Disney Enterprises, Inc., et al v. VidAngel, Inc.
Filing
37
Filed Appellant VidAngel, Inc. motion to file Emergency Motion Under Circuit Rule 27-3 For A Stay Pending Appeal UNDER SEAL. Deficiencies: None. Served on 12/30/2016. (Court-Entered filing of motion submitted under seal at [16]) [10282910] (WL) [Entered: 01/27/2017