anti-

2

circumvention provisions of section 1201 of title 17.” 150 Cong. Rec.

3

S.11852-01 at S11853 (Sen. Hatch) (RJN Ex. G at 269). VidAngel asserts the

4

history “does not evince a clear intent to prohibit VidAngel from decrypting

5

DVDs for the purpose of accessing a disk to filter.” Opp. 16-17. The history

6

in fact shows VidAngel’s defense to the DMCA violation is meritless: “It

7

would not be a defense to a claim of violation of section 1201 that the

8

circumvention is for the purpose of engaging in the conduct covered by this

9

new exemption in section 110(11).” 150 Cong. Rec. at S11853 (RJN Ex. G at

10

269).

11 

Public Performance Violation: “[A]n infringing transmission of a

12

performance to a household [is] not rendered non-infringing by section

13

110(11) by virtue of the fact that limited portions of audio or video content of

14

the motion picture being performed are made imperceptible.” Id.

15 Plaintiffs pointed to these and similar quotations from the legislative history. Mot.
16 14-15, 22. VidAngel ignores them. The legislative history that VidAngel quotes
17 simply does not address the issues that actually matter in this case.
18

Second, VidAngel argues that because movie streaming services such as

19 iTunes, Netflix and Hulu did not exist in 2005, Congress must have intended for the
20 FMA to allow filtering services to circumvent DVD protections in order to copy
21 movies to computer servers and make filtered streams to users. Opp. 17. Nothing in
22 the statute or legislative history supports this position. And the history makes clear
23 that FMA does not protect a service that circumvents in order to filter.
24

C.

VidAngel’s Interpretation Of The FMA Leads To Absurd Results

25

“[I]nterpretations of a statute which would produce absurd results are to be

26 avoided if alternative interpretations consistent with the legislative purpose are
27 available.” Griffin v. Oceanic Contractors, Inc., 458 U.S. 564, 575 (1982). If
28 VidAngel were right that the FMA completely exempts a party from liability under
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1 Title 17, see Opp. 12, practically any streaming service could avoid all liability for
2 infringement and circumvention merely by following VidAngel’s sham “buy3 sellback” model and allowing its customers to choose to filter out a snippet of
4 content. A service need not even filter “sex, violence, [or] profanity” to qualify for
5 the FMA. See Opp. 5. The statute is “content-neutral.” H.R. Rep. 109-33(1) at 6
6 (RJN Ex. K at 483). Thus, under VidAngel’s interpretation, a service could filter
7 only a movie’s credits (as VidAngel did pre-litigation, and says it will do again,
8 Mot. 11), or an even smaller portion of content, and circumvent, copy and stream at
9 will. Congress, in creating a limited exemption for making content imperceptible,
10 did not intend to create such a massive loophole in the law.
11 II.

VIDANGEL’S NON-FMA DEFENSES ARE MERITLESS

12

A.

13

VidAngel admits that it bypasses and removes the technological protection

VidAngel Has No Defense For Its DMCA Violation

14 measures on Plaintiffs’ Discs. Opp. 16; Meldal Decl. ¶ 40. VidAngel
15 euphemistically calls this “re-formatting.” Opp. 17. The DMCA calls it
16 circumvention, and the statute makes it illegal. § 1201(a)(1)(A) (prohibition),
17 (a)(3)(A) (definition). VidAngel cannot excuse its DMCA violation.
18

First, VidAngel is wrong that the purported purchase of a Disc conveys

19 authority to decrypt the Disc to view it on another platform. Opp. 17. Courts have
20 repeatedly rejected this argument: “[T]he purchase of a DVD does not give the
21 purchaser the authority of the copyright holder to decrypt CSS.” 321 Studios v.
22 Metro Goldwyn Mayer Studios, Inc., 307 F. Supp. 2d 1085, 1096 (N.D. Cal. 2004);
23 see Universal City Studios, Inc. v. Corley, 273 F.3d 429, 444 (2d Cir. 2001) (same).
24

Second, VidAngel is wrong that it has an exemption from the DMCA because

25 VidAngel enables “space shifting.” Opp. 17. There is no DMCA exemption for
26 space shifting—a point that VidAngel itself admits only six pages earlier. Id. at 1027 11. VidAngel’s argument is particularly disingenuous because the Librarian of
28

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1 Congress and the Copyright Office have repeatedly declined to adopt the exemption
2 VidAngel’s seeks. Only last year, the Register again “recommended against the
3 adoption of a proposed exemption, on the ground that the law of fair use, as it
4 stands today, does not sanction broad-based space-shifting or format-shifting.” 5 80
5 Fed. Reg. 65944-01 at 65960 (Oct. 28, 2015).
Third, VidAngel is wrong that a DMCA injunction “essentially” operates as a

6

7 prior restraint. Opp. 18. The DMCA authorizes, and courts routinely grant,
8 injunctions to halt circumvention violations. § 1203(b)(1); MDY Indus., LLC v.
9 Blizzard Entm’t, Inc., 629 F.3d 928, 953-54 (9th Cir. 2010); 321 Studios, 307 F.
10 Supp. 2d at 1105. Overstreet v. United Brotherhood of Carpenters and Joiners, 409
11 F.3d 1199 (9th Cir. 2005), which VidAngel cites as “cf.” authority, Opp. 18, has
12 nothing to do with the DMCA or this case.
Fourth, VidAngel’s expert, Sigurd Meldal argues that CSS, AACS and BD+

13

14 are not effective access-control measures because illegal software—such as the
15 AnyDVD HD software VidAngel uses—to rip Discs is readily available on the
16 Internet. See Meldal Decl. ¶ 12. Dr. Meldal is not permitted to make legal
17 arguments, Crow Tribe of Indians v. Racicot, 87 F.3d 1039, 1045 (9th Cir. 1996)
18 (“[e]xpert testimony is not proper for issues of law”), and in any event, courts have
19 uniformly rejected this argument, 321 Studios, 307 F. Supp. 2d at 1095 (“this is
20 equivalent to a claim that, since it is easy to find skeleton keys on the black market,
21 a deadbolt is not an effective lock to a door”); Realnetworks, Inc. v. DVD Copy
22 Control Ass’n, 641 F. Supp. 2d 913, 932 (N.D. Cal. 2009) (same). CSS, AACS and
23
24
25
26
27
28

5

VidAngel incorrectly asserts that Don Verrilli told the Supreme Court at the
Grokster argument that his movie studio and record company clients “agreed that
space shifting is legal.” Opp. 17. He actually said that “[t]he record companies, my
clients, have said, for some time now … that it’s perfectly lawful to take a CD that
you’ve purchased, upload it onto your computer, put it onto your iPod.” RJN Ex. B
at 53 (Tr. of MGM v. Grokster Oral Argument at 12). CDs are not protected by
technological protection measures; DVDs and Blu-ray discs are, and thus are subject
to the protections of the DMCA’s anti-circumvention prohibition.
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1 BD+ all effectively control access “in the ordinary course of [their] operation,”
2 which is all the DMCA requires. § 1201(a)(3)(B); Realnetworks, 641 F. Supp. 2d at
3 932 (CSS); Adv. Access Content Licensing Adm’r, LLC v. Shen, No. 14-CV-1112
4 (VSB), Dkt. No. 87 at 4-5 (S.D.N.Y. Mar. 16, 2015) (AACS) (RJN Ex. A at 9-10).
B.

5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25

VidAngel does not dispute that it copies Plaintiffs’ movies from Discs to
computer servers. Ehler Decl. Ex. EE Tr. 58:1-4; Schumann Decl. ¶¶ 40-42. That
violates Plaintiffs’ reproduction right. ReDigi, 934 F. Supp. 2d 640, 649-50.
VidAngel instead tries to defend its copying by calling it “intermediate,” a
concept that has no application here. Opp. 10. VidAngel uses its unauthorized
copies to make unauthorized streams. Schumann Decl. ¶¶ 40-42; Supp. Schumann
Decl. ¶ 21. There is nothing “intermediate” about VidAngel’s copies. The cases on
which it relies are completely inapposite. Two of them hold that a defendant may
have a defense of fair use to an infringement claim when it makes copies of another
party’s copyrighted computer software for the sole purpose of discovering
functional, non-copyrightable elements of that software that are required for the
defendant’s product to interoperate with that software.6 Sony Computer Entm’t, Inc.
v. Connectix Corp., 203 F.3d 596, 606 (9th Cir. 1999); Sega Enters. Ltd. v.
Accolade, Inc., 977 F.2d 1510, 1522 (9th Cir. 1992). UMG Recordings, Inc. v.
MP3.com, Inc., 92 F. Supp. 2d 349, 351 n.2 (S.D.N.Y. 2000), makes clear that Sony
and Sega provide no defense for making permanent copies of works to servers in
order to stream performances to customers. See also ReDigi, 934 F. Supp. 2d at 650
(rejecting ReDigi’s argument that it simply “migrates a file” when it creates new
copies of works upon upload and download).
VidAngel also insists it makes “personal copies” and says such copies are

26
27

VidAngel Cannot Defend Its Infringement Of The Reproduction
Right By Calling Its Copies “Intermediate” And “Personal”

6

The third case VidAngel cites—Kelly v. Arriba Soft Corp., 336 F.3d 811 (9th Cir.
28 2003)—has nothing to do with such “intermediate” copying.
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1 immune from infringement. No case holds that making “personal copies” of movies
2 is fair use or otherwise lawful. And one of the cases that VidAngel cites holds
3 exactly the opposite: “there is as yet no generally recognized right to make a copy
4 of a protected work, regardless of its format, for personal noncommercial use.”
5 United States v. Elcom Ltd., 203 F. Supp. 2d 1111, 1135 (N.D. Cal. 2002) (cited
6 Opp. 11). And, there is nothing “personal” about the copies VidAngel makes.
7 VidAngel makes four master copies of files (differing in resolution) from a single
8 Disc, and then streams from those master files to thousands of different paying
9 users. Supp. Schumann Decl. ¶¶ 21, 24-28; Ehler Decl. Ex. EE Tr. 90:18-22.
C.

10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

Aereo Provides No Defense To VidAngel’s Infringement Of
Plaintiffs’ Public Performance Right

VidAngel ignores on-point precedent establishing its infringement of the
public performance right. See Mot. 17-18. VidAngel instead misreads American
Broadcasting Cos. v. Aereo, Inc., 134 S. Ct. 2498 (2014), to argue that VidAngel
makes private performances because its users “purchase[]” Discs. Opp. 11.
VidAngel’s Aereo defense fails because it is based on gimmickry—calling
what obviously is a rental service a “buy-sellback” service—and Aereo makes it
clear that a service like VidAngel cannot use gimmickry to create loopholes in
copyright law. The Supreme Court rejected Aereo’s arguments that it transmitted
“private” performances because it transmitted broadcast programs from separate
copies captured from thousands of individual antennae. The Court held that Aereo’s
“behind-the-scenes” mechanisms made no difference to “Congress’ regulatory
objectives,” “Aereo’s commercial objective,” or “the viewing experience.” See
Aereo, 134 S. Ct. at 2508-09.
The same substance-over-form analysis compels the conclusion that “buysellback” is a sham: the alleged “buyer” does not control the Disc that VidAngel
supposedly “sells” him or her; VidAngel does not stream a performance to the user
from his or her “copy”; VidAngel actively encourages users to treat the service as a

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1 rental; and VidAngel’s users treat it as a rental, with only [four] of out of more than
2 [1.5 million] purported “sales” resulting in the transfer of a Disc. Mot. 7-9, 20. Mr.
3 Harmon himself admitted that “buy-sellback” is just VidAngel’s “creative way” to
4 offer “the value of a Redbox while staying buttoned up legally,” and that
5 [“VidAngel is NOT a disc service”—i.e., it does not sell Discs—but instead “is a
6 streaming service.”] Ehler Decl. Ex. DD at 366; id. Ex. W at 234. Tellingly,
7 VidAngel does not respond to any of this evidence in its Opposition.
VidAngel insists that its service falls within the Court’s dicta stating that the

8

9 analysis of the public performance right might be different with a different type of
10 service, such as one that allows users to “receive performances in their capacities as
11 owners or possessors of the underlying works,” analogous to a car owner getting its
12 keys back from a valet parker. Aereo, 134 S. Ct. at 2510. The Court explained that
13 the valet analogy would not apply to a service, like Aereo’s, where the users lacked
14 a “relationship to the work[]” prior to dealing with the service. Id. VidAngel
15 likewise falls outside the dicta because its users also have no “prior relationship” to
16 the movies before coming to VidAngel’s service to stream them.
VidAngel also argues that Aereo holds it is not infringement if “the user of a

17

18 service pays primarily for something other than the transmission of copyrighted
19 works.” Opp. 11. The Supreme Court actually said that it “ha[d] not considered”
20 that question. Aereo, 134 S. Ct. at 2511. And, in any event, VidAngel’s users do
21 not pay “primarily” for something other than streaming Plaintiffs’ works. Without
22 the streamed content, VidAngel’s service has no value. See Ehler Decl. Exs. A, B.7
23
24
25
26
27
28

7

VidAngel incorrectly accuses Plaintiffs of trying to force users to “be charged
twice”—once for the sale of a Disc, a second time for a stream—in order “to watch
a movie once.” Opp. 11. Plaintiffs ask for no such thing. VidAngel decided to run
its service by buying copies of movies on Discs and then streaming performances
from server copies. Reproduction and public performance are two different rights
under the Copyright Act, and copyright owners are entitled to compensation for the
exercise of each right. (That is why, for example, Netflix pays for the DVDs it uses
for its mail-order business, and separately for the right to stream the same movies.)
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1

D.

VidAngel’s Unauthorized Conduct Is Not Fair Use

2

It is settled law, and VidAngel does not dispute, that fair use is not a defense

3 to a DMCA violation. See Mot. 15-16. VidAngel does not meet its burden of
4 showing the fair use defense likely will excuse VidAngel’s copying and streaming
5 of Plaintiffs’ works. Perfect 10, Inc. v. Amazon.com, Inc., 508 F.3d 1146, 1158 (9th
6 Cir. 2007); see MP3.com, 92 F. Supp. 2d at 351 (service’s conduct, not that of its
7 users, must meet burden for fair use defense). Indeed, VidAngel does not show that
8 any fair use factor weighs in its favor.
9

Factor One: VidAngel’s use is not transformative. VidAngel argues that,

10 because its users must select at least one filter, VidAngel’s copying and streaming
11 are transformative. Opp. 19-20. Not so. VidAngel uses Plaintiffs’ movies and TV
12 shows for their intrinsic purpose, just like airlines and networks do when they show
13 edited versions of Plaintiffs’ works. VidAngel’s customers recognize they can
14 watch a full work with minimal filtering. See Bennett Decl. Ex. C; id at 20 (“Even a
15 single word is good enough to then watch the movie. Beats Redbox all day.”).
Numerous cases (discussed in Plaintiffs’ Motion) make it clear that VidAngel

16

17 uses Plaintiffs’ works for their intrinsic purpose, not for transformative use. Mot.
18 23-24. VidAngel ignores all of these except for Clean Flicks of Colorado, LLC v.
19 Soderbergh, 433 F. Supp. 2d 1236, 1241 (D. Colo. 2006), which rejected a filtering
20 service’s fair use defense where “the edits are a small percentage of most of the
21 films copied and the use is clearly for commercial gain.” VidAngel calls Clean
22 Flicks “inapposite” because that service had no FMA defense. Opp. 22. That is a
23
24
25
26
27
28

Customers of legitimate streaming services, however, pay one charge to watch the
movie through that service. ClearPlay customers who want to use filters on top of
an authorized stream pay only once—to Google Play—to watch the movie; they pay
ClearPlay separately for filtering. See ClearPlay, “Filtering & Streaming Together”
available at https://try.clearplay.com/streaming-sign-up/. VidAngel is wrong that
Congress did not intend for users to pay to filter: ClearPlay, whose service the
legislative history expressly cited, charged users for its filtering service, while users
paid separately for DVDs they wished to watch. See Hearing on H.R. 4586 at 2
(RJN Ex. E at 154).
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1 distinction without a difference. The FMA has no effect on the fair use defense, see
2 § 110 (last sentence), and in any event VidAngel has no FMA defense either. Clean
3 Flicks and Plaintiffs’ other authority show factor one weighs for Plaintiffs.
4

Factor Two: Plaintiffs’ works are at the core of copyright protection.

5 VidAngel’s argument that “this factor favors fair use” because Plaintiffs already
6 published their works, Opp. 20, is wrong. The law is clear that motion picture
7 content—whether or not published—is “creative in nature and thus fit[s] squarely
8 within the core of copyright protection.” Elvis Presley Enters., Inc. v. Passport
9 Video, 349 F.3d 622, 629 (9th Cir. 2003).
10

Factor Three: VidAngel copies all, and publicly performs nearly all, of

11 Plaintiffs’ works. Even with filters, VidAngel is copying entire works and
12 streaming nearly complete versions—the heart of Plaintiffs’ works by any measure.
13 Id. at 630. This factor weighs for Plaintiffs.
14

Factor Four: VidAngel directly interferes with the market for Plaintiffs’

15 works. VidAngel argues that it does not harm the market for Plaintiffs’ works
16 because “filtered movies are not a substitute” for Plaintiffs’ works. Opp. 21.
17 VidAngel is wrong because the evidence shows its offerings are substituting for
18 authorized streams of Plaintiffs’ works. Ehler Decl. Ex. I; Bennett Decl. Ex. D.
19 VidAngel originally asserted that “[o]ver 92 percent of VidAngel customers would
20 not watch those movies without filtering,” Opp. 21, but later filed an errata dropping
21 that number to 51%. Dkt. 76. Taking VidAngel at its (unexamined) word on this
22 (VidAngel refused Plaintiffs’ repeated requests for the actual survey data),
23 VidAngel admits that nearly half of its customers would watch the exact same
24 movie without filters.8 Moreover, these numbers only account for VidAngel. The
25 relevant question on factor four is “whether unrestricted and widespread” streaming
26

8

Even VidAngel’s errata is erroneous. The errata states that “[o]ver 51% of its
users would not watch unfiltered content under any circumstances.” Dkt. 76 at 1,
27
21. In fact, the survey instrument (like VidAngel’s Opposition) asked whether the
28 user would have watched the particular movie without filters. Bennett Decl. Ex. E.
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1 by other services mimicking VidAngel would “substantially adverse[ly] impact”
2 Plaintiffs’ potential market opportunities. Campbell v. Acuff-Rose Music, Inc., 510
3 U.S. 569, 590 (1994). The answer obviously is yes.
4

VidAngel also is off-base arguing that its unauthorized use “[i]ncreases

5 [Plaintiffs’] [s]ales.” Opp. 21. To be clear, VidAngel does not purchase a Disc for
6 every individual customer to whom it streams. VidAngel instead purports to have in
7 its vault a Disc for every user who, at a particular moment, has obtained access to
8 the content. Once a user “sells back” their access (i.e., returns the rental), the Disc
9 becomes “available” again in VidAngel’s system for a different user. On average,
10 for every [16] users to whom VidAngel streams a new release title, VidAngel buys
11 one Disc containing that title.9 Harmon Decl. ¶ 61. This means if VidAngel buys
12 100 Discs of new releases, VidAngel will use those 100 Discs to justify streams of
13 the same title to [1,600] different users. Buying one Disc for multiple users helps
14 VidAngel’s bottom line, not Plaintiffs’.
More important, VidAngel’s purported “help” to Plaintiffs is entirely

15

16 irrelevant as a legal matter. Courts have roundly rejected the argument that an
17 infringing use is “fair” because the use allegedly generates incremental income for
18 the copyright owner: “‘Any allegedly positive impact of defendant’s activities on
19 plaintiffs’ prior market in no way frees defendant to usurp a further market that
20 directly derives from reproduction of the plaintiffs’ copyrighted works.’” A&M
21 Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1017 (9th Cir. 2001) (quoting
22 MP3.com, 92 F. Supp. 2d at 352); Clean Flicks, 433 F. Supp. 2d at 1242 (same).
VidAngel fails to show it likely will prevail on any fair use factor, much less

23

24 that its defense likely will succeed. All factors weigh decisively for Plaintiffs.
25
26
9

Mr. Harmon’s declaration provides this ratio only for new releases. Based on the
limited discovery thus far, a conservative estimate of the ratio for all VidAngel
28 offerings is, for every Disc, around [19-20 streaming sessions]. Bennett Decl. ¶ 7.
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1

E.

VidAngel’s Antitrust Allegations Provide No Defense

2

VidAngel asserts that Plaintiffs have conspired to put it out of business. Opp.

3 18; Harmon Decl. ¶¶ 14-16, 45-60. This is a smokescreen to divert attention from
4 VidAngel’s unlawful conduct.10
First, VidAngel incorrectly asserts that Plaintiffs (and other motion picture

5

6 studios) are parties to an agreement with the Directors Guild of America (“DGA”)
7 that prohibits any studio from licensing any service through which users could apply
8 filters. Opp. 7; Harmon Decl. ¶ 48. The DGA Agreement is publicly available, and
9 it does not set forth any such prohibition.
Second, VidAngel alleges that Plaintiffs and other “studios” directed Google

10

11 and other licensees not to do business with VidAngel. Opp. 7; Harmon Decl. ¶ 49.
12 Mr. Harmon, however, admitted at his deposition that VidAngel has no evidence
13 that any Plaintiff directed Google or anyone else not to work with VidAngel.
14 Bennett Decl. M Tr. 273:14-277:11, 301:15-20; see id. Ex. J at 51 (Google
15 expressing it might [“go it alone”]).
Third, VidAngel argues that Plaintiffs refused when asked to license

16

17 VidAngel. Opp. 7-8; Harmon Decl. ¶ 59. Notably, Mr. Quinto did not make his
18 license “offer” until after Plaintiffs filed this Motion. Quinto Decl. ¶¶ 2-4 Ex. A.
19 Mr. Quinto’s “offer,” moreover, was a transparent attempt to gain litigation
20 advantage. Mr. Quinto invited all Plaintiffs—who are competitors in licensing their
21 works—collectively “to discuss[] a license.” Id. Had Plaintiffs accepted the offer,
22 VidAngel presumably would have used that as evidence of joint licensing to support
23 its antitrust counterclaim. Because Plaintiffs refused to engage in joint licensing
24 discussions, VidAngel has cited this as evidence of a purported group boycott.
25
26

10

Plaintiffs will move to dismiss the antitrust counterclaims before the hearing on
this Motion. Plaintiffs moved to dismiss VidAngel’s original counterclaim.
27
Dkt. 35. VidAngel mooted the first motion to dismiss by amending the
28 counterclaim the day its opposition was due. Dkt. 77.
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1 VidAngel’s Catch 22 litigation tactics provide no basis for denying this Motion.11
2 III.
3
4
5
6
7
8
9
10
11

PLAINTIFFS FACE AN IMMINENT AND INCREASING RISK OF
IRREPARABLE HARM
VidAngel admits it intends to increase exponentially its unlawful streaming of

Plaintiffs’ works. VidAngel currently claims to have more than a [half-million]
monthly streams spread across nearly [100,000] monthly active users. Ehler Decl.
Ex. EE Tr. 190:2-8; id. Ex. AA at 317. Absent an injunction, VidAngel will try to
grow that user base to [

] within a year, and [

] in two years. Id.

Ex. Y at 283. The law is clear that such conduct causes immediate and irreparable
harm to copyright owners’ exclusive rights to control their works. ivi, 691 F.3d at
286; Aereo, 2014 WL 5393867, at *7; Zediva, 824 F. Supp. 2d at 1012-14.

12

A.

Plaintiffs Filed Suit And Sought An Injunction When It Was Clear
VidAngel Posed A Viable Threat Of Harm

13

In an effort to avoid an injunction and continue its illegal streaming for profit,

14 VidAngel argues that Plaintiffs waited too long to sue and so forfeited the right to a
15 preliminary injunction. Opp. 22-24. If accepted, VidAngel’s argument would
16 require plaintiffs to “rush to court at the first sign of potential infringement, even if
17 the prospect of harm is remote.” Am. Broadcasting Cos. v. Aereo Inc. (“Aereo I”),
18 2012 WL 3854042, at *27-28 (S.D.N.Y. Jul. 11, 2012). That is why the law is to
19 the contrary. Id; Arc of Cal., 757 F.3d at 990.
VidAngel argues that because Plaintiffs knew about and investigated

20

21 VidAngel’s service before filing suit, any harm may be reparable. Opp. 21-22.
22 Aereo I expressly rejected the same type of argument. There, as here, plaintiffs
23 “were aware of [the service’s] existence for roughly a full year before seeking [an]
24 injunction,” Aereo I, 2012 WL 3854042 at *27. Indeed, Aereo had received
25
11

VidAngel also relies on confidential agreements of a non-party (Sony Pictures)
that VidAngel admits it obtained trolling WikiLeaks for documents stolen during the
27 massive criminal cyber-attack on Sony. Opp. 7; Harmon Decl. ¶¶ 48-50. Plaintiffs
will not respond in kind by quoting from stolen documents, but simply note that the
28 materials VidAngel cites do not support its claim.
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1 substantial press attention and $4.5 million in funding a year before plaintiffs filed
2 suit. Id. at *28. The court held that plaintiffs “did not unduly sleep on their rights”
3 but brought suit once it was clear that Aereo “posed a substantial and imminent
4 threat of irreparable harm.” Id. at *27-28. The same is true here. Plaintiffs learned
5 of VidAngel when it was in “limited beta” and had fewer than 5,000 users—which
6 would not lead legitimate streaming licensees to “notice (let alone complain).”
7 Cittadine Decl. ¶¶ 35-36. Plaintiffs monitored VidAngel and investigated their
8 claims. Id. Once VidAngel started marketing itself more aggressively, expanded its
9 content offering, and posed a more significant threat of harm, Plaintiffs filed this
10 action and sought a preliminary injunction.12 That is not undue delay. Aereo I,
11 2012 WL 3854042 at *27.
VidAngel asserts that it detrimentally relied on the lack of a response to Mr.

12

13 Quinto’s letters. Opp. 24. Mr. Harmon admitted under oath, however, that if
14 Plaintiffs had sued VidAngel earlier, the company would have behaved just as it has
15 since June 2016. Bennett Decl. Ex. M Tr. 313:5-20. VidAngel was not lulled into
16 complacency but was actively preparing for litigation. It hired (in its own words)
17 [“NO CONFLICT”] counsel in fall 2015 so it could present the [“most relevant
18 defense available in the industry”]. Ehler Decl. Ex. Y at 286. As Mr. Harmon
19 concedes, if Plaintiffs (or someone else) had objected in response to Mr. Quinto’s
20 letters, VidAngel could have instituted a potentially unnecessary declaratory
21 judgment action. Harmon Decl. ¶ 24. Plaintiffs were entitled to wait until the harm
22
23
24
25
26
27
28

12

Contrary to VidAngel’s claim that Plaintiffs waited a “year-and-a-quarter” to
seek a preliminary injunction, Opp. 22, Plaintiffs sought a stipulated preliminary
injunction from VidAngel on June 10, 2016. Bennett Decl. ¶ 13, Ex. K at 53-54.
VidAngel also asserts that Plaintiffs “seemingly learned of VidAngel in December
2014,” when, VidAngel says, Plaintiffs “apparently . . . caus[ed] Google to”
withdraw support for a different VidAngel service. Opp. 23. This is pure conjecture
that has no basis in fact. See pp. 14-15 supra. And VidAngel’s accusation that
Plaintiffs are “hid[ing] evidence” by refusing VidAngel’s demand to conduct a
company-wide email search is not true. Opp. 23. As Plaintiffs explained (and
VidAngel does not dispute) searching the emails of many thousands of employees is
infeasible and unnecessary. Marquart Decl. Ex. E.
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1 from VidAngel’s service was imminent before bringing suit.
2

B.

Plaintiffs’ Harms Are Not Speculative

3

Mr. Cittadine testified, among other things, that VidAngel’s service threatens

4 to undermine content owners’ legitimate digital business and dealings with third
5 parties. Cittadine Decl. ¶¶ 14-34. He specifically explained that as of August 22,
6 VidAngel was directly interfering with the exclusive window Fox had granted HBO
7 for The Martian and Brooklyn. Id. ¶ 32. These and other harms that Mr. Cittadine
8 describes are fact, not speculation. Opp. 26.
9

That harm continues to grow as VidAngel adds more users and encourages

10 them to stream through VidAngel rather than a licensed service. The evidence since
11 Plaintiffs’ filing shows this harm only continues to grow. For example, one
12 VidAngel user posted a review to Facebook on September 7: “Far and away the
13 best video streaming service out there . . . Even if you don’t want to filter much or
14 anything, take out one swear word or even the credits. You’ll live and so will
15 Spielberg, Disney, and the others.” Bennett Decl. Ex. C at 15. See also id. Ex. D at
16 28 (Sept. 13: “#CivilWar is already on @VidAngel great job, can’t wait to watch it
17 tonight. I even use VA when I don’t need filtering, cheaper than Amazon.”); id. at
18 29 (Sept. 20: “I will never watch a movie at home through another service. Simply
19 amazing in every way.”). VidAngel thus undermines Plaintiffs’ relationships with
20 authorized streaming services—harm that courts have repeatedly held is irreparable.
21 Fox Television Stations, Inc. v. BarryDriller Content Sys., PLC, 915 F. Supp. 2d
22 1138, 1147 (C.D. Cal. 2012) (“pressure on [] licensing relationships” is irreparable);
23 Zediva, 824 F. Supp. 2d at 1013 (same); Fox Television Stations, Inc. v. FilmOn X
24 LLC, 966 F. Supp. 2d 30, 50 (D.D.C. 2013) (same).
25

VidAngel’s growth has exacerbated the harm to Plaintiffs’ business and will

26 continue to do so. Cittadine Decl. ¶ 34. VidAngel continues to add Plaintiffs’
27 popular titles as they are released to Disc. Bennett Decl. Ex. F (Captain America:
28

- A.594 -

-17REPLY IN SUPPORT OF PRELIMINARY INJUNCTION
16-CV-04109-AB (PLAX)

1 Civil War (2016), posted September 13); Ehler Decl. Ex. EE Tr. 36:19-37:5. The
2 Opposition says VidAngel projects growth to [
3 with an annual revenue of

by April 2018

], Harmon Decl. ¶ 63; its internal

4 projections predict even more aggressive growth to [
], Ehler Decl. Ex. Y at 283.

5
6

C.

Money Damages Are Inadequate To Redress Plaintiffs’ Harms

7

VidAngel is wrong that money damages are adequate to compensate

8 Plaintiffs’ harms. Opp. 28-29. First, VidAngel will not be able to pay a final
9 judgment, making an injunction appropriate. BarryDriller, 915 F. Supp. 2d at 1147;
10 Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 518 F. Supp. 2d 1197, 1217
11 (C.D. Cal. 2007). The statutory damages for each work VidAngel has infringed
12 may be as much as $150,000, § 504(c); and statutory damages will be as high as
13 $2,500 for each act of circumvention (i.e., for each of the “thousand[s]” of titles
14 VidAngel has ripped from Discs, Harmon Decl. ¶ 30), § 1203(c)(3). VidAngel
15 pleads financial hardship, Harmon Decl. ¶ 63, and will not be able to pay.
16

Second, infringement like VidAngel’s directly undermines Plaintiffs’

17 “exclusive right to decide when, where, to whom, and for how much they will”
18 license their copyrighted works. Zediva, 824 F. Supp. 2d at 1012. Money damages
19 cannot compensate this harm. Citing Fox Broadcasting Co. v. Dish Network,
20 L.L.C., 905 F. Supp. 2d 1088, 1110 (C.D. Cal. 2012), VidAngel urges that
21 Plaintiffs’ licenses can be used to calculate money damages. Opp. 29. But
22 VidAngel’s large-scale infringement “eviscerate[s] Plaintiffs’ ability to protect and
23 enforce their statutorily-created property rights,” which cannot be compensated with
24 payment for lost sales. Grokster, 518 F. Supp. 2d at 1218. Dish also is inapposite
25 because the court there said it was the skipping of commercials rather than the
26 infringing copying that was the real source of harm. 905 F. Supp. 2d at 1011.
27 Here, VidAngel’s circumvention and copyright infringement, if not enjoined, will
28

- A.595 -

-18REPLY IN SUPPORT OF PRELIMINARY INJUNCTION
16-CV-04109-AB (PLAX)

1 undermine Plaintiffs’ legitimate licensing and goodwill.
2

Third, the law is clear that harm to goodwill and relationships with consumers

3 and licensees is non-quantifiable and thus irreparable. See Rent-A-Ctr., Inc. v.
4 Canyon Television & Appliance Rental, Inc., 944 F.2d 597, 603 (9th Cir. 1991)
5 (“intangible injuries . . . qualify as irreparable harm”).
6

D.

VidAngel, Not The FMA, Causes Plaintiffs’ Harm

7

VidAngel is wrong that Plaintiffs’ harm flows from the FMA rather than

8 VidAngel’s conduct. Opp. 25-26. This argument rests on VidAngel’s FMA
9 defense, and thus collapses along with that defense.
10 IV.
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27

THE LEGITIMATE HARDSHIPS ALL WEIGH IN PLAINTIFFS’
FAVOR
VidAngel’s claimed hardships must be disregarded. First, the fact that

VidAngel will have to stop violating Plaintiffs’ rights, Opp. 29, is not hardship as a
matter of law. Mot. 31-32 (citing cases).
Second, VidAngel is wrong that its status as a start-up entitles it to an
exemption from the law of injunctive relief. Opp. 29. Courts regularly enjoin
infringing startups. BarryDriller, 915 F. Supp. 2d at 1147 (enjoining “start-up” in
part because it would not be able to satisfy damages); FilmOn X, 966 F. Supp. 2d at
50; Zediva, 824 F. Supp. 2d at 1014-15.
Third, VidAngel’s appeal to equity ignores the fact that its revenues are
primarily enriching VidAngel’s owners. In just the first five months of 2016,
VidAngel spent [$2.2 million] on sales and marketing—where the main services are
provided by [Harmon Brothers LLC], which is owned by Neal Harmon and his
brothers (who also are VidAngel’s principals). Ehler Decl. Ex. AA at 319; id. Ex. Z
at 306 ([showing Harmon Brothers’ role in marketing]); Bennett Decl. Ex. M Tr.
19:7-20:19, id. Ex. G. VidAngel’s owners have no right to profit from illegal
activity.

28

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-19REPLY IN SUPPORT OF PRELIMINARY INJUNCTION
16-CV-04109-AB (PLAX)

1 V.

THE PUBLIC INTEREST STRONGLY FAVORS AN INJUNCTION

2

The public interest is served by upholding Plaintiffs’ rights. Mot. 32-33

3 (citing cases). VidAngel cites cases involving individuals’ interest in not being
4 involuntarily subjected to speech or conduct they do not want to hear. Opp. 31-32.
5 These cases are inapposite because enjoining VidAngel will not force anyone to see
6 or hear anything. VidAngel’s multiple declarations from individuals who say the
7 “public” wants to be able to view filtered content does not change any of this. There
8 are other market alternatives for filtering that do not depend on circumvention or
9 copyright infringement. Bennett Decl. Ex. A, B; see also Clean Flicks, 433 F. Supp.
10 2d at 1240 (finding similar declarations “inconsequential to copyright law and []
11 addressed in the wrong forum,” in part because the court’s role was not “to
12 determine the social value of copyrighted works”).
13 VI.

MINIMAL SECURITY SHOULD BE REQUIRED

14

VidAngel’s request for a $50 million bond is excessive and unsupported. In

15 analogous cases, the required security has been well below $1 million. See, e.g.,
16 BarryDriller, 915 F. Supp. 2d at 1149 (rejecting request for $15 million bond in
17 favor of $250,000); Zediva, 824 F. Supp. 2d at 1015 ($50,000); FilmOn X, 966 F.
18 Supp. 2d at 50 ($150,000). VidAngel also argues that a massive bond is necessary
19 so its lawyers will have the incentive to continue litigating its antitrust counterclaim.
20 VidAngel provides no legal or factual support for this perplexing argument.
21
22

CONCLUSION
Plaintiffs respectfully request that the Court grant their motion.

23 DATED: October 3, 2016

MUNGER, TOLLES & OLSON LLP

24
25
26
27

By:

/s/ Kelly M. Klaus
KELLY M. KLAUS
Attorneys for Plaintiffs

28

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-20REPLY IN SUPPORT OF PRELIMINARY INJUNCTION
16-CV-04109-AB (PLAX)

1
2

CERTIFICATE OF SERVICE
I hereby certify that on October 3, 2016, I authorized the electronic filing of

3 the foregoing with the Clerk of the Court using the CM/ECF system, which will
4 send e-mail notification of such filing to all registered parties. I certify under
5 penalty of perjury under the laws of the United States of America that the foregoing
6 is true and correct.
7
8 DATED: October 3, 2016

MUNGER, TOLLES & OLSON LLP

9
10
11

By:

/s/ Kelly M. Klaus
Kelly M. Klaus

12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

- A.598 -

-21REPLY IN SUPPORT OF PRELIMINARY INJUNCTION
16-CV-04109-AB (PLAX)

FILED UNDER SEAL PURSUANT
TO ORDER OF THE COURT
DATED SEPTEMBER 14, 2016
(Dkt. 75)

- A.599 -

Highly Confidential -Pursuant to Protective Order
of Tedd Cittadine-Rule (30) (b) (6)
Page 1
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
WESTERN DIVISION

DISNEY ENTERPRISES, INC.;
LUCASFILM LTD. LLC;
TWENTIETH CENTURY FOX FILM
CORPORATION; AND WARNER
BROS. ENTERTAINMENT, INC.,
Plaintiffs,
vs.
VI DANGEL

)
)
)
)

)
)
)
)

) Case No. CV16-04109
I

INC .

)
)

I

)
)

___________________________ )
Defendant.

AND RELATED CROSS-ACTION.

)
)

~--------------------------)
(COMPLETE CAPTION ON THE FOLLOWING PAGE.)
C 0 N F I D E N T I A L
(PURSUANT TO PROTECTIVE ORDER, THE FOLLOWING
TRANSCRIPT HAS BEEN DESIGNATED
11
HIGHLY CONFIDENTIAL 11 )

Pursuant to Rule 30(b) (6)
VIDEOTAPED DEPOSITION OF TEDD CITTADINE
Tuesday, August 9, 2016
at 9:19 a.m.

eLitigation Services, Inc. - els®els-team.com

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Page 83
A.

1

Uh-huh.
MR. KLAUS:

2

And just -- and so just --

3

just for my purposes, Mr. Marquart, when you're

4

using "filtering" in this depos-

5

unless you say otherwise, that's going to mean

6

"making imperceptible limited portions of audio or

7

video content of a motion picture"?

deposition,

8

MR. MARQUART:

Yes.

9

And I specifically mean to include the

10

examples that the witness gave, which would be

11

bleeping -- he mentioned to filter out or make

12

imperceptible audio -- and removing and cutting,

13

which would be to skip the video.
MR. KLAUS:

14
15

Removing, cutting, skipping

video?

16
17

MR. KLAUS:

18

-

MR. MARQUART:

MR. MARQUART:

Yes.

Okay.
Those were examples of

19

filtering that I also mean to include.

20

BY MR. MARQUART:
Q.

21

Have you -- has Fox ever authorized one

22

of its clients to provide filtering of authorized

23

copies of VOD titles?
MR. KLAUS:

24
25

So the -- and just to be

clear, is it a -- speaking at a general level
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Page 84
1

-

without going into any specific agreement, but I

2

think the question is:

3

agreement that specifically authorizes filtering as

4

Mr. Marquart has described it?

Are you aware of an

5

THE DEPONENT:

6

Theoretically, it's possible if we agreed

7

with a client about it.
I

8
9

Let me think about that.

offhand.

10

can't think of a specific agreement

I

don't have the agreements with me.

That comes to mind is something where the

11

client and -- and Fox have mutually decided to

12

authorize it.

13

BY MR. MARQUART:

14

Q.

Okay.

So you can't -- you can't, sitting

15

here today, remember any instance in which it has

16

been done?

17

A.

Has been agreed upon.

I can't -- I can't

18

think of a specific example.

19

all of the -- I don't have the agreements in front

20

of me, but I can't think of a specific

21

circumstance.

Q.

22
23

possible."

24
25

Okay.

And said,

Again, I don't know

"Theoretically, it's

Just clarify that for me.
What do you mean?

A.

So if -- if Fox and the client were to

eLitigation Services, Inc. - els®els-team.com

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Highly Confidential -Pursuant to Protective Order
of Tedd Cittadine-Rule (30) (b) (6)
Page 96
1

A.

-- more specifically.

2

Q.

Let's talk about those.

3

A.

Okay.

4

Q.

What's digital sell-through?

5

A.

Digital sell-through is a right that we

6

grant our clients to offer consumers the ability to

7

access content for a very long period of time,

8

whether it's by download or whether it's by stream,

9

to a number of authorized devices.

Q.

10
~

Okay.

And the second category you

11

mentioned -- I believe you called -- what was your

12

word?

13

A.

Video-on-demand, or --

14

Q.

Yes.

15

A.

16

rental"

17

Q.

Okay.

18

A.

-- in more of a generic sense.

19

Q.

Okay.

20

A.

It's a -- a -- a limited time frame where

you can refer to it as "digital

What does that entail?

21

a consumer can download and watch a piece of

22

content, whether that's television or -- or film.

23

Q.

Okay.

24

A.

More prevalent in the -- the film

25

business than in the television business.
eLitigation Services, Inc.

- [e-mail]

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of Tedd Cittadine-Rule (30) (b) (6)
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Q.

1

2

Does your business have anything to do

with physical disc sales?

3

MR. KLAUS:

4

MR. MARQUART:

Sorry.

5

MR. KLAUS:

what he's involved in

6

or

7

"Your business" meaning

BY MR. MARQUART:
Q.

8

9

Does the business that you're involved in

have anything to do with physical disc sales?

10

A.

A very

11

Q.

Are you where familiar with the

12

very minor aspect of it does.

technology called "ultraviolet"?

13

A.

I

14

Q.

What is that technology?

15

A.

Ultraviolet is a -- is a consortium of

am.

16

companies -- technology companies, content

17

providers, as well as retailers or our -- our

18

clients, that are working together to create better

19

utility for digital content.

20

It involves the interoperability of

21

rights from one retailer to another, meaning you

22

buy a piece of content at Apple, and if you're an

23

Amazon user, that piece of content would be

24

available in your Amazon ecosystem as well as your

25

Apple ecosystem, so it makes the content more
eLitigation Services, Inc. - els®els-team.com

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Highly Confidential -Pursuant to Protective Order
of Tedd Cittadine-Rule (30) (b) (6)
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1

usable, as well as a standard set of -- of rights

2

and utility that a customer can get.

3

So whether they buy from Apple or Amazon

4

or another party, you know, they're guaranteed a

5

a certain amount -- or baseline of utility with

6

that movie.
Q.

7

Okay.

And how does that -- how does that

8

technology relate to the actual purchase -- the

9

retail purchase of physical discs?
MR. KLAUS:

10

11

Object to the form of the

question.
THE DEPONENT:

12

I would say that it

13

doesn't specifically relate to the purchase of

14

physical discs.

15

A number of studios, including Fox, have

16

attached what we call an eCopy or eCopy rights to a

17

physical disc

18

BY MR. MARQUART:

19

Q.

Yeah.

20

A.

-- where we have voluntarily granted with

21

some our digital retailers the right for the

22

consumer that buys a physical disc to get a digital

23

or electronic copy of that movie.

24
25

And there -- they would be able to watch
that copy at a retailer of their choice, and that
eLitigation Services, Inc. - [e-mail]

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1

would be a retailer that Fox has authorized to

2

offer that.

Q.

3

4

that's

offered for free?
MR. KLAUS:

5

6

And -- and when that's offered,

Object to the form of the

question.
THE DEPONENT:

7

8

for no additional cost --

9

That is currently offered

BY MR. MARQUART:

10

Q.

11

A.

12

Q.

No additional cost

13

A.

or the Blu-ray.

14

Q.

other than the cost of the DVD or

15

Okay.
to the DVD

Blu-ray?

16

A.

That's correct.

17

Q.

Okay.

And are

does that cover all of

18

Fox's new-release titles for major theatrical

19

motion pictures?
A.

20

21

most,

I believe that -- that covers most --

if not all.

22

Q.

Okay.

23

A.

A very large percent.

24

Q.

And what about Fox's television

25

programs?
eLitigation Services, Inc. - els®els-team.com

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Highly Confidential -Pursuant to Protective Order
of Tedd Cittadine-Rule (30) (b) (6)
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A.

1

A much more limited selection of tel-

2

television programs would be available for an

3

electronic copy.

4

that -- very, very small number would be

5

ultraviolet enabled.
Q.

6

7

Okay.

And a much smaller percentage of

So -- and is ultraviolet becoming

more or less popular,
A.

8

9

in your estimation?

That's a good question.
I am not an -- an expert on ultraviolet.

10

I can only tell you that,

11

ultraviolet has not changed, you know, noticeably

12

in the last,

13

in my opinion,

I would say, two years.

We have the same number of retailers that

14

have participated in ultraviolet.

And our -- our

15

strategy -- as well from like our

as well as

16

what I can tell from our competitors

17

materially changed of putting eCopies on discs,

18

some of which are ultraviolet enabled.
Q.

19

Okay.

has not

Does -- does Fox allow a member of

20

the public who has purchased a digital copy, to

21

filter content of that copy to themselves for

22

private horne viewing?
MR. KLAUS:

23

24

Object to the form of the

question.

25

THE DEPONENT:

Who has purchased the --

eLitigation Services, Inc. - [e-mail]

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of Tedd Cittadine-Rule (30) (b) (6)
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1

how was the purchase made in this case?

2

BY MR. MARQUART:
Q.

3

4

Let us use the example of an ultraviolet

purchase.

5

A.

Okay.

6

Q.

An individual has bought a disc at an

7

authorized retailer.

8

A.

Okay.

9

Q.

That purchase allows them,

10

for free,

to

access a digital copy.

11

A.

Yes.

12

Q.

Does Fox allow that user to view their

13

digital copy in a filtered format to their

14

specifications?
MR. KLAUS:

15

16

Object to the form of the

question.

17

If you know, you can answer the question.

18

THE DEPONENT:

19

To my knowledge, it does not allow them

Yes.

20

to -- to filter the -- the movie that they've

21

purchased physically and then redeem the digital

22

copy of that.

23

BY MR. MARQUART:
Q.

24

25

Does -- to your knowledge, does any other

Plaintiff allow that?
eLitigation Services, Inc. - [e-mail]

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1

MR. KLAUS:

If you know.

2

THE DEPONENT:

Not -- not to my

3

.......

knowledge, but -- but I don't know for

4

sure .

5

BY MR. MARQUART:
Q.

6

for

And I know the answer to this.

7

But, to your knowledge, does Fox allow

8

any third party to assist that user in filtering

9

out content from their streamed copy?
MR. KLAUS:

10

Object to the form of the

11

question, outside the scope, calls for a legal

12

conclusion.

13

If you know of any third-party agreements

14

that specifically authorize that, you can say "Yes"

15

or "No."
THE DEPONENT:

16
17

BY MR. MARQUART:
Q.

18
19

No.

Okay.

Based on your counsel's

clarification, I have another question.
Does -- do you believe that Fox has to

20
21

authorize the filtering of that digital copy before

22

it may legally be filtered by the user?
MR. KLAUS:

23

Object to the form of the

24

question, calls for a legal conclusion.

It's

25

outside the scope of the deposition topics.
eLitigation Services, Inc. - els®els-team.com

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of Tedd Cittadine-Rule (30) (b) (6)
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1

If it were illegal,

2

to that behavior, yes.

3

I would object to --

BY MR. MARQUART:
Q.

4

5

The -- the second example you mentioned

on Harm Number 2

6

A.

Uh-huh.

7

Q.

-- control of revenue and license

8

agreements was -- the second specific example you

9

gave, was that existing VOD users might complain to

10

you.

11

Do you recall that?

A.

12

13

Existing VOD users being existing VOD

clients?

14

Q.

Yeah.

Sorry.

15

A.

Yeah.

16

Q.

Let me specify that.

17

A.

Yeah.

18

Q.

So your existing VOD clients might come

19

to you and complain about the unauthorized

20

distributors' activities and say that it's harming

21

their business?

22

A.

Yes, they do complain.

23

Q.

Do you have any evidence of actual

24

complaints to you or to anyone at Fox about

25

VidAngel?
eLitigation Services,

Inc.

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1

A.

Again, I have not received specific

2

complaints about VidAngel, or rarely receive

3

specific complaints about individual pirate or

4

illegal or unauthorized service from clients.

5

rarely.

6

Very

But very frequently, we receive

7

push-back.

Whether we're trying to negotiate

8

economic terms or counter-protection terms or

9

consumer-use cases that unauthorized or pirate

10

services don't have to play by the same rules, or

11

the rules do not apply to them.

12

I get frequent push-back about that from

13

a -- from a generic sense about unauthorized

14

services, not specific to a single or -- or

15

multiple authorized services.
Q.

16

Okay.

But so no one -- no one

17

specifically mentioned VidAngel in that context in

18

any of your negotiations; correct?

......... 19

A.

That's correct.

20

Q.

And you don't normally receive specific

21

complaints?

22

A.

23

They're normally generic?

Regarding specific unauthorized services,

that's --

24

Q.

25

A.

If you -that's correct.

eLitigation Services, Inc. - els®els-team.com

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n

o
3
,

4

8

.

1

,
e
,

- A.612 -

BAKER MARQUART LLP

2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
Tel: [phone] ● Fax: [phone]

1 Ryan G. Baker (Bar No. 214036)
[e-mail]
2 Jaime Marquart (Bar No. 200344)
[e-mail]
3 Scott M. Malzahn (Bar No. 229204)
[e-mail]
4 Brian T. Grace (Bar No. 307826)
[e-mail]
5 BAKER MARQUART LLP
2029 Century Park East, Sixteenth Floor
6 Los Angeles, California 90067
Telephone: [phone]
7 Facsimile: [phone]
8 Peter K. Stris (Bar No. 216226)
[e-mail]
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[e-mail]
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[e-mail]
11 Daniel Geyser (Bar No. 230405)
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12 STRIS & MAHER LLP
725 South Figueroa Street, Suite 1830
13 Los Angeles, California 90017
Telephone: [phone]
14 Facsimile: [phone]
15 David W. Quinto (Bar No. 106232)
[e-mail]
16 3007 Franklin Canyon Drive
Beverly Hills, California 90210
17 Telephone: [phone]
Facsimile: [phone]
18 Attorneys for Defendant and
19 Counterclaimant VidAngel, Inc.
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UNITED STATES DISTRICT COURT

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CENTRAL DISTRICT OF CALIFORNIA

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WESTERN DIVISION

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DISNEY ENTERPRISES, INC.;
LUCASFILM LTD. LLC;
TWENTIETH CENTURY FOX FILM
CORPORATION; AND WARNER
BROS. ENTERTAINMENT, INC.,
Plaintiffs,

26
vs.

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VIDANGEL, INC.,

- A.613 -

CASE NO. 16-cv-04109-AB (PLAx)
FILED UNDER SEAL PURSUANT
TO ORDER OF THE COURT
DATED SEPTEMBER 14, 2016 (Dkt.
75)
DECLARATION OF SIGURD
MELDAL IN SUPPORT OF
VIDANGEL’S MEMORANDUM OF
POINTS AND AUTHORITIES IN

DECLARATION OF SIGURD MELDAL

1

OPPOSITION TO PRELIMINARY
INJUNCTION MOTION

Defendant.

2
3

VIDANGEL, INC.,

4

Counterclaimant,

5
6

vs.

8

DISNEY ENTERPRISES, INC.;
LUCASFILM LTD. LLC;
TWENTIETH CENTURY FOX FILM
CORPORATION; AND WARNER
BROS. ENTERTAINMENT, INC.,

9

Counterclaim Defendants.

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10

BAKER MARQUART LLP

2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
Tel: [phone] ● Fax: [phone]

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- A.614 -

1

DECLARATION OF SIGURD MELDAL

1

I, Dr. Sigurd Meldal, declare:

2

1.

I submit this declaration in support of defendant and counterclaimant

3

VidAngel, Inc.’s (“VidAngel’s”) Memorandum of Points and Authorities in

4

Opposition to Plaintiffs’ Motion for Preliminary Injunction. I have personal

5

knowledge of the facts set forth herein and, if called and sworn as a witness, I could

6

and would testify competently hereto.

7

2.

I have been retained by VidAngel as an expert in this case. I am a

8

professor of computer engineering, software engineering and computer science at

9

San Jose State University and a computer scientist for Quandary Peak Research and

10

I have served as a consulting Professor in the Electrical Engineering Department at

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Stanford University.

BAKER MARQUART LLP
2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
Tel: [phone] ● Fax: [phone]

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3.

I have received several honors and awards over the course of my

13

career, including the Fulbright-Hayes Fellowship, the Carl-Erik Fröberg Award, a

14

Certificate of Recognition from the California State Assembly, and a Certificate of

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Special Recognition from the U.S. House of Representatives.

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Professional Honors and Experience

17

4.

I have served on many professional committees and organizations. For

18

example, I serve as a Commissioner of the national Engineering Accreditation

19

Commission of the Accreditation Board for Engineering and Technology (ABET.)

20

(The Engineering Accreditation Commission of ABET defines the standards for

21

engineering education and determines whether programs are up to those standards or

22

not.) I am also a member of the Fulbright Association, and a Senior Member of the

23

Institute of Electrical and Electronics Engineers (IEEE) and of the Association for

24

Computing Machinery (ACM).

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- A.615 -

2

DECLARATION OF SIGURD MELDAL

1

5.

I have more than 30 years of experience working on security and

2

networked systems, starting with contributions to the surveillance systems for the

3

nuclear arms treaties of the ‘80s and including the creation of degree curricula in

4

security and privacy. I was the founding director of the Silicon Valley Big Data and

5

Cybersecurity Center as well as a member of the Strategic Task Force on

6

Cybersecurity for the State of California. I am also Co-Director of the NSF Science

7

and Technology Center for Research in Ubiquitous Secure Technologies (the “NSF

8

TRUST Center”) at the University of California, Berkeley.

9

6.

I have previously testified in a number of cases concerning intellectual

property that relates to mobile devices, networked systems and services-oriented

11

architectures, including in particular smartphones, wireless communication and

12

telephony, network-based data systems, location-oriented web services and mobile

13

device positioning systems as well as streaming video content across the internet.

14

My Curriculum Vitae is attached as Exhibit A.

BAKER MARQUART LLP
2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
Tel: [phone] ● Fax: [phone]

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15

Documents and Things Reviewed

16

7.

The opinions expressed in this declaration are based on my professional

17

experience as well as my use and review of VidAngel’s service and the following

18

documents:

19

(i)

VidAngel’s Answer and Counter Complaint (Dkt. 11);

20

(ii)

The deposition testimony of Todd Cittadine and Neal Harmon;

21

(iii)

Deposition exhibit 15 (a description of VidAngel’s filtering

22

technology), deposition exhibit 16 (a description of VidAngel’s process for

23

preparing discs for streaming), deposition exhibit 17 (VidAngel’s instructions

24

for adding new movie and television show titles to its inventory), and

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deposition exhibit 19 (VidAngel’s encoding and segmenting checklist);

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- A.616 -

3

DECLARATION OF SIGURD MELDAL

1

(vi)

2

27), declarations of Todd Cittadine (Unredacted) (Dkt. 28) and Robert

3

Schumann (Unredacted) (Dkt. 29) in support of Plaintiffs’ Motion for

4

Preliminary Injunction;

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(v)

6

Entertainment Sales Update;

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(vi)

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Vudu, iTunes Store, and Youtube;

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(vii)

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BAKER MARQUART LLP
2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
Tel: [phone] ● Fax: [phone]

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8.

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The standard terms of service for VOD Google Play, Amazon Video,
ClearPlay, Inc.’s website available at https://www.clearplay.com.

In the mid to late 1990s, digital versatile discs (“DVDs”) began to

replace VHS tapes as the primary media onto which motion pictures were recorded
for sale in the home entertainment market. By 2005, the home entertainment market
was dominated by DVDs. Attached as Exhibit B is a true and correct copy of a
Digital Entertainment Group report dated January 8, 2007, stating that in 2005,
approximately 94% of digital home entertainment was consumed using discs. By
2006, this percentage increased to well over 99%. But as I will explain later, the
home entertainment market is now moving rapidly away from physical discs, to
services that stream a title directly to a user’s television or other device.
Discs Were Encrypted by the Late 1990s

21
22

The Digital Entertainment Group’s DEG Year-End 2006 Home

DVD and Blu-ray Discs Dominated the
Home Entertainment Market in 2005

11
12

The Plaintiffs’ Motion for a Preliminary Injunction (Unredacted) (Dkt.

9.

Encryption of DVDs also dates back to the 1990’s, and was the subject

of an appellate opinion in 2001. Universal City Studios, Inc. v. Corley, 273 F.3d
429 (2d Cir. 2001). In 2005, DVDs and Blu-ray discs bore security features,
commonly known as “encryption,” that encoded the content in such a way that the
disc’s contents could not be accessed, copied or modified without a decryption key.
A disc cannot be used without first decrypting it. Common forms of encryption
included Content Scramble System (“CSS”) for DVDs and Advanced Access

- A.617 -

4

DECLARATION OF SIGURD MELDAL

1

Content System (“AACS”) for Blu-ray discs. I have read the Declaration of Robert

2

Schumann in Support of Plaintiffs’ Motion for Preliminary Injunction (“Schumann

3

Dec.”) and, for the purposes of my opinion expressed in this declaration, agree with

4

his descriptions of how CSS, AACS and BD+ each function (but disagree with his

5

assessment of their effectiveness, as noted below). (Schumann Dec. ¶¶ 20-34.)

6

CSS, AACS, and to a lesser extent BD+, remain the most common forms of

7

encryption for DVDs and Blu-ray discs today. (Schumann Dec. ¶¶ 20, 27.)

8

10.

By definition, it is impossible to access, view, copy or alter in any way

a motion picture contained on an encrypted digital disc without first unlocking the

10

encryption. In 2005, all household DVD players were equipped with digital keys

11

that unlocked the encryption on the digital disc prior to sending the video to the

12

user’s television.

BAKER MARQUART LLP
2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
Tel: [phone] ● Fax: [phone]

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13

The Digital Millennium Copyright Act

14

11.

The DMCA addresses, to some extent, the forms of encryption

15

described above and in Mr. Schumann’s Declaration. It provides that “a

16

technological measure [i.e., encryption] ‘effectively controls access to a work’ if the

17

measure, in the ordinary course of its operation, requires the application of

18

information, or a process or a treatment, with the authority of the copyright owner,

19

to gain access to the work.”

20

12.

In the case of the encryption commonly used to access motion pictures

21

on Blu-rays and DVDs, it is undisputed that software capable of removing these

22

measures is ubiquitous and easily accessible, despite the fact that much of that

23

software is no longer readily sold in the United States. In light of the ease with

24

which one may currently decrypt a DVD or Blu-ray disc using readily available

25

software, DVD and Blu-ray encryption does not “effectively control access to a

26

work,” because these measures may be easily removed in the ordinary course of

27

their operation to gain access to the work. Accordingly, Robert Schumann’s opinion

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- A.618 -

5

DECLARATION OF SIGURD MELDAL

1

expressed throughout Paragraphs 20-34 (under the headings, “CSS Is An Effective

2

Access-Control System for DVDs,” and “AACS and BD+ Are Effective Access-

3

Control Systems for Blu-ray Discs”) that CSS, AACS and BD+ are effective access-

4

control systems is incorrect.

5

The 2005 Family Movie Act Authorized
Third Parties (Such as VidAngel) to Filter
Motion Pictures in Either of Two Ways

6
7

13.

I understand that The Family Home Movie Act of 2005 (“FMA”)

8

provides the legal context for the expert opinions expressed herein. The FMA

9

specifically provides that “it is not a violation of copyright” to:

10

[make] 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,
or. . .creat[e] or provi[de]. . .a computer program or other technology
that enables such making imperceptible and that is designed and
marketed to be used, at the direction of a member of a private
household, for such making imperceptible, if no fixed copy of the
altered version of the motion picture is created by such computer
program or other technology.

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BAKER MARQUART LLP
2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
Tel: [phone] ● Fax: [phone]

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17 U.S.C. § 110(11). As used in the FMA, “motion picture” is defined to include

17

television programs. The “making imperceptible . . . limited portions of audio or

18

video content of a motion picture” referenced in the FMA is commonly referred to

19

as “filtering.”

20

14.

The plain language of the FMA quoted above expressly authorizes and

21

exempts from copyright infringement two distinct methods for filtering motion

22

pictures. The first – and today far more important method – is the “transmission” or

23

streaming method. The word “transmission” has broad meaning in the context of

24

the Copyright Act. “To ‘transmit’ a performance or display is to communicate it by

25

any device or process whereby images or sounds are received beyond the place from

26

which they are sent.” 17 U.S.C. § 101. In turn, “device,” “machine,” and “process”

27

are defined to include “one now known or later developed.” Id. Accordingly, the

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- A.619 -

6

DECLARATION OF SIGURD MELDAL

1

FMA expressly authorized future processes for privately transmitting filtered

2

versions of motion pictures to members of households at their direction. In the

3

transmission method, a third party, at the direction of a member of the household,

4

makes imperceptible limited portions of an authorized copy of a motion picture's

5

audio or video content in a “transmission” to that household. This first method is

6

the more important today because it works across every type of device and mobile

7

platform for viewing content. This is also the method that VidAngel employs, as

8

described in more detail below.

9

15.

The FMA also exempts any computer program or other technology that

filters an authorized copy of a motion picture “during a performance in” a private

11

household 17 U.S.C. § 110(11). In 2005, when the FMA was being created, this was

12

the only type of filtering service that existed. It was provided by a company called

13

ClearPlay, which sold specialized hardware to be installed in the user’s home. The

14

ClearPlay hardware unlocked encryption through the use of a built-in DVD/Blu-ray

15

disc drive equipped with a CSS “key” that unlocked the DVD’s CSS encryption. See

16

https://www.clearplay.com/p-450-clearplay-blu-ray-player-cp1126.aspx, a true and

17

correct copy of which is attached as Exhibit C. All DVD player manufacturers

18

obtained CSS keys through licenses from the DVD Copy Control Association

19

(“DVD CCA”) so that every home DVD player could unlock CSS encryption. Once

20

the home DVD player unlocked the CSS encryption, the ClearPlay set top box

21

provided the filtering. Because no fixed copy of the altered work was ever created

22

by the ClearPlay box, its service was expressly authorized by the FMA. The

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ClearPlay set top box recently retailed for $249.99 and required an additional $7.99

24

per month subscription to ClearPlay for the filters. The ClearPlay method did not

25

allow a user to access filtered content on modern mobile devices. See

26

https://www.clearplay.com/t-streaming_support.aspx, a true and correct copy of

27

which is attached as Exhibit D (noting the ClearPlay Streaming Player works only

BAKER MARQUART LLP
2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
Tel: [phone] ● Fax: [phone]

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- A.620 -

7

DECLARATION OF SIGURD MELDAL

1

on a Mac or PC computer using a Chrome browser, and only when the computer is

2

attached to the TV via HDMI cable or the “tab-cast” feature of the Chromecast in

3

order to work).

4

16.

The FMA expressly does not require that the household or the

5

technology provider operating at the direction of the household obtain the consent of

6

the copyright holder prior to filtering a work, provided that no fixed copy of the

7

altered work is created. 17 U.S.C. § 110(11). This lack of a consent requirement for

8

filtering is essential to any functioning market for filtering motion pictures because

9

the major studios that own those works and the directors that create them were
vehemently opposed to the enactment of the FMA and to companies that provided

11

filtering technology. In fact, I have reviewed the deposition testimony of Tedd

12

Cittadine, who testified that no studio to his knowledge has ever privately licensed

13

any third party to filter any of its works. Deposition Transcript of Tedd Cittadine

14

attached as Exhibit B to the Declaration of Jaime W. Marquart filed concurrently

15

herewith (“Marquart Dec.”) at Tr. 83:21-84:21.

BAKER MARQUART LLP
2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
Tel: [phone] ● Fax: [phone]

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16

17.

Digitally encoded motion pictures to be distributed commercially are

17

usually encrypted. The content of the movie is transformed from its viewable format

18

into a representation where the content is no longer distinguishable from random

19

data – encrypted data. Without a subsequent decryption, the content information is

20

not accessible – it cannot be viewed or manipulated in any meaningful way. Thus

21

before the movie content can be displayed to a viewer, the encrypted data has to be

22

decrypted, or unlocked, reversing the encryption process to yield the original

23

information content.

24

18.

Since the encrypted representation of the content is indistinguishable

25

from random data, the movie content cannot be analyzed for objectionable content

26

subject to filtering, nor can such filtering be applied without the content first

27

becoming viewable again. It is thus impossible to view or filter for viewing a

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- A.621 -

8

DECLARATION OF SIGURD MELDAL

1

motion picture stored in a digitally encrypted format without first unlocking the

2

encryption. This is true in the case of DVD viewing, where a key contained within a

3

DVD player unlocks the encryption, and it also true in the case of streaming, where

4

a viewing application provided by the streaming service unlocks the encryption.

5

The reason for this is that, by definition, encryption prevents accessing, copying or

6

altering the content of the original files.

7

19.

In drafting the FMA, Congress obviously considered known

8

technologies. When Congress enacted the FMA, encrypted physical discs were the

9

dominant technology in the market. To transmit a filtered version of a motion
picture stored on any physical disc sold in the home entertainment market, one must

11

first unlock the encryption of the content and make an intermediate version. The

12

reason for this is that a filter has to modify the movie content to be delivered to the

13

viewer, a process that requires the substitution of original content with the filtered

14

(e.g., muted audio or hidden video) content based on information regarding the time

15

points where the filter is to be invoked, and how. Such manipulation of the original

16

content cannot occur without that content being available, i.e., the encrypted data

17

has to be decrypted before any filtering can occur.

BAKER MARQUART LLP
2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
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10

18
19

20.

It is inherent in the decryption process that a local version of the

unlocked content be created – be it in memory or other storage.

20

21.

Having made the movie content ready for a filtered transmission,

21

further transient versions are created. It is common to create different versions of the

22

content adapted to various presentation formats (e.g., for standard and high

23

definition resolutions) and for different transmission bandwidth environments (e. g.,

24

slower vs. faster connections between the servers and the consumer). Finally, for

25

broadly distributed content, when a customer requests a particular movie (as filtered

26

by filtering technologies such as VidAngel’s), the streaming media is usually moved

27

from the central servers to so-called “edge servers” to place the multimedia data

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- A.622 -

9

DECLARATION OF SIGURD MELDAL

1

repository closer to the consumer to avoid the massive network traffic congestion

2

that would result if all multimedia were transmitted from a single hub. (This is

3

commonly referred to as a “pull cache” technology.)

4

22.

The strategy of creating temporary versions of data such as movie

5

content to enable streaming transmissions is referred to as “caching,” and is a

6

standard practice in the computer and networking professions generally, and with

7

respect to streaming media content in particular.

8
9

23.

As is common industry practice for delivering of commercial digital

content, VidAngel’s technology ensures the integrity and the protection of such

10

content against illegal access by encrypting the content prior to its delivery across

11

the Internet to the customer (see below for details).

BAKER MARQUART LLP
2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
Tel: [phone] ● Fax: [phone]

12

Technological Measures Implemented
by VOD Providers Impede Filtering

13
14

24.

Today, physical discs are rapidly being replaced by Video on Demand

15

(“VOD”) distribution. None of the VOD services described in Plaintiffs’ Complaint

16

– Netflix, Hulu, iTunes, Google Play, Amazon Video and VUDU – existed in April

17

2005, when the FMA was enacted. To deliver VOD content to a consumer, standard

18

VOD files are transmitted from the VOD provider’s server to a user’s television,

19

computer or mobile device in an encrypted format. The most popular VOD

20

providers all use a combination of legal and technological means to prevent

21

filtering. First, all the most popular VOD providers provide their own studio-

22

approved form of encryption for the motion picture files they stream to their users.

23

See, e.g., Marquart Dec. Ex A at Tr. 80:13 – 81:16. Second, their VOD distribution

24

systems are “closed systems.” In closed systems, the files are encrypted prior to

25

transmission to the user’s device and then may be opened and viewed only by using

26

a proprietary software application loaded on the user’s device. The use of a closed

27

system is intended to prevent any third party (or the user) from accessing or altering

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- A.623 -

10

DECLARATION OF SIGURD MELDAL

1

any VOD file transmitted to it. In closed systems, access to the VOD provider’s

2

proprietary software is necessary to alter the file, and no user or third party may

3

access, alter or add to that software. Id.

4

25.

I have read the declaration and deposition transcript of Plaintiffs’

5

witness, Tedd Cittadine, who testified that the market for VOD titles is divided into

6

two general types of transactions, rental (usually for a small period of time, such as

7

24-48 hours) and what the VOD providers characterize as “sell-through.” This

8

comports with my understanding of the market for VOD titles. In general, “sell-

9

through” is meant to mimic in some, but not other, respects the purchase of a
physical disc, and VOD providers generally refer to a sell-through transaction as a

11

“Purchase.” The price for a purchase of a VOD title is commensurate with the price

12

for purchasing a physical disc at retail, though it is usually reduced by a small

13

amount (as much as $5.00 for a new release), which reflects costs saved by not

14

having to manufacture, package, store, distribute and ship discs. A “sell-through”

15

transaction differs from a traditional purchase of a physical disc, however, in that it

16

is merely a license to view the VOD title within the VOD provider’s viewing

17

software subject to a long list of restrictions contained in terms of service

18

agreements that must be accepted to complete the “purchase.” The same is true of

19

“renting” a VOD title, with the additional term that a customer’s window to watch

20

the title expires within a short time.

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10

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26.

Third, their terms of service agreements prohibit filtering. I have

22

reviewed the standard terms of use for the four VOD providers mentioned in

23

Plaintiffs’ Complaint as marketing major motion pictures on a rental and “sell-

24

through” basis: Vudu, Google Play, iTunes, and Amazon Instant Video. Two other

25

services mentioned in Plaintiffs’ Complaint – Netflix and Hulu – provide VOD titles

26

on a subscription basis. However, I understand that Plaintiffs in this case have

27

compared VidAngel’s service to the non-subscription-based VOD providers. True

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- A.624 -

11

DECLARATION OF SIGURD MELDAL

1

and correct copies of the terms of service agreements for the four non-subscription-

2

based services are attached collectively as Exhibit E. Each of them provides that

3

the user may not modify any digital content purchased through the provider’s

4

system. Because these terms of service expressly prohibit modification of

5

audiovisual content in the ways necessary to filter (through automatic skipping and

6

muting), a user may not filter VOD content without violating the VOD provider’s

7

terms of service.

8

27.

9

Fourth, in addition to VOD terms of service, which prohibit filtering,

several technological issues make it impractical to apply filters accurately to a VOD
title after it is opened within the VOD provider’s proprietary software on a user’s

11

device. Due to varying transfer rates and other technical functionalities unique to

12

each VOD provider’s viewing application software, as well as operational

13

differences unique to each user’s device, it has not been possible for a third party to

14

create software compatible across multiple devices and applications to filter titles

15

after they have been opened in a particular VOD provider’s viewing application.

16

More importantly, such software cannot be written for even a simple application.

17

Closed systems contain security features that prevent the creation of filtering

18

software compatible with that system absent assistance from the VOD provider. To

19

develop filtering software that functions within a VOD provider’s closed system, a

20

developer typically must have the consent and participation of the VOD provider to

21

access its software for the purpose of developing software compatible with it. I

22

have been informed, and have confirmed in part through my review of Mr.

23

Cittadine’s deposition transcript, that no VOD provider and no Plaintiff has ever

24

consented to allow a third party to create software compatible with a VOD

25

provider’s closed system to allow users to apply customized filters to titles viewed

26

within the provider’s closed system.

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- A.625 -

12

DECLARATION OF SIGURD MELDAL

Google’s Purported YouTube Player “Exception”
Demonstrates That Plaintiffs Have Made It Infeasible to
Provide Filtered VOD Content to Consumers

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2029 CENTURY PARK EAST, 16TH FLOOR
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Tel: [phone] ● Fax: [phone]

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28.

One exception to the closed VOD delivery systems architecture and

terms of service described above is the YouTube Embeddable Player and its
application programing interface (“API”). The YouTube Embeddable Player API
also did not exist in April 2005, when the FMA was enacted. An API is a set of
function and interface definitions, the protocols for their use, and associated
programming tools that affords software developers controlled access to the API
owner’s software. An API permits the development of other software programs that
can interact with the API owner’s software. The additional software is often referred
to as a “plug-in” to the API owner’s software. In theory, the YouTube Embeddable
Player API allows a software developer to create a plug-in for the YouTube
Embeddable Player capable of allowing automatic skipping and muting of undesired
content in an encrypted motion picture file after the file is opened for viewing by the
YouTube Embeddable Player in a user’s Google Chrome browser. To my
knowledge, no other VOD provider’s player contains an API that would allow for
the creation of a plug-in capable of allowing automatic skipping and muting of
undesired content in an encrypted motion picture file after the file is opened for
viewing by the VOD provider’s player.
29.

Paragraph 47 of Plaintiffs’ Complaint alleges that the YouTube API

allows a third party – such as VidAngel – to filter VOD titles purchased from
Google. This is inaccurate in a number of ways. To begin, YouTube’s terms of
service – attached as Exhibit F – expressly prohibit a user (or anyone directed by the
user) from “alter[ing] or modify[ing] any part of” a motion picture viewed on the
YouTube Embeddable Player. The user also “agree[s] not to access Content
through any technology or means other than the video playback pages of the Service
itself, the Embeddable Player, or other explicitly authorized means YouTube may
designate.” The YouTube Paid Service Terms of Service – a true and correct copy

- A.626 -

13

DECLARATION OF SIGURD MELDAL

1

of which is attached as Exhibit G – further prohibits copying the Paid Services or

2

the sublicensing them to any third party. These terms of service also do not allow a

3

user to “circumvent, reverse-engineer, modify, disable, or otherwise tamper with

4

any security technology that YouTube uses to protect the Paid Service or encourage

5

or help anyone else to do so.” All these restrictions expressly make it a violation of

6

YouTube’s Terms of Service to engage in any of the activities necessary to filter a

7

motion picture through YouTube’s Embeddable Player.

8
9

30.

In addition, the YouTube API Services Terms of Service for developers

writing software plug-ins that interact with the API – a true and correct copy of
which is attached as Exhibit H – also prohibit any technology capable of filtering

11

motion pictures viewed through the YouTube Player API. They provide that

12

developers may not “separate, isolate, or modify the audio or video components of

13

any YouTube audiovisual content made available through the YouTube API.”

14

Thus, any third party that attempts to provide a filtering plug-in for a YouTube

15

Embeddable Player does so in violation of YouTube’s terms of use. I have also read

16

Exhibit A to the Declaration of Neal Harmon, which is a notification from YouTube

17

informing VidAngel that its filtering plug-in for the YouTube Embeddable Player

18

violates the YouTube API Services Terms of Service.

BAKER MARQUART LLP
2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
Tel: [phone] ● Fax: [phone]

10

19

31.

There are also several technological limits to creating a plug-in

20

compatible with the YouTube Embeddable Player API capable of accurately and

21

seamlessly filtering motion pictures purchased lawfully for viewing on the YouTube

22

Embeddable Player. To begin with, the Embeddable Player plug-in works only with

23

standard-definition content, not with the popular high-definition format typical of

24

DVDs or Blu-ray discs. More importantly, because the plug-in is not officially

25

supported by Google, changes to YouTube can cause the filters to fail. When that

26

happens, filtering is ineffective and users will see content that they did not want to

27

see until the plug-in is updated. Finally, slower computers cannot process both the

28

- A.627 -

14

DECLARATION OF SIGURD MELDAL

1

video and the filter at the same time, resulting in missed filters. The end result is

2

that – without Google’s technical support and cooperation – no method of using a

3

YouTube Embeddable Player plug-in provides a consistent filtering experience for

4

the majority of users and no method would provide a high-definition filtering

5

experience for any user. In addition, this method does not work on modern mobile

6

devices.1

7

32.

Furthermore, these approaches to enabling a filtering functionality for

8

the customer suffer from reductions in the quality of the viewer experience such as

9

lower resolution, delays or stops, stuttering, and other impediments to smooth

10

viewing. Consequently, the commercial quality a viewer would expect when

11

enjoying the filtered content would be significantly jeopardized and diminished.

BAKER MARQUART LLP
2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
Tel: [phone] ● Fax: [phone]

12

VidAngel Transmits Filtered Versions of Plaintiffs’
Motion Pictures to Owners of Authorized Copies of
the Motion Pictures Pursuant to the FMA

13
14

33.

VidAngel is an online video filtering service that operates under the

15

“transmission” filtering method authorized by the FMA. Its service allows

16

customers to stream filtered feature films and television shows via the Internet to a

17

wide range of devices, including desktop computers, laptops, iPads, smart phones,

18

and televisions (through devices like Roku, Google Chromecast, or Apple TV).

19
20
21
22
23
24
25
26
27

1

I am also aware of certain “digital rights locker services,” such as UltraViolet
and Disney Movies Anywhere and disc-to-digital services such as VUDU and
Flixter, that claim to allow consumers to convert previously purchased DVDs or
Blu-ray discs into high quality digital files. See 37 CFR Part 201 (Exemption
to Prohibition on Circumvention of Copyright Protection Systems for Access
Control Technologies). These services merely provide the same digital right to a
user that he or she would obtain if purchasing a “sell-through” license from a VOD
provider for the disc the customer owns. The user then must follow the same terms
of service attendant to that VOD license, which prevent any third-party filtering in
the same way that other VOD services prevent filtering. Marquart Dec. Ex. B at Tr.
96:11-102:4.

28

- A.628 -

15

DECLARATION OF SIGURD MELDAL

1

VidAngel users can select from more than 80 unique filters when viewing a film or

2

television show. The filters have the effect of skipping audiovisual content or

3

muting audio content in categories created by VidAngel and selected by the user.

4

Example categories include sexual activity, nudity, drug use, obscenity, vulgarity,

5

the “F” word, blasphemy and violence. All users must select at least one filter, and

6

each user has the option to select as many other filters as apply to that content, thus

7

permitting users in most instances to select many thousands of different

8

combinations of filters, thus making a customer’s viewing experience individualized

9

and unique.

10

VidAngel’s Filtering Technology

11

34.

VidAngel follows the first, “transmission,” method contemplated by

the FMA, requiring the purchase of an authorized copy of a physical disc, a filtered

13

version of which is then streamed to the user without making a fixed copy of the

14

filtered work. VidAngel delivers filtered content to users by streaming it over the

15

Internet using a video content delivery protocol called HTTP Live Streaming2

16

(“HLS”). HLS divides the audiovisual content into short segments that are

17

frequently less than 4 seconds and never more than 10 seconds that are delivered

18

separately to a user’s device when viewed. The user’s device downloads each

19

segment individually. At the beginning of an HLS streaming session, the user’s

20

device downloads an index file which provides the device with a list of segment

21

files that the device can then request and play to display the content.3

BAKER MARQUART LLP
2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
Tel: [phone] ● Fax: [phone]

12

22
23

35.

VidAngel’s filtering technology divides each feature film or television

show into hundreds or sometimes thousands of small segments (ranging from 2

24
25
26
27

2

R. Pantos, W. May, “HTTP Live Streaming,” Internet Engineering Task Force,
Apr. 4, 2016 (retrieved from https://tools.ietf.org/html/draft-pantos-http-livestreaming-19, Sept. 3, 2016)
3
Id.

28

- A.629 -

16

DECLARATION OF SIGURD MELDAL

1

tenths of a second to 10 seconds in length), for which each segment is identified and

2

“tagged” as associating with one or more available categories of filterable content.

3

When a user selects a filter category and streams a feature film or television show,

4

all segments that are tagged for that filter are omitted from the stream.

5

36.

If the filter concerns audiovisual content, the user’s device will not

6

download the segments that have been tagged for that filter. If the filter affects only

7

the audio, the user’s device downloads a version of the segment with the voice

8

soundtrack muted while other soundtracks continue to play, but leaves the video

9

portion unchanged.

10

37.

Based on my review of the documents that VidAngel has provided to

me, it is my understanding that VidAngel’s system is designed and operates as

12

follows:

13

(i)

VidAngel lawfully purchases DVDs and Blu-ray discs;

14

(ii)

VidAngel places a DVD or Blu-ray disc into the optical drive of a

BAKER MARQUART LLP
2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
Tel: [phone] ● Fax: [phone]

11

15

computer. VidAngel then uses a commercially available software program such as

16

AnyDVD HD to automatically allow read-access for the purpose of mounting the

17

DVD or Blu-ray files for uploading onto a computer, in the process necessarily

18

removing restrictions on DVD or Blu-ray content access;

19

(iii)

VidAngel uses a software program to extract the subtitle/caption data

20

files and then creates temporary (“locally cached”) Matroska files (erroneously

21

referred to by Plaintiffs’ expert, Robert Schumann, as “Mastroska” files) of the

22

feature films. Matroska files are multimedia files that can hold an unlimited number

23

of video, audio, picture, or subtitle tracks in one file;

24

(iv)

VidAngel uploads the subtitle/caption data files and Matroska files

25

(collectively known as the “pre-filter files” or “PF” files) onto a secure folder on a

26

third-party Internet service provider’s cloud storage service (“PCSS”) and uploads

27

the subtitle/caption into a separate PCSS folder (“PCSS cache” of these intermediate

28

- A.630 -

17

DECLARATION OF SIGURD MELDAL

1

files);

2

(v)

VidAngel destroys the locally cached Matroska file;

3

(vi)

VidAngel boots an encoding and segmenting server (“ESS”) to run two

4

scripts, including an encoding script and a segmenting script, as follows:

5

a.

The encoding script temporarily copies the PF files from the PCSS

6

cache to the ESS, uses ffmpeg to prepare the PF files for tagging and filtering,

7

creates a single mp4 file (640 kilobytes per second bitrate) for tagging (when that is

8

not performed beforehand on YouTube or when corrections need to be made to the

9

tags), copies the mp4 file from the ESS to a secure PCSS location, creates four
Transport Stream files (“TS files”) at 640, 1200, 2040 and 4080 bitrates for filtering,

11

copies the TS files to a secure location on the PCSS, and deletes all copies and files

12

on the ESS. This script is run once for each title’s Matroska file.

BAKER MARQUART LLP
2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
Tel: [phone] ● Fax: [phone]

10

13

b.

The segmenting script temporarily copies the TS files from the PCSS to

14

the ESS, segments the TS files for adaptive bitrate streaming (as per the HLS

15

specification) based on both 9-10 second intervals and the locations of each tag for

16

the title (which could be as short as 2 tenths of a second), creates thumbnail files for

17

player scrubbing preview for each non-filterable segment, saves a comma-separated

18

values (CSV) file containing the results of the segmenting process for each segment,

19

uploads the CSV file for use by the filtering system, encrypts the segments of each

20

bitrate with a new and unique encryption key, copies the unencrypted segments

21

from the ESS to a secure location on the PCSS, copies the encrypted segments from

22

the ESS onto a publicly accessible location on the PCSS (the “TS cache”), copies

23

the encryption keys from the ESS to a secure location on the PCSS, deletes older

24

revision files on the PCSS, and deletes all copies and files on the ESS;

25

(vii) VidAngel lawfully purchases additional DVDs and Blu-ray discs;

26

(viii) VidAngel enters the information concerning the additional discs into an

27

inventory system;

28

- A.631 -

18

DECLARATION OF SIGURD MELDAL

1

(ix)

VidAngel applies bar codes to the disc packages;

2

(x)

VidAngel sells specific discs to specific customers;

3

(xi)

VidAngel requires each customer to select one or more filters; and

4

(xii) VidAngel streams encrypted content from the discs to each purchaser

5

while applying the filters chosen by that customer.

6

(xiii) At the customer’s device VidAngel software assembles the segments in

7

sequence, and for each segment decrypts the content, displays it and then discards

8

the segment.

9

VidAngel’s Technology Prevents File Sharing and Does
Not Create Any Watchable Copy of Plaintiffs’ Works

10
11

38.

Based on my understanding of VidAngel’s system, at no point during

this process does VidAngel create a fixed copy of the altered (filtered) movie or

13

television show viewed by any user. In fact, VidAngel’s service does not even

14

make a “copy” of the original motion picture in any traditional sense. Rather, the

15

feature film or television show is altered (filtered) as it is divided into hundreds or

16

thousands of small segments and streamed to the user’s device using the HLS

17

protocol. A user can view the contents of each segment only after it has been

18

streamed in sequence, decrypted with the correct keys (keys which, themselves, are

19

protected and accessible only by a user who has legally purchased a disc from

20

VidAngel), and rendered with a VidAngel media player. After each unencrypted

21

segment is viewed, it is removed from the device's memory by the player and, for all

22

intents and purposes, is gone.

BAKER MARQUART LLP
2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
Tel: [phone] ● Fax: [phone]

12

23

39.

I have read the description of VidAngel’s service in the Declaration of

24

Robert Schumann (Paragraphs 7 to 19 and 35 to 42), and the service, as he describes

25

it, also creates no fixed copy of the altered movie or television show.

26
27
28

- A.632 -

19

DECLARATION OF SIGURD MELDAL

The Purported Legal Violations Plaintiffs Complain of
Are Necessary to Provide any Filtering/Streaming
Service Authorized by the FMA

1
2
3

40.

The FMA provides that it is not a violation of copyright to “transmit” a

4

filtered motion picture to a consumer who lawfully purchased a copy of the

5

unfiltered work. To transmit a filtered version of a movie or television show from a

6

DVD or Blu-ray disc to a household, VidAngel must first unlock the encryption on

7

the DVD or Blu-ray disc. Only after the encryption is unlocked can VidAngel tag

8

audiovisual and audio segments of the movie or television show for filtering. This

9

process of unlocking the encryption contained on the disc is the functional

10

equivalent of what occurs every time a person places the disc in a player to view the

11

contents of the disc.

BAKER MARQUART LLP
2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
Tel: [phone] ● Fax: [phone]

12

41.

As is common practice for Internet content delivery services (and

13

multimedia services in particular), VidAngel employs multiple delivery servers for

14

caching purposes to ensure that its users receive a seamless stream and avoid

15

creating network traffic congestion. VidAngel streams filtered content to users from

16

one of eight or more servers located in different parts of the United States. The

17

content is streamed to the user from whichever server is closest. The closer the user

18

is to the server, the faster the content reaches the user’s device, reducing the need

19

for buffering. Without the use of distributed servers, a viewer would see and hear a

20

motion picture briefly before it froze while the next segment of the motion picture

21

loaded, thereby diminishing the presentation quality of the media content. Rather

22

than see continuous motion, the viewer would experience a maddening start, stop,

23

start, stop viewing of the motion picture.

24

42.

Each VidAngel user experiences an individualized stream based on the

25

filters he or she selects. A user can choose from many thousands of different

26

combinations of filters for any movie or television show, creating a private viewing

27

experience. For two people to watch all of the exact same segments of a filtered

28

- A.633 -

20

DECLARATION OF SIGURD MELDAL

1

motion picture streamed through VidAngel’s process, they would have to choose the

2

same combination of filter settings and receive each of the segments from the same

3

server.

4

43.

Decrypting and streaming a filtered version of a motion picture

contained on a DVD or Blu-ray disc that the user has lawfully purchased is the only

6

method a third party such as VidAngel can employ to transmit a filtered version of a

7

motion picture to a household absent an express VOD license from the copyright

8

owner. It is my understanding that the studios refuse to license VOD rights to

9

VidAngel (or any other service that filters content). Moreover, the closed systems

10

of the VOD providers prevent the creation of technology that could permit filtering

11

without their consent and participation. Thus, VidAngel’s method is the only

12

known method a third party could use to transmit filtered content to a household

13

without first obtaining the copyright holder’s consent.

BAKER MARQUART LLP
2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
Tel: [phone] ● Fax: [phone]

5

14

44.

Importantly, VidAngel’s methodology ensures that any decrypted file

15

can be accessed only by the legal purchaser of the disc containing the file, and that

16

no filtered version could ever be conveyed to a member of the public by any means.

17

VidAngel’s decryption technology thus does not and cannot harm the market for the

18

work, nor does VidAngel’s decryption process result in injury to copyright owners.

19

45.

Tedd Cittadine declares that the following four harms he claims will

20

befall Plaintiffs if VidAngel’s service is not enjoined: (1) the service harms the

21

studios’ “basic right to control how, when and through which channels our content

22

is disseminated for viewing by consumers”; (2) the service causes “harm to the

23

online distribution of our content and to our relationships with authorized

24

distributors”; (3) the service causes “harm to our ability to secure and protect

25

content in an online environment”; and (4) the service causes “harm to the overall

26

development of the on-demand streaming market by the provision of user-viewing

27

experiences without our rigorous quality controls.” To begin with, I have reviewed

28

- A.634 -

21

DECLARATION OF SIGURD MELDAL

1

Mr. Cittadine’s declaration and his deposition transcript and have found no direct

2

evidence that VidAngel has actually caused any of these injuries; rather, Mr.

3

Cittadine has merely testified that VidAngel “threatens” serious harm to the studios.

4

More importantly, any service that transmits a filtered version of Plaintiffs’ motion

5

pictures pursuant to the FMA would “harm” the studios in each of these ways. By

6

definition, filtering does not allow Plaintiffs to control the manner in which a user

7

filters their works, and the FMA states that filtering shall occur without the studios’

8

consent. This necessarily means that viewing experiences will occur outside of the

9

studios’ control.

10
11

I declare under penalty of perjury under the laws of the United States of
America that the foregoing is true and correct.

BAKER MARQUART LLP
2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
Tel: [phone] ● Fax: [phone]

12

Executed on September 11, 2016, at Wilmington, Delaware.

13
14

_____________________________________

15

Dr. Sigurd Meldal

16
17
18
19
20
21
22
23
24
25
26
27
28

- A.635 -

22

DECLARATION OF SIGURD MELDAL

BAKER MARQUART LLP

2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
Tel: [phone] ● Fax: [phone]

1 Ryan G. Baker (Bar No. 214036)
[e-mail]
2 Jaime Marquart (Bar No. 200344)
[e-mail]
3 Scott M. Malzahn (Bar No. 229204)
[e-mail]
4 Brian T. Grace (Bar No. 307826)
[e-mail]
5 BAKER MARQUART LLP
2029 Century Park East, Sixteenth Floor
6 Los Angeles, California 90067
Telephone: [phone]
7 Facsimile: [phone]
8 Peter K. Stris (Bar No. 216226)
[e-mail]
9 Brendan Maher (Bar No. 217043)
[e-mail]
10 Elizabeth Brannen (Bar No. 226234)
[e-mail]
11 Daniel Geyser (Bar No. 230405)
[e-mail]
12 STRIS & MAHER LLP
725 South Figueroa Street, Suite 1830
13 Los Angeles, California 90017
Telephone: [phone]
14 Facsimile: [phone]
15 David W. Quinto (Bar No. 106232)
[e-mail]
16 3007 Franklin Canyon Drive
Beverly Hills, California 90210
17 Telephone: [phone]
Facsimile: [phone]
18 Attorneys for Defendant and
19 Counterclaimant VidAngel, Inc.
20

UNITED STATES DISTRICT COURT

21

CENTRAL DISTRICT OF CALIFORNIA

22
23
24
25

WESTERN DIVISION
DISNEY ENTERPRISES, INC.;
LUCASFILM LTD. LLC;
TWENTIETH CENTURY FOX FILM
CORPORATION; AND WARNER
BROS. ENTERTAINMENT, INC.,

26
27
28

- A.636 -

Plaintiffs,
vs.

CASE NO. 16-cv-04109-AB (PLAx)
FILED UNDER SEAL PURSUANT
TO ORDER OF THE COURT
DATED SEPTEMBER 14, 2016 (Dkt.
75)
DECLARATION OF NEAL
HARMON IN SUPPORT OF
VIDANGEL’S MEMORANDUM OF

DECLARATION OF NEAL HARMON

1

VIDANGEL, INC.,

POINTS AND AUTHORITIES IN
OPPOSITION TO PRELIMINARY
INJUNCTION MOTION

Defendant.

2
3
4

VIDANGEL, INC.,
Counterclaimant,

5
vs.

6
7
8
9

DISNEY ENTERPRISES, INC.;
LUCASFILM LTD. LLC;
TWENTIETH CENTURY FOX FILM
CORPORATION; AND WARNER
BROS. ENTERTAINMENT, INC.,
Counterclaim Defendants.

10

BAKER MARQUART LLP

2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
Tel: [phone] ● Fax: [phone]

11
12
13
14
15
16
17
18

I, Neal Harmon, declare:
1.

counterclaimant VidAngel, Inc. (“VidAngel”). I submit this declaration in support
of VidAngel’s Memorandum of Points and Authorities in Opposition to Plaintiffs’
Motion for Preliminary Injunction. I have personal knowledge of the facts set forth
herein and, if called as a witness, I could and would testify competently thereto.
Why My Family Wanted to Watch Filtered Content

19
20
21
22
23
24
25
26
27
28

I am a founder and the Chief Executive Officer of defendant and

2.

Throughout my life, I have been a consumer of family-friendly movies

and television programs. I was raised in rural Idaho. We did not watch movies with
sex or nude scenes or with excessive violence and profanity in our home. For much
of my childhood, this meant that my family did not have access to many mainstream
movies and television shows, as they often included content at odds with my
family’s beliefs and values. At times, we felt left out of popular American culture,
as we were unable to watch the most popular movies and shows. Even
entertainment offerings with messages and themes compatible with my family’s
values and beliefs still included some scenes with content we found objectionable.

- A.637 -

1

DECLARATION OF NEAL HARMON

1
2
3
4
5
6
7

Figure 1 - I was the third of 9 children and our family enjoyed movie experiences together. Here we are with our
parents, spouses and young children. We had movie night out on the lawn for our family reunion using VidAngel.

8
9
10

12

never know when a particular scene in a broad family comedy might include
material that made us uncomfortable. For this reason, my family was very excited
about the CleanFlicks service that debuted in 2000.

13

3.

CleanFlicks was a business that produced edited versions of films to

remove content that was inappropriate for children or that other viewers might find

15

offensive. CleanFlicks removed sexual content, profanity and some references to

16

violence from movies, either by muting audio or cutting entire portions of the track.

17

My family and I used the CleanFlicks service to watch the same movies the rest of

18

the country found enjoyable and moving, without compromising our values. To our

19

regret, a group of Hollywood directors engaged in litigation with CleanFlicks for

20

copyright infringement and in 2006 a federal district court found that CleanFlicks’

21

filtered movies infringed their copyrights. CleanFlicks’ service was held to infringe

22

because, contrary to the requirements of the Family Movie Act (“FMA”),

23

CleanFlicks did not allow each consumer to decide what to mute or delete. It also

24

created fixed copies of filtered works. When CleanFlicks and similar services were

25

put out of business, my family lost a major source of family-friendly content.

26
27

Telephone: [phone]
Facsimile: (424) 652-785

14

Telephone: [phone]
Facsimile: [phone]

BAKER MARQUART LLP

2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
Tel: [phone] ● Fax: [phone]

11

We decided not to watch certain offerings we were interested in, because we could

4.

The FMA was enacted in 2005, in response to a lawsuit against a

number of different filtering companies, including ClearPlay. The FMA promised a

28

- A.638 -

2

DECLARATION OF NEAL HARMON

1

clearly legal way to filter out content from popular films and television shows that

2

families like mine found objectionable.

3

5.

In 2012, Google announced the debut of Google Play. Google Play is a

4

digital distribution service operated and developed by Google. Among other things,

5

Google Play serves as a digital media store, offering music, magazines, books,

6

movies and television programs. It is similar to services such as Apple iTunes,

7

VUDU and Amazon Video. Google Play allows users to download media to various

8

digital devices, including phones and Google TV. When Google debuted Google

9

Play, I had already been experimenting with the YouTube JavaScript application

12

through Google Play and watched on a YouTube Player in a Google Chrome web

13

browser.

14

6.

Telephone: [phone]
Facsimile: (424) 652-785

permitted automatic skipping and muting of movies and television shows purchased

Telephone: [phone]
Facsimile: [phone]

BAKER MARQUART LLP

programming interface (“API”). It allowed me to write program codes that

11
2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
Tel: [phone] ● Fax: [phone]

10

Around the time Google Play debuted, I realized that the way users

15

consume movies and other visual narratives was undergoing a profound shift away

16

from traditional physical embodiments like DVDs and Blu-ray discs to digital

17

streaming. The popularity of smart phones and tablets along with the development

18

of internet infrastructure and other technologies offered users the potential to stream

19

movies and television shows to many types of devices whenever a user desired.

20

Remembering my family’s struggle to find appropriate film and television content, I

21

realized there was a tremendous opportunity to serve the vast market of households

22

with religious, moral and other objections to the adult content of most mainstream

23

studio offerings in the context of this massive shift to streaming distribution.

24

7.

Sometime in 2012, my brothers and I asked ourselves, “Why isn’t there

25

a content filtering service for streaming?” Using my coding knowledge, I coded a

26

filtering tool for the movie “Cinderella Man” on the YouTube Player in the Google

27

Chrome browser. (YouTube is owned by Google.) The tool filtered the film for

28

- A.639 -

3

DECLARATION OF NEAL HARMON

1

swearing and a couple of especially gruesome punches. While it would play only the

2

standard definition (“SD”) version of the movie on a computer, the tool succeeded

3

in removing the objectionable content. “Cool,” we said, “it seems to work for SD

4

content on the Chrome browser.” At the time, though, we realized that high

5

definition (“HD”) content would become the industry standard for digital movie

6

distribution. Realizing this, my brothers and I started to look for ways to create a

7

filtering tool that would work on HD content streams.

8

The Development That Led Us to Found VidAngel

9

8.

In 2013, Google announced that it would conduct a private beta test of

12

content on high-definition televisions by streaming it directly to a television set via

13

Wi-Fi from the Internet or a local network. Users select the media to play using

14

mobile and web apps that work with the Google Chromecast technology. The first-

15

generation Chromecast was a video-streaming device that was made available for

16

purchase in July 2013. When Chromecast was announced, there was no company

17

providing a content filtering service pursuant to the FMA that worked with HD

18

video streams. My brothers and I saw a market opportunity to provide families with

19

such a tool.

20

9.

Telephone: [phone]
Facsimile: (424) 652-785

developed by Google. The players are physically small dongles and play video

Telephone: [phone]
Facsimile: [phone]

BAKER MARQUART LLP

the Chromecast streaming device. Chromecast is a line of digital media players

11
2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
Tel: [phone] ● Fax: [phone]

10

“The Chromecast is how we get filtered HD content on the television,”

21

my brothers and I said to each other. “It’s time to build this.” To confirm our

22

intuitions concerning the potential market for such a service, we conducted research

23

and found that about half of American parents would use a filtering service.

24

Although we created VidAngel because we wanted it for our own children, we knew

25

many other families would want to use it as well. We then set about creating the

26

technology, business plan and infrastructure necessary for a filtering service. After

27

many months of hard work, we launched a private beta VidAngel filtering service

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DECLARATION OF NEAL HARMON

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capable of filtering HD content through Chromecast. It was and is my

2

understanding that our beta service fully complied with the provisions of the FMA.

3

We simply provided users with a tool they could use to filter digital content streams

4

from Google Play using the Chromecast’s technology.
The Studios’ First Attempt to Block VidAngel

5
6

10.

In January 2014, we raised $600,000 to launch VidAngel.com. After

7

the private beta launch, we reached out to Google to ask whether we could purchase

8

Chromecast devices at wholesale and then sell them to families who wanted to use

9

VidAngel’s filtering service. Google responded that it would consider a bulk

12

Chromecast API launch, even though we were attending a conference in California,

13

we were so excited to launch that we did not sleep the entire night trying to get the

14

system to work and be the first out the door on the list of Chromecast applications. It

15

never worked.

16
17
18
19
20

Telephone: [phone]
Facsimile: (424) 652-785

Softward Development Kit (SDK) on February 3, 2014. The day of Google’s

Telephone: [phone]
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BAKER MARQUART LLP

purchase agreement only after VidAngel successfully launched a public beta of its

11
2029 CENTURY PARK EAST, 16TH FLOOR
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21
22
23
24
25
26
27
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DECLARATION OF NEAL HARMON

1
2
3
4
5
6
7
8
9
10

13
14
15

Figure 2 - I took this photo of my brothers Daniel and Jordan in our Redwood City, CA hotel on Tuesday,
Feb 4, 2014 at 8:05am after working through the night trying to understand why our programs no longer
worked

Telephone: [phone]
Facsimile: (424) 652-785

12

Telephone: [phone]
Facsimile: [phone]

BAKER MARQUART LLP

2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
Tel: [phone] ● Fax: [phone]

11

11.

We discovered that Google removed the technology from their SDK

16

that made the filtering service possible on native Chromecast. Google did not notify

17

us or publicly announce the removal of its technology. Based on conversations I

18

later had with a Google representative, I am informed and believe that Google

19

removed this technology at the request of the movie studios, which claimed that

20

Google would be in violation of its agreement with them if it enabled VidAngel’s

21

filtering.

12.

22

Also, on December 5, 2013, VidAngel received a notification from

23

YouTube that VidAngel’s YouTube Player API programming violated the

24

developers’ API Terms of Service for YouTube. Attached as Exhibit A is a true and

25

correct copy of that notification. Again based on later conversations with a Google

26

representative, I am informed and believe that YouTube sent this notification

27

because the studios told Google that it would be in violation of its agreement with

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DECLARATION OF NEAL HARMON

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them if it enabled VidAngel’s filtering. As explained in more detail in Paragraphs

2

48-50 below, I later obtained a copy of Google Play’s VOD Distribution Agreement

3

with Sony, which confirmed this belief.

4

13.

That the technology enabling filtering had been quietly removed gave

5

me pause about moving forward with the VidAngel service. Even though I

6

understood that our service was legal under the FMA, I was aware of the studios’

7

historical hostility to filtering. In light of that hostility, I was concerned that the

8

studios might again try to shut down our service despite the clear protections of the

9

FMA. VidAngel was a startup company without the deep pockets and litigation
campaign that would bankrupt VidAngel’s business – before VidAngel could

12

prevail in court under the FMA.

13

15

Telephone: [phone]
Facsimile: (424) 652-785

14

VidAngel’s Attempt to Partner with Google Play
and the Studios’ Interference with Those Efforts
Telephone: [phone]
Facsimile: [phone]

BAKER MARQUART LLP

budgets of the major studios, and I feared that the studios would wage a legal

11
2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
Tel: [phone] ● Fax: [phone]

10

14.

Because we had already raised money, we decided to test different

16

models and ultimately opted for seeing how many customers we could acquire if we

17

gave the filtering away for free -- even if users could watch only on the YouTube

18

Player in the Chrome browser on their computer, and only in SD format.

19

15.

While VidAngel was working with counsel to develop a filtering

20

technology compliant with the law, someone from a different division of Google

21

reached out to partner with VidAngel to provide a filtering feature for all of Google

22

Play. VidAngel was thrilled to pursue this option, realizing that with Google’s

23

resources and reach in digital markets, VidAngel would finally be able to serve the

24

vast market of Americans desiring an effective digital streaming filtering tool. The

25

partnership did not materialize because Google’s distribution contracts required

26

them to seek permission from the studios to develop a filtering tool. I was advised

27

by Google that the studios refused Google’s requests to develop such a tool with

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DECLARATION OF NEAL HARMON

1

VidAngel.

2

16.

After the studios rejected Google’s requests to allow the use of a

3

filtering tool, VidAngel realized that a small startup could not possibly negotiate a

4

filtering license with the studios. With the help of legal counsel, VidAngel then

5

decided to pursue the launch of its current filtering system.
VidAngel’s Current Streaming Technology

6
7

17.

By mid-2014, it was clear that the VidAngel service, as it was then

11

but then had to return to the VidAngel site to select the filtering they desired. After

12

those steps, users could watch only an SD version of the content and only on their

13

computer. This multi-step process confused and frustrated customers. In addition,

14

the filters often did not work properly because computer processors struggled with

15

YouTube’s API. Further, the service was not then adapted to modern industry

16

standards for digital content streaming – users demanded HD content and needed to

17

be able to watch the content on their mobile devices and high-definition set-top

18

boxes. By mid-2014, people simply did not watch SD movies exclusively on their

19

desktops computers and no major distributor of digital content limited their

20

distribution in this way.

21

Telephone: [phone]
Facsimile: (424) 652-785

Users would use their Google Play accounts to rent content viewable on YouTube,

Telephone: [phone]
Facsimile: [phone]

It required users first to create an account on VidAngel and then with Google Play.

10

BAKER MARQUART LLP

structured, using the YouTube Player API, could never achieve commercial success.

9

2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
Tel: [phone] ● Fax: [phone]

8

18.

In June 2014, the Supreme Court published its decision in American

22

Broadcasting Companies v. Aereo, 573 U.S. ___, 134 S. Ct. 2498. In that decision,

23

the Court noted: “an entity that transmits a performance to individuals in their

24

capacities as owners or possessors does not perform to ‘the public.’” This language

25

prompted me to seek legal advice concerning ways to provide a lawful filtering

26

service to the owners of movies under the FMA.

27

19.

I am familiar with some of the litigation involving filtering technology

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DECLARATION OF NEAL HARMON

1

and the FMA. I know that in 2005, a federal court in Colorado dismissed a

2

copyright infringement claim against ClearPlay based on the FMA. Huntsman v.

3

Soderbergh, No. Civ. A02CV01662RPMMJW, 2005 WL 1993421 (D. Colo. 2005).

4

The Court found that the FMA protected ClearPlay’s service from the studios’

5

infringement claims: “the effect of the Family Movie Act is that Congress made a

6

policy decision that those who provide the technology to enable viewers to edit

7

films for their private viewing should not be liable to the copyright owners for

8

infringing their copyright … .” I am also aware that the FMA protects a technology

9

that filters content “transmitted to [the] household for private home viewing.”
without making a “fixed copy of the altered version of the motion picture.”

12

VidAngel specifically designed its current technology to comply with the FMA and

13

the relevant Court decisions interpreting the FMA and copyright law.
20.

Telephone: [phone]
Facsimile: (424) 652-785

14

Telephone: [phone]
Facsimile: [phone]

BAKER MARQUART LLP

Today, VidAngel follows the FMA and transmits filtered content to users’ homes

11
2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
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10

Under the current service, customers buy an authorized DVD or Blu-

15

ray disc from VidAngel (which buys it at retail after the studios release it) and then

16

choose various filters provided by VidAngel to apply to the movie. VidAngel then

17

streams the filtered movie to the user’s home. VidAngel allows users to sell back

18

their disc to VidAngel if they choose not to own the movie permanently.

19

21.

In early 2015, VidAngel began privately testing the new service with

20

customers. Over the course of a few months, the service improved substantially and

21

we were able to expand it to the Google Play app store and Chromecast.

22

VidAngel Announces Its New Service to the Studios

23

22.

By July of 2015, VidAngel felt confident enough in its service to seek

24

feedback from the major movie studios. To that end, with the help of counsel,

25

VidAngel sent a letter on July 23, 2015, to the major studios and television networks

26

(including all plaintiffs herein) explaining its service and technology. A true and

27

correct copy of that July 23, 2015 letter as sent to Disney is attached as Exhibit B.

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DECLARATION OF NEAL HARMON

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VidAngel’s letter explained that VidAngel operates under the FMA’s filtering

2

exemption, and works as follows: (1) VidAngel “purchases the DVD or Blu-ray disc

3

for the customer and stores it in a physical vault;” (2) it “streams” the contents of the

4

disc to the customer in a filtered format chosen by the customer; and (3) it then “re-

5

purchase[s] the disc at a discount from the sale price. . .based on the length of time

6

the customer has owned the disc.” VidAngel explained that it had grown from 43 to

7

4848 users in just under six months (a 10,000% growth rate) and now wished to buy

8

directly from the studios “to scale its business.” The letter invited the studios to

9

access the service and concluded:

10

If you have any questions concerning VidAngel’s technology or
business model, please feel free to ask. If you disagree with
VidAngel’s belief that its technology fully complies with the Copyright
Act or otherwise does not adequately protect the rights of copyright
owners, please let us know. VidAngel wants to take the concerns of
content owners into consideration and address them to the extent it can.

12
13

Unbeknownst to VidAngel at the time, Disney almost immediately accessed its

15

service. Attached as Exhibit C is true and correct copy of a printout from a

16

VidAngel user account showing that, on August 6, 2015, a Disney employee signed

17

up for a VidAngel account using a non-descript Gmail account and provided

18

payment information for a Director of Antipiracy Operations at Disney. Even

19

though they were obviously investigating VidAngel, Plaintiffs did not respond to

20

VidAngel’s letter, so it sent a second letter on August 21, 2015. A true and correct

21

copy of the August 21, 2015 letter is attached as Exhibit D. VidAngel had over 750

22

titles available for the new filtering service when it sent its letters to Disney. Prior

23

to filing suit on June 9, 2016, none of the plaintiffs, nor any of the dozen other

24

entities to which VidAngel wrote, ever expressed to VidAngel that they believed its

25

services infringed their copyrights and none ever sent a cease and desist letter to

26

VidAngel.

27

Telephone: [phone]
Facsimile: (424) 652-785

14

Telephone: [phone]
Facsimile: [phone]

BAKER MARQUART LLP

2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
Tel: [phone] ● Fax: [phone]

11

23.

I understand that two of the plaintiffs confirmed receipt of VidAngel’s

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DECLARATION OF NEAL HARMON

1

letters and called or emailed VidAngel’s counsel. Warner Bros. Entertainment

2

Inc.’s parent, Time Warner, Inc., emailed VidAngel in October. VidAngel promptly

3

returned the email and even scheduled a call to answer his questions. Time Warner

4

later cancelled the call and never rescheduled it. Fox called VidAngel’s counsel in

5

September 2015 and left a message, but in my understanding did not return phone

6

calls placed to it in September and October by VidAngel’s counsel. Thereafter,

7

VidAngel heard nothing from Plaintiffs, through counsel or otherwise, until this

8

lawsuit was filed.
VidAngel Wanted the Studios’ Feedback for Many Reasons

9
10

24.

The letters were an important part of VidAngel’s strategy of developing

12

with the FMA, as a practical matter we understood that any legal challenge from the

13

studios would have significant financial consequences for VidAngel even if its

14

technology were ultimately vindicated by the Courts. It was important to assess the

15

studios’ attitude toward VidAngel’s new streaming system early on, to provide

16

VidAngel’s investors (and potential investors) with accurate information about the

17

studios’ position with respect to VidAngel’s technology. For that reason, the letters

18

requested feedback from the studios and invited them to examine VidAngel’s

19

technology and ask any questions they might have about it. Because the letters

20

invited a response from the studios and clearly described VidAngel’s technology,

21

VidAngel assumed that, to the extent the studios had a problem with VidAngel’s

22

technology, they would inform VidAngel if any of them disagreed that VidAngel’s

23

service complied with the FMA. Further, as VidAngel’s model involved purchasing

24

DVDs from the studios and was serving a market of customers that would never

25

watch un-filtered studio content, VidAngel was creating new revenue for the

26

studios. VidAngel believed then (and continues to believe) that there are very good

27

business reasons for the studios to support VidAngel’s model. Since VidAngel’s

Telephone: [phone]
Facsimile: (424) 652-785

new technology. Although VidAngel believed its new filtering system complied

Telephone: [phone]
Facsimile: [phone]

BAKER MARQUART LLP

2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
Tel: [phone] ● Fax: [phone]

11

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DECLARATION OF NEAL HARMON

1

service contributes to the studios’ bottom line, it was another reason to view the

2

studios’ silence in response to VidAngel’s letters as tacit approval of its service.

3

Had any studio expressed a complaint to VidAngel in response to the letters,

4

VidAngel would have discussed and considered any proposal to resolve it. In

5

particular, VidAngel could have adapted its technology in some way or, to the

6

extent the studios expressed an opinion that VidAngel’s technology was infringing,

7

VidAngel could have filed a declaratory relief suit concerning its technology.

8
9
10

25.

studios after sending two very direct letters, VidAngel opened its services to the
public in August 2015.

11

26.

The version of the system that was publicly launched in August 2015

solved the problems of the 2014 design: it simplified the user-interface, required

13

users to register only once with VidAngel, allowed users to watch HD content on

14

their favorite mobile devices and set-top boxes, and improved the filters so that they

15

were more seamless. By bringing VidAngel’s technology up to and beyond industry

16

standards and offering the features users expect of any content streaming service,

17

VidAngel found a large market for filtered movie and television content. As a

18

result, its customer base began to shoot up almost immediately.

19

Telephone: [phone]
Facsimile: (424) 652-785

12

Telephone: [phone]
Facsimile: [phone]

BAKER MARQUART LLP

2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
Tel: [phone] ● Fax: [phone]

Having received no feedback or objections to our technology from the

27.

In fact, today, VidAngel’s apps are rated higher by users than the

20

leading studio distribution platforms. For example, the VidAngel rating on Google

21

Play is 4.8 stars whereas Netflix is 4.4 stars, Hulu is 4.1 stars, and Disney Movies

22

Anywhere is 3.9 stars. For all ratings on the Apple App Store, VidAngel has 5 stars,

23

Netflix has 3.5 stars, Hulu has 2 stars, and Disney Movies Anywhere has 3.5 stars.

24

On Roku, VidAngel has 4.5 stars, Netflix has 3 stars, Hulu has 3.5 stars and Disney

25

Movies Anywhere has 3.5 stars.

26
27

28.

By the end of 2015, VidAngel’s monthly disc sales had grown to over

100,000. In January 2016, USA Today published an article about VidAngel’s

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DECLARATION OF NEAL HARMON

1

services and the ability to stream filtered versions of Star Wars prequels for a net

2

cost (after buy and sellback) of as little as $1. A true and correct copy of this USA

3

Today article is attached as Exhibit E. On January 12, a Disney employee -- using

4

the secret VidAngel account created with payment information from Disney’s

5

Director of Antipiracy Operations -- logged on to VidAngel account and purchased

6

Frozen and a Star Wars prequel. (See Exhibit F hereto.) This same employee

7

purchased and sold back 17 total titles over the next four months.

8

29.

On March 3, 2016, Disney announced that it would release Star Wars:

12

titles available before they become available in other digital markets. This is untrue.

13

In fact, the film was available for digital download purchase four days before

14

VidAngel could buy DVDs. Attached as Exhibit F is a true and correct copy of an

15

article regarding Disney’s announcement. While the film was not made available

16

for shorter-term rentals when VidAngel began to make the filtered film available,

17

this is irrelevant because VidAngel does not rent titles. In any event, Star Wars:

18

The Force Awakens is the only major title released in this way, and it was clearly

19

done so at a time when the plaintiffs were planning litigation against VidAngel.

20

Despite VidAngel’s growing popularity, the imminent release of Star Wars: The

21

Force Awakens, and the fact that Plaintiffs had been discussing VidAngel with one

22

another and outside counsel for over seven months, Plaintiffs did not send VidAngel

23

a cease and desist letter or seek an injunction. Instead, on April 5, Plaintiffs

24

purchased, streamed and sold back the film. (See Exhibit C.)
VidAngel Invested Millions in Reliance Upon the Studios’ Silence

25
26
27

Telephone: [phone]
Facsimile: (424) 652-785

have used Star Wars: The Force Awakens to show that VidAngel purportedly makes

Telephone: [phone]
Facsimile: [phone]

“purchase” (but not a shorter rental period) on April 1. I am aware that Plaintiffs

11

BAKER MARQUART LLP

The Force Awakens on DVD on April 5. The film would be available for digital

10

2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
Tel: [phone] ● Fax: [phone]

9

30.

During the ten and a half months from VidAngel’s first letter to the

filing of Plaintiffs’ suit, VidAngel openly streamed filtered versions of every one of

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DECLARATION OF NEAL HARMON

4

in funding since it wrote to Plaintiffs in July 2015. Attached as Exhibit G is a true

5

and correct copy of an article from October 2015 announcing that VidAngel had

6

raised $2.5 million in additional funding. VidAngel invested most of that funding to

7

develop its current model prior to Plaintiffs filing suit. Prior to the filing of this

8

lawsuit, VidAngel also had applications approved on every major mobile

9

application store and set-top box (e.g., Roku, Apple App Store, Apple TV, Amazon

10

Fire TV, Android TV and Kindle Fire). Monumental efforts went into each one of

11

these apps. In fact, VidAngel hired scores of tech, support and content employees.

12

VidAngel also hired scores of contractors to support the employees. Also, VidAngel

13

updated all the streaming technology to play more smoothly and built a multi-

14

thousand title content library. After several months passed without objection from

15

the studios, VidAngel concluded that the studios did not object to its service. In

16

response to media inquiries about the legality of its service, I cited VidAngel’s

17

letters and the studios’ lack of objection as a basis for VidAngel believing its service

18

did not infringe. Attached as Exhibit H are news articles containing my quotes

19

about the studios having no objection to VidAngel’s service. Today, over 500,000

20

families have used VidAngel’s filtering service.

21

Telephone: [phone]
Facsimile: (424) 652-785

$1.2 million purchasing discs at retail. VidAngel has also spent millions of dollars

Telephone: [phone]
Facsimile: [phone]

time, VidAngel continued to purchase DVDs. In total, VidAngel has spent over

3

BAKER MARQUART LLP

Plaintiffs’ most popular titles as soon as they were available on DVD. During this

2

2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
Tel: [phone] ● Fax: [phone]

1

31.

In fact, it was not until VidAngel announced its intention to seek

22

significant financing that Disney finally decided to sue. On May 24, 2016, a couple

23

of weeks before the suit, VidAngel informed its better customers (including Disney,

24

which has purchased 17 titles with its secret VidAngel account) of its intent to raise

25

additional funds through Regulation A+ financing. Then, and only then, did Disney

26

finally decide to sue. I believe this litigation was intentionally timed to cut off

27

VidAngel’s access to cash flow at a critical stage in its development and prevent our

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DECLARATION OF NEAL HARMON

1

modern filtering service from growing.

2

VidAngel Is a Filtering Company

3

32.

Because VidAngel has catered only to people who want to filter the

4

motion pictures they watch in their homes, we did not immediately recognize that

5

others might try to abuse VidAngel’s service or exploit loopholes in our service to

6

watch motion pictures without filtering. At the very early stages of our service, our

7

system allowed one to stream a movie even if no filter was selected. At that time,

8

we trusted that our audience was using our service for filtering.

9

33.

In December 2015, we created a #StopJarJar marketing campaign to

We discovered that the campaign was attracting users who were watching Star Wars

12

without filters. We therefore halted the campaign and began requiring filters to

13

watch movies on VidAngel.
34.

Telephone: [phone]
Facsimile: (424) 652-785

14

Telephone: [phone]
Facsimile: [phone]

BAKER MARQUART LLP

coincide with Star Wars 7 movie launch, giving away a free $20 Star Wars movie.

11
2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
Tel: [phone] ● Fax: [phone]

10

Later on, we discovered that other customers were setting a single

15

global filter (e.g., Jar Jar Binks) and then watching movies on the Roku that didn’t

16

have any tags for the selected filter, resulting in a few unfiltered streams. As soon as

17

we discovered potential loophole, we altered the system again so that it ensured that

18

a filter was set on each streamed movie. It has upset a few customers, but it has

19

allowed us to stay focused on our original target market of FMA-compliant filtering.

20

35.

When the studios sued us, they complained that the opening and

21

closing credits were another loophole of sorts. Because we had always tried to

22

prevent improper use of VidAngel, we immediately removed the opening and

23

closing credits tags altogether. VidAngel received a few complaints from those who

24

were abusing the system, but it also got complaints from those who used those

25

filters for legitimate purposes. One reason these filters were created was that credits

26

are often more than mere lists of the people who did certain tasks in creating the

27

film. Some movies save the most offensive content for the credits. The titles and

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DECLARATION OF NEAL HARMON

1

credits feature allowed users to avoid such content. We are now updating our apps

2

to allow our customers to use the opening and closing credits filters provided that

3

they also pick at least one additional filter.

4

36.

All of the above steps to remove potential loopholes and focus

5

VidAngel’s viewing experience on filtering have been a part of our evolution, as we

6

become known to a larger audience of people. VidAngel is committed to ensuring

7

that people come to VidAngel to view filtered versions of motion pictures.

8
9

37.

Despite there being a few times where the system has been abused, our

data shows that 95.93 percent of VidAngel’s purchases came from users who

12

from users who voluntarily chose more than one filter. This indicates that our users

13

are overwhelmingly using VidAngel for filtering, and that the number of users

14

choosing multiple filters is increasing.

15

Telephone: [phone]
Facsimile: (424) 652-785

2016, and found that more recently 96.93 percent of VidAngel’s purchases came

Telephone: [phone]
Facsimile: [phone]

BAKER MARQUART LLP

voluntarily chose more than one filter. VidAngel also ran these numbers for July

11
2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
Tel: [phone] ● Fax: [phone]

10

38.

The studios claim that VidAngel is threatening the “legitimate

16

streaming market” because VidAngel’s sellback model allows a net cost of $1, but

17

the data prove otherwise. Because almost 96% of VidAngel’s purchasers have

18

selected multiple filters over VidAngel’s entire history, this means the version of the

19

film or television show VidAngel streams to them is of a different character than the

20

version available through other VOD providers like Google Play, Amazon Video,

21

VUDU and iTunes. VidAngel has had a long history of ensuring that it is reaching

22

its target filtering market.

23
24

39.

VidAngel has additional data showing that most of its users would not

have watched the movie they chose to see absent filtering:

25

SURVEY QUESTION: Would you have watched "[title]" without a filter?

26

Out of 180,227 movies watched, 92,225 users said they would not have

27

watched the movie at all without filters (as of 8/26/2016). These answers come from

28

- A.652 -

16

DECLARATION OF NEAL HARMON

1

the account holders (usually parents). The numbers do not fully account for

2

hundreds of comments like these:

3

I would let my 13+ year old children watch without the filter. My younger
kids had to wait until Vidangel provided it.

4
5

My kids love this movie especially at Halloween but I hate it because it
needed to be edited. Thank you for editing it and putting it on your site.

6

The filter was great with younger kids watching (13 yr old in my case)

7

The filter was for the kids.

8

I wouldn't have let me kids watch without the filters.

9

My husband and I love the movie "Apollo 13" but we have never watched it
with our kids (youngest is age 7.) We muted the language that we feel is
inappropriate for our own household and were able to watch it with our
children. They loved it :)

10

12

I would have watched it without a filter with my older kids, but not the
youngers.

13

40.

This means that, while over half of all movies would not have been

watched by the account holders without filters at all, far more users would not have

15

watched the movie with their family without filters. This filtered-only viewership is

16

entirely additive to the studios’ market, and the purchases of those films and shows

17

would not have occurred without VidAngel.

18
19

Telephone: [phone]
Facsimile: (424) 652-785

14

Telephone: [phone]
Facsimile: [phone]

BAKER MARQUART LLP

2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
Tel: [phone] ● Fax: [phone]

11

41.

VidAngel’s Marketing Is About Filtering
VidAngel is constantly testing advertising messages and the studios

20

have cherry picked a few that never even got traction. While the studios say

21

VidAngel has an “unfair advantage” using its net cost with sellback and filters as a

22

marketing hook, what they fail to acknowledge is that VidAngel is not a direct

23

competitor to their distribution partners because those partners do not offer filtering.

24

42.

VidAngel learned in its early market testing that the market for filtered

25

content was far larger if customers did not have to pay an additional fee for filtering.

26

It seemed that customers felt they should be able to watch the movie however they

27

wanted after they had purchased the movie. As a company strategy, VidAngel

28

- A.653 -

17

DECLARATION OF NEAL HARMON

1

wanted to reach broadest filtering audience possible and adjusted its marketing

2

messages accordingly.

3

43.

Historically, those who would like to enjoy filtered content had to pay a

4

premium price for the ability to do so (even purchase expensive hardware and a

5

subscription in addition to the cost of the movie). VidAngel’s messaging helps those

6

who think that filtering is more expensive and more difficult to realize that the

7

opposite is true. An analogy explains why VidAngel’s marketing references other

8

VOD services. People may believe that flying in an airplane is dangerous. Airlines

9

may highlight that the chances of dying in a car are higher than the chances of dying

Plane tickets do not directly compete with car sales, but the comparison is useful to

12

customers.

13

44.

The number of users voluntarily choosing more than one filter (over 96

percent in July) are evidence that the studios have mistakenly concluded that

15

VidAngel’s marketing highlighting net cost gives VidAngel an “unfair advantage,”

16

when the approach is ultimately attracting a filtering audience rather than competing

17

with all the many distributors who do not offer filtering.

18
19

Telephone: [phone]
Facsimile: (424) 652-785

14

Telephone: [phone]
Facsimile: [phone]

BAKER MARQUART LLP

in an airplane to dispel that myth and attract people to purchasing plane tickets.

11
2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
Tel: [phone] ● Fax: [phone]

10

The Studios Are Being Disingenuous Concerning the Lawsuit

45.

In their Complaint, the studios say they are suing VidAngel because it

20

is allegedly operating an "unlicensed VOD streaming service" even though

21

VidAngel is operating a remote filtering service under the FMA.

22

46.

Plaintiffs claim that "The FMA requires that any copy or performance

23

made pursuant to that statute be otherwise 'authorized'— that is, not violating the

24

copyright owner’s other exclusive rights." Complaint (Dkt No. 1), ¶ 44. Under this

25

position, the authority to filter content in the home resides with the studios, not with

26

the family. This position would essentially repeal the FMA, which does not require

27

any consent from the studios to filtering (consent they would definitely not give).

28

- A.654 -

18

DECLARATION OF NEAL HARMON

1

47.

The ultimate irony is that the studios will not sell a streaming license

2

that permits filtering to anyone, putting companies like VidAngel in a Catch-22

3

position. Indeed, 10 years after the studios were compelled by the FMA to dismiss a

4

lawsuit with ClearPlay, the market has yet to see a studio-licensed streaming

5

product that supports filtering.

6

DVDs and Blu-ray Discs Are the Only “Authorized”
Copies of Plaintiff’s Movies Available for Filtering

7
8
9

48.

Due to the agreement the studios have made with the Directors Guild of

America (“DGA”), major studio agreements with their distributors have language
Google search for “VOD license agreement”):

13
14
15
16
17
18
19

CUTTING, EDITING AND INTERRUPTION. Licensee [Google]
shall not make, or authorize any others to make, any modifications,
deletions, cuts, alterations or additions in or to any Included Program
without the prior written consent of Licensor [Sony]. For the
avoidance of doubt, no panning and scanning, time compression or
similar modifications shall be permitted. Without limiting the
forgoing, Licensee shall not delete the copyright notice or credits from
the main or end title of any Included Program or from any other
materials supplied by Licensor hereunder. No exhibitions of any
Included Program hereunder shall be interrupted for intermission,
commercials or any other similar commercial announcements of any
kind.
Telephone: [phone]
Facsimile: (424) 652-785

12

Telephone: [phone]
Facsimile: [phone]

BAKER MARQUART LLP

similar to the Sony/Google agreement posted on WikiLeaks (which I found doing a

11
2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
Tel: [phone] ● Fax: [phone]

10

49.

Discovering this language in the studios’ actual agreements helped me

20

realize that this was the reason Google was forced to remove technical support for

21

filtering HD content on the Chromecast and was forced to seek permission from the

22

studios to enable filtering on Google Play.

23

50.

What’s more, when the studios sign a deal for the rights to a specific

24

title, they seem to be required to include the following language in all of their

25

agreements. For example, in Sony’s agreement for the movies Fury and American

26

Hustle, the following language binds Sony:

27
28

- A.655 -

[Sony] shall have the right...to make any and all changes and

19

DECLARATION OF NEAL HARMON

modifications in the Picture; provided, [Sony] shall comply with any
contractual right of first opportunity to make such changes granted to
Director.

1
2

5
6
7
8
9
10

BAKER MARQUART LLP

2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
Tel: [phone] ● Fax: [phone]

11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

Given this language and the studio interpretation of the FMA, this

language trickles down through all agreements and ultimately hands the authority to
make any changes to the movie back to the director of the movie.
52.

The legislative history of the FMA reflect that the DGA refused to

testify or cooperate with Congress in any way when FMA was being debated in
Congress. The DGA and the studios would not seek a business deal with filtering
companies in 2004. And these are the same organizations who have not filled the
market need for filtering for the last decade, leading a few brothers from Idaho to
ask themselves, “Why isn’t there filtering for streaming?”
53.

If the court were to interpret the law as argued by the studios, then

VidAngel will not be able to operate under the “transmitted” language of the FMA
because the studios will not sell VidAngel a license that permits filtering. In fact,
Telephone: [phone]
Facsimile: (424) 652-785

4

51.

Telephone: [phone]
Facsimile: [phone]

3

they are unable to do so without cooperation from the DGA. And lack of
cooperation from the DGA is the reason the FMA was passed by Congress in the
first place. VidAngel is the only entity that provides a filtering service under the
FMA for those viewing title on modern mobile devices such as smartphones, tablets,
and SmartTVs.
VidAngel Would Love to Purchase a Filtered Streaming License
54.

VidAngel has various business reasons for which it is preferable to

purchase a streaming license that allows for filtering. For example:
a)

Discs will increasingly become less available and may eventually be

phased out of existence.
b)

New customers complain about VidAngel’s buy/sellback model and

ask why they can’t just rent the movies.
c)

A streaming license would allow VidAngel to provide both filtered and

unfiltered versions of movies.

- A.656 -

20

DECLARATION OF NEAL HARMON

1

d)

There is a lot of overhead and waste in managing a vault of physical

3

e)

Acquiring physical discs through retailers is time consuming and

4

difficult.

5

f)

2

discs.

When customer demand exceeds our supply, VidAngel has to send

6

customers out-of-stock notices. VidAngel sent out almost 60,000 unique customers

7

over 250,000 out of stock notices last month alone. This means that VidAngel

8

turned away 250,000 requests for streams that it could have received income for if it

9

had a standard VOD distribution agreement that allows for filtering.

10

When VidAngel purchases more discs than it is ultimately able to sell,

it ends up with hundreds or thousands of discs that it will never sell.

12

55.

VidAngel assumed that it needed to have significant size before the

studios would ever consider a filtered licensing deal. Some contacts in Hollywood

14

told me to wait until we had over 1 million users, preferably over 5 million.

15

Telephone: [phone]
Facsimile: (424) 652-785

13

Telephone: [phone]
Facsimile: [phone]

BAKER MARQUART LLP

2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
Tel: [phone] ● Fax: [phone]

11

g)

56.

In fact, VidAngel started talking with a local distributor in Utah about a

16

licensing deal in May of 2016, before the lawsuit. This distributor has agreed to

17

licensing its latest film to VidAngel because it has not signed an agreement with the

18

DGA and can permit filtering of content.

19
20

57.

After Plaintiffs filed their lawsuit, VidAngel inquired of some of the

plaintiffs whether they were open to a business solution rather than litigation.

21

58.

VidAngel also met with Sony, Lionsgate and Paramount about a

22

licensing deal since those studios had not sued them. VidAngel has reached out to

23

many others. These studios have either said, “this is complicated legally,” or

24

“maybe we can solve the problem with the airline cut,” or “you have to get the DGA

25

to agree first.” Multiple studios said they would get back to me after meeting with

26

their legal teams and never did.

27

59.

Finally, I am aware that my counsel has emailed counsel for Disney

28

- A.657 -

21

DECLARATION OF NEAL HARMON

1

and offered to make certain changes to VidAngel’s model and that Plaintiffs’

2

counsel responded: “my clients absolutely will not engage in any joint licensing

3

discussions.” Counsel for VidAngel then offered to abandon its FMA exemption

4

defense (and with it the requirement that consumers must purchase copies of discs)

5

and instead pay a streaming license fee to stream filtered content, noting that this

6

arrangement would resolve Disney’s DMCA and infringement claims. Disney has

7

not responded to this offer.

8
9

60.

It appears that VidAngel is back to 2005 again, with no business

solution available to VidAngel.

10

New Releases on VidAngel Generate
Revenue Share Similar to Studio Contracts

12

Over its history, much of VidAngel’s revenue comes from the sale and

61.

filtered streaming of popular movies within the first four weeks of their release.

14

Each new release DVD or Blu-ray is purchased by VidAngel and is then sold to its

15

customers (after it is bought back by VidAngel) on average 16 times. The average

16

net revenue for each transaction over VidAngel’s history is $1.20. The average cost

17

for a new release DVD or Blu-ray is $15.01. This means that VidAngel, on average,

18

contributes $15.01 in capital for total revenue of $19.20. In other words, the studios

19

receive approximately 78% of all of the revenue VidAngel receives on a new release

20

title. By comparison, the Google Play and VUDU VOD Distribution Agreements

21

with Sony calls for Sony to receive 70% of the revenue day one, and receive 65%

22

for the four weeks thereafter for all new release rentals.

Telephone: [phone]
Facsimile: (424) 652-785

13

Telephone: [phone]
Facsimile: [phone]

BAKER MARQUART LLP

2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
Tel: [phone] ● Fax: [phone]

11

23

VidAngel Maintains It Has Robust Records of Every Transaction
In Its History Related to Each of Plaintiffs’ Titles

24
25

62.

VidAngel maintains records of every transaction. Those records

26

include the date purchased, date sold back, amounts paid to purchase and sell back,

27

the specific disc purchased and filters used. VidAngel maintains that data for every

28

- A.658 -

22

DECLARATION OF NEAL HARMON

1

title VidAngel users have ever filtered and streamed.

2

VidAngel Will Suffer Tremendous Hardship If an Injunction Issues

3

63.

In the event that VidAngel is enjoined on October 24, 2016, the

4

following financial damages (immediate, and future) would be incurred in the

5

estimated 18-month timeframe for the trial to occur:

6

a.

. VidAngel is

7

currently operating at a

8

Hosting, Credit Card Fees, and Tagging Costs.

, this includes

9

.

10

b. VidAngel expects to have a user base of
by April 2018 (18 months from the injunction hearing). With a

12

, and a

13

15
16
17
18
19
20
21

Telephone: [phone]
Facsimile: (424) 652-785

14

, the
Telephone: [phone]
Facsimile: [phone]

BAKER MARQUART LLP

2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
Tel: [phone] ● Fax: [phone]

11

.

If VidAngel were to be enjoined, the total value of the customers
lost would be

.

c. In Apr 2018, VidAngel's monthly revenue run rate is projected to
be at

per month, or an annual
If VidAngel achieves this goal in the timeframe

projected, the company would be valued at, or above,
. All of this potential market value would be lost if
VidAngel is enjoined.

22

VidAngel, formed just three years ago, has only 20 full-time employees. To date,

23

VidAngel has been capitalized with over $3.6 million and has spent over a third of

24

that capital, $1.2 million, purchasing discs.

25
26
27
28

- A.659 -

23

DECLARATION OF NEAL HARMON

64.

VidAngel developed its filter-and-strenm technology J u ~H f:lS ~ons um~r

2

preferences were beginning to move awny from getting physicfl l DVP:i/Ol t.J =
my

3

discs to watch on a home television to having content streamed to Lh ~m to watch on

4

all sorts of devices, which now are only infrequently n televis ion set. Con:wmen~

5

increasingly want to avoid having to obtain discs and want th e freedom

6

content on tablet, laptop, and desktop computers, smart telephones, and other

7

devices, and want to be able to watch content wherever they may be, in private, A»

8

consumer preferences involving digital technologies always do, the preference for

9

streamed content is happening rapidly and the bulk of the transition will likely be

w wai..Ch

10

complete in less than three years. VidAngel is the only company currently

11

streaming filtered content to customers. (The only other content filtering service

12

sells devices that consumers may use at home to filter the content of physical DVD

13

and Blu-ray discs being watched on a television set.) As the sole competitor

0:: . o"
<"' "' ..

14

offering to provide filtered streamed content to modern devices, VidAngel

u..

15

obviously has a significant head start over potential competitors in developing its

16

technology and increasing its know-how. Further, VidAngel owes a large portion of

17

its success to the highly capable and competent employees and independent

18

contractors it has attracted, trained, and retained. Were VidAngel to be enjoined

19

during the pendency of this action, it would lose all the advantages described above.

20

I declare under penalty of perjury under the laws of the United States of

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America that the foregoing is true and correct.

22

Executed on September 12, 2016, at Provo, Utah.

23
24
25
26
27
28
24

- A.660 -

DECLARATION OF NEAL I JARMON

1 Ryan G. Baker (Bar No. 214036)
[e-mail]
2 Jaime Marquart (Bar No. 200344)
[e-mail]
3 Scott M. Malzahn (Bar No. 229204)
[e-mail]
4 Brian T. Grace (Bar No. 307826)
[e-mail]
5 BAKER MARQUART LLP
2029 Century Park East, Sixteenth Floor
6 Los Angeles, California 90067
Telephone: [phone]
7 Facsimile: [phone]
8 Peter K. Stris (Bar No. 216226)
[e-mail]
9 Brendan Maher (Bar No. 217043)
[e-mail]
10 Elizabeth Brannen (Bar No. 226234)
[e-mail]
11 Daniel Geyser (Bar No. 230405)
[e-mail]
12 STRIS & MAHER LLP
725 South Figueroa Street, Suite 1830
13 Los Angeles, California 90017
Telephone: [phone]
14 Facsimile: [phone]
15 David W. Quinto (Bar No. 106232)
[e-mail]
16 3007 Franklin Canyon Drive
Beverly Hills, California 90210
17 Telephone: [phone]
Facsimile: [phone]
18
19 Attorneys for Defendant and
Counterclaimant VidAngel, Inc.
20
21

UNITED STATES DISTRICT COURT

22

CENTRAL DISTRICT OF CALIFORNIA

23

WESTERN DIVISION

24 DISNEY ENTERPRISES, INC.;
LUCASFILM LTD. LLC;
25 TWENTIETH CENTURY FOX FILM
CORPORATION; AND WARNER
26 BROS. ENTERTAINMENT, INC.,
27
28

- A.661 -

Plaintiffs,
vs.

CASE NO. CV16-04109-AB (PLAx)
FILED UNDER SEAL PURSUANT
TO ORDER OF THE COURT
DATED SEPTEMBER 14, 2016 (Dkt.
75)
VIDANGEL’S MEMORANDUM OF
POINTS AND AUTHORITIES IN

VIDANGEL’S OPPOSITION TO PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION

1 VIDANGEL, INC.,
2

OPPOSITION TO MOTION FOR
PRELIMINARY INJUNCTION

Defendant.

3

Judge: Hon. André Birotte Jr.

4
5

Date: October 24, 2016
Time: 10:00 a.m.
Courtroom: 4

6

Filed concurrently herewith:

7
8

VIDANGEL, INC.,

9
10

Counterclaimant,
vs.

11 DISNEY ENTERPRISES, INC.;
LUCASFILM LTD. LLC;
12 TWENTIETH CENTURY FOX FILM
CORPORATION; AND WARNER
13 BROS. ENTERTAINMENT, INC.,
14
15

Counterclaim Defendants.

Request
for
Judicial
Notice,
Declarations of Neal Harmon, Sigurd
Meldal, Jaime Marquart, David Quinto,
Elizabeth Ellis, Theodore Baehr, David
Barton, Tim Barton, Gary Bauer, David
Bozell III, L. Brent Bozell, Connor
Boyack, Rick Green, Rebecca Hagelin,
Donna Rice Hughes, Harry Jackson,
Matt Kibbe, Andrea Lafferty, Gary
Marz, Bryan and Diane Schwartz, Bob
Waliszewkski, Tim Wildmon, and
Timothy F. Winter; Evidentiary
Objections; Application to File Under
Seal with Supporting Declaration of
Jaime Marquart and Proposed Order

16
17
18
19
20
21
22
23
24
25
26
27
28

- A.662 -

VIDANGEL’S OPPOSITION TO PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION

TABLE OF CONTENTS
Page
INTRODUCTION………………………………………………………..….1
FACTUAL BACKGROUND……………………………………….………3
A.

Prior to 2005, Disney Used Copyright Litigation to Prevent
Customers Who Purchased Movies for Home Viewing from
Filtering Objectionable Content……………………………….3

B.

Congress Enacted the FMA to Ensure that Families Could
Watch Filtered Content in Private……..………………………4

C.

Congress’s Decision to Authorize For-Profit Companies to
Stream Lawfully Purchased Movies for Filtered Home
Viewing Was Knowingly Made Over Disney’s Vigorous
Opposition……………………………………………...………5

D.

In Furtherance of Its Unlawful Agreements with the DGA,
Disney Prohibits Filtering in All Streaming Licenses…………7

E.

Unable to Obtain a License from Disney, VidAngel Has
Developed an FMA Authorized Streaming Business Model
That Enables Customers Who Purchase Movies for Home
Viewing to Filter Objectionable Content………………………8

LEGAL STANDARD…………………………………………………..…...9
ARGUMENT………………………………………………………………..9
I.

DISNEY IS NOT LIKELY TO PREVAIL…………………………..9
A.

Disney Will Not Succeed on Its Reproduction and Public
Performance Copyright Claims………………………………10

B.

In Any Event, the FMA Shields Companies Like VidAngel
From Liability Under any Provision on the Copyright Act…..12

C.

VidAngel’s Service Does Not Violate the Copyright Act’s
Anticircumvention Provisions Found in the DMCA………....16

i

- A.663 -

D.

Even if VidAngel Is in Technical Violation of the Law, Its
Service Is a Protected Fair Use……………………………....19
1.
2.

Plaintiffs’ Works Are Especially Amendable to Fair
Use…………………………………………………….20

3.

VidAngel’s Users May Access Plaintiffs’ Works
Only for Transformative Purposes…………………....20

4.

VidAngel’s Lawful Filtering Service Increases
Disney’s Disc Sales…………………………………...21

5.
II.

VidAngel’s Service Is Highly Transformative……..…19

The Clean Flicks Fair Use Analysis Is Inapposite……22

DISNEY CANNOT DEMONSTRATE IRREPARABLE HARM…22
A.

Disney’s Year and a Quarter Delay Demonstrates That an
Injunction Is Unnecessary to Prevent Immediate and
Irreparable Harm………………………………………….….22

B.

Disney’s Alleged Harms Are Caused by the FMA, Not
VidAngel…………………………………………………..... 25

C.

Disney’s Alleged Harms Are Speculative………………...…26

D.

Disney’s Alleged Harms Are Economic…………………......28

III.

THE BALANCE OF HARDSHIPS WEIGHS AGAINST A
PRELIMINARY INJUNCTION………………………………...….29

IV.

THE PUBLIC INTEREST STRONGLY FAVORS ALLOWING
FAMILIES TO USE VIDANGEL’S FILTERING SERVICE…...…31
A.
B.

V.

The Supreme Court Has Repeatedly Protected the Public
from Offensive Content……………………………………....31
VidAngel Serves an Important Public Interest…………….....32

ANY INJUNCTION SHOULD BE CONDITIONED ON THE
POSTING OF A LARGE BOND……………………………….…..33

CONCLUSION………………………………………………………….... 35
ii

- A.664 -

TABLE OF AUTHORITIES
Page
CASES
A&M Records, Inc. v. Napster, Inc.,
239 F. 3d 1004 (9th Cir. 2001) ........................................................................34
Activant Sols., Inc. v. Wrenchead, Inc.,
No. C 03-3376 VRW,
2004 WL 1887529 (N.D. Cal. Aug. 23, 2004) ................................................31
All for the Wild Rockies v. Cottrell,
632 F.3d 1127 (9th Cir. 2011) .........................................................................30
Alvarez v. Tracy,
773 F.3d 1011 (9th Cir. 2014) ..........................................................................15
American Broadcasting Companies, Inc. v. Aereo, Inc.,
573 U.S. 134 S. Ct. 2498 (2014) ...............................................................11, 24
Authors Guild v. Google, Inc.,
804 F.3d 202 (2d Cir. 2015),
cert. denied sub nom. Authors Guild v.
Google, Inc., 136 S. Ct. 1658 (2016).........................................................19, 20
Bird-B-Gone, Inc. v. Bird Barrier Am., Inc.,
2013 WL 11730662 (C.D. Cal. Mar. 20, 2013) ..............................................25
Buddy Systems, Inc. v. Exer-Genie, Inc.,
545 F. 2d 1164 (9th Cir. 1976) ........................................................................33
Cabell v. Markham,
148 F.2d 737 (2d Cir. 1945) ............................................................................12
Campbell v. Acuff–Rose Music, Inc.,
510 U.S. 569 (1994)...................................................................................19, 21
Capitol Records v. Redigi, No. 1:12-cv-00095,
Order Denying Motion for Preliminary Injunction
(S.D.N.Y. February 6, 2012) ...........................................................................29
Citibank N.A. v. Citytrust,
756 F.2d 273 (2d Cir.1985) .............................................................................23
Clean Flicks of Colo., LLC v. Soderbergh,
433 F. Supp. 2d 1236 (D. Colo. 2006) ...........................................................22
Columbia Pictures Indus., Inc. v. Miramax Films Corp.,
11 F. Supp. 2d 1179 (C.D. Cal. 1998) .............................................................21
iii

- A.665 -

Corley v. United States,
556 U.S. 332 (2009)...................................................................................12, 13
Credit Bureau Connection, Inc. v. Pardini,
726 F. Supp. 2d 1107 (E.D. Cal. 2010) ...........................................................34
Cybermedia, Inc. v. Symantec Corp.,
19 F. Supp. 2d 1070 (N.D. Cal. 1998).............................................................34
Design Furnishings, Inc. v. Zen Path, LLC,
2010 WL 5418893 (E.D. Cal. Dec. 23, 2010) .................................................34
eBay, Inc. v. MercExchange, LLC,
547 U.S. 388 (2006)...................................................................................24, 26
FCC v. Fox Television Stations, Inc.,
556 U.S. 502 (2009)........................................................................................32
FCC v. Pacifica Foundation,
438 U.S. 726 (1978).........................................................................................32
Flexible Lifeline Systems, Inc. v. Precision Lift, Inc.,
654 F.3d 989 (9th Cir. 2011) ............................................................................26
Fox Broadcasting Co. Inc. v. Dish Network, L.L.C.,
905 F. Supp. 2d 1088 (C.D. Cal. 2012) ...............................................25, 26, 29
Fox Broadcasting Co. v. Dish Network LLC,
747 F.3d 1060 (9th Cir. 2013) ....................................................................25, 29
Garcia v. Google, Inc.,
786 F.3d 733 (9th Cir. 2015) ............................................................................25
Goldie’s Bookstore, Inc. v. Super. Ct.,
739 F.2d 466 (9th Cir. 1984) ............................................................................26
Green v. U.S. Department of Justice,,
No. 1:16-cv-01492-EGS (D.D.C. filed on July 21, 2016)...............................18
Hanginout, Inc. v. Google, Inc.,
54 F. Supp.3d 1109 (S.D. Cal. 2014) ..............................................................23
Harper & Row Publishers v. Nation Enters.,
471 U.S. 539 (1986).........................................................................................21
Hibbs v. Winn,
542 U.S. 88 (2004)...........................................................................................12
Huntsman v. Soderbergh,
No. 02-M-1662 (MJW),
200 WL 1993421 (D. Colo. filed Aug. 29, 2002) .....................................14, 15
Hybritech Inc. v. Abbott Labs.,
849 F.2d 1446 (Fed.Cir.1988) .........................................................................31
iv

- A.666 -

Indep. Living Ctr. v. Maxwell–Jolly,
572 F.3d 644 (9th Cir.2009) ............................................................................31
Int’l Jensen, Inc. v. Metrosound U.S.A., Inc.,
4 F.3d 819 (9th Cir. 1993) ...............................................................................30
Kelly v. Arriba Soft,
336 F.3d 811 (9th Cir. 2003) .....................................................................10, 20
Lopez v. Brewer,
680 F.3d 1068 (9th Cir. 2012) .........................................................................30
LucasArts Entm't Co. v. Humongous Entm’t Co.,
815 F. Supp. 332 (N.D. Cal. 1993) ..................................................................30
MacDonald v. Chicago Park Dist.,
132 F.3d 355 (7th Cir. 1997) ...........................................................................31
MCA, Inc. v. Wilson,
667 F.2d 180 (2d Cir. 1981) ............................................................................21
MDY Industries, LLC v. Blizzard Entertainment, Inc.,
629 F.3d 928 (9th Cir. 2010) ...........................................................................18
Mead Johnson & Co. v. Abbott Labs.,
201 F. 3d 883 (7th Cir. 2000) ..........................................................................33
Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd.,
545 U.S. 913, 125 S. Ct. 2764 (2005) .............................................................17
MGM v. Honda Motor Co.,,
900 F. Supp. 1287 (C.D. Cal. 1995) ................................................................34
Oakland Trib., Inc. v. Chron. Pub. Co.,
762 F.2d 1374 (9th Cir. 1985) .........................................................................23
OG Int’l, Ltd. v. Ubisoft Entm’t,
No. C 11-04980 CRB,
2011 WL 5079552 (N.D. Cal. Oct. 26, 2011) .................................................30
Ossur Holdings, Inc. v. Bellacure, Inc.,
No. C05-1552JLR,
2005 WL 3434440 (W.D. Wash. Dec. 14, 2005) ............................................30
Overstreet v. United Bros. of Carpenters and Joiners of Am.,
409 F.3d 1199 (9th Cir. 2005) .........................................................................18
Perfect 10, Inc. v. Amazon.com, Inc.,
508 F.3d 1146 (9th Cir. 2007) .........................................................................20
Perfect 10, Inc. v. Google, Inc.,
653 F.3d 976 (9th Cir. 2011) ............................................................................25
v

- A.667 -

Petrella v. Metro-Goldwyn-Mayer, Inc.,
134 S. Ct. 1962 (2014).....................................................................................24
Pyro Spectaculars N., Inc. v. Souza,
861 F. Supp.2d 1079 (E.D. Cal. 2012) ............................................................28
Realnetworks, Inc. v. DVD Copy Control Ass'n,
641 F. Supp. 2d 913 (N.D. Cal. 2009).............................................................11
Reno v. ACLU,
521 U.S. 844 (1997).........................................................................................32
Rent-A-Center v. Canyon Television & Appliance Rental, Inc.,
944 F.2d 597 (9th Cir. 1991) ......................................................................26, 28
Rowan v. United States Post Office Dept.,
397 U.S. 728 (1970).........................................................................................32
Sammartano v. First Judicial Dist. Ct.,
303 F.3d 959 (9th Cir. 2002) ...........................................................................31
Sega Enters. Ltd. v. Accolade Inc.,
997 F.2d 1510 (9th Cir. 1992) .........................................................................10
Sierra Forest Legacy v.th
Rey,
577 F.3d 1015 (9 Cir. 2009) ..........................................................................31
Sony Computer Entm’t, Inc. v. Connectix Corp.,
203 F.3d 596 (9th Cir. 1999) ...........................................................................10
Sony Corp. v. Universal City Studios, Inc.,
464 U.S. 417 (1984)...........................................................................................9
Stone v. INS,
514 U.S. 386 (1995).........................................................................................12
Stormans, Inc. v. Selecky,
586 F.3d 1109 (9th Cir. 2009) ...................................................................31, 33
The Squaxin Island Tribe v. State of Washington,
781 F. 2d 715 (9th Cir. 1986) ..........................................................................33
Topline Corp. v. 4273371 Canada, Inc.,
2007 WL 2332471 (W.D. Wash. Aug. 13, 2007)............................................34
Universal City Studios,nd v. Corley,
Inc.
273 F. 3d 429 (2 Cir. 2001)...........................................................................11
U.S. c. Elcom Ltd.,,
203 F. Supp. 2d 1111 (N.D. Cal. 2002)...........................................................11
Valeo Intell. Prop., Inc. v. Data Depth Corp.,
368 F. Supp. 2d 1121 (W.D. Wash. 2005) ......................................................23
vi

- A.668 -

Warner Bros. Entertainment Inc. v. WTV Systems, Inc.,
824 F. Supp. 2d 1003 (2011) .....................................................................22, 23
Weinberger v. Romero-Barcelo,
456 U.S. 305 (1982)...................................................................................31, 33
Winter v. Natural Res. Defense Council, Inc.,
555 U.S. 7 (2008)....................................................................................1, 9, 24
STATUTES
15 U.S.C. § 1114(3)(A)................................................................................................7
17 U.S.C. § 101 ..........................................................................................................13
17 U.S.C. § 106(1), (4).................................................................................................9
17 U.S.C. § 110(11) ........................................................................................... passim
17 U.S.C. § 1203(b)(1)...............................................................................................18
17 U.S.C. § 1201(a)(1)(A) ...............................................................................9, 16, 18
F.R.C.P. § 65(c) .........................................................................................................33
OTHER AUTHORITIES
150 CONG. REC. H7654-01 (Sept. 24, 2004) ...............................................4, 5, 13, 16
150 CONG. REC. s11852-01 (Nov. 24, 2004) .......................................................16, 17
151 CONG. REC. H2114-01 (Apr. 10, 2005) ................................................................5
4 Nimmer on Copyright § 14.06[A][3][c] .................................................................23
H.R. REP. No. 108-670 (2004) .........................................................................4, 12, 13
H.R. REP. No. 109-33(I) .................................................................................... passim
U.S. COPYRIGHT OFFICE, Docket No. 2014-07, EXEMPTION TO PROHIBITION
ON CIRCUMVENTION OF COPYRIGHT PROTECTIONS SYSTEMS FOR
ACCESS CONTROL TECHNOLOGIES (2015)........................................................11

vii

- A.669 -

1
2

INTRODUCTION
Disney and three other Hollywood studios (“Disney”) have sued VidAngel, a

3 small Utah-based company that operates an online video streaming service designed
4 to enable lawful owners of movies to filter out objectionable content before viewing
5 those movies at home. According to Disney, VidAngel is a copyright pirate that
6 chooses to steal rather than “negotiate and pay for the rights they use.” See
7 Plaintiffs’ Memorandum of Points and Authorities (“MPAS”) at 1:22-23. Like
8 many of its movies, however, Disney’s story is pure fantasy.
9

When that story is fully told, three things are clear: (1) VidAngel is no

10 pirate. It spent over a third of its capital contributions to buy DVD and Blu-ray
11 discs sold by the studios and re-sells them to consumers, many of whom would not
12 otherwise watch the movies recorded on them. (2) Disney is no victim. It is a bully
13 that, acting in concert with other powerful companies, has long engaged in an
14 unlawful effort to block any online filtering services for the at-home viewing of
15 lawfully purchased movies. And (3) this lawsuit is about filtering, not piracy. It is
16 an elegantly disguised attempt by Disney’s lawyers to accomplish what its lobbyists
17 could not: obstruction of the Family Home Movie Act of 2005 (“FMA”).
18

Currently before this court is Disney’s motion for a preliminary injunction

19 seeking to shut down VidAngel’s operations pending resolution of this
20 litigation. That motion must be denied.
21

It is well settled that a party seeking the “extraordinary remedy” of a

22 preliminary injunction must “clearly show” that it is likely to succeed on the merits;
23 that it will suffer irreparable harm without an injunction; that the balance of equities
24 tips in its favor; and that an injunction is in the public interest. Winter v. Natural
25 Res. Def. Council, Inc., 555 U.S. 7, 24 (2008). Disney has not met—and cannot
26 meet—its burden on any (let alone all four) of those factors.
27

First, Disney cannot establish that any of its claims are likely to

28 succeed. VidAngel’s service is both legal and fair.

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-1VIDANGEL’S OPPOSITION TO PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION

1

It is legal because nothing VidAngel does can reasonably be construed as

2 infringement or circumvention under federal law. Any possible confusion on that
3 issue was conclusively resolved by Congress over a decade ago. The FMA
4 authorizes for-profit companies to stream lawfully purchased movies for home
5 viewing with objectionable content filtered out pursuant to each customer’s
6 individual choice. Disney vigorously opposed the FMA. They lost, but have
7 continued their war against filtering by refusing to license any company ever to
8 filter lawfully purchased content for home viewing. Without apparent irony, Disney
9 insists that VidAngel’s DVD-based business model is illegal, when it is Disney’s
10 misconduct that has effectively made that model the only way in which FMA11 authorized filtering can be meaningfully made available to American families.
12

VidAngel’s service is also fair. Contrary to Disney’s intimations and

13 accusations, every VidAngel customer must actually purchase a Disney movie
14 before it is streamed for their home viewing. If Disney’s view of the law were
15 adopted, anyone who wanted to purchase and have a filtered movie streamed for
16 home-viewing would be forced to pay Disney twice for that privilege: once for the
17 DVD and once to watch it. That’s unfair.
18

Second, Disney cannot show that VidAngel’s continued operation pending

19 trial would cause any irreparable harm. After receiving letters from VidAngel in
20 July and August of 2015, Disney (and all five other major studios) discussed
21 VidAngel’s service for almost a year before Disney (but not three other major
22 studios) elected to file this action. Less than two weeks after receiving VidAngel’s
23 first letter, Disney established a VidAngel account, and the major studios exchanged
24 over 1,300 emails related to VidAngel in the ten-plus months before suit. Disney
25 then waited several more months before seeking to enjoin VidAngel’s service. That
26 is not how Big Hollywood responds to pirates, however small, and it is not how they
27 react to those who traffic in DMCA circumvention technologies aimed at facilitating
28 piracy. In those cases, the studios have always acted quickly and in concert. Here,

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-2VIDANGEL’S OPPOSITION TO PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION

1 in contrast, Disney took a year, not to build a case against a pirate, but to decide how
2 to neutralize an act of Congress. Such extraordinary delay bars injunctive relief.
3

Finally, Disney cannot prove that the balance of hardships tips decisively in

4 its favor or that the public interest supports a preliminary injunction. To the
5 contrary, the balancing of hardships weighs strongly in favor of VidAngel, the only
6 participant in a nascent market being suppressed by Disney.

Moreover, as

7 evidenced by the half-million families it has already served, that market serves an
8 important public interest recognized by Congress when it passed the FMA.
9
10

FACTUAL BACKGROUND
This case is about filtering, not piracy. And Disney is going to lose, because

11 Congress said so. Specifically, the FMA authorizes for-profit companies such as
12 VidAngel to stream lawfully purchased movies for home viewing with objectionable
13 content filtered out pursuant to each customer’s individual choice. Disney and the
14 other major studios vigorously opposed the FMA. They lost, but have continued
15 their war against filtering by refusing to license any company to filter content.
16 Declaration of Jaime Marquart (“Marquart Dec.”), Ex. B at Tr. 83:20-84:21. That
17 de facto ban has necessitated VidAngel’s DVD-based business model, which makes
18 the filtering authorized by the FMA meaningfully available to American families.
19 To correct the highly misleading narrative set forth by Disney, we begin with a brief
20 summary of the relevant factual history.
21

A.

22

Prior to 2005, Disney Used Copyright Litigation to Prevent
Customers Who Purchased Movies for Home Viewing From
Filtering Objectionable Content.

23

Before 2005, the motion picture studios sued every service that tried to

24 provide filtered content to consumers. H.R. REP. No. 109-33(1) at 7 (2005). Like
25 today, Disney and its allies attempted to use scorched-earth litigation tactics to bully
26 smaller players. As the House Judiciary Committee noted with some incredulity,
27 Disney and its allies had sued companies lawfully providing filtering services under
28 the pre-FMA legal regime: “Testimony provided by the Register on June 17, 2004,

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-3VIDANGEL’S OPPOSITION TO PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION

1 makes clear that some parties to the suit should not face liability for their current
2 actions.” Id. at 5. See also H.R. REP. No. 108-670, at 3 (2004) (“The Committee is
3 . . . concerned that one service that has adopted a model that is already legal under
4 existing law is embroiled in litigation.”). The Committee also observed that if
5 Disney and its allies had allowed the “airline and broadcast versions [of movies to] .
6 . . be[] made available for sale to the public,” new legislation (which became the
7 FMA) might not have been needed. H.R. REP. No. 108-670, at 3 (2004).
Indeed, it was precisely because Big Hollywood refused to acknowledge the

8

9 moral rights of American families to filter objectionable content that Congress
10 changed the law by enacting the FMA over 11 years ago.
11

B.

12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

Congress Enacted the FMA to Ensure that Families Could Watch
Filtered Content in Private

There is no serious doubt concerning the purpose of the FMA. It was enacted
to ensure “that existing copyright and trademark law cannot be used to prevent a
parent from deciding what their children see in the privacy of their own home”
because Congress did “not take kindly to those who would presume to tell parents
how they decide what is best for their children.” 150 CONG. REC. H7654-01 (Sept.
24, 2004) (statement of Rep. Sensenbrenner).

Congress sought to “shield[]

companies that make movie-filtering systems from liability for copyrighting
infringement,” id., and “ensure” that technology that helps parents “determine what
their children see on the screen” would “not face continued legal challenges.” Id.
(statement of Rep. Smith).
Congress wanted to “allow for technology innovation to flourish without
having to face continued legal challenges” and without “requir[ing] limits to be
placed on content the studios develop.” Id. (statement of Rep. Cannon). At the
same time, though, Congress wanted to allow other use of “available technology to
skip over portions of a movie.” 151 CONG. REC. H2114-01 (Apr. 10, 2005)
(statement of Rep. Sensenbrenner). It was “time for the rights of parents not to be

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-4VIDANGEL’S OPPOSITION TO PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION

1 tied up in the courts any longer.” Id.
2

Congress believed strongly that families should be allowed to filter content

3 shown at home. The FMA’s House sponsor succinctly explained that need:
4
5
6
7

Just as the author of a book should not be able to force someone to read
that book in any particular manner or order, a studio or director should
not be able to force our children to watch a movie in a particular
way. No one can argue with a straight face it should be against the law
to skip over a few pages or even entire chapters of a book. So, too,
it should not be illegal to skip over a few words or scenes in a
movie. The Family Movie Act ensures that parents have such rights.

8 150 CONG. REC. H7654-01 (Sept. 28, 2004) (statement of Rep. Lamar
9 Smith). Congressman Cannon observed that the FMA was intended to allow parents
10 “to protect their children from the sex, violence, profanity and other objectionable
11 materials that are found in movies” by “clarifying the exemption in the copyright
12 infringement law allowing people to skip, mute or avoid scenes on DVDs.” Id.
13

As explained below, the legislative choices that Congress made in the FMA

14 were directly intended to prevent studios or directors from using litigation to block
15 parental filtering they disliked.
16

C.

17

Congress’s Decision to Authorize For-Profit Companies to Stream
Lawfully Purchased Movies for Filtered Home Viewing Was
Knowingly Made Over Disney’s Vigorous Opposition.

18

Disney and all the major studies—as well as the Motion Picture Association

19 of America (MPAA), and the Directors Guild of America (DGA)—fought intensely
20 to prevent the passage of the FMA. See, e.g., H.R. REP 109-33(1) at 70. Their
21 central grievance was the same as here, namely, that only Disney and its friends
22 should have the right to make “editorial decisions” about movies. The FMA was
23 problematic because it stopped studios from invoking copyright law to block
24 filtering they did not bless. Id.
25

As Disney’s Capitol Hill allies explained in a minority report reflecting the

26 reason for Disney’s opposition to the FMA: “The issue in the debate [is] who should
27 make editorial decisions about what movie content children see: parents or a for28 profit company,” H.R. REP. No. 109-33(1) at 69 (emphasis added). The minority

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-5VIDANGEL’S OPPOSITION TO PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION

1 report further noted that the FMA “does not require that filtering be done with the
2 permission of the content creator or owner, but rather creates an exemption from
3 copyright and trademark liability for filtering.” Id. at 74 (emphasis added). Indeed,
4 Congresswoman Watson memorably complained that the FMA would “shield[]
5 companies that make movie-filtering systems from liability for copyrighting
6 infringements.” Id. Exactly.
Then and now, Disney and its allies were and are motivated by the same goal:

7

8 to prevent any parental filtering.1 For Disney, home-viewing was and is an all or
9 nothing proposition: “[D]on’t let your children watch a movie unless you approve of
10 the content of the entire movie.” H.R. REP. No. 109-33(I) at 72. In Disney’s
11 preferred world, parents’ only recourse should be to rely on its G, PG, PG-13, R,
12 and NC-17 rating system, which according to Disney, “effectively enable[s] parents
13 to steer their children away from movies they consider inappropriate.” Id.2
In the considered judgment of Congress, that view was an unacceptable insult

14

15 to the right of parents to control content in their own home in accord with their
16 constitutionally-protected values. At the same time, Congress was acutely sensitive
17
18

1

The inability to completely control what is filtered underlies several of Disney’s
alleged “irreparable injuries.” See Cittadine Dec., ¶¶ 5, 15-17, 21-34. If that were
19
correct, Disney would be irreparably injured every time a movie-watcher closed his
eyes to avoid seeing a scary scene.
20
2
Of course, as the House Judiciary Committee wryly observed, Disney fails to
21
assert the moral rights of movie directors when such is inconvenient to Disney:
22
The Committee is aware of numerous motion pictures being edited for
screen size, content, and time purposes with or without the director’s
23
consent so that a motion picture can be displayed on the 48-3 aspect
ratios of standard definition televisions, or an airplane with
24
objectionable language remove, and on television channels in the
traditional 90 or 120-minute time slots. The Committee sees no
25
difference between the impact upon the moral rights of directors of
such modifications and someone wanting to prevent certain content
26
from being displayed on their television.
27
H.R. REP. No. 109-33(I) at 7.
28

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-6VIDANGEL’S OPPOSITION TO PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION

1 to the prospect that the studios and directors might never license third parties to
2 stream filtered content to consumers. Accordingly, the FMA was drafted to permit
3 third parties to filter without consent and without liability for intellectual property
4 claims the studios and directors might assert.
To that end, the FMA amended section 110 of the Copyright Act to provide

5

6 that “the following are not infringements of copyright: . . . (11) the making
7 imperceptible, by or at the direction of a member of a private household, of limited
8 portions of audio or video content of a motion picture, during a performance . . .
9 transmitted to that household for private home viewing, from an authorized copy of
10 the motion picture . . . if no fixed copy of the altered version of the motion picture is
11 created . . . .” 17 U.S.C. § 110(11) (emphasis added). The Lanham Act was
12 similarly amended. See 15 U.S.C. § 1114(3)(A).
13

D.

14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

In Furtherance of Its Unlawful Agreements with the DGA, Disney
Prohibits Filtering in All Streaming Licenses

Disney and other MPAA member studios have entered into an agreement with
the DGA (“DGA Agreement”) that prohibits all but very limited editing or cutting
of their major motion pictures and does not allow any form of filtering under the
FMA.

(Dkt. No. 11).

VidAngel has counter-complained against Disney for

antitrust violations with respect to the DGA Agreement, alleging that the agreement
is part of a concerted effort to prohibit the lawful provision of online filtering
services pursuant to the FMA. Id.
Disney’s witness, Tedd Cittadine, admitted that no plaintiff in this case has
ever licensed any VOD provider to filter streamed movies. Marquart Dec., Ex. B at
Tr. 83:20-84:21. He further admitted that his company’s standard VOD agreements
all have a term similar to the one in the VOD agreement between Sony and Google
Play. Marquart Dec., Ex B at Tr. 343:6-21. That agreement prohibits the VOD
provider from “mak[ing], or authoriz[ing] any others to make, any modifications,
deletions, cuts, alterations or additions” in or to any of Disney’s titles sold by the

- A.676 -

-7VIDANGEL’S OPPOSITION TO PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION

1 VOD provider. Harmon Dec., ¶ 48; Quinto Dec., ¶¶ 2-4, Ex. A. The terms of
2 service of VOD providers likewise prevent users from filtering Disney titles they
3 buy from a VOD provider. Meldal Dec., ¶¶ 26, 29, 30, Exs. G & H. To obviate this
4 motion, VidAngel offered to enter into a standard VOD license agreement with
5 Disney that allowed for filtering. Harmon Dec., ¶ 59; Quinto Dec., ¶¶ 2-4. Disney
6 (i.e., each plaintiff in this litigation) refused to consider its offer. Id. The reason is
7 simple. Disney does not want the market for filtering its licensed VOD titles to
8 exist.
9

E.

10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

Unable to Obtain a License from Disney, VidAngel Has Developed
an FMA Authorized Streaming Business Model That Enables
Customers Who Purchase Movies for Home Viewing to Filter
Objectionable Content.

The Declarations of VidAngel’s CEO, Neal Harmon, and its technological
expert, Dr. Sigurd Meldal, explain in detail how VidAngel lawfully acquires DVDs
of Disney’s titles, sells those discs to its users, and then streams filtered versions of
those titles to the lawful owners of those discs for private home viewing. Harmon
Dec., ¶¶ 20, 26, 61; Meldal Dec., ¶¶ 33-44. The declarations provide much more
detail on how the technology works, but the letters VidAngel sent to Disney and
other studios well over a year ago explained its basic service quite succinctly: (1)
VidAngel “purchases [a] disc for the customer and stores it in a physical vault;” (2)
using proprietary technology, it “streams” the contents of the disc to the customer
in a filtered format chosen by the customer; then (3) it “re-purchase[s] the disc at a
discount from the sale price. . .based on the length of time the customer has owned
the disc.” Harmon Dec., ¶ 22, Ex. B. VidAngel has spent over a third of its capital
contributions to buy digital video discs and Blu-ray discs (collectively, “DVDs”)
sold by the studios and re-sells them to consumers, many of whom would not
otherwise watch the movies recorded on them. Id., ¶ 63. To date, VidAngel has
spent over $1,200,000 to purchase content sold by the studios. Id. No fixed copy of
an altered work is ever created. Id. This service complies with the FMA.

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-8VIDANGEL’S OPPOSITION TO PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION

1
2

LEGAL STANDARD
A preliminary injunction is an “extraordinary remedy never awarded as of

3 right.” Winter, 555 U.S. at 24. Indeed, the remedy is appropriate only if the movant
4 proves “[1] that he is likely to succeed on the merits, [2] that he is likely to suffer
5 irreparable harm in the absence of preliminary relief, [3] that the balance of equities
6 tips in his favor, and [4] that an injunction is in the public interest.” Id. at 20.
7

When a plaintiff seeks to enjoin a technology, as Disney does here, a court

8 should exercise particularly great restraint. As the Supreme Court observed in the
9 seminal Sony Betamax case: “[t]he judiciary’s reluctance to expand the protections
10 afforded by copyright without explicit legislative guidance is a recurring
11 theme,” Sony Corp. v. Universal City Studios, Inc., 464 U.S. 417, 431 (1984), and
12 “it is Congress that has been assigned the task of defining the scope of the limited
13 monopoly that should be granted to authors . . . to give the public appropriate access
14 to their work product.” Id. at 429.
15

ARGUMENT

16 I.

DISNEY IS NOT LIKELY TO PREVAIL.

17

Disney is not likely to prevail on either its first claim for relief, for Copyright

18 infringement, 17 U.S.C. § 106(1), (4), or its second claim for relief, for violation of
19 the DMCA 17 U.S.C. § 1201(a)(1)(A). Knowing that it cannot demonstrate a
20 likelihood of success on its first and most important cause of action, for copyright
21 infringement, Disney focuses first on its second, DMCA claim, in its moving papers.
22 Not only does that argument put the cart before the horse, it reveals the inherent
23 infirmity in Disney’s logic. This Court’s analysis of the copyright infringement
24 claims should shed light on the larger purpose of the DMCA, which was intended to
25 protect against copyright infringement.
26
27
28

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-9VIDANGEL’S OPPOSITION TO PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION

1
2

A.

Disney Will Not Succeed on Its Reproduction and Public
Performance Copyright Claims.

In contending that VidAngel violates Disney’s exclusive rights to reproduce

3 and publicly perform its copyrighted works, Disney ignores that it gave up certain
4 rights, and the subsequent owners acquired other rights, when physical copies of
5 Disney’s DVDs were lawfully sold in the market.
6

Disney first argues that VidAngel’s intermediate copies violate its

7 reproduction right, citing only case law in which a defendant acted unlawfully by
8 making copies capable of being viewed by consumers. But, the case law draws a
9 clear distinction between unlawful copies, which can be viewed by consumers, and
10 lawful “intermediate” copies, which cannot. VidAngel does not make any copy that
11 a consumer could watch, even if given access to the relevant files. After decrypting
12 discs it owns, VidAngel creates intermediate files that are not capable of being
13 watched. (Intermediate files can be compared to computer source code, which is
14 unusable until it has been compiled and converted into object code.) VidAngel tags
15 the files for over 80 types of content, breaks them into approximately 1,300
16 fragments that contain no more than 10 seconds of content (and frequently less),
17 encrypts those fragments, and stores them in a secure, access-controlled location in
18 the cloud. Meldal Dec., ¶¶ 33-38. A consumer given access to the content at any
19 point before his or her disc purchase and selection of filters would be unable to
20 watch it. Such intermediate copies are thus not “copies” as defined by the
21 Copyright Act and, as a matter of law, do not give rise to infringement claims. Sega
22 Enters. Ltd. v. Accolade Inc., 997 F.2d 1510 (9th Cir. 1992); Sony Computer Entm’t,
23 Inc. v. Connectix Corp., 203 F.3d 596 (9th Cir. 1999); Kelly v. Arriba Soft, 336 F.3d
24 811 (9th Cir. 2003).
25

Moreover, the U.S. Copyright Office’s most recent triennial report to

26 Congress noted that both legislative history and a Central District of California
27 decision militated in favor of the creation of an exemption for making personal
28 copies of discs one owns (a practice known as “format-shifting”) before concluding

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-10VIDANGEL’S OPPOSITION TO PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION

1 that the policy judgments related to it “are complex and thus best left to Congress or
2 the courts.” U.S. COPYRIGHT OFFICE, Docket No. 2014-07, EXEMPTION TO
3 PROHIBITION ON CIRCUMVENTION OF COPYRIGHT PROTECTIONS SYSTEMS FOR
4 ACCESS CONTROL TECHNOLOGIES (2015). Various courts have addressed the issue
5 and noted that the owner of a disc may make a personal copy. Universal City
6 Studios, Inc. v. Corley, 273 F.3d 429 (2d Cir. 2001); Realnetworks, Inc. v. DVD
7 Copy Control Ass’n, 641 F. Supp. 2d 913, 942-43 (N.D. Cal. 2009); U.S. v. Elcom
8 Ltd., 203 F. Supp. 2d 1111, 1125 (N.D. Cal. 2002). And, here, Congress has spoken.
9

Nor is the streaming of filtered copies to customers who have purchased

10 DVDs a public performance. The Supreme Court has declared that a transmission
11 of a copyrighted program is not made to “the public” when it is made “to those who
12 act as owners or possessors of the relevant product.” Am. Broad. Cos. v. Aereo,
13 Inc., 134 S. Ct. 2498, 2510 (2014). Disney characterized that statement as dictum,
14 but the Court took pains to craft a “limited holding” that would not discourage “the
15 emergence or use of different kinds of technologies.” Id. It further suggested that
16 the public service right is not be infringed when – as with a filtering service – “the
17 user of a service pays primarily for something other than the transmission of
18 copyrighted works . . . .” Id. at 2511. Because VidAngel streams filtered versions
19 of motion pictures created at the direction of and owned by its customers, it is
20 simply untrue that VidAngel engages in public performances.
21

Disney’s argument requires the Court to find that Congress intended that

22 consumers be charged twice to watch a movie once. That is not the law. The FMA
23 requires that any consumer watching filtered content must first have lawfully
24 purchased a copy (i.e., a DVD), thus ensuring that the studios receive a royalty
25 payment. Then, says Disney, the consumer must pay a separate streaming fee to
26 watch that copy. But nothing in the FMA suggests that Disney should be paid twice
27
28

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-11VIDANGEL’S OPPOSITION TO PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION

1 when consumers watch a filtered movie once. 3 Indeed, that suggestion is especially
2 absurd given that Disney does not even provide the filtering service.
3

B.

4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23

In Any Event, the FMA Shields Companies Like VidAngel From
Liability Under any Provision of the Copyright Act.

Even assuming Disney is likely to succeed on the merits of its reproduction
and public performance claims, VidAngel has a strong FMA defense. The FMA
expressly provides that a third party may filter and transmit content as specified by a
lawful owner of a copy so long as a fixed copy of the altered content is not created.
VidAngel complies with those requirements. Disney’s argument that VidAngel’s
service necessarily violates its public performance right unless Disney chooses to
grant a license to VidAngel would improperly give Disney a veto power over the
FMA. If accepted by the Court, Disney’s argument would render the first, and now
most important, provision of the FMA (allowing a third party to filter and stream the
content of a disc owned by a consumer) meaningless. In actuality, Congress made
filtering legal without the studios’ consent.
The FMA must be read to give it purpose. As Judge Learned Hand observed,
“it is one of the surest indexes of a mature and developed jurisprudence . . . to
remember that statutes always have some purpose or object to accomplish.” Cabell
v. Markham, 148 F.2d 737, 739 (2d Cir. 1945). See also Stone v. INS, 514 U.S. 386,
397 (1995) (“When Congress acts to amend a statute, we presume it intends its
amendment to have real and substantial effect.”); Hibbs v. Winn, 542 U.S. 88, 101
(2004) (“A statute should be construed so that effect is given to all its provisions, so
that no part will be inoperative or superfluous, void or insignificant . . . .”); Corley v.

24

3

Congress intended that the studios would be compensated only through the
sale of copies of movies: “the bill would impose a private-sector mandate on
25
copyright owners. [It] would limit the right of copyright owners to collect
compensation under copyright law from persons using or manufacturing a
26
technology that enables making limited changes to a motion picture for a private
27 home viewing.” H.R. REP. No. 109-33(1) at 22; H.R. REP. No. 108-670, at 6
(2004).
28

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-12VIDANGEL’S OPPOSITION TO PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION

1 United States, 556 U.S. 332 (2009) (same).
2

Here, Congress enacted the FMA to provide a legislative solution to the

3 studios’ refusal to cooperate with third parties seeking to satisfy consumer demand
4 for filtered motion pictures. Congress intended that “directors may not control
5 every detail of how their works are displayed, particularly for a legal copy aired in
6 the privacy of a consumer’s home.” H.R. REP. No. 108-670, at 3 (2004). To ensure
7 that neither the studios nor the directors could deny the public the ability to enjoy
8 filtered content in the privacy of their homes, the FMA “does not require that
9 filtering be done with the permission of the content creator or owner, but rather
10 creates an exemption from copyright and trademark liability for filtering.” Id. at
11 76. Disney’s argument that a filtering service (like VidAngel) needs the identical
12 permissions it would have needed before the FMA’s enactment would render this
13 provision meaningless.
14

VidAngel streams “authorized” (not bootlegged) copies of physical discs that

15 it obtains on the legal market. Harmon Dec., ¶ 20. It is not required to obtain any
16 further authorization from Disney to engage in its filtering service. See 17 U.S.C.
17 110(11); 150 CONG. REC. H7654-01 (Sept. 28, 2004) (“The making imperceptible
18 must be ‘from an authorized copy of a motion picture.’ Thus, skipping and muting
19 from an unauthorized to ‘bootleg’ copy of a motion picture would not be exempt.”)
20

Disney does not dispute that VidAngel transmits filtered motion pictures for

21 private home viewing at the direction of members of private households. Nor can
22 it. Under the Copyright Act, “[t]o ‘transmit’ a performance. . .is to communicate it
23 by any device or process whereby images or sounds are received beyond the place
24 from which they are sent.” 17 U.S.C §101. “This legislation contemplates that any
25 altered performances of the motion picture would be made either directly by the
26 viewer or at the direction of a viewer where the viewer is exercising substantial
27 choice over the types of content they choose to skip or mute.” 150 CONG. REC.
28 H7654-01 (Sept. 28, 2004).

- A.682 -

That unquestionably occurs here, as VidAngel’s
-13-

VIDANGEL’S OPPOSITION TO PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION

1 customers select the filters that they wish to apply to each motion picture
2 transmitted to them for private viewing in the home. Meldal Dec., ¶¶ 37(b)(xi)-(xii).
3

Tellingly, Disney’s papers ignore entirely the one case actually construing the

4 FMA. 4 In Huntsman v. Soderbergh, No. 02-M-1662 (MJW) (D. Colo. filed Aug.
5 29, 2002), all the major studios counter complained against ClearPlay and 11 other
6 small businesses (“ClearPlay”) that employed a variety of technologies to allow the
7 public to watch filtered motion pictures. Disney alleged that:
8

[ClearPlay had found a] profitable business in providing to certain
audiences, bowdlerized versions of other peoples’ movies. Rather than
go to the effort . . . of . . . producing . . . their own movies . . . they
simply take the Studios’ movies and alter them without authorization
by removing the material they think this audience will not want.

9
10

11 Motion

Picture

Studio

Def.

Answer

and

Counterclaims,

Huntsman

v.

12 Soderbergh, No. 02-M-1662 (MJW), 2005 WL 1993421 (D. Colo. Aug. 17, 2005),
13 2002 WL 1993421, ¶ 23.
ClearPlay offered edited versions “of the Hottest Movies.” Id. at ¶ 62. Its

14

15 “editing service and software utilize[d] ’ClearPlay Filters’ and ‘ClearPlay Guides’
16 that [we]re created for each motion picture title.” Id. at ¶ 63. Disney alleged that
17 ClearPlay “created, duplicated, rented, sold, or otherwise publicly distributed
18 unlawfully edited” copies of movies (id. at ¶ 86) and that ClearPlay had additionally
19 “created . . . film specific software files which, when used in conjunction with
20 DVDs containing the Studios’ motion pictures, create unlawfully edited or
21 otherwise altered versions of the Studios’ motion pictures.” Id. at ¶ 115. Like
22 VidAngel’s technology, ClearPlay’s filtering technology did not create fixed copies
23 of the filtered works.
Because the action was still pending when the FMA took effect, the claims

24
25
26

4

That omission could not have resulted from oversight in that 3 of the 4
plaintiffs herein—Disney, Fox, and Warner Bros.—lost.
27
28

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-14VIDANGEL’S OPPOSITION TO PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION

1 against ClearPlay had to be dismissed. The court explained: “the effect of the
2 Family Movie Act is that Congress has made a policy decision that those who
3 provide the technology to enable viewers to edit films for their private viewing
4 should not be liable to the copyright owners for infringing their copyright
5 protections or to the directors for the Lanham Act claims, and that removes this
6 court’s jurisdiction over any further controversy. . . .” 2005 WL 1993421, at *2
7 (emphasis added).
8

The upshot is quite simple: if a filtering service complies with the FMA, that

9 service need not satisfy any other provisions of the Copyright Act: “The Committee
10 strongly believes that subject to certain conditions, copyright and trademark law
11 should not be used to limit a parent’s right to control what their children watch in
12 the privacy of their own home.” H.R. REP. No. 109-33(1) at 5.
13

Those “certain conditions” were spelled out in the House Report (as well as in

14 the text of the statute itself): “This new subsection ensures that U.S. copyright law
15 does not prohibit . . . the use of any filtering service or technology that mutes or
16 skips content, provided the service or technology: 1. ‘is confined to private, in17 home use; 2. ‘for the household of the purchasing consumer only; and 3. ‘does not
18 create a fixed copy of the alternate version.” Id. at 24 (emphasis added). Further,
19 “technology used to filter certain material out of movies for private viewing would
20 not constitute a violation of copyright or trademark law.” Id. at 21 (emphasis
21 added). The Report explained what was not exempted: “The Act does not create an
22 exemption for actions that result in fixed copies of altered works.” Id. at 7.
23

Moreover, Disney’s argument that “VidAngel’s server copy segments are

24 fixed because they are [allegedly] stored for more than a transitory duration” is
25 legally and factually meritless. MPAS at 22, fn. 11. The term “fixed copy” in the
26 FMA clearly is distinguishable from intermediate copies made incident to the
27 filtering process, and it cannot be reasonably construed as prohibiting the creation of
28 such copies. See 17 U.S.C. § 110(11); Alvarez v. Tracy, 773 F.3d 1011, 1025 (9th

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-15VIDANGEL’S OPPOSITION TO PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION

1 Cir. 2014) (Kozinski, J., dissenting) (discussing the doctrine of expressio unius est
2 exclusio alterius). Congress’ intent was to prohibit third parties from creating and
3 selling a single fixed, altered version of a motion picture to the public at large:
4

There is a basic distinction between a viewer choosing to alter what is
visible or audible when viewing a film, the focus of this legislation, and
a separate entity choosing to create and distribute a single, altered
version to members of the public. The section 110(11) exemption only
applies to viewer directed changes to the viewing experience, and not
the making or distribution of actual altered copies of the motion
picture.

5
6
7

8 150 CONG. REC. S11852-01 (Nov. 24, 2004); see also 150 CONG. REC. H7654-01
9 (Sept. 24, 2004).
10

C.

11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27

VidAngel’s Service Does Not Violate the Copyright Act’s
Anticircumvention Provisions Found in the DMCA.

Disney contends that VidAngel circumvents access control measures in
violation of § 1201(a)(1)(A) of the Copyright Act. 17 U.S.C. § 1201(a)(1)(A). This
statutory provision was added to the Copyright Act as part of the Digital Millennium
Copyright Act (“DMCA”). As such, Disney refers to VidAngel’s alleged violation
of 17 U.S.C. § 1201(a)(1)(A) as its DMCA claim.
The DMCA claim asserted by Disney is specious. To be sure: because
Disney encrypts DVDs “to prevent unauthorized access to their content on Discs,”
MPAS at 12:8-9, and VidAngel decrypts them, Disney’s argument has superficial
appeal. The argument, however, is based on a fundamental misapprehension of both
the DMCA’s text and VidAngel’s service.
Section 1201(a)(3)(A) of the Copyright Act expressly defines what it means
“to circumvent a technological measure” as, inter alia, “to decrypt an encrypted
work. . . without the authority of the copyright owner.” 17 U.S.C. § 1201(a)(3)(A).
But VidAngel buys authorized copies of Disney’s DVDs. Harmon Dec., ¶¶ 20, 61;
Meldal Dec., ¶ 33. And it sells them to its customers, who are able to view (with
filtering) what they have purchased. Id. That is not circumvention.

28

- A.685 -

Contrary to Disney’s contention, the FMA legislative history does not evince
-16VIDANGEL’S OPPOSITION TO PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION

1 a clear intent to prohibit VidAngel from decrypting DVDs for the purpose of
2 accessing a disk to filter audio and visual content. That history merely shows that
3 Congress was aware that “some copy protection technologies rely on matter placed
4 into the audio or video signal” and the FMA “does not allow the skipping of
5 technologies or other copy-protection-related matter for the purpose of defeating
6 copy protection.” 150 CONG. REC. S11852-01 (Nov. 24, 2004) (emphasis
7 added). On the other hand, “it is expected that skipping and muting of content in the
8 actual motion picture will be skipped or muted at the direction of the viewer based
9 on that viewer’s desire to avoid seeing or hearing the action or sound in the motion
10 picture.” Id. Thus, in balancing the legitimate interests of the viewer and the
11 copyright holder, Congress expressed its intention that the FMA’s safe harbor not be
12 misused for the purpose of thwarting “copy protection technologies.” Id.
13

At most, what VidAngel does could be considered as decrypting content for

14 the purpose of allowing it to be viewed in another way, a procedure known as re15 formatting or “space shifting.” VidAngel does so at the request of disc purchasers
16 who elect to have their DVD content streamed to them rather than receiving the
17 physical discs. As former Solicitor General Don Verrilli assured the Supreme Court
18 in Grokster while representing the major record labels and movie studios, his clients
19 agreed that space shifting is legal. Transcript of Oral Argument at 12, Metro20 Goldwyn-Mayer Studios, Inc. v. Grokster, 545 U.S. 913 (2005) (No. 04-480).
21

Moreover, the DMCA should not be construed so broadly as to gut the FMA

22 of its effectiveness. It is undisputed that, when the FMA was enacted in April 2005,
23 the only existing technology capable of allowing consumers to receive filtered
24 content streamed to them required that DVDs be decrypted and intermediate copies
25 be made. Marquart Dec., Ex A at Tr. 79:7-80:24, 80:19-82:14; Meldal Dec., ¶¶ 1926 23.) While Disney argues this is “irrelevant as a legal matter” (MPAS at 13:7),
27 Congress surely did not intend to enact an impotent statute that would have no
28 practical effect. To the contrary, “[t]he plain meaning of [the FMA] exempts from

- A.686 -

-17VIDANGEL’S OPPOSITION TO PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION

1 actions brought under U.S. copyright and trademark law the ‘making imperceptible
2 . . . of limited portions of audio or video content provided no fixed copy is created.”
3 H.R. REP 109-33(I) at 6-7 (emphasis added). That exemption is limited only in that
4 “[t]he Act does not create an exemption for actions that result in fixed copies of
5 altered works.” Id. The Chair of the House Judiciary Committee explained that,
6 “this legislation, the Family Movie Act, clarifies that existing copyright and
7 trademark law cannot be used to prevent a parent from utilizing available
8 technology to skip over portions of a movie they may find objectionable.” 151
9 CONG. REC. H2114-01 (Apr. 10, 2005) (statement of Rep. Sensenbrenner).
Tellingly, Disney defends its DMCA claim based principally on MDY

10

11 Industries, LLC v. Blizzard Entertainment, Inc., 629 F.3d 928, 952-55 (9th Cir.
12 2010) (“MDY”). But MDY simply did not turn on 17 U.S.C. § 1201(a)(1)(A). And,
13 perhaps more importantly, the MDY court noted the tension between antitrust law
14 and the doctrine of copyright misuse; indeed, it expressly cautioned against DMCA
15 application when, as here, antitrust issues are present. Id. at 951. 5
In any event, the remedies section of the DMCA portion of the Copyright Act

16

17 makes clear that to redress violations, courts “may not impose a prior restraint on
18 free speech,” 17 U.S.C. § 1203(b)(1), which is essentially what Disney seeks, and
19 courts should be especially wary of imposing such a restraint at a preliminary stage.
20 Cf. Overstreet v. United Bros. of Carpenters and Joiners, 409 F.3d 1199, 1218 (9th
21 Cir. 2005). Even if this provision is ultimately (and incorrectly) found to support an
22 award of damages, the DMCA ought not to serve as the basis for enjoining
23 VidAngel’s service.
24
5

The Court should act with restraint for the additional reason that the Electronic
Frontier Foundation recently filed suit in the District of Columbia challenging the
26 constitutionality of the precise DMCA provision, 17 U.S.C. § 1201(a)(1)(A), at
issue herein. Ex. A to Request for Judicial Notice (“RJN”), Green v. U.S. Dep’t of
27 Justice, Case No. 1:16-cv-01492-EGS, (D.D.C. filed on July 21, 2016).
25

28

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-18VIDANGEL’S OPPOSITION TO PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION

D.

1
2

Even if VidAngel Is in Technical Violation of the Law, Its Service
Is a Protected Fair Use.

If VidAngel’s service is found to be in technical violation of the FMA, it is

3 nonetheless entitled to protection as a “fair use.” As the Supreme Court recently
4 explained, “[t]he ultimate goal of copyright is to expand public knowledge and
5 understanding. . .. [W]hile authors are undoubtedly important intended beneficiaries
6 of copyright, the ultimate, primary intended beneficiary is the public, whose access
7 to knowledge copyright seeks to advance by providing rewards for authorship.”
8 Authors Guild v. Google, Inc., 804 F.3d 202, 212 (2d Cir. 2015), cert. denied 136 S.
9 Ct. 1658 (2016); see also Campbell v. Acuff–Rose Music, Inc., 510 U.S. 569, 575
10 (1994) (Fair Use furthers “copyright’s very purpose, ‘[t]o promote the Progress of
11 Science and useful Arts.’”). To determine whether a particular use of a work is fair,
12 the factors considered: (1) the purpose and character of the use, including whether it
13 is of a commercial nature 6 or is for nonprofit educational purposes; (2) the nature of
14 the copyrighted work; (3) the amount and substantiality of the portion used in
15 relation to the copyrighted work as a whole; and (4) the effect of the use upon the
16 potential market for or value of the copyrighted work. Campbell at 576-77; 17
17 U.S.C. § 107. The Court should also consider the clear legislative intent to make
18 filtering services such as VidAngel’s service available to the public and the public
19 interest in allowing children to be protected from inappropriate content.
20

1.

VidAngel’s Service Is Highly Transformative.

The central inquiry in evaluating the purpose and character of the use of a

21

22 copyrighted work is to determine whether and to what extent the new work is
23 “transformative.” Campbell, 510 U.S. at 579. A work is “transformative” when it
24 does not “merely supersede the objects of the original creation” but rather serves a
25
26

6

Under the FMA, it is irrelevant that VidAngel is a for-profit business. See H.R.
REP. No. 109-33(1) at 69-74; 17 U.S.C. § 110(11).
27
28

- A.688 -

-19VIDANGEL’S OPPOSITION TO PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION

1 new and different function. Id.; Perfect 10, Inc. v. Amazon.com, Inc., 508 F.3d
2 1146, 1164 (9th Cir. 2007).
VidAngel’s filtering service transforms films that many people find offensive

3

4 or inappropriate for children into family-friendly content as judged by each viewer.
5 By its very nature, VidAngel’s service is transformative in that it alters the content
6 of the works as seen by different viewers in different ways. Each user is privately
7 streamed a customized version of the work that no longer contains the content the
8 viewer finds objectionable. The vast majority of VidAngel users would not watch
9 the content streamed to them without filters. Harmon Dec., ¶¶ 37-40. VidAngel
10 makes the unwatchable watchable, thus furthering congressional intent to provide
11 families with access to content they otherwise would not consume, and creates a
12 new audience for the filtered works. VidAngel’s highly transformative service
13 weighs heavily in favor of finding fair use.
14

2.

Plaintiffs’ Works Are Especially Amenable to Fair Use

“Published works are more likely to qualify as fair use [than unpublished

15

16 works] because the first appearance of the artist’s expression has already occurred.”
17 Kelly v. Arriba Soft Corp., 336 F.3d 811, 820 (9th Cir. 2003).
VidAngel filters exclusively published works. Because the copyright owner’s

18

19 expression of those works occurs before VidAngel’s use, this factor favors fair use.
20

3.

21
22
23
24
25
26
27
28

VidAngel’s Users May Access Plaintiffs’ Works Only for
Transformative Purposes

In determining whether a use is fair, courts assess the amount and
substantiality of the copyrighted work that is “made accessible to the public for
which it may serve as a competing substitute.” Authors Guild, 804 F.3d at 221-222.
VidAngel’s service allows individual users to control how much of a film is made
imperceptible. Each user is required to apply at least one (substantive) filter, and
VidAngel’s system never allows the public to access any original, unaltered work.
VidAngel’s data show that the overwhelming majority of users (96 percent) apply

- A.689 -

-20VIDANGEL’S OPPOSITION TO PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION

1 multiple filters. Harmon Dec., ¶ 37. Thus, the amount of Plaintiffs’ works made
2 accessible is determined by each user and is always limited to the amount necessary
3 to create that particular user’s desired filtered work. VidAngel users never watch
4 exact copies of the original films. Moreover, VidAngel’s filtered content is not a
5 substitute for Plaintiffs’ original works.
6

4.

7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27

VidAngel’s Lawful Filtering Service Increases Disney’s Disc
Sales.

The “single most important element of fair use” is the impact of the use on the
traditional market for the copyrighted work. Harper & Row Publishers v. Nation
Enters., 471 U.S. 539, 566 (1986). To defeat a claim of fair use, the copyright
holder must point to the market harms that result from secondary use substituting for
the original work. See Campbell, 510 U.S. at 591 (“cognizable market harm” is
limited to “market substitution”). This factor “requires the Court to strike a balance
between the benefit the public will derive if the use is permitted and the personal
gain the copyright owner will receive if the use is denied.” Columbia Pictures
Indus., Inc. v. Miramax Films Corp., 11 F. Supp. 2d 1179, 1189 (C.D. Cal. 1998)
(quoting MCA, Inc. v. Wilson, 667 F.2d 180, 183 (2d Cir. 1981)).
VidAngel does not harm the market for unfiltered movies because filtered
movies are not a substitute for them. As a rule, VidAngel cannot offer filtered
movies until after the unfiltered originals have been shown in theaters, released on
collector’s edition discs, and streamed to audiences. See Harmon Dec., ¶¶ 29-30.
Because VidAngel does not make fixed copies of filtered works, it cannot compete
in the pay or free television market. VidAngel’s filtering service increases the
market for Disney’s works. Over 51% of VidAngel customers would not watch
those movies without filtering.

Harmon Dec., ¶¶ 37-40.

VidAngel lawfully

purchases thousands of discs to resell to these unique customers. In fact, VidAngel
has spent over one-third of its capital contributions to purchase discs. Id., ¶ 61.

28

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-21VIDANGEL’S OPPOSITION TO PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION

5.

1
2
3
4
5
6
7
8
9

Disney’s reliance on Clean Flicks of Colo., LLC v. Soderbergh, 433 F. Supp.
2d 1236 (D. Colo. 2006) is inapposite because it was not decided under the FMA.
Clean Flicks made fixed copies of edited films, which is expressly prohibited by the
FMA. Id. at 1240. The FMA was also inapplicable because CleanFlicks, rather
than its customers, decided what to filter. Here, no fixed copy of the filtered work is
ever made and each user chooses what to filter. Accordingly, VidAngel’s service is
clearly fair use to the extent it is not exempted by the FMA.
II.

DISNEY CANNOT DEMONSTRATE IRREPARABLE HARM.
A.

10
11
12
13
14
15
16
17
18
19
20
21
22
23
24

The Clean Flicks Fair Use Analysis Is Inapposite

Disney’s Year-and-a-Quarter Delay Demonstrates That an
Injunction Is Unnecessary to Prevent Immediate and Irreparable
Harm.

Disney relies heavily on Warner Bros. Entertainment Inc. v. WTV Systems,
824 F. Supp. 2d 1003 (C.D. Cal. 2011), to support its irreparable harm argument.
But in that case, the plaintiffs – who were represented by Disney’s counsel herein,
Glenn Pomerantz and Kelly Klaus – brought suit against an online DVD rental
service called Zediva within 18 days of Zediva’s launch. Even so, counsel took
pains to explain their delay in seeking an injunction.7 Significantly, they alleged
that because Zediva had 137 titles available for rent, it posed an imminent threat.
By comparison, VidAngel had over 750 titles available when it notified 16 studios
and networks, including Disney, of its service with not one but two letters in July
and August of 2015. VidAngel explained that it: (1) “purchases the DVD or Blu-ray
disc for the customer and stores it in a physical vault;” (2) “streams” the contents of
the disc to the customer in a filtered format chosen by the customer; and (3) then
7

In WTV Systems, plaintiffs’ counsel submitted a declaration emphasizing the
speed with which plaintiffs filed suit. RJN Ex. B. When the parties stipulated to
25
expedited discovery, the stipulation recited that the additional time required for
26 discovery would not evidence any delay. Here, however, the parties stipulated only
that the continuance of the preliminary injunction hearing from October 24 to
27 October 31, 2016, would not constitute evidence of delay.
28

- A.691 -

-22VIDANGEL’S OPPOSITION TO PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION

1 “re-purchase[s] the disc at a discount from the sale price. . .based on the length of
2 time the customer has owned the disc.” Harmon Dec., ¶ 22, Ex. B. VidAngel added
3 that it had grown from 43 to 4848 users in just under six months (a 10,000% growth
4 rate) and wished to buy directly from studios “to scale its business.” Id. The letters
5 invited Disney to access its service, ask questions, and express any objections.
6 Notwithstanding that the harm alleged Disney alleges herein is the same as in WTV
7 Systems, Disney took almost a year and a quarter longer to seek an injunction.
8

Delay in requesting a preliminary injunction is inconsistent with a claim of

9 irreparable harm. Oakland Trib., Inc. v. Chron. Pub. Co., 762 F.2d 1374, 1377 (9th
10 Cir. 1985) (“long delay before seeking a preliminary injunction implies a lack of
11 urgency and irreparable harm.”); 4 MELVILLE B. NIMMER & DAVID NIMMER,
12 NIMMER ON COPYRIGHT § 14.06[A][3][c] (unreasonable delay can defeat irreparable
13 injury and the delay “need not be great”). Denying an unreasonably delayed request
14 for injunctive relief furthers the purpose of such relief – to maintain the status quo.
15 See, e.g., Citibank N.A. v. Citytrust, 756 F.2d 273 (2d Cir. 1985) (10-week delay
16 following notice of infringement was unreasonable); Hanginout, Inc. v. Google,
17 Inc., 54 F. Supp. 3d 1109, 1132–33 (S.D. Cal. 2014) (seven-month delay in filing
18 suit, and even more before seeking preliminary injunction, was inexcusable); Valeo
19 Intell. Prop., Inc. v. Data Depth Corp., 368 F. Supp. 2d 1121, 1128 (W.D. Wash.
20 2005) (three-month delay belied claims of irreparable harm).
21

Disney seemingly learned of VidAngel in December 2014, when it apparently

22 called provisions in its agreements with Google to Google’s attention, thus causing
23 Google to alter the Chromecast technology to render VidAngel’s service
24 unworkable. Harmon Dec., ¶¶ 10-13. Evidently to hide evidence of that, Plaintiffs
25 refused to search for or produce any e-mail communications related to VidAngel
26 sent before late July 2015. Marquart Dec., Ex. E. Disney’s further year-and-a27 quarter delay in scheduling a preliminary injunction hearing after receiving
28 VidAngel’s July 2015 letter negates its claims of irreparable harm. After receiving

- A.692 -

-23VIDANGEL’S OPPOSITION TO PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION

1 VidAngel’s first letter, Disney opened a VidAngel account on August 6, 2015.
2 Harmon Dec., ¶ 22, Ex. C. Also on August 6, 2015, 18 mostly legal employees of
3 Plaintiffs and other MPAA studios and 7 MPAA lawyers exchanged e-mails and
4 messages about VidAngel. Marquart Dec., Ex. D. On August 20, 2015, Plaintiffs e5 mailed renowned litigation counsel, Tom Nolan of Skadden Arps, about VidAngel.
6 Id. On August 28, 2015, Plaintiffs e-mailed Kelly Klaus, Glen Pomerantz and
7 Jonathan Blavin of Munger Tolles, about VidAngel. Id. In all, 59 employees of
8 Plaintiffs, the MPAA, or other MPAA studios exchanged 124 messages concerning
9 VidAngel in August 2015 alone. Id. Plaintiffs’ in-house counsel and outside
10 counsel discussed VidAngel over 1,300 times by e-mail alone before filing suit. Id.
11 Yet, Plaintiffs failed to send any cease-and-desist letter or other objection to
12 VidAngel prior to filing. Harmon Dec., ¶ 22. Their delay prejudiced VidAngel and
13 it users.

Hundreds of thousands of families now rely on VidAngel’s filtering

14 service, and VidAngel invested millions in its distribution model (and enriched
15 Plaintiffs by doing so), in reliance upon the studios’ silence. Harmon Dec., ¶ 30.
The authority Disney cites to justify its delay is inapposite. The primary case

16

17 Disney quotes to explain its delay – Petrella v. Metro-Goldwyn-Mayer, Inc., 134 S.
18 Ct. 1962 (2014) – did not involve a preliminary injunction and did not address
19 irreparable harm. At issue was whether asserting a laches defense precluded the
20 issuance of a permanent injunction. Particularly after eBay and Winter – which
21 require a showing of imminent actual harm – Plaintiffs’ delay negates any claim of
22 irreparable harm. 8
23
24
25
26
27
28

8

Disney will likely rely upon another case in which they were involved,
American Broad. Cos., 2012 WL 3854042 (S.D.N.Y. 2012), in which delay of
roughly one year was excused, but only because defendant’s business relied on an
untested technology perceived as not viable. Further, (1) most of the delay occurred
while Aereo operated in “stealth” mode before its public announcement; (2) when it
finally announced itself, the plaintiffs were unsure whether Aereo was viable; (3)
Aereo operated in an invitation only, beta-testing phase for much of the delay; (4)
Aereo loomed large only after it announced the commercial launch of its service in
(footnote continued)

- A.693 -

-24VIDANGEL’S OPPOSITION TO PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION

B.

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24

Disney’s Alleged Harms Are Caused by the FMA, Not VidAngel.

A plaintiff must also present evidence of actual harm suffered as a direct
result of the defendant’s actions. Fox Broadcasting Co. v. Dish Network, L.L.C.,
905 F. Supp. 2d 1088, 1110 (C.D. Cal. 2012), aff’d 747 F.3d 1060 (9th Cir. 2013);
see also Perfect 10, Inc. v. Google, Inc., 653 F.3d 976, 982 (9th Cir. 2011) (Perfect
10 did not prove a sufficient causal connection between irreparable harm to its
business and Google’s search service). If there is not a sufficient causal nexus
between the alleged irreparable injury and the alleged wrongdoing, an injunction
will not issue. Garcia v. Google, Inc., 786 F.3d 733, 748 (9th Cir. 2015) (citing
Perfect 10, 653 F.3d at 982); Bird-B-Gone, Inc. v. Bird Barrier Am., Inc., 2013 WL
11730662, at *6 (C.D. Cal. Mar. 20, 2013).
In Dish, Fox alleged that Dish’s “Autohop” service, which allowed
subscribers to skip commercials in recorded Fox television shows, infringed. 905 F.
Supp. 2d at 1095. To ensure Autohop functioned properly, Dish made “quality
assurance” (“QA”) copies of Fox’s shows. Id. Fox sought a preliminary injunction,
arguing that the QA copies resulted in irreparable harm by causing a “loss of
control” of Fox’s copyrights. The court found that Fox did not establish irreparable
harm caused by Dish. Id at 1110. It held that the alleged harms flowed from the
non-infringing ad-skipping function the copies facilitated. Id. The Ninth Circuit
affirmed: “[i]n refusing to enjoin Dish from creating these [QA] copies, the district
court correctly concluded that the harms Fox identified—including ‘loss of control
over its copyrighted works and loss of advertising revenue’—did not ‘flow from’ the
quality assurance copies themselves, but from the entire Autohop program.” Fox
Broad. Co. v. Dish Network LLC, 747 F.3d at 1072. It concluded, “the market harm

25

New York City, one month before suit; and (5) Aereo admitted that it would not
26 have changed its business plan if it had received a cease-and-desist letter and was
gearing up for litigation. Id. at 28. Here, VidAngel was publicly launched in July
27 2015 and had considerably more subscribers than even Aereo had when ABC sued
it.
28

- A.694 -

-25VIDANGEL’S OPPOSITION TO PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION

1 that Fox and its amici allege results from the automatic commercial-skipping, not
2 the recording of programs …..” Id. at 1069.
3

Here, legitimate filtering under the FMA, not infringement by VidAngel,

4 causes the “harms” alleged by Disney. First, Disney alleges harm to its right to
5 control how, when and through which channels consumers view its works. By
6 definition, filtering under the FMA occurs without Disney’s consent, and Disney
7 may not control how others view those works.

Second, Disney alleges that

8 VidAngel undermines its ability to license unfiltered content for streaming, but the
9 FMA does not require a license to stream filtered content. Third, Disney claims
10 VidAngel disrupts its ability to secure and protect its content, but the FMA allows
11 the transmission of filtered content. Thus, Disney does not have any right to review
12 and approve VidAngel’s service (which is very secure in any event). Meldal Dec.
13 ¶¶ 34, 38-39. Fourth, Disney argues that VidAngel could prevent the development
14 of the online streaming market through inferior user-viewing experiences. Again,
15 the FMA allows filtered transmissions without Disney’s consent.

Moreover,

16 VidAngel’s streaming service is independently rated as superior to Disney’s (and to
17 that of any other third party streaming service). Harmon Dec., ¶ 27.
18

C.

19

Disney’s irreparable injury analysis depends on a premise invalidated by the

Disney’s Alleged Harms Are Speculative.

20 Supreme Court: that a presumption of irreparable harm applies to copyright
21 infringement claims. See eBay Inc., 547 U.S. at 392-3; Flexible Lifeline Sys., 654
22 F.3d at 995-996 (9th Cir. 2011); Dish Network, 905 F. Supp. 2d at 1109 (requiring
23 an “independent showing” that plaintiff was likely to suffer irreparable harm). A
24 threatened loss of prospective customers, goodwill or reputation supports irreparable
25 harm only if it is not speculative. Rent-A-Center v. Canyon Television & Appliance
26 Rental, Inc., 944 F.2d 597, 603 (9th Cir. 1991); Goldie’s Bookstore, Inc. v. Super.
27 Ct., 739 F.2d 466, 472 (9th Cir. 1984) (rejecting the plaintiff’s claimed lost goodwill
28 and “untold” customers as too speculative).

- A.695 -

-26VIDANGEL’S OPPOSITION TO PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION

1

Disney’s “evidence” in support of its four alleged irreparable harms is

2 supplied only by Tedd Cittadine who at his deposition could offer no evidence that
3 VidAngel was actually causing any of the hypothetical harms to which he testified.
4 VidAngel has provided its disc-based filtered streaming service since the beginning
5 of 2015 and over 500,000 families have now used it. Harmon Dec., ¶¶ 25, 30.
6 Logic suggests that if any of the speculated harms were real, there would now be
7 evidence of actual injury. Yet, Cittadine had no evidence: (1) of actual harm
8 caused by VidAngel to Disney’s “control of its copyrights” (Marquart Dec., Ex. A at
9 Tr. 196:8-13, 197:18-25); (2) that any VOD provider actually complained about
10 VidAngel or that VidAngel ever even came up in negotiations with them (id., Ex. B
11 at Tr. 227:23-228:19); (3) that VidAngel undermined Disney’s ability to secure and
12 protect its content online (id., Ex. A at Tr. 240:14-24); or (4) that VidAngel hindered
13 Disney’s development of the on-demand streaming market through inferior user
14 experiences.

Id. at 263:11-18.9

Cittadine also acknowledged that the four

15 hypothetical “harms” existed when Disney received VidAngel’s July 2015 letter. 10
Cittadine’s hypotheticals are based upon a false assumption that VidAngel is

16

17 a copyright pirate, like the filing-sharing networks shut down by courts. When
18
19
20
21
22
23

9

Owing to the admission that Plaintiffs have no evidence of inferior viewer
experience, Disney cites to the Ehler declaration, Ex. L, for the proposition that
VidAngel’s social media pages reflect a few consumer complaints of “poor
streaming quality.” Exhibit L reflects just 9 complaints from January 2016 through
July 2016. In almost all the screen captures, VidAngel responds to the consumer
issue and promises to quickly resolve it, which is not “evidence” of any widespread
consumer issue with VidAngel. To the contrary, VidAngel’s service is growing
precisely because it provides a quality viewing experience. Harmon Dec., ¶¶ 26-28.
10

Cittadine admitted that Fox would have had the same concern about
VidAngel’s security in July 2015 that it did in June 2016, when it applied for a
25 preliminary injunction. Marquart Dec., Ex. A at Tr. 245:18-246:21. Cittadine
admitted that VidAngel offered to allow Fox to look at its security architecture in
26 July of 2015. Id. at 244:13-18. Cittadine also admitted that he did not know
whether Fox ever took VidAngel up on that offer (in fact, Fox did not). Id. at
27 244:25-245:7.
24

28

- A.696 -

-27VIDANGEL’S OPPOSITION TO PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION

1 asked for Disney’s evidence that VidAngel was causing harm to its right to control
2 its intellectual property, Cittadine referenced “piracy that costs our business billions
3 of dollars.” Marquart Dec., Ex. A at Tr. 195:19-23. Cittadine stated that: (1)
4 “piracy obviously encourages people to watch consumer content without paying for
5 it” (id. at 198:17-19); (2) “piracy undermines our ability to try and build a legitimate
6 marketplace” (id. at 199:9-12); and (3) piracy “challenges us when we’re trying to
7 negotiate business deals with our clients.” Id. at 200:16-20.
Plaintiffs have now demonstrated that the claimed irreparable injuries are

8

9 purely pretextual. After Cittadine declared that VidAngel’s “out-of-stock” notices
10 harmed Disney by creating a poor user experience (Cittadine Dec., at ¶¶ 29-30),
11 VidAngel offered to negotiate a reasonable license fee to stream filtered content in
12 lieu of sending out-of-stock notices pending resolution of this action. Quinto Dec.,
13 ¶¶ 2-4 and Ex. A. Plaintiffs’ counsel responded: “my clients absolutely will not
14 engage in any joint licensing discussions.” Id., ¶ 3. Counsel for VidAngel then
15 offered to abandon its FMA exemption defense (and with it the requirement that
16 consumers must purchase copies of discs) and instead pay a license fee to stream
17 filtered content, noting that such arrangement would resolve Disney’s DMCA and
18 infringement claims. 11 Plaintiffs never responded to the offer. Id., ¶ 4.
19

D.

20

Economic injury alone will not support a finding of irreparable harm because

Disney’s Alleged Harms Are Economic.

21 it can generally be remedied by money damages. Pyro Spectaculars N., Inc. v.
22 Souza, 861 F. Supp.2d 1079, 1092 (E.D. Cal. 2012) (citing Rent-A-Center, 944 F.2d
23 at 603). A preliminary injunction is appropriate only if the record establishes that
24
11

VidAngel’s counsel described the many reasons why VidAngel would prefer
to license content for streaming from Plaintiffs rather than continue its current
26 physical DVD-based model, including that the studios will someday stop selling
DVDs and that movies are usually released for streaming prior to their DVD release,
27 requiring VidAngel customers to wait for this content. Quinto Dec., Ex. E.
25

28

- A.697 -

-28VIDANGEL’S OPPOSITION TO PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION

1 the harm is not economic. Id. If a defendant in a copyright infringement action
2 maintains accurate records from which damages can be calculated, the harms are not
3 irreparable. See Capitol Records v. Redigi, No. 1:12-cv-00095, Order Denying
4 Motion for Preliminary Injunction (S.D.N.Y. Feb. 6, 2012) and transcript of ruling
5 on preliminary injunction. RJN., Ex. C.
In Dish, 905 F. Supp. 2d at 1110–11, the Central District denied a preliminary

6

7 injunction because the damages were calculable. Fox accused Dish of copying its
8 programs, which could be purchased from services like iTunes, without paying for
9 them. The fact that “Fox has licensing agreements with other companies shows that
10 the copies of Fox Programs have a market value that other companies already pay in
11 exchange for the right to use the copies.” Id. So too here. The same VOD market is
12 at issue and any damages are both economic and easily calculable. The Ninth
13 Circuit agreed that monetary damages could compensate Fox for the loss of its
14 copies, reasoning that Fox’s existing VOD licenses could “at the very least”
15 constitute a starting point or aid in calculating damages. Fox Broad. Co., 747 F.3d
16 at 1073. It also found that the appropriate market to consider was that for Fox’s
17 VOD licenses (iTunes, Hulu, etc.). Id. at 1070, 1073.
As in Dish and Redigi, the value of VidAngel’s sales can be calculated.

18

19 VidAngel has records of every transaction – including purchase date, sell-back date,
20 amount paid, and filters selected – for every title it has ever filtered and streamed.
21 Harmon Dec., ¶ 62. Thus, any damages caused by VidAngel are easily calculable.
22 III.
23
24
25
26
27
28

THE BALANCE OF HARDSHIPS WEIGHS AGAINST A
PRELIMINARY INJUNCTION.
If its service is enjoined, VidAngel, whose only business is providing the

filtering service at issue, would suffer an unimaginable financial hardship that could
impair its ability to defend this action before the merits are decided. Where there are
no more than “serious questions going to the merits,” the moving party must show
that “the balance of hardships tips sharply in [its] favor.” All for the Wild Rockies v.

- A.698 -

-29VIDANGEL’S OPPOSITION TO PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION

1 Cottrell, 632 F.3d 1127, 1134-35 (9th Cir. 2011); Lopez v. Brewer, 680 F.3d 1068,
2 1072 (9th Cir. 2012).
“In evaluating the balance of hardships a court must consider the impact

3

4 granting or denying a motion for a preliminary injunction will have on the
5 respective enterprises. Thus the relative size and strength of each enterprise may be
6 pertinent to this inquiry.” Int’l Jensen, Inc. v. Metrosound U.S.A., Inc., 4 F.3d 819,
7 827 (9th Cir. 1993). When a larger, established corporation seeks a preliminary
8 injunction against a start-up, courts consistently refuse to enjoin the start-up’s
9 business operations. See, e.g., LucasArts Entm't Co. v. Humongous Entm’t Co., 815
10 F. Supp. 332, 338 (N.D. Cal. 1993) (refusing to enjoin “a start-up company with
11 limited financial resources” because it “depends to a large extent on sales of its
12 products to pay its employees and operating expenses” and its “customers may lose
13 their trust and confidence in the young company’s ability to deliver goods on time”);
14 OG Int’l, Ltd. v. Ubisoft Entm’t, No. C 11-04980 CRB, 2011 WL 5079552, at *11
15 (N.D. Cal. Oct. 26, 2011); Ossur Holdings, Inc. v. Bellacure, Inc., No. C0516 1552JLR, 2005 WL 3434440, at *9 (W.D. Wash. Dec. 14, 2005).
The hardships strongly favor VidAngel, which has but 20 full-time

17

18 employees. Harmon Dec., ¶ 63. This injunction would prevent it from filtering any
19 motion pictures owned or licensed by Disney, and would cast doubt on the legality
20 of its entire business enterprise.

Additionally, VidAngel’s goodwill would be

21 seriously damaged as customers could not reliably depend upon VidAngel to filter
22 many popular motion pictures. In contrast, Disney are four of the world’s largest
23 movie studios and have “presented little evidence regarding the harm [they]
24 allegedly [are] suffering, other than the harm presumptively caused by copyright
25 infringement.” 12 See Activant Sols., Inc. v. Wrenchead, Inc., No. C 03-3376 VRW,
26
12

Plaintiffs do not attempt to balance the hardships, but dismiss VidAngel’s
hardships as legally irrelevant based on the assumption that they have demonstrated
(footnote continued)
28
27

- A.699 -

-30VIDANGEL’S OPPOSITION TO PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION

1 2004 WL 1887529, at *9 (N.D. Cal. Aug. 23, 2004).
2 IV.
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19

THE PUBLIC INTEREST STRONGLY FAVORS ALLOWING
FAMILIES TO USE VIDANGEL’S FILTERING SERVICE.
“The public interest analysis for the issuance of a preliminary injunction

requires [the court] to consider ‘whether there exists some critical public interest
that would be injured by the grant of preliminary relief.’” Indep. Living Ctr. v.
Maxwell–Jolly, 572 F.3d 644, 659 (9th Cir. 2009) (quoting Hybritech Inc. v. Abbott
Labs., 849 F.2d 1446, 1458 (Fed. Cir. 1988)). “If. . .the impact of an injunction
reaches beyond the parties, carrying with it a potential for public consequences, the
public interest will be relevant to whether the district court grants the preliminary
injunction.” Stormans, Inc. v. Selecky, 586 F.3d 1109, 1138-39 (9th Cir. 2009)
(citing Sammartano v. First Judicial Dist. Ct., 303 F.3d 959, 965 (9th Cir. 2002)).
See also Sierra Forest Legacy, 577 F.3d at 1022 (“When deciding whether to issue a
narrowly tailored injunction, district courts must assess the harms pertaining to
injunctive relief in the context of that narrow injunction”). Further, when “an
injunction is asked which will adversely affect a public interest ... the court may in
the public interest withhold relief until a final determination of the rights of the
parties, though the postponement may be burdensome to the plaintiff.” Weinberger
v. Romero-Barcelo, 456 U.S. 305, 312–13 (1982).

20
21

A.

The Supreme Court Has Repeatedly Protected the Public from
Offensive Content.

The courts and Congress have frequently protected families from offensive

22 content while in the privacy of their homes. The following are but a few
23 examples. In Rowan v. United States Post Office Dept., 397 U.S. 728 (1970), the
24
25

a likelihood of success. (Mot. at 31-32.) That is not the case. In any event, where,
26 as here, the balance of hardships tips strongly in the defendant’s favor, the plaintiff
is required to demonstrate a stronger likelihood of success on the merits.
27 MacDonald v. Chicago Park Dist., 132 F.3d 355, 357 (7th Cir. 1997).
28

- A.700 -

-31VIDANGEL’S OPPOSITION TO PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION

1 Supreme Court upheld a statute allowing anyone who received material that he or
2 she perceived as erotically arousing or sexually provocative to request that the
3 Postmaster General order the sender not to send further mailings because there is no
4 constitutional right to send unwanted materials into someone’s home.

It was

5 irrelevant that the recipient could simply choose to throw the unwanted mail away:
6 “[T]he asserted right of a mailer . . . stops at the outer boundary of every person’s
7 domain.” Id. at 738. In FCC v. Pacifica Foundation, 438 U.S. 726 (1978), the
8 Court noted that “broadcasting is uniquely accessible to children, even those too
9 young to read,” id. at 749, and held that the FCC has the power to regulate indecent
10 radio broadcasts. Id. at 731, 738. The Supreme Court also upheld the issuance of
11 notices of liability to Fox Television Stations for permitting “fleeting” expletives
12 during nationally broadcast awards shows (although a later decision excused the
13 fines). See FCC v. Fox Television Stations, Inc., 556 U.S. 502 (2009). In Reno v.
14 ACLU, 521 U.S. 844 (1997), the Supreme Court noted that it has “repeatedly
15 recognized the governmental interest in protecting children from harmful
16 materials.” Id. at 875 (citing cases). Of especial significance here, it noted that a
17 less restrictive alternative to banning all indecent speech on the Internet would be to
18 “require[e] that indecent material be ‘tagged’ in a way that facilitates parental
19 control of material coming into their homes.” Id. at 879.
20

B.

21

The public interest in protecting every person’s right to watch filtered content

VidAngel Serves an Important Public Interest.

22 in private would be severely undercut by the issuance of a preliminary injunction.
23 Consumers are rapidly shifting their viewing preferences toward mobile devices,
24 tablets, and SmartTVs. VidAngel is the only entity that provides a filtering service
25 under the FMA for those viewing methods. Meldal Dec., ¶¶ 8, 24, Harmon Dec., ¶¶
26 52-53. An injunction would affect the largest and fasting growing segment of
27 filtered content viewers. As reflected by the overwhelming support of countless
28 families and community leaders, VidAngel serves an important public interest. See

- A.701 -

-32VIDANGEL’S OPPOSITION TO PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION

1 Declarations of Timothy F. Winter; Donna Rice Hughes; Harry Jackson; Connor
2 Boyack; Matt Kibbe; David Bozell; L Brent Bozell III; David Barton; Gary Bauer;
3 Gary Marx; George E. Roller; Patrick Trueman; Rebecca Hagelin; Rick Green;
4 Andrea Lafferty; Theodore Baehr; Tim Barton; Bryan and Diane Schwartz; Bob
5 Waliszwewski; and Tim Wildmon.
An injunction would also reach far beyond the parties by destroying the

6

7 market for filtered films. See Stormans, 586 F.3d at 1139 (overturning a preliminary
8 injunction in part because it “clearly reached non-parties and implicated issues of
9 broader public concern that could have public consequences.”). Moreover, due to
10 Disney’s unreasonable delay in bringing its motion, over 500,000 families have used
11 VidAngel’s service to provide family-friendly entertainment options. Harmon Dec.,
12 ¶ 30. The Court should not end the public’s ability to watch filtered movies before a
13 final determination of the parties’ rights. See Weinberger, 456 U.S. at 312.
14 V.

ANY INJUNCTION SHOULD BE CONDITIONED ON THE POSTING
OF A BOND OF NOT LESS THAN $50 MILLION.

15
16
17
18
19
20
21
22
23
24
25
26

A preliminary injunction may issue “only if the movant gives security in an
amount that the court considers proper to pay the costs and damages sustained by
any party wrongfully enjoined or restrained.” F.R.C.P. § 65(c); Squaxin Island
Tribe v. Washington, 781 F. 2d 715, 724 (9th Cir. 1986). A party that is wrongfully
enjoined may be limited to the amount of the bond as its recovery. Buddy Sys., Inc.
v. Exer-Genie, Inc., 545 F. 2d 1164, 1168 (9th Cir. 1976). Thus, “[w]hen setting the
amount of security, district courts should err on the high side,” because “an error in
the other direction produces irreparable injury.” Mead Johnson & Co. v. Abbott
Labs., 201 F.3d 883, 888 (7th Cir. 2000). In analogous circumstances, courts in this
circuit typically require multi-million dollar bonds.13
13

See A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1028 (9th Cir. 2001)
($5 million); MGM v. Honda Motor Co., 900 F. Supp. 1287, 1290 (C.D. Cal. 1995)
27
($6 million); see also Design Furnishings, Inc. v. Zen Path, LLC, 2010 WL
(footnote continued)
28

- A.702 -

-33VIDANGEL’S OPPOSITION TO PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION

1

VidAngel occupies a uniquely advantageous market position. It developed its

2 filter-and-stream technology just as consumer preferences were beginning to shift
3 from viewing physical discs on a home television to streaming content on all sorts of
4 devices. Consumers increasingly want the freedom to watch content wherever they
5 may be, on tablet, laptop, smart telephones, and other devices.

As consumer

6 preferences involving digital technologies always do, the change in preference for
7 streamed content is happening rapidly and will likely be complete in under three
8 years. VidAngel enjoys a unique market position as the only company currently
9 streaming filtered content to customers. (The only other content filtering service on
10 the market sells devices that consumers may use at home to filter the content of
11 physical DVDs being watched on a television set.) As the sole company offering to
12 provide filtered streaming content, VidAngel enjoys a significant head start over
13 potential competitors in developing its technology, patenting its break-throughs, and
14 increasing its know-how. VidAngel would lose this enormous head start if it were
15 enjoined. Loss of market share, especially during a critical period in a company’s
16 growth, is, of course, an irreparable injury. See Credit Bureau Connection, Inc. v.
17 Pardini, 726 F. Supp. 2d 1107, 1123 (E.D. Cal. 2010). Further, VidAngel owes a
18 large portion of its success to the highly capable and competent employees and
19 independent contractors it has attracted, trained, and retained. Were VidAngel to be
20 enjoined during the pendency of this action, it would lose all the advantages
21 described above.
22

The injunction threatens to put VidAngel out of business before any

23 resolution on the merits and would cause it serious financial loss.

To date,

24
25

5418893, at *9 (E.D. Cal. 2010) ($1 million); Topline Corp. v. 4273371 Canada,
26 Inc., 2007 WL 2332471 at *15 (W.D. Wash. Aug. 13, 2007) ($1 million);
Cybermedia, Inc. v. Symantec Corp., 19 F. Supp. 2d 1070, 1081 (N.D. Cal. 1998)
27 ($1.6 million).
28

- A.703 -

-34VIDANGEL’S OPPOSITION TO PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION

1 VidAngel has been capitalized with over $3.6 million. Harmon Dec., ¶ 63. In the
2 next 18 months (a cautious estimate of the time it will take to get to trial), VidAngel
3 is expected to earn
4 would be

and the company’s fair market value
.

Harmon Dec., ¶ 63.

But if its entire business is

5 wrongfully enjoined, VidAngel would lose all its value. Id.
6

The devastating financial repercussions of an injunction also would severely

7 hamper VidAngel’s ability to properly fund the litigation of its antitrust claims
8 against the counterclaim defendants, which are well-funded and established giants in
9 the entertainment industry. Disney, the DGA, and others have entered into written
10 agreements that are clearly designed to prohibit the lawful provision of online
11 filtering services. These agreements unreasonably restrain the market for licensed
12 VOD filtered streaming.

An injunction would jeopardize the pursuit of these

13 legitimate claims on behalf of this suppressed market. Thus, VidAngel requests a
14 bond of not less than $50,000,000.
15
16

CONCLUSION
For the reasons explained above, Disney’s motion should be denied.

17
18 DATED: September 12, 2016

Respectfully submitted,

19
20
21
22
23
24
25

By: /s/ Jaime W. Marquart
Jaime W. Marquart
BAKER MARQUART LLP
2029 Century Park East, Sixteenth Floor
Los Angeles, California 90067
[phone]
[phone] (facsimile)
Attorneys for Defendant and
Counterclaimant VidAngel, Inc.

26
27
28

- A.704 -

-35VIDANGEL’S OPPOSITION TO PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION

1 GLENN D. POMERANTZ (SBN 112503)
[e-mail]
2 KELLY M. KLAUS (SBN 161091)
[e-mail]
3 ROSE LEDA EHLER (SBN 296523)
[e-mail]
4 ALLYSON R. BENNETT (SBN 302090)
[e-mail]
5 MUNGER, TOLLES & OLSON LLP
355 South Grand Avenue, Thirty-Fifth Floor
6 Los Angeles, California 90071-1560
Telephone: [phone]
7 Facsimile: [phone]
8 Attorneys for Plaintiffs
9

UNITED STATES DISTRICT COURT

10

CENTRAL DISTRICT OF CALIFORNIA

11

WESTERN DIVISION

12 DISNEY ENTERPRISES, INC.;
LUCASFILM LTD. LLC;
13 TWENTIETH CENTURY FOX FILM
CORPORATION and WARNER
14 BROS. ENTERTAINMENT INC.,
Plaintiffs and Counterclaim
Defendants,

15
16
17

vs.
VIDANGEL, INC.,

18
19
20
21
22
23
24
25

Defendant and CounterClaimant.

Case No. 16-cv-04109-AB (PLAx)
UNREDACTED VERSION OF
DOCUMENT PROPOSED TO BE
FILED UNDER SEAL
PLAINTIFFS’ NOTICE OF
MOTION AND MOTION FOR
PRELIMINARY INJUNCTION;
MEMORANDUM OF POINTS AND
AUTHORITIES IN SUPPORT
THEREOF
Judge: Hon. André Birotte Jr.
Date: October 24, 2016
Time: 10:00 a.m.
Crtrm.: 4
Filed concurrently herewith:
(1) Declaration of Tedd Cittadine
(2) Declaration of Rose Leda Ehler
(3) Declaration of Kelly M. Klaus
(4) Declaration of Robert Schumann
(5) [Proposed] Order
(6) Application to File Under Seal
Trial Date:

None Set

26
27
28

- A.705 -

NOTICE OF MOTION AND MOTION FOR PRELIMINARY INJUNCTION
16-CV-04109-AB (PLAX)

1 TO ALL PARTIES AND THEIR ATTORNEYS OF RECORD:
2

PLEASE TAKE NOTICE that on October 24, 2016, at 10:00 a.m., before the

3 Honorable André Birotte Jr., in Courtroom 4 of the United States District Court for
4 the Central District of California, located at 312 North Spring Street, Los Angeles,
5 California 90012, Plaintiffs Disney Enterprises, Inc., Lucasfilm Ltd. LLC, Twentieth
6 Century Fox Film Corporation, and Warner Bros. Entertainment Inc. (collectively,
7 “Plaintiffs”) will and hereby do move for a Preliminary Injunction restraining
8 Defendant VidAngel, Inc. (“VidAngel”) and all of its officers, agents, servants,
9 employees, and attorneys, and those persons in active concert or participation or
10 privity with any of them, from: [1] violating Plaintiffs’ rights pursuant to § 1201(a) of
11 the Digital Millennium Copyright Act (“DMCA”), 17 U.S.C. § 1201(a), by
12 circumventing technological measures that effectively control access to Plaintiffs’
13 copyrighted works on DVDs and Blu-ray discs; and [2] infringing by any means,
14 directly or indirectly, Plaintiffs’ exclusive rights under § 106 of the Copyright Act,
15 id. § 106, including by reproducing or publicly performing Plaintiffs’ copyrighted
16 works.
17

This Motion is made on the following grounds as explained in the

18 accompanying Memorandum of Points and Authorities and supporting papers:
19

1.

Plaintiffs are likely to succeed on the merits because the record

20 evidence clearly shows that VidAngel: (a) uses “ripping” software to circumvent
21 technological protection measures on DVDs and Blu-ray discs that effectively
22 control access to Plaintiffs’ copyrighted motion pictures and television shows on
23 those discs, thereby violating § 1201(a); (b) copies the resulting unprotected digital
24 files containing Plaintiffs’ works to a computer system, thereby infringing Plaintiffs’
25 exclusive rights to reproduce their works under § 106(1); and (c) transmits
26 performances from the unauthorized copies that VidAngel makes to the public,
27 thereby infringing Plaintiffs’ exclusive rights to perform their works publicly under
28 § 106(4).

- A.706 -

NOTICE OF MOTION FOR PRELIMINARY INJUNCTION
16-CV-04109-AB (PLAX)

1

2.

VidAngel’s defenses to violating Plaintiffs’ rights are meritless.

2

3.

Absent a preliminary injunction, Plaintiffs will suffer irreparable harm,

3 including with respect to their ability to exercise their exclusive rights, their
4 relationships and goodwill with authorized licensees, and the development of the
5 market for on-demand streaming. The balance of equities tips decidedly in
6 Plaintiffs’ favor, and an injunction is in the public interest.
7

This Motion is based upon this Notice of Motion and Motion; the attached

8 Memorandum of Points and Authorities; the Declarations of Tedd Cittadine
9 (“Cittadine Decl.”), Rose Leda Ehler (“Ehler Decl.”), Kelly M. Klaus (“Klaus
10 Decl.”) and Robert Schumann (“Schumann Decl.”) and Exhibits thereto; all
11 documents on file in this action; and such further or additional evidence or
12 argument as may be presented before or at the time of the hearing on this Motion.
13
14 DATED: August 22, 2016

MUNGER, TOLLES & OLSON LLP

15
16
17
18
19

By:

/s/ Kelly M. Klaus
KELLY M. KLAUS
Attorney for Plaintiffs

20
21
22
23
24
25
26
27
28

- A.707 -

-2NOTICE OF MOTION FOR PRELIMINARY INJUNCTION
16-CV-04109-AB (PLAX)

TABLE OF CONTENTS

1

Page

2
3
4

INTRODUCTION ....................................................................................................... 1
FACTUAL BACKGROUND...................................................................................... 4

5
6

A.

Plaintiffs And Their Copyrighted Works................................................ 4

B.

VidAngel Builds Its Business By Exploiting Plaintiffs’ Rights ............. 5

7

1.

10

C.

11

How VidAngel Works .................................................................. 7

3.

9

VidAngel’s Decision To Create An Unlicensed Service ............. 5

2.

8

VidAngel’s Escalating Marketing And Recent Growth ............... 9

VidAngel’s Letters To Plaintiffs And Other Studios, And This
Lawsuit .................................................................................................. 10

12 ARGUMENT ............................................................................................................. 11
13 I.
14

PLAINTIFFS ARE LIKELY TO SUCCEED ON THE MERITS OF
THEIR CLAIMS ............................................................................................. 11
A.

15

Plaintiffs Will Succeed On Their DMCA Claim .................................. 11
1.

VidAngel Circumvents The Technological Protection
Measures That Control Access To Plaintiffs’ Works On
Discs............................................................................................ 12

2.

VidAngel Has No Defense To Its Violation Of § 1201(a) ......... 13

16
17
18

a.

The DMCA Makes No Exception For Businesses
That Want To Circumvent To Provide Filters ................. 13

20

b.

The FMA Does Not Authorize Circumvention................ 14

21

c.

There Is No Fair Use Exemption To § 1201(a)
Liability ............................................................................ 15

19

22
23

B.

Plaintiffs Will Succeed On Their Copyright Infringement Claims ...... 16
1.

Plaintiffs Own Or Control Valid Copyrights In The Works
That VidAngel Exploits .............................................................. 16

2.

26

VidAngel Violates Plaintiffs’ Exclusive Rights To
Reproduce And Publicly Perform Their Copyrighted
Works .......................................................................................... 16

27

a.

24
25

28

- A.708 -

VidAngel Violates Plaintiffs’ Exclusive Right To
Reproduce Their Works By Making Copies .................... 17
-iPLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION
16-CV-04109-AB (PLAX)

TABLE OF CONTENTS
(continued)

1
2
b.

3
4

Page

VidAngel Violates Plaintiffs’ Exclusive Right To
Publicly Perform Their Copyrighted Works .................... 17
i.

VidAngel Publicly Performs Plaintiffs’
Works ..................................................................... 17

ii.

VidAngel’s “Buy-Sellback” Scheme Does
Not Transform VidAngel’s Public
Performances Into Private Ones............................. 18

5
6
7
3.

8

None of VidAngel’s Defenses Excuse Its Infringement ............ 21
a.

The FMA Does Not Excuse VidAngel’s
Infringement ..................................................................... 21

b.

11

VidAngel’s Affirmative Defense Of Fair Use Does
Not Excuse Its Infringement ............................................ 22

12

i.

VidAngel’s Wholesale Copying And Publicly
Performing Plaintiffs’ Works Are
Commercial And Non-Transformative .................. 23

ii.

Plaintiffs’ Copyrighted Works Are Highly
Creative .................................................................. 24

iii.

VidAngel Copies The Entirety Of Plaintiffs’
Works And Publicly Performs Substantially
The Entirety Of Them ............................................ 24

iv.

VidAngel’s Service Undermines Existing
And Potential Markets For Plaintiffs’ Works ........ 25

9
10

13
14
15
16
17
18
c.

19
20

II.

The First Sale Doctrine Does Not Authorize
VidAngel’s Copying or Streaming................................... 26

21

PLAINTIFFS WILL SUFFER IRREPARABLE HARM ABSENT AN
INJUNCTION ................................................................................................. 27

22

A.

VidAngel’s Unauthorized Service Causes Immediate And
Irreparable Harms ................................................................................. 27

B.

Plaintiffs’ Motion Is Timely, And VidAngel’s Assertions of
“Delay” Do Not Negate Irreparable Harm ........................................... 30

23
24
25 III.
26
27

THE BALANCE OF HARDSHIPS TIPS DECISIVELY FOR
PLAINTIFFS ................................................................................................... 31

IV.

A PRELIMINARY INJUNCTION IS IN THE PUBLIC INTEREST ........... 32

V.

MINIMAL SECURITY SHOULD BE REQUIRED...................................... 33

28

- A.709 -

-iiPLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION
16-CV-04109-AB (PLAX)

1

TABLE OF CONTENTS
(continued)

2

Page

3 CONCLUSION.......................................................................................................... 33
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

- A.710 -

-iiiPLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION
16-CV-04109-AB (PLAX)

1

TABLE OF AUTHORITIES
Page(s)

2
3 FEDERAL CASES

4 321 Studios v. Metro Goldwyn Mayer Studios, Inc.,
307 F. Supp. 2d 1085 (N.D. Cal. 2004)................................................................ 12
5
6 A & M Records, Inc. v. A.L.W., Ltd.,
855 F.2d 368 (7th Cir. 1988) ................................................................................ 20
7
8 A&M Records, Inc. v. Napster, Inc.,
239 F.3d 1004 (9th Cir. 2001) .............................................................................. 16
9
American Broadcasting Companies, Inc. v. Aereo, Inc.,
10
134 S. Ct. 2498 (2014)...................................................................... 3, 7, 17, 18, 19
11
Apple Inc. v. Psystar Corp.,
12
673 F. Supp. 2d 943 (N.D. Cal. 2009).................................................................. 32
13
Arc of Cal. v. Douglas,
14
757 F.3d 975 (9th Cir. 2014) .......................................................................... 30, 31
15 Arista Records LLC v. Myxer, Inc.,
No. CV 08-03935 GAF, 2011 WL 11660773 (C.D. Cal. 2011) .......................... 25
16
17 Authors Guild. v. Google, Inc.,
804 F.3d 202 (2d Cir. 2015) ................................................................................. 24
18
19 Cadence Design Sys., Inc. v. Avant! Corp.,
125 F.3d 824 (9th Cir. 1997) ................................................................................ 31
20
21 Campbell v. Acuff-Rose Music, Inc.,
510 U.S. 569 (1994) ................................................................................. 23, 24, 25
22
Capitol Records, LLC v. ReDigi Inc.,
23
934 F. Supp. 2d 640 (S.D.N.Y. 2013) .................................................................. 26
24
Central Point Software, Inc. v. Global Software & Accessories, Inc.,
25
880 F. Supp. 957 (E.D.N.Y. 1995) ....................................................................... 20
26 Clean Flicks of Colo. v. LLC v. Soderbergh,
433 F. Supp. 2d 1236 (D. Colo. 2006) ................................................................. 24
27
28

- A.711 -

-ivPLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION
16-CV-04109-AB (PLAX)

1
2

TABLE OF AUTHORITIES
(continued)

Page(s)

3 Columbia Pictures Industries, Inc. v. Redd Horne, Inc.,
749 F.2d 154 (3d Cir. 1984) ..................................................................... 17, 18, 19
4
5 Dish Network, L.L.C. v. Vicxon Corp.,
No. 12-CV-9-L WVG, 2013 WL 3894905 (S.D. Cal. July 26, 2013) ................. 15
6
Dr. Seuss Enters., L.P. v. Penguin Books, USA, Inc.,
7
109 F.3d 1394 (9th Cir. 1997) .............................................................................. 25
8
Eldred v. Ashcroft,
9
537 U.S. 186 (2002) ............................................................................................. 32
10
Elvis Presley Enters., Inc. v. Passport Video,
11
349 F.3d 622 (9th Cir. 2003) .................................................................... 23, 24, 25
12 Harper & Row Publishers, Inc. v. Nation Enters.,
471 U.S. 539 (1985) ............................................................................................. 23
13
14 Hooks v. Kitsap Tenant Support Servs., Inc.,
816 F.3d 550 (9th Cir. 2016) ................................................................................ 14
15
16 Kelly v. Primco Mgmt., Inc.,
No. CV-14-07263 BRO, 2015 WL 10990368 (C.D. Cal. Jan. 12,
17
2015) ..................................................................................................................... 32
18
L.A. News Serv. v. Tullo,
19
973 F.2d 791 (9th Cir. 1992) ................................................................................ 25
20 Leadsinger, Inc. v. BMG Music Publ’g,
512 F.3d 522 (9th Cir. 2008) .......................................................................... 23, 25
21
22 Lotus Dev. Corp. v. Paperback Software Int’l,
740 F. Supp. 37 (D. Mass. 1990).......................................................................... 30
23
24 Lydo Enters., Inc. v. City of Las Vegas,
745 F.2d 1211 (9th Cir. 1984) .............................................................................. 30
25
26 MAI Sys. Corp. v. Peak Computer, Inc.,
991 F.2d 511 (9th Cir. 1993) .......................................................................... 17, 22
27
MDY Indus., LLC v. Blizzard Entm’t, Inc.,
28
629 F.3d 928 (9th Cir. 2010) ...................................................................... 2, 12, 14
-v-

- A.712 -

PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION
16-CV-04109-AB (PLAX)

1
2

TABLE OF AUTHORITIES
(continued)

Page(s)

3 Monge v. Maya Magazines, Inc.,
688 F.3d 1164 (9th Cir. 2012) ......................................................................... 23,24
4
5 On Command Video Corporation v. Columbia Pictures Industries,
777 F. Supp. 787 (N.D. Cal. 1991)................................................................. 18, 19
6
Peker v. Masters Collection,
7
96 F. Supp. 2d 216 (E.D.N.Y. 2000) .................................................................... 26
8
Perfect 10, Inc. v. Amazon.com, Inc.,
9
508 F.3d 1146 (9th Cir. 2007) .............................................................................. 22
10
Petrella v. Metro-Goldwyn-Mayer, Inc.,
11
134 S. Ct. 1962 (2014)................................................................................ 4, 30, 31
12 Realnetworks, Inc. v. DVD Copy Control Ass’n,
641 F. Supp. 2d 913 (N.D. Cal. 2009)............................................................ 12, 32
13
14 Red Baron-Franklin Park, Inc. v. Taito Corp.,
883 F.2d 275 (4th Cir. 1989) ................................................................................ 26
15
16 Salinger v. Colting,
607 F.3d 68 (2d Cir. 2010) ................................................................................... 27
17
18 Ticketmaster L.L.C. v. RMG Techs., Inc.,
507 F. Supp. 2d 1096 (C.D. Cal. 2007) ................................................................ 28
19
Triad Sys. Corp. v. Se. Express Co.,
20
64 F.3d 1330 (9th Cir. 1995) ................................................................................ 31
21
TRW Inc. v. Andrews,
22
534 U.S. 19 (2001) ............................................................................................... 13
23 UMG Recordings, Inc. v. Escape Media Grp., Inc.,
No. 11 CIV. 8407, 2014 WL 5089743 (S.D.N.Y. Sept. 29, 2014) ...................... 17
24
25 United Fabrics Int’l, Inc. v. C&J Wear, Inc.,
630 F.3d 1255, 1257 (9th Cir. 2011) .................................................................. 16
26
27 United States v. Crippen,
No. CR 09-703 PSG, 2010 WL 7198205 (C.D. Cal. Nov. 23, 2010) ............ 15, 16
28
-vi-

- A.713 -

PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION
16-CV-04109-AB (PLAX)

1
2

TABLE OF AUTHORITIES
(continued)

Page(s)

3 Universal City Studios, Inc. v. Reimerdes,
111 F. Supp. 2d 294 (S.D.N.Y. 2000) ............................................................ 12, 16
4
5 Warner Bros. Entertainment Inc. v. WTV Systems, Inc.,
824 F. Supp. 2d 1003 (C.D. Cal. 2011) ........................................ 18, 19, 27, 29, 33
6
Winter v. Natural Res. Def. Council, Inc.,
7
555 U.S. 7 (2008) ................................................................................................. 11
8
Worldwide Church of God v. Philadelphia Church of God, Inc.,
9
227 F.3d 1110 (9th Cir. 2000) .............................................................................. 24
10
WPIX, Inc. v. ivi, Inc.,
11
691 F.3d 275 (2d Cir. 2012) ................................................................................. 28
12 FEDERAL STATUTES
13
17 U.S.C. § 101................................................................................................ 3, 17, 22
14
17 U.S.C. § 106............................................................................................. 14, passim
15
17 U.S.C. § 106(1) ................................................................................................. 1, 17
16
17 17 U.S.C. § 106(3) ..................................................................................................... 26
18 17 U.S.C. § 106(4) ............................................................................................. 1, 3, 17
19 17 U.S.C. § 107.................................................................................................... 15, 22
20
17 U.S.C. § 109(a) ..................................................................................................... 26
21
17 U.S.C. § 110.............................................................................................. 14, 15, 21
22
23 17 U.S.C. § 110(11) ........................................................................................ 2, passim
24 17 U.S.C. § 117(c) ..................................................................................................... 31
25 17 U.S.C. § 410(c) ..................................................................................................... 16
26 17 U.S.C. § 1201.................................................................................................. 14, 15
27
17 U.S.C. § 1201(a) ........................................................................................ 1, passim
28
-vii-

- A.714 -

PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION
16-CV-04109-AB (PLAX)

1

TABLE OF AUTHORITIES
(continued)

2

Page(s)

3 17 U.S.C. § 1201(c) ................................................................................................... 15
4 17 U.S.C. § 1201(d)-(j) .............................................................................................. 13
5
FEDERAL REGULATIONS
6
37 CFR pt. 201.40 ...................................................................................................... 13
7
LEGISLATIVE MATERIALS
8
9 151 Cong. Rec. S501-S502 (daily ed. Jan. 25, 2005)...................................... 2, 15, 22
10 H.R. 4586, Serial No. 94 (June 17, 2004) ................................................................. 15
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

- A.715 -

-viiiPLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION
16-CV-04109-AB (PLAX)

1

MEMORANDUM OF POINTS AND AUTHORITIES

2

INTRODUCTION
Defendant VidAngel operates an online on-demand video streaming service

3

4 that blatantly violates Plaintiffs’ rights under the DMCA and the Copyright Act:


5

VidAngel starts by circumventing the technological protection

6

measures on DVDs and Blu-ray discs (collectively, “Discs”) that

7

control access to the digital media files of Plaintiffs’ copyrighted

8

movies and television shows—or, as VidAngel’s employees say, they

9

“rip[]” the movies—a violation of § 1201(a) of the DMCA. Schumann
Decl. ¶¶ 7, 35-38, 43, Ex. C at 23; Dkt. 11(Counter-Complaint) ¶ 61.

10


11

VidAngel then copies to computer servers the copyrighted works that

12

VidAngel has ripped—a violation of Plaintiffs’ exclusive rights to

13

reproduce their works under § 106(1) of the Copyright Act. Schumann

14

Decl. ¶¶ 37, 40-42, Ex. C at 23-25; Ehler Decl. Ex. EE at Tr. 58:1-4.1


15

VidAngel then streams performances of those copyrighted works over

16

and over again to numerous VidAngel customers, i.e., “to the public”—

17

a violation of Plaintiffs’ exclusive rights to publicly perform their

18

works under § 106(4). Schumann Decl. ¶¶ 7-8, Ex. C at 23-25; Ehler

19

Decl. Ex. EE at Tr. 90:18-22.
Legitimate on-demand streaming services—e.g., iTunes, Amazon and Google

20

21 Play—run their businesses without illegally circumventing and with authorization to
22 copy and stream Plaintiffs’ works. These legitimate services negotiate and pay for
23 the rights they use. VidAngel does not, and it thereby acquires an unjust
24 competitive advantage that VidAngel touts in its advertising. Id. Ex. A (examples).
25
1

All transcript references are to the 30(b)(6) deposition of VidAngel’s CEO, Neal
Harmon on August 11, 2016, excerpts at Ehler Decl., Ex. EE. The “Tr.” references
27 are to the page and line of the original deposition transcript rather than the page as
28 consecutively numbered in the Exhibits.
-126

- A.716 -

PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION
16-CV-04109-AB (PLAX)

1 VidAngel’s illegal conduct threatens imminent, irreparable harm by depriving
2 Plaintiffs of their rights to control their content, interfering with relationships with
3 licensees, and undercutting the growth of the legitimate on-demand streaming
4 market. Even VidAngel’s followers recognize VidAngel causes harm. Id. Ex. C (“I
5 could watch Star Wars 7 on VidAngel (only filtering one small thing) for $1 before
6 any other video streaming service had it available. If you guys are allowed to rip,
7 stream, and resell DVDs, the other streaming services will want to do it too – it’s
8 only fair.”).
9
10

VidAngel tries to defend its service with three meritless arguments.
First, VidAngel argues that Congress sanctioned all of its unlawful conduct

11 under the Family Movie Act of 2005 (“FMA”), 17 U.S.C. § 110(11), because
12 VidAngel allows its users to select content “filters” that skip or mute content from
13 streamed movies. The claims at issue have nothing to do with the filtering aspects
14 of VidAngel’s service, and the FMA provides VidAngel no shelter on this motion.
15 The FMA says that one does not infringe copyright by making motion picture
16 content “imperceptible” (or providing software that does the same) in the context of
17 private home viewing. Id. The FMA does not say that a business that filters thereby
18 has a total exemption from the DMCA or from having to license the right to copy
19 and publicly stream movies. On the contrary, the FMA makes clear that the relevant
20 filtering must be done from an “authorized copy,” which VidAngel does not make
21 and from which it does not stream. Id.; see 151 Cong. Rec. S501-S502 (daily ed.
22 Jan. 25, 2005) (Sen. Hatch) (“[A]n infringing transmission of a performance to a
23 household, [is] not rendered non-infringing by section 110(11) by virtue of the fact
24 that limited portions [of the performance] are made imperceptible.”). Filtering does
25 not make an underlying unlicensed service legal. And the FMA provides no defense
26 to circumventing, which is “distinct from infring[ing].” MDY Indus., LLC v.
27 Blizzard Entm’t, Inc., 629 F.3d 928, 946, 950 (9th Cir. 2010).
28

- A.717 -

-2PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION
16-CV-04109-AB (PLAX)

1

Second, VidAngel claims it does not violate the public performance right

2 because it makes only “private” performances to users who “purchase” Discs from
3 VidAngel. That is wrong. When it streams movies over the Internet, VidAngel is
4 “transmitting” performances to users. Transmissions infringe § 106(4) where, as
5 here, the defendant makes them “to the public, by means of any device or process,
6 whether the members of the public capable of receiving the performance or display
7 receive it in the same place or in separate places and at the same time or at different
8 times.” 17 U.S.C. § 101 (defining “[t]o perform . . . a work ‘publicly’”). A long
9 line of precedent construing this provision (the “Transmit Clause”)—including in
10 the Supreme Court’s recent decision in American Broadcasting Companies, Inc. v.
11 Aereo, Inc., 134 S. Ct. 2498 (2014)—makes it clear that VidAngel’s online, on12 demand transmissions are public performances. They do not become “private”
13 performances just because VidAngel purports to “sell” its users the Discs (which
14 VidAngel then immediately offers to buy back for a net access price of $1 a day).
15 VidAngel’s “buy-sellback” scheme is an artifice—what its CEO called a “creative
16 way” to compete while trying to be “buttoned up legally.” Ehler Decl. Ex. DD at
17 366. This sleight of hand does not cure VidAngel’s infringement. What matters is
18 whether VidAngel is transmitting performances to the public, not the label that
19 VidAngel uses to describe its transactions. Aereo, 134 S. Ct. at 2509 (“[W]hen
20 Aereo streams the same television program to multiple subscribers, it ‘transmit[s]
21 . . . a performance’ to all of them”). VidAngel publicly performs without a license.
22

Third, VidAngel argues that Plaintiffs forfeited the right to a preliminary

23 injunction because they did not immediately sue VidAngel when its outside litigator
24 (and recently appointed General Counsel) sent letters describing parts of the service
25 to Plaintiffs and other motion picture studios in July 2015. Dkt. 11, Ex. A. At that
26 point, as noted in those letters, VidAngel had fewer than 5,000 users and described
27 its service as being in a “limited beta.” Id. The letters did not say when VidAngel
28 would launch publicly, and Plaintiffs could not have known whether the service
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1 would survive, let alone thrive. As the Supreme Court has recognized, “[e]ven if an
2 infringement is harmful, the harm may be too small to justify the cost of litigation.”
3 Petrella v. Metro-Goldwyn-Mayer, Inc., 134 S. Ct. 1962, 1976 (2014). Copyright
4 owners do not have to immediately sue anyone who infringes, or forever lose the
5 right to seek a preliminary injunction; such a requirement would lead to unnecessary
6 litigation and burdens on the courts. VidAngel started to advertise more
7 aggressively earlier this year and gained traction in the press and online blogs; it
8 now has more than [100,000] active monthly users (and more than [400,000] total)
9 and continues to grow. Ehler Decl. Ex. D; id. Ex. AA at 317. Plaintiffs were
10 justified in suing when they did, and they satisfy all the requirements for injunctive
11 relief.
12

FACTUAL BACKGROUND

13

A.

Plaintiffs And Their Copyrighted Works

14

Plaintiffs, directly or through affiliates, invest substantial resources and effort

15 to produce and distribute some of the most popular and critically acclaimed movies
16 and television programs in the world. Their works include, among many others,
17 Frozen (2013) (Disney), Star Wars: The Force Awakens (2015) (Lucasfilm), Avatar
18 (2009) (Fox), and Harry Potter and the Sorcerer’s Stone (2001) (Warner Bros.).
19

Copyright protection is critical to Plaintiffs’ ability to obtain a return on their

20 substantial investments in these and other works and to underwrite the production of
21 new creative content, often at great financial risk. Cittadine Decl. ¶ 8. A studio will
22 spend tens or even hundreds of millions of dollars producing, distributing and
23 marketing a major motion picture. Id. ¶ 7. Third parties that wish to exercise
24 Plaintiffs’ rights to exploit their works must negotiate to obtain those rights. Id.
25 ¶ 14.
26

Plaintiffs employ different strategies to make their content available to meet

27 consumer demand, but each Plaintiff tries to tailor the value and price for each
28 offering—or “distribution channel”—to the willingness of customers (and licensees)
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1 to pay for those offerings. Id. ¶ 9. Plaintiffs distribute and license their content for
2 home entertainment across a number of channels. These include, among others:
3 (1) physical Discs; (2) digital download through services like iTunes, VUDU or
4 Amazon Video; (3) on-demand streaming for short-term viewing on a per5 transaction fee (e.g., iTunes Store or Google Play Store); or (4) subscription on6 demand streaming (e.g., Netflix or Hulu). Id.
7

Plaintiffs’ strategic process of releasing their content across different

8 distribution channels and to different licensees over time is called “windowing.” Id.
9 ¶ 15. A Plaintiff may decide to release specific titles only through certain channels
10 for a prescribed period, e.g., releasing titles for purchase on Discs or digital
11 download before releasing them to on-demand streaming. Id. ¶¶ 15, 33. Plaintiffs
12 often negotiate higher licensing fees in exchange for granting a licensee the
13 exclusive right to perform a movie or television show during a particular time
14 period. Id. ¶ 15. The online and digital channels have become increasingly
15 important revenue sources. Id. ¶ 10.
16

Especially in this digital age, to exercise their exclusive rights under

17 copyright, Plaintiffs must protect their content from piracy and unauthorized use.
18 Technological protection measures that control access (here, “access controls”) are
19 one way in which Plaintiffs ensure that copies of their content stored on Discs
20 cannot be easily copied and disseminated digitally. Schumann Decl. ¶¶ 20, 27. The
21 access controls that encrypt the digital files on Discs can lawfully be unencrypted
22 for playback or copying only by authorized devices. Id. ¶¶ 20-34.
23
24
25

B.

VidAngel Builds Its Business By Exploiting Plaintiffs’ Rights
1.

VidAngel’s Decision To Create An Unlicensed Service

In the fall of 2013, VidAngel first launched a standalone filtering service

26 through a web browser plug-in. Ehler Decl. Ex. EE at Tr. 135:12-136:7. This
27 technology permitted a user to apply filters to content streamed from YouTube (and
28 if a full-length movie, obtained legitimately through Google Play). Id.
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1

In the fall of 2014, VidAngel decided to “pivot” its business to its current

2 service, which does not simply provide filtering but offers unauthorized streaming
3 for a daily fee. Id. Ex. V at 217; Id. Ex. EE at Tr. 136:8-12. VidAngel knew from
4 surveying users who stopped using its prior service that [47% of them “didn’t want
5 to pay for rentals on YouTube/Google Play.”] Id. Ex. V at 227. It also had
6 information that only 1% of Americans would actually pay to watch filtered
7 versions of movies if you charged them to use a filter. Id. Ex. E at 61. VidAngel
8 decided that, rather than provide filters to run on streams from licensed services, it
9 would rip and copy Discs and charge users for streaming. When investors
10 questioned whether the company was getting into a [declining business (movies on
11 Discs)], Mr. Harmon, the CEO, assured them that [“VidAngel is NOT a disc service.
12 VidAngel is a streaming service.”] Id. Ex. W at 234 (emphasis added).2
From the outset of its “pivot,” VidAngel knew it would need licenses to run a

13

14 streaming business. VidAngel, however, decided on a strategy of asking for
15 forgiveness, not permission. As Mr. Harmon put it in a fall 2014 email to an
16 investor: [“[i]n the future we plan to negotiate licenses for content directly from
17 Hollywood (as Netflix) did. . . . We need disc[s] right[] [now] on the streaming
18 platform (which is growing at over 20 percent annually), not an upward trend in disc
19 sales.”] Id.; see also id. Ex. DD at 366 (Feb. 2015: Mr. Harmon saying VidAngel
20 would “have to be a lot bigger” to “get licensing from Hollywood. . . . Until then,
21 we sell DVDs and Blu-Rays to you, vault them in our warehouse, and stream you a
22 filtered movie. The buyback system was the most creative way we could come up
23 with in order to offer you the value of a Redbox while staying buttoned up
24 legally.”); id. Ex. X at 257 (Sept. 2015: Mr. Harmon saying VidAngel [“
25
2

At deposition, Mr. Harmon claimed this email was discussing a model for users to
“trade or share” their own Discs. Ehler Decl. Ex. EE at Tr. 146:8-148:6. But the
27 statement that VidAngel would be a [“streaming service,” “NOT a disc service,”]
28 was true regardless of the source of Discs. Id. Ex. W at 234.
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1
2
3
4

”]).
2.

How VidAngel Works

For every movie or TV show it streams, VidAngel first rips a digital copy of

5 the content from a single Disc. Id. Ex. EE at Tr. 127:6-131:7; Schumann Decl. ¶¶
6 37-39, 42, Exs. C at 23, D. Using RedFox AnyDVD HD software—popularly
7 known as a “ripping” tool—VidAngel circumvents the technological protections—
8 CSS, AACS, BD+—that Plaintiffs use to control access to their content. Ehler Decl.
9 Ex. S. VidAngel previously used the same software sold by the same developers
10 and staff of SlySoft, a ripping software company whose owner was found guilty of
11 distributing illegal circumvention tools. Id. Exs. F, EE at Tr. 68:9-69:16.
12

After circumventing the access controls, VidAngel copies the underlying

13 digital files (i.e., the movie or television show) onto its computers and then saves
14 additional copies on leased third-party servers. Schumann Decl. ¶ 40-42. VidAngel
15 uses the ripped digital copies stored on those servers to stream content. Id.; Ehler
16 Decl. Ex. EE at Tr. 90:18-22.
17

VidAngel charges customers for its on-demand streaming through a sham

18 “buy-sellback” scheme. VidAngel adopted this scheme as part of the “pivot,”
19 believing that it provided a loophole from public performance liability in light of
20 dicta in the Aereo decision. Id. Ex. V at 217. As discussed at pp. 18-21, infra,
21 VidAngel’s reliance on “buy-sellback” does not change its liability. The facts
22 showing “buy-sellback” to be a fiction, however, speak volumes about VidAngel’s
23 credibility in defending its service.
24

“Buy-sellback” works like this: Users pay an upfront fee of $20, purportedly

25 to “purchase” a physical Disc. Id. Ex. P at 181, 198 (“like a ‘security deposit’”).
26 VidAngel then associates the user with an individual Disc that VidAngel has bar27 coded and stored at its facility (the so-called “vault copy”). Id. Ex. EE at Tr. 51:528 20; 184:22-185:9. The user does not control or possess the vault copy; VidAngel
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1 does. Id. at 124:21-25. VidAngel claims that, upon request, it will transfer
2 possession of the vault copy to the user. Id. at 228:21-229:1. To date, however,
3 VidAngel has received only [eight] requests from users to receive the physical Disc
4 and has returned only [four] Discs—out of more than [1.5 million] purported “sales”
5 thus far in 2016 alone. Id. at 229:2-12; 189:21-190:8.3
Furthermore, VidAngel does not actually stream from the vault copy—the

6

7 copy that VidAngel claims the customer “owns.” Id. at 127:6-20. Rather, VidAngel
8 circumvents the access controls on a Disc, copies the content and then streams from
9 the ripped copy that resides on VidAngel’s leased server. Id. at 130:20-131:17.
10 VidAngel then encourages the user to “sell back” the Disc at a “buyback” price that
11 goes down by $1 or $2 for each 24-hour period. Id. Ex. G at 93-94 (VidAngel
12 promotional clips on YouTube).4 The net effect is that the user pays $1 or $2 a day
13 for on-demand access to stream the movie or television show—daily prices which
14 VidAngel prominently features in its advertising. Id. Ex. G.
VidAngel constantly encourages users to treat the service as an online rental

15

16 service, which they can do by simply clicking to “sellback” the movie for credit.
17 Among other things, VidAngel provides: (1) an icon in the corner of the viewing
18 screen, allowing the user to initiate sellback during the stream; (2) a sellback
19 “popup” box at the end of the movie; (3) a link to sellback in the user dashboard;
20
21
22
23
24
25

3

Other inconsistencies expose the fiction that VidAngel is performing the contents
of a Disc the user “owns.” For example, the [four] users who actually requested and
received physical Discs can still stream the same content via VidAngel—proving
the stream comes from a different copy. Id. at 235:6-21. And, users who want to
watch a television show “purchase” access only to a single episode. Id. Ex. H.
Discs of Plaintiffs’ television shows contain entire seasons. If a user actually
“owned” the Disc, the user could watch the full season.
4

“How VidAngel $1 Movie Works in 15 Seconds” is available on YouTube at
https://www.youtube.com/watch?v=map6EIP41bY (last visited Aug. 21, 2016).
27 “How $1 Movies Work on VidAngel Sellback” is available at
28 https://www.youtube.com/watch?v=wvcF4x1d0xo (last visited Aug. 21, 2016).
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1 (4) an email reminder about the sellback option after 24 hours; and (5) until this
2 lawsuit, an “auto-sellback” default setting, whereby users would automatically set
3 their devices to sellback, and thus be assured the equivalent of a rental transaction.
4 Id. Ex. BB at 336-37.
3.

5
6

VidAngel’s Escalating Marketing And Recent Growth

VidAngel’s strategy has involved rapidly growing its user base. In July 2015,

7 VidAngel had fewer than 4,848 users, but ambitious growth plans. Dkt. 11, Ex. A at
8 3. A November 2015 investor presentation projected that for 2016, VidAngel would
9 reach [

] customers and [

10 customers and [
11 [

] in revenue; for 2017, [

] in revenue; and for 2018, [

]
] customers and

] in revenue—with projected profit margins of [

]. Ehler

12 Decl. Ex. Y at 283.
13

To achieve these ends, VidAngel this year embarked on an aggressive

14 marketing campaign, explicitly contrasting its $1-a-day (or $2 for HD) price
15 (because it foregoes license fees) with the more typical $4.99 or $5.99 daily fee
16 charged by licensed services; VidAngel also boasts of its ability to offer movies not
17 available on other services. Ehler Decl. Exs. A, B. VidAngel’s users have
18 responded to VidAngel’s marketing cues:
19
20

One more thing I love about VidAngel is that I can easily
download NEW movies cheaper than anywhere else! I
probably won’t edit this one for our family, but I’m so
happy I can still just rent it for $2 a night!

21
22 Id. Ex. I at 98; see also id. at 101 (“We bought Star Wars and sold it back for a total
23 of $1 when it was like $5 to rent on Amazon. So even if you don’t need content
24 cleaned, it’s a great video service.”).
25

This spring, VidAngel began adding more of Plaintiffs’ works to its service,

26 with a particular focus on marketing movies as soon as they were released on Disc.
27 On April 5, 2016, VidAngel offered Star Wars: The Force Awakens. Id. Ex. J.
28 April 5 was the same day that The Force Awakens was released for purchase on
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1 Disc and digital download, but was not yet available to the on-demand streaming
2 market. Cittadine Decl. ¶ 16. VidAngel also released Disney’s Zootopia, Warner
3 Bros.’s Batman v. Superman: Dawn of Justice and Keanu, and Fox’s DeadPool and
4 The Revenant, among others, within a week of their release on Disc and, for some of
5 these titles, before they were released on any other on-demand streaming service.
6 Ehler Decl. Ex. N.
7

By June 2016, when Plaintiffs filed suit, VidAngel had grown to nearly

8 [500,000] monthly transactions across well over [100,000] monthly active users. Id.
9 Ex. AA at 315, 317. VidAngel had also streamed over [1.5 million] movies in the
10 first half of 2016. Id. Ex. EE at Tr. 189:21-190:8. VidAngel continues to
11 aggressively market its service using Plaintiffs’ copyrighted content.
12

C.

VidAngel’s Letters To Plaintiffs And Other Studios, And This
Lawsuit

13
14

Late last summer, VidAngel’s then-outside counsel, David Quinto, sent letters

15 to Plaintiffs or their corporate parents, ostensibly expressing interest in purchasing
16 more Discs directly from each company. Dkt. 11, Ex. A. Mr. Quinto sent the letters
17 to General Counsels, not to people in business development. He purported to
18 describe VidAngel’s nascent service, which he said was in “limited beta” testing.
19 Id. at 3. Mr. Quinto said nothing about VidAngel circumventing the access-control
20 measures on Discs. He said nothing about VidAngel marketing its service for $1-a21 day on-demand streaming through its “buy-sellback” scheme or offering Plaintiffs’
22 content before that content was available to authorized licensees.
23

Plaintiffs started investigating their potential legal claims against VidAngel

24 almost immediately after receiving Mr. Quinto’s letter. Cittadine Decl. ¶ 35.
25 Starting earlier this year, VidAngel launched a much broader advertising offensive
26 and started to gain traction in the press and on blogs, and its service started to grow
27 to significant user numbers. On June 9, 2016, Plaintiffs filed this suit.
28

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1

In response, VidAngel modified certain aspects of its service. Before being

2 sued, VidAngel allowed users to filter for either the opening or closing credits as the
3 single required filter, meaning users could stream essentially the entire movie
4 without filters (users could even set this as the default filter).5 Ehler Decl. Ex. EE at
5 Tr. 247:24-248:21. To the chagrin of its users, VidAngel suspended this option in
6 response to this litigation, although users still must only select one filter to use the
7 service.6 Id. at 246:10-247:22.
8

ARGUMENT

9

Plaintiffs satisfy all the requirements for a preliminary injunction: They

10 likely will succeed on the merits and suffer irreparable harm absent preliminary
11 relief; the balance of equities tip in their favor, and an injunction is in the public
12 interest. Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 20 (2008).
13 I.
14

PLAINTIFFS ARE LIKELY TO SUCCEED ON THE MERITS OF
THEIR CLAIMS
A.

Plaintiffs Will Succeed On Their DMCA Claim

15
To prevail on their circumvention claim, Plaintiffs must prove that VidAngel

16

17 “circumvent[s] a technological measure that effectively controls access to a work
18 protected” by copyright. 17 U.S.C. § 1201(a)(1)(A). A violation of the DMCA is
19 “independent of traditional copyright infringement,” and no “nexus” to copyright
20
21
5

22
23
24
25
26
27
28

This was a popular option particularly for Disney works. When VidAngel offered
this option, customers watched [23.61%] of streams of Up, [22.36%] of streams of
Finding Nemo, [20.91%] of streams of Monsters, Inc., [20.46%] of streams of WallE and [20.36%] of streams of Big Hero 6 essentially unfiltered by selecting only the
credits filter. Ehler Decl. Ex. CC. For Warner Bros.’s An Innocent Man, customers
viewed [44.90%] of streams using only this filter. Id.
6
Users were upset that they would have to filter actual movie content (rather than
the credits) to cheaply stream movies: “@VidAngel and you took away censoring
the end credits which was an easy choice if I didn’t really want to censor anything.”
Ehler Decl. Ex. FF; id Ex. K (examples); see also id. Ex. O.

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1 infringement is required. See MDY Indus., 629 F.3d at 946, 949, 952 (expressly
2 declining to adopt a “infringement nexus requirement”) (emphasis added).
1.

3

VidAngel Circumvents The Technological Protection
Measures That Control Access To Plaintiffs’ Works On Discs

4
5

A technological measure effectively controls access to a copyrighted work if,

6 “in the ordinary course of its operation, [it] requires the application of information,
7 or a process or a treatment, with the authority of the copyright owner, to gain access
8 to the work.” 17 U.S.C. § 1201(a). Plaintiffs use CSS, AACS and BD+ to prevent
9 unauthorized access to their content on Discs. Schumann Decl. ¶¶ 20, 27. All three
10 qualify as DMCA access controls. See id. ¶¶ 20-34; Realnetworks, Inc. v. DVD
11 Copy Control Ass’n, 641 F. Supp. 2d 913, 932 (N.D. Cal. 2009) (“CSS . . .
12 effectively controls access to . . . copyrighted DVD content”); 321 Studios v. Metro
13 Goldwyn Mayer Studios, Inc., 307 F. Supp. 2d 1085, 1095 (N.D. Cal. 2004);
14 Universal City Studios, Inc. v. Reimerdes, 111 F. Supp. 2d 294, 317-18 (S.D.N.Y.
15 2000).
16

VidAngel circumvents these access controls. To circumvent is “to

17 descramble a scrambled work, to decrypt an encrypted work, or otherwise to avoid,
18 bypass, remove, deactivate, or impair a technological measure, without the authority
19 of the copyright owner.” 17 U.S.C. § 1201(a)(3)(A). VidAngel admits that it “uses
20 a commercially available software program to automatically allow read-access for
21 the purpose of mounting the DVD [and Blu-ray] files for uploading onto a
22 computer, in the process removing restrictions on DVD [and Blu-ray] encryption.”
23 Dkt. 11 ¶ 50(ii) (emphasis added); see Ehler Decl. Ex. S (invoice for AnyDvd HD);
24 Schumann Decl. ¶¶ 35-39. In short, VidAngel circumvents technological measures
25 that control access, and is liable under § 1201(a).
26
27
28

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2.

1

VidAngel Has No Defense To Its Violation Of § 1201(a)
a.

2

The DMCA Makes No Exception For Businesses That
Want To Circumvent To Provide Filters

3
VidAngel argues that its circumvention is lawful because “the making of a

4

5 decrypted copy [is] the necessary first step in making a lawfully purchased DVD
6 capable of being filtered.” See Dkt. 11 (Counter-Complaint) ¶¶ 61-62. That is not
7 true as a factual matter and is irrelevant as a legal matter. As VidAngel admits,
8 other services provide software that allows consumers to apply filters to Discs they
9 have purchased. See id. ¶ 34 (describing ClearPlay’s DVD-filtering service). What
10 VidAngel means is that circumventing is a “necessary first step” for the type of
11 business VidAngel wants to run—one that provides unauthorized on-demand access
12 to content streamed from copies ripped from Discs. Circumvention makes it easier
13 and cheaper for VidAngel to run its business, but that does not make the
14 circumvention lawful.
VidAngel’s circumvention does not fit into any enumerated exception to the

15

16 anti-circumvention right or any additional exception promulgated by the Librarian
17 of Congress.7 17 U.S.C. § 1201(d)-(j). Where, as here, “Congress explicitly
18 enumerates certain exceptions to a general prohibition, additional exceptions are not
19 to be implied, in the absence of evidence of a contrary legislative intent.” TRW Inc.
20 v. Andrews, 534 U.S. 19, 28 (2001) (quotations omitted).
21
22
23
24
25

7

The DMCA calls for the Librarian of Congress to engage in triennial rulemaking to
26 determine if certain noninfringing uses of a copyrighted work are entitled to an
exception. 17 U.S.C. § 1201(a)(1)(B)-(C). The exceptions the Librarian has
27 promulgated are at 37 CFR Part 201.40, and none applies to VidAngel. Indeed, the
28 Librarian has never even been asked to consider such an exception for filtering.
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b.

1
2

The FMA Does Not Authorize Circumvention

VidAngel argues that the FMA shows Congress’s intent to exempt VidAngel

3 from § 1201(a) liability. The FMA’s text and legislative history show the opposite
4 is true.
5

The FMA addresses a narrowly specified type of activity (the making

6 imperceptible of certain audio and video), which, if it falls within the FMA is “not
7 an infringement[] of copyright.” 17 U.S.C. § 110(11). Section 1201, however,
8 provides a separate cause of action that is not a claim of infringement. As the Ninth
9 Circuit explained—in the course of declining to adopt the requirement of a “nexus”
10 between a DMCA violation and infringement—the DMCA “create[d] a new
11 anticircumvention right in § 1201(a) distinct from infringement.” See MDY Indus.,
12 629 F.3d at 950 (emphasis added). “Infringement” is the violation of one of
13 copyright’s exclusive rights, which are found in § 106. It is not the same as
14 circumvention. The FMA further states that nothing in that exception to
15 infringement (§ 110(11)) “shall be construed to imply further rights under section
16 106 of this title, or to have any effect on defenses or limitations on rights granted
17 under any other section of this title or under any other paragraph of this section.” 17
18 U.S.C. § 110 (final sentence) (emphasis added). Section 1201(a) embodies rights
19 and defenses relating to circumvention and not infringement. The FMA by its plain
20 language provides VidAngel no defense.
21

Because “the statutory language is unambiguous and the statutory scheme is

22 coherent and consistent,” there is no need to examine legislative history. Hooks v.
23 Kitsap Tenant Support Servs., Inc., 816 F.3d 550, 562 (9th Cir. 2016). But the
24 legislative history confirms that the FMA does not excuse circumvention. The
25 section-by-section analysis by the FMA’s Senate sponsor states that the FMA “does
26 not provide any exemption from the anti-circumvention provisions of section 1201,”
27 and that it:
28

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would not be a defense to a claim of violation of section
1201 that the circumvention is for the purpose of engaging
in the conduct covered by this new exemption in section
110(11) [the FMA], just as it is not a defense under section
1201 that the circumvention is for the purpose of engaging
in any other non-infringing conduct.

1
2
3
4

5 151 Cong. Rec. S502 (daily ed. Jan. 25, 2005); see id. (“Any suggestion that support
6 for the exercise of viewer choice . . . requires violation of either the copyright in the
7 work or of the copy protection schemes that provide protection for such work should
8 be rejected.”).8 The FMA provides VidAngel no defense to its § 1201(a) violations.
c.

9

There Is No Fair Use Exemption To § 1201(a) Liability

The fair use defense under § 107 does not apply to § 1201(a) violations. See,

10

11 e.g., Dish Network, L.L.C. v. Vicxon Corp., No. 12-CV-9-L WVG, 2013 WL
12 3894905, at *6 (S.D. Cal. July 26, 2013) (“[P]otential lawful or fair use is not a
13 defense to § 1201(a) when its requirements are established.”); United States v.
14 Crippen, No. CR 09-703 PSG, 2010 WL 7198205, at *2 (C.D. Cal. Nov. 23, 2010)
15 (“A reading of § 1201(c) that adds the fair use arrow to a defendant’s § 1201(a)
16 quiver contradicts the plain meaning of the statute and must be rejected.”).
17
8

18
19
20
21
22
23
24
25
26
27
28

When Congress first considered the FMA, in 2004, Representative Goodlatte
expressed concern that it might interfere with copyright owners’ rights under
§ 1201. Hearing on H.R. 4586, Serial No. 94 (June 17, 2004) at 84. He asked about
including an explicit provision to make clear that the FMA has no effect on § 1201.
Id. In a letter, the Register of Copyrights stated that such an explicit provision was
unnecessary because “[t]he anticircumvention provisions of section 1201 apply even
in cases where circumvention is carried out in order to engage in an act that is not an
act of infringement under the copyright statute.” Id. at 89. The Register advised
against including a specific statement confirming the inapplicability of the FMA to
§ 1201 claims, noting such a provision could create needless confusion regarding
the other exemptions from infringement in § 110 (where the FMA is codified) and
elsewhere in the Copyright Act: “To include in this new exemption a reference to
section 1201 when none of the other exemptions in section 110 or elsewhere in the
Copyright Act make such reference will imply that those existing exemptions also
apply to liability under the anticircumvention provisions, when it should be clear
that they do not.” Id.

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1

“[T]he decision not to make fair use a defense to a claim under Section

2 1201(a) was quite deliberate.” Reimerdes, 111 F. Supp. 2d at 322. Congress was
3 well aware “that technological controls on access to copyrighted works might erode
4 fair uses by preventing access even for uses that would be deemed ‘fair,’” and
5 “struck a balance among the competing interests.” Id. (citing Commerce Com. Rep.
6 25-26). Reading a fair use defense into § 1201(a) would upset that balance and be
7 contrary to the statute. Crippen, 2010 WL 7198205, at *5 (§ 1201(a) is a
8 “rebalancing of interests that attempts to deal with special problems created by the
9 so-called digital revolution”; “[t]hat balancing [is] done by the DMCA, not by
10 adding fair use to the circumvention equation”) (citation omitted).
11

B.

Plaintiffs Will Succeed On Their Copyright Infringement Claims

12

Plaintiffs easily establish prima facie infringement claims because they

13 (1) “show ownership” and (2) demonstrate a violation of “at least one exclusive
14 right” (sections 1 and 2, infra). A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004,
15 1013 (9th Cir. 2001). VidAngel’s claimed defenses are meritless (section 3, infra).
1.

16

Plaintiffs Own Or Control Valid Copyrights In The Works
That VidAngel Exploits

17
18

Certificates of registration issued by the Copyright Office for the copyrighted

19 works identified in the Complaint are included with this filing. Klaus Decl. Exs. A20 RR. The certificates create a presumption of copyright validity and ownership. 17
21 U.S.C. § 410(c); United Fabrics Int’l, Inc. v. C&J Wear, Inc., 630 F.3d 1255, 1257
22 (9th Cir. 2011). It is undisputed that VidAngel currently offers all the works listed
23 in Exhibit A to the complaint and, unless enjoined, will continue to offer these
24 works and other future releases. Ehler Decl. Ex. EE at Tr. 27:19-29:14; 30:3-20;
25 31:6-37:4.
26

2.

VidAngel Violates Plaintiffs’ Exclusive Rights To Reproduce
And Publicly Perform Their Copyrighted Works

27
28

- A.731 -

VidAngel infringes at least two distinct § 106 rights, each of which is
-16PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION
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1 sufficient to render VidAngel liable.
2

a.

VidAngel Violates Plaintiffs’ Exclusive Right To
Reproduce Their Works By Making Copies

3
4

Plaintiffs have the exclusive right “to reproduce” their works “in copies.” 17

5 U.S.C. § 106(1). VidAngel admits to making copies of Plaintiffs’ works onto
6 computer system and third-party servers, thereby violating the reproduction right.
7 Ehler Decl. Ex. EE at Tr. 58:1-4. This is infringement. MAI Sys. Corp. v. Peak
8 Computer, Inc., 991 F.2d 511, 518 (9th Cir. 1993) (transferring digital work “from a
9 permanent storage device to a computer’s RAM [or storage]” infringes the
10 reproduction right); see UMG Recordings, Inc. v. Escape Media Grp., Inc., No. 11
11 CIV. 8407, 2014 WL 5089743, at *20 (S.D.N.Y. Sept. 29, 2014) (“uploaded copies”
12 of works violate reproduction right).
13
14

b.

VidAngel Violates Plaintiffs’ Exclusive Right To
Publicly Perform Their Copyrighted Works
i.

VidAngel Publicly Performs Plaintiffs’ Works

15
16

Plaintiffs have the exclusive right “to perform the copyrighted work

17 publicly.” 17 U.S.C. § 106(4). VidAngel violates that right under the Transmit
18 Clause. VidAngel “transmits” “performances” “of the work[s].” 17 U.S.C. § 101
19 (definition of public performance and “to transmit”); Aereo, 134 S. Ct. at 2508
20 (Internet streams trigger the Transmit Clause). And VidAngel streams “to the
21 public,” i.e., VidAngel’s thousands of users. Under the Transmit Clause, the fact
22 that VidAngel’s users receive those performances “in separate places” and “at
23 different times” does not change the fact that VidAngel is performing “to the
24 public.” 17 U.S.C. § 101; Aereo, 134 S. Ct. at 2510.
25

VidAngel’s public performance liability follows from Transmit Clause

26 precedent. Columbia Pictures Industries, Inc. v. Redd Horne, Inc., 749 F.2d 154 (3d
27 Cir. 1984), held that a remote video rental service—wherein patrons selected videos
28 from a store, which transmitted performances from the videos to private in-store
-17-

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1 booths—violated the public performance right. The court held that the store
2 “show[ed] each copy [of a movie] repeatedly to different members of the public,”
3 and that the service was “essentially the same as a movie theatre, with the additional
4 feature of privacy.” Id. at 159.
5

On Command Video Corporation v. Columbia Pictures Industries, 777 F.

6 Supp. 787 (N.D. Cal. 1991), held that a hotel’s “electronic rental” system—in which
7 the hotel rented movies to guests and transmitted performances from the main office
8 to individual hotel rooms—infringed the public performance right. The court held
9 that the “relationship between the transmitter of the performance, On Command,
10 and the audience, hotel guests,” was “a commercial, ‘public’ one regardless of
11 where the viewing takes place.” Id. at 788.
12

Warner Bros. Entertainment Inc. v. WTV Systems, Inc., 824 F. Supp. 2d 1003

13 (C.D. Cal. 2011) (“Zediva”), held that the Zediva service—which streamed
14 performances from DVDs and DVD players purportedly assigned to specific
15 users—violated the public performance right. Id. at 1006-07, 1010.
16

And Aereo held that Internet streaming of content captured from over-the-air

17 broadcast signals by thousands of separate antennae—each of which, Aereo
18 claimed, was assigned separately to individual subscribers—infringed. The Court
19 squarely rejected Aereo’s claim that its technical design (using an individual
20 antenna to make a separate transmission path to each user) made the performances
21 private. Aereo, 134 S. Ct. at 2508-09 (noting subscribers would not “care much”
22 about the service’s technical design).
23

Like its predecessors, VidAngel “transmits” (by streaming) performances “to

24 the public” (its users). VidAngel’s liability is clear.

26

VidAngel’s “Buy-Sellback” Scheme Does Not
Transform VidAngel’s Public Performances Into
Private Ones

27

VidAngel argues that it makes private, not public, performances because it

25

ii.

28 transmits streams of movies that users purportedly “buy” from VidAngel. VidAngel
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1 claims support for this argument in dicta from Aereo, stating that a different analysis
2 might apply where users “receive performances in their capacities as owners or
3 possessors of the underlying works.” Aereo, 134 S. Ct. at 2510. This argument
4 fails.
5

First, the Court’s description of the ownership/possessory relationship that

6 might be relevant is plainly inapplicable to VidAngel. The Court said that the
7 difference between a valet returning cars to their owners and a dealership selling
8 new cars provided a potential analogy to the private/public distinction: “we would
9 not say that the [valet] provides cars ‘to the public’ . . . [w]e would say that a car
10 dealership . . . provide[s] cars to the public, for it sells cars to individuals who lack a
11 pre-existing relationship to the cars.” Id. The Court said Aereo was more like a car
12 dealership because it “transmits to large numbers of paying subscribers who lack
13 any prior relationship to the works.” Id. The same is true of VidAngel, whose users
14 have no “prior relationship” with the works they watch, but instead receive access
15 by paying VidAngel a fee.
16

Second, as Aereo and the other cases discussed above make clear, courts must

17 look at the reality of what the defendant is doing rather than the stratagem it
18 employs to characterize its performances as private. The Court rejected Aereo’s
19 claim that associating each user with an antenna made its streams private
20 performances. The Court explained that this gimmickry did not “render Aereo’s
21 commercial objective any different from that of cable companies,” and did not
22 “significantly alter the viewing experience.” Id. at 2508. It is unfathomable that the
23 courts in Redd Horne, On Command, and Zediva would have deemed the
24 performances private if the defendants had said they were “selling” videos to
25 customers and “buying them back” after each performance.
26

The courts’ focus on substance rather than labels is fatal to VidAngel’s

27 “private performance” argument. VidAngel streams the same copyrighted works to
28 multiple users (“the public”) in a manner that is fundamentally the same as other on-19-

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1 demand services. VidAngel’s own internal documents make it clear that
2 [“VidAngel is NOT a disc service. VidAngel is a streaming service.”] Ehler Decl.
3 Ex. W at 234 (emphasis added). VidAngel’s labeling the transaction a “sale” does
4 not affect the user’s viewing experience. Given that only [eight] users have ever
5 requested a copy of the Disc they purportedly “bought”—out of [millions] of
6 purported “sales”—it is obvious that VidAngel’s users do not treat the service as
7 selling them Discs. Id. Ex. EE at Tr. 189:21-190:8, 229:2-12; see also id. Ex. I at
8 120 (“VidAngel – An Honest Review”9). VidAngel’s business model depends on
9 consumers treating the “buy-sellback” option just like an on-demand streaming
10 rental service, and it encourages this behavior at every turn by repeatedly reminding
11 users to “sellback,” sending email reminders, and even offering “auto-sellback.” Id.
12 at Ex. BB at 336-37. VidAngel’s labeling of the transaction cannot disguise what is
13 really taking place.10
Third, even if VidAngel were right (which it is not) that the Court should look

14

15 at how VidAngel characterizes its service (at least in its legal papers as opposed to
16 its marketing materials), that would not help VidAngel. VidAngel streams
17 performances to paying subscribers from a master copy stored on a server (not a
18 Disc temporarily assigned to the user) in the same way licensed services do—except
19 VidAngel’s master copy is unauthorized and VidAngel has no license to stream.
20
21
22

9

“VidAngel – An Honest Review” is available on YouTube at
23 https://www.youtube.com/watch?v=KG7xgmDHF40 (last visited Aug. 21, 2016).
10
In analogous contexts, courts have recognized “rentals” couched as “sales”
24
through a sell-buyback structure as gimmicks and held that it is the substance that
25 matters. A & M Records, Inc. v. A.L.W., Ltd., 855 F.2d 368, 370 (7th Cir. 1988)
26 (rejecting buyback scheme under Record Rental Amendment of 1984); Central
Point Software, Inc. v. Global Software & Accessories, Inc., 880 F. Supp. 957, 964
27 (E.D.N.Y. 1995) (rejecting buyback scheme under Computer Software Rental
28 Amendments Act of 1990).

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1 Schumann Decl. ¶¶ 7, 42. In sum, VidAngel’s attempt to characterize its
2 performances as private fails.
3
4
5

3.

None of VidAngel’s Defenses Excuse Its Infringement
a.

The FMA Does Not Excuse VidAngel’s Infringement

The statutory text and Congress’s clear intent establish that the FMA is

6 narrow and does not exempt VidAngel’s infringement of Plaintiffs’ rights.
7

First, as a textual matter, the FMA exempts only (1) “the making

8 imperceptible” and (2) “the creation or provision of a computer program or other
9 technology that enables such making imperceptible.” 17 U.S.C. § 110(11). Every
10 other word in the FMA narrows the circumstances in which these two exemptions to
11 § 106 apply. The savings clause, moreover, clarifies the FMA shall not be
12 “construed to imply further rights under” § 106. Id. § 110 (final sentence).
13

VidAngel argues that a business that offers filtering software has statutory

14 authorization to publicly perform Plaintiffs’ works because the FMA permits
15 filtering “during a performance . . . transmitted to that household for private home
16 viewing.” Dkt. 11 (Counter-Complaint) ¶ 65 (quoting 17 U.S.C. § 110(11)
17 (omissions in original)). The plain text of the FMA defies this reading. VidAngel’s
18 reading ignores the requirement that the performance be from an “authorized copy.”
19 17 U.S.C. § 110(11). If Congress wanted to grant filtering businesses a total
20 exemption from copyright infringement—a radical notion with no historical
21 support—it would have said that directly. The fact that the transmission must come
22 from an “authorized copy” of the copyrighted work makes clear that Congress did
23 not provide a blanket exemption to the reproduction or public performance right. Id.
24 VidAngel’s answer to this is that it purchases authorized copies of Plaintiffs’ movies
25 on Discs. But VidAngel does not stream from those Discs (and even if it did, it
26 would still be publicly performing them without the necessary license, as discussed
27 above). VidAngel does not stream from an “authorized copy;” it streams from a
28

- A.736 -

-21PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION
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1 ripped digital copy that it obtained by violating § 1201(a) and then by violating
2 Plaintiffs’ reproduction right.11 Schumann Decl. ¶¶ 35-42.
The FMA was “targeted narrowly and specifically” at the act of filtering and

3

4 did not impact other rights and obligations under the Copyright Act. The statute
5 was not intended to be a blanket license for every business that engaged in
6 filtering.12
b.

7

VidAngel’s Affirmative Defense Of Fair Use Does Not
Excuse Its Infringement

8
VidAngel must show it likely will succeed on its defense that copying and

9

10 publicly performing Plaintiffs’ works are fair uses. Perfect 10, Inc. v. Amazon.com,
11 Inc., 508 F.3d 1146, 1158 (9th Cir. 2007). VidAngel cannot meet its burden. All
12 four factors that § 107 directs the Court to consider weigh against VidAngel.
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

11

Even if VidAngel’s reading were correct—which it is not—VidAngel could not
rely on the statute because it [
]. Schumann Decl. Ex. C at 25; Ehler Decl. Ex. EE at Tr.
95:22-96:14. The FMA only applies “if no fixed copy of the altered version of the
motion picture is created by such computer program or other technology.” 17
U.S.C. § 110(11). VidAngel’s documents make clear that it [
.
Schumann Decl. Ex. C at 25. A copy is fixed if it is “sufficiently permanent or
stable to permit it to be perceived, reproduced, or otherwise communicated for a
period of more than transitory duration.” MAI Sys. Corp., 991 F.2d at 518 (citing 17
U.S.C. § 101). VidAngel’s server copy segments are fixed because they are stored
for more than a transitory duration. Id. (software loaded to a computer’s RAM is
fixed, even if for the sole purpose of viewing the system and running an error log).
12

Senator Hatch, a sponsor of the bill, explained that the FMA “would not exempt
from liability an otherwise infringing performance, or a transmission of a
performance, during which limited portions of audio or video content of the motion
picture are made imperceptible” and infringing performances “are not rendered noninfringing by section 110(11) by virtue of the fact that limited portions of audio or
video content of the motion picture being performed are made imperceptible during
such performance or transmission.” 151 Cong. Rec. S501 (daily ed. Jan. 25, 2005)
(Sen. Hatch) (emphasis added).

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i.

1
2
3

VidAngel’s Wholesale Copying And Publicly
Performing Plaintiffs’ Works Are Commercial And
Non-Transformative

The first factor asks whether VidAngel’s use is commercial and

4 transformative. Leadsinger, Inc. v. BMG Music Publ’g, 512 F.3d 522, 530 (9th Cir.
5 2008).
6

VidAngel’s use of Plaintiffs’ works obviously is commercial: VidAngel

7 copies and publicly performs Plaintiffs’ works to profit in its business. Harper &
8 Row Publishers, Inc. v. Nation Enters., 471 U.S. 539, 562 (1985). VidAngel’s
9 commercial use weighs against fair use because VidAngel “stands to profit from
10 exploitation of the copyrighted material without paying the customary price.”
11 Leadsinger, 512 F.3d at 530 (quotations omitted).
12

VidAngel’s commercial use is not transformative. A transformative use adds

13 “something new, with a further purpose or different character, altering the first
14 [work] with new expression, meaning or message.” Campbell v. Acuff-Rose Music,
15 Inc., 510 U.S. 569, 579 (1994). VidAngel’s wholesale copying of Plaintiffs’ works
16 “in their entirety” to its computer system adds nothing new to those works and is not
17 transformative. Worldwide Church of God v. Philadelphia Church of God, Inc., 227
18 F.3d 1110, 1117 (9th Cir. 2000).
19

VidAngel’s public performance of those works—in which VidAngel makes

20 the entire copied work available to users and allows them to selectively filter out
21 small portions of Plaintiffs’ works— also is not transformative. Removing portions
22 of the works obviously does not add anything new to them. VidAngel instead is
23 “simply rebroadcast[ing] for entertainment purposes [works] that Plaintiffs
24 rightfully own”—which is not transformative. Elvis Presley Enters., Inc. v.
25 Passport Video, 349 F.3d 622, 628-29 (9th Cir. 2003), overruled on other grounds
26 as recognized in Seltzer v. Green Day, Inc., 725 F.3d 1170 (9th Cir. 2013); see
27 Monge v. Maya Magazines, Inc., 688 F.3d 1164, 1174 (9th Cir. 2012) (“neither
28 minor cropping nor the inclusion of headlines or captions transformed the
-23-

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1 copyrighted [photographs]”); Worldwide Church of God, 227 F.3d at 1117 (“where
2 the use is for the same intrinsic purpose as the copyright holder’s, such use seriously
3 weakens a claimed fair use”) (alterations and internal quotation marks omitted); cf.
4 Authors Guild. v. Google, Inc., 804 F.3d 202, 225 (2d Cir. 2015) (while Google
5 Books’ display of “snippets” of text was held to be transformative, court expressly
6 stated that “[i]f Plaintiffs’ claim were based on Google’s converting their books into
7 a digitized form and making that digitized version accessible to the public, their
8 claim would be strong”).
9

The court in Clean Flicks of Colo. v. LLC v. Soderbergh, 433 F. Supp. 2d

10 1236 (D. Colo. 2006), considered and rejected the same fair use defense that
11 VidAngel makes. The defendants there mechanically edited movies to remove
12 content and therefore had no FMA defense. The court held that the defendants also
13 had no fair use defense. The court emphasized that the defendants (1) added
14 nothing to the movies, (2) only removed small amounts of content, and (3) did so for
15 commercial gain. Id. at 1241. All of those findings apply to VidAngel.
ii.

16
17

Plaintiffs’ Copyrighted Works Are Highly Creative

Plaintiffs’ works are highly creative, and “the nature of the copyrighted work”

18 favors Plaintiffs. Campbell, 510 U.S. at 586; Elvis Presley Enters., 349 F.3d at 629
19 (motion pictures “are creative in nature and thus fit squarely within the core of
20 copyright protection”).
21
22
23

iii.

VidAngel Copies The Entirety Of Plaintiffs’ Works
And Publicly Performs Substantially The Entirety
Of Them

VidAngel copies Plaintiffs’ works in their entirety. Ehler Decl. Ex. EE at Tr.

24 112:19-113:2. This weighs strongly against fair use. See Monge, 688 F.3d at 1180
25 (no fair use where defendant copied photographs in their entirety). VidAngel’s
26 public performances omit some portions of each work. See Ehler Decl. Ex. Q
27 (removing “nudity/graphic violence/f-bomb . . . took out 14min” from Deadpool).
28 But VidAngel always performs the “heart” of the works, and this factor weighs
-24-

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1 against VidAngel. See Campbell, 510 U.S. at 586; Elvis Presley Enters., 349 F.3d
2 at 630; L.A. News Serv. v. Tullo, 973 F.2d 791, 798 (9th Cir. 1992).
3

iv.

VidAngel’s Service Undermines Existing And
Potential Markets For Plaintiffs’ Works

4
5

The fourth factor considers current market harm and ‘“whether unrestricted

6 and widespread conduct of the sort engaged in by the defendant . . . would result in a
7 substantially adverse impact on the potential market’ for the original.” Campbell,
8 510 U.S. at 590 (citations omitted). Where, as here, the defendant uses the works
9 “for commercial gain, the likelihood of market harm may be presumed.”
10 Leadsinger, 512 F.3d at 531-32 (quotations omitted); see Campbell, 510 U.S. at 591
11 (presumption of market harm “makes common sense” in cases involving “copying
12 of the original in its entirety for commercial purposes”) (quotation marks and
13 alterations omitted). To rebut this presumption, VidAngel must “bring forward
14 favorable evidence about relevant markets.” Arista Records LLC v. Myxer, Inc., No.
15 CV 08-03935 GAF, 2011 WL 11660773, at *43 (C.D. Cal. 2011) (quoting Dr. Seuss
16 Enters., L.P. v. Penguin Books, USA, Inc., 109 F.3d 1394, 1403 (9th Cir. 1997)).
17 This VidAngel cannot do.
18

VidAngel plainly undermines existing and developing markets for Plaintiffs’

19 works. VidAngel’s own marketing materials and strategy compare it to legitimate
20 on-demand streaming services such as iTunes, Google Play, Amazon Video, and
21 Netflix. Ehler Decl. Exs. A, B. Further, as explained by the Senior Vice President,
22 Digital Distribution at Fox, VidAngel undercuts the market for Plaintiffs’ works in a
23 number of ways. Cittadine Decl. ¶¶ 16-22; 26-34. For example when VidAngel
24 released Star Wars: The Force Awakens on the same day it was released to Disc and
25 for digital download, VidAngel was “competing directly with these other exclusive
26 viewing options and preempting legitimate on-demand streaming services” which
27 did not yet have rights to stream that title. Id. ¶ 16. Likewise, “[b]y offering
28 consumers on-demand streaming at a lower price —which VidAngel can offer only
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1 because it misappropriates Fox’s content—VidAngel threatens the business of all of
2 [Fox’s licensees] who have negotiated legal, authorized licenses [with Fox and other
3 Plaintiffs] for those rights.” Id. ¶ 20. Many VidAngel customers are using the
4 service because of its price as compared to authorized services—a differential that
5 exists only because VidAngel does not pay for the rights it exploits. Ehler Decl. Ex.
6 I (examples).
7

In sum, fair use is not a defense to VidAngel’s blatant infringement.
c.

8

The First Sale Doctrine Does Not Authorize VidAngel’s
Copying or Streaming

9
VidAngel claims that Plaintiffs’ attempt to enforce their reproduction and

10

11 public performance rights violates the first sale doctrine, see 17 U.S.C. § 109(a),13
12 because VidAngel buys Discs and resells them via its “buy-sellback” model. Dkt.
13 11 (Counter-Complaint) ¶¶ 53-59. Even if VidAngel were actually selling Discs
14 (which it is not), the argument would be a red herring. The first sale doctrine
15 applies only to Plaintiffs’ right of distribution, which is not at issue here. See Red
16 Baron-Franklin Park, Inc. v. Taito Corp., 883 F.2d 275, 280-81 (4th Cir. 1989)
17 (“the first sale doctrine has no application to the rights of the owner of a copyright
18 guaranteed by § 106, except the right of distribution”); Capitol Records, LLC v.
19 ReDigi Inc., 934 F. Supp. 2d 640, 655 (S.D.N.Y. 2013) (“[T]he first sale defense
20 does not apply to ReDigi’s infringement of those [reproduction] rights.”); Peker v.
21 Masters Collection, 96 F. Supp. 2d 216,221 (E.D.N.Y. 2000) (“no defense that
22 [defendant] used a lawfully acquired object to achieve its unlawful goal of
23 copying”).
24
25
13

“Notwithstanding the provisions of section 106(3), the owner of a particular copy
. . . lawfully made under this title, or any person authorized by such owner, is
27 entitled, without the authority of the copyright owner, to sell or otherwise dispose of
28 the possession of that copy . . . .” 17 U.S.C. § 109(a) (emphasis added).
-2626

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1 II.

PLAINTIFFS WILL SUFFER IRREPARABLE HARM ABSENT AN
INJUNCTION

2
3

A court may find that a copyright owner’s harm is likely “irreparable” for

4 many reasons, including that a particular loss is “difficult to replace,” “difficult to
5 measure,” or of a kind “that one should not be expected to suffer.” Salinger v.
6 Colting, 607 F.3d 68, 81 (2d Cir. 2010). VidAngel’s illegal conduct puts Plaintiffs
7 at risk of suffering imminent, irreparable harms; VidAngel’s “delay” defense does
8 not change this fact.
9

A.

VidAngel’s Unauthorized Service Causes Immediate And
Irreparable Harms

10
11

First, VidAngel interferes with Plaintiffs’ basic right to control how, when

12 and through which channels consumers can view their copyrighted works. “As the
13 copyright holders, Plaintiffs have the exclusive right to decide when, where, to
14 whom, and for how much they will authorize transmission of their Copyrighted
15 Works to the public.” Zediva, 824 F. Supp. 2d at 1012 (citation omitted). Where
16 defendants operate an “infringing service without the normal licensing restrictions
17 imposed by Plaintiffs, [it] interfere[s] with Plaintiffs’ ability to control the use and
18 transmission of their Copyrighted works, thereby, causing irreparable injury.” Id. at
19 1012 (citation omitted). Plaintiffs’ exclusive rights under copyright are critical to
20 providing Plaintiffs the opportunity to earn a return on their substantial
21 investments—often tens of millions of dollars for a major motion picture—in
22 creating content. Cittadine Decl. ¶¶ 7-8. This harm is ongoing and worsening as
23 VidAngel continues to add Plaintiffs’ works and grow its user base. Id. ¶ 34.
24

Plaintiffs exercise their rights through agreements with authorized

25 distributors. Some licenses grant the licensee an exclusive time window for
26 performing a title. Id. ¶ 15. The price for such a license is based, in part, on the
27 promise and scope of exclusivity. Id. VidAngel operates without any license and
28 performs Plaintiffs’ works during negotiated exclusivity periods. As of this filing,
-27-

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1 VidAngel offers (at least) two of Plaintiffs’ works—The Martian and Brooklyn—
2 during periods these works are exclusive to an authorized licensee, HBO. Id. ¶ 30.
3 As noted, VidAngel offered Star Wars: The Force Awakens when no service had
4 rights to distribute it for on-demand streaming. Id. ¶ 16; Ehler Decl. Ex. J.
5 VidAngel flaunts its interference with exclusive windows as a competitive
6 advantage over authorized services by expressly promoting titles that are available
7 on VidAngel but “NOT on Netflix.” Ehler Decl. Ex. A at 13-15, 23-38. VidAngel
8 thus interferes with Plaintiffs’ exercise of their exclusive rights and frustrates
9 Plaintiffs’ ability to negotiate for similar rights in the future. Cittadine Decl. ¶¶ 17,
10 36.
11

Second, VidAngel threatens harm to Plaintiffs’ relationships and goodwill

12 with authorized distributors by undermining their ability to provide licensed
13 offerings. See Ticketmaster L.L.C. v. RMG Techs., Inc., 507 F. Supp. 2d 1096, 1115
14 (C.D. Cal. 2007) (irreparable harm includes “damage to goodwill”). VidAngel
15 poses a threat to the businesses of Plaintiffs’ legitimate licensees and, in turn, to
16 Plaintiffs’ relationships with them and the goodwill Plaintiffs have worked to create.
17 Cittadine Decl. ¶¶ 18-22. VidAngel’s users often compare the service to Plaintiffs’
18 licensees, commenting that they prefer VidAngel because it provides inexpensive
19 access to Plaintiffs’ copyrighted works. See Ehler Decl. Ex. I (examples).
20 Licensees complain to Plaintiffs that their business suffers from competition with
21 unlicensed services that offer low-cost or free content because they do not obtain
22 licenses. Cittadine Decl. ¶ 19. VidAngel’s unrestrained conduct thus threatens the
23 legitimate online distribution market. Id. ¶¶ 19, 22; see WPIX, Inc. v. ivi, Inc., 691
24 F.3d 275, 286 (2d Cir. 2012) (holding that unrestrained unauthorized Internet
25 retransmissions of broadcast programming “would encourage” other services to
26 follow suit, diminish plaintiffs’ negotiating position, adversely affect “quantity and
27 quality of efforts put into creating” new works, and “drastically change the industry,
28 to plaintiffs’ detriment”).

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1

Third, VidAngel threatens harm to Plaintiffs’ ability to secure and protect

2 their content in the online environment. Online distribution carries with it a
3 heightened risk of piracy because the Internet facilitates the ability to exploit
4 copyrighted content on a mass scale. Cittadine Decl. ¶ 24. Plaintiffs require
5 licensees to employ specified security measures to prevent piracy. Id.¶ 25. Because
6 VidAngel streams Plaintiffs’ works without negotiating a license, Plaintiffs are
7 deprived of their right to impose those terms on VidAngel. Id. VidAngel
8 jeopardizes Plaintiffs’ content and harms Plaintiffs’ relationships with licensees who
9 are required to abide by security requirements to which VidAngel is not bound. Id.
10

Fourth, VidAngel threatens harm to the overall development of the on-

11 demand streaming market by the provision of inferior user-viewing experiences.
12 See Zediva, 842 F. Supp. 2d at 1014 (Zediva “threatens the development of a
13 successful and lawful video on demand market by offering a sub-optimal customer
14 experience and, thus, tarnishing customers’ perception of video on demand as an
15 attractive option for viewing Plaintiffs’ Copyrighted Works.”). Plaintiffs require
16 their licensees to have quality controls, which maintain predictable standards and
17 allow customers to view Plaintiffs’ movies under consistently positive conditions.
18 Cittadine Decl. ¶ 27. VidAngel threatens these efforts and provides an inferior user19 viewing experience that tarnishes Plaintiffs’ brands because it is not bound to
20 comply with Plaintiffs’ quality controls. Id. This possibility is not merely
21 theoretical: VidAngel’s social media pages contain customer complaints about the
22 service’s poor streaming quality. Ehler Decl. L (attaching numerous examples).
23

VidAngel also threatens the lawful market by confusing consumers that

24 VidAngel is engaged in lawful conduct. See Zediva, 824 F. Supp. 2d at 1013
25 (finding that the Zediva service threatened “to create incorrect but lasting
26 impressions with consumers about what constitute[d] lawful video on demand
27 exploitation” of copyrighted works). VidAngel publicly justifies its unlicensed
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1 activities as “legal” under the FMA. Ehler Decl. Ex. M. But VidAngel’s service is
2 not legal, and it creates incorrect expectations about the value of Plaintiffs’ content.
3

B.

Plaintiffs’ Motion Is Timely, And VidAngel’s Assertions of
“Delay” Do Not Negate Irreparable Harm

4
5

VidAngel has asserted that Plaintiffs face no irreparable harm because they

6 did not sue as soon as they learned of VidAngel when they received Mr. Quinto’s
7 letters in July 2015. Plaintiffs are not required to act immediately to sue, or to seek
8 to enjoin, every potential infringer. See Petrella, 134 S. Ct. at 1976 (“Even if an
9 infringement is harmful, the harm may be too small to justify the cost of
10 litigation.”). A rule that required a copyright holder to pursue every possible
11 threat—no matter how nascent—would generate a rash of litigation and motion
12 practice, which would not serve the Courts, the parties, or the public interest. See
13 Lotus Dev. Corp. v. Paperback Software Int’l, 740 F. Supp. 37, 82 (D. Mass. 1990)
14 (“Prudent business judgment, Rule 11, and basic common sense required [the
15 plaintiff] first to ascertain that the threat to its intellectual property interest was
16 serious, and that its legal position was sound, before filing suit.”) (internal
17 quotations omitted). Courts are “loath to withhold relief” solely on the ground that a
18 party delayed seeking an injunction. Arc of Cal. v. Douglas, 757 F.3d 975, 990 (9th
19 Cir. 2014) (citing Lydo Enters., Inc. v. City of Las Vegas, 745 F.2d 1211, 1214 (9th
20 Cir. 1984)).
21

Plaintiffs filed this suit when VidAngel’s conduct was sufficiently egregious

22 to require litigation and when it was apparent VidAngel would continue operating.
23 See Arc of Cal., 757 F.3d at 991 (“The significance of such a prudent delay in
24 determining irreparable harm may become so small as to disappear.”). To require
25 Plaintiffs to “sue soon, or forever hold [their] peace” would force Plaintiffs to mount
26 a federal case to stop services that might never get off the ground—which is often
27 the case. Petrella, 134 S. Ct. at 1976 (describing “seemingly innocuous
28 infringements”). Plaintiffs filed suit after they had conducted their investigation and
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1 analysis, and when it was clear that litigation was necessary to stop VidAngel’s
2 illegal conduct.
3

Moreover, each new title that VidAngel offers gives rise to a new

4 infringement claim and inflicts new immediate, irreparable harm.14 Id. at 1969
5 (“[e]ach wrong gives rise to a discrete ‘claim’ that ‘accrue[s]’ at the time the wrong
6 occurs”). VidAngel has added more and more of Plaintiffs’ titles in recent months
7 and promises to continue to do so, especially with Plaintiffs’ most popular releases.
8 Ehler Decl. Exs. N (examples of titles recently added); EE at Tr. 32:9-37:4, R
9 (VidAngel offers new movies that reach more than [$10 million] in domestic sales).
The harm that VidAngel causes is not over and done with, but continuing and

10

11 growing. The time a party takes initially in seeking judicial protection “is not
12 particularly probative in the context of ongoing, worsening injuries.” Arc of Cal.,
13 757 F.3d at 990-91 (citations omitted). VidAngel’s growth, increased marketing
14 and more brazen conduct have increased the immediacy and magnitude of the harm
15 to Plaintiffs, further justifying injunctive relief. See id.
16 III.

THE BALANCE OF HARDSHIPS TIPS DECISIVELY FOR
PLAINTIFFS

17
The threat of harm to Plaintiffs, as demonstrated above, is substantial. In

18

19 contrast, VidAngel “cannot complain of the harm that will befall it when properly
20 forced to desist from its infringing activities.” Triad Sys. Corp. v. Se. Express Co.,
21 64 F.3d 1330, 1338 (9th Cir. 1995), superseded on other grounds by 17 U.S.C.
22 § 117(c); see Cadence Design Sys., Inc. v. Avant! Corp., 125 F.3d 824, 830 (9th Cir.
23 1997) (“Where the only hardship that the defendant will suffer is lost profits from an
24
25

14

For example, on July 20, 2016, VidAngel made Batman v. Superman: Dawn of
26 Justice (Ultimate Edition) available, when that title was not yet available to
legitimate on-demand streaming services. See Ehler Decl. Ex. N at 155. On August
27 4, VidAngel offered Keanu, when that title was not yet available to legitimate on28 demand services. See id. at 157.
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1 activity which has been shown likely to be infringing, such an argument in defense
2 merits little equitable consideration”) (quotations and citations omitted); Apple Inc.
3 v. Psystar Corp., 673 F. Supp. 2d 943, 950 (N.D. Cal. 2009) (“Since [small start-up
4 defendant] does not (and cannot) claim any legitimate hardships as a result of being
5 enjoined from committing unlawful activities, and Apple would suffer irreparable
6 and immeasurable harms if an injunction were not issued, this factor weighs
7 strongly in favor of Apple’s motion.”).
8

VidAngel does not suffer a legitimate hardship if it is enjoined because the

9 very core of its business involves circumvention and infringement. The fact that
10 VidAngel’s litigation counsel sent letters to a number of general counsel makes
11 clear that VidAngel knew from the outset it was on thin ice. Nonetheless, VidAngel
12 proceeded at its peril.
13 IV.

A PRELIMINARY INJUNCTION IS IN THE PUBLIC INTEREST

14

Upholding copyright protection is in the public interest. See Eldred v.

15 Ashcroft, 537 U.S. 186, 212 n.18 (2002) (“[t]he economic philosophy behind the
16 [Copyright] [C]lause . . . is the conviction that encouragement of individual effort by
17 personal gain is the best way to advance public welfare through the talents of
18 authors and inventors”) (citation omitted); Kelly v. Primco Mgmt., Inc., No. CV-1419 07263 BRO, 2015 WL 10990368 at *16 (C.D. Cal. Jan. 12, 2015) (“[I]t is virtually
20 axiomatic that the public interest can only be served by upholding copyright
21 protections . . . .”); Realnetworks, Inc., 641 F. Supp. 2d at 943 (“By making it a
22 DMCA violation to distribute products that enable consumers to override copyright
23 owner preferences against unauthorized copying, Congress determined that the
24 public interest is best served by outlawing such products.”).
25

VidAngel’s circumvention violations and infringements undermine

26 Congress’s purposes in the DMCA and Copyright Act. Congress believed that
27 content owners must have exclusive rights, as set forth in § 106, and also the ability
28 to safeguard access to their works, in order to be able to earn returns on their (often
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1 substantial) investments. VidAngel’s violation of Plaintiffs’ rights flouts Congress’s
2 goals and harms Plaintiffs. An injunction serves the public interest in upholding the
3 law.
4 V.

MINIMAL SECURITY SHOULD BE REQUIRED

5

The required security need not be substantial. See Zediva, 824 F. Supp. 2d at

6 1015 (requiring $50,000 bond). Any hardship VidAngel faces results from its
7 voluntary decision to build a business around violating Plaintiffs’ rights. Plaintiffs
8 respectfully submit that security in the amount of $50,000 is appropriate.
9

CONCLUSION

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The Court should grant Plaintiffs’ motion for a preliminary injunction.

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DATED: August 22, 2016

MUNGER, TOLLES & OLSON LLP

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By:

/s/ Kelly M. Klaus
KELLY M. KLAUS
Attorneys for Plaintiffs

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CERTIFICATE OF SERVICE
I hereby certify that on August 22, 2016, I authorized the electronic filing of

3 the foregoing with the Clerk of the Court using the CM/ECF system, which will
4 send e-mail notification of such filing to all registered parties. I certify under
5 penalty of perjury under the laws of the United States of America that the foregoing
6 is true and correct.
7
8 DATED: August 22, 2016

MUNGER, TOLLES & OLSON LLP

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By:

/s/ Kelly M. Klaus
Kelly M. Klaus

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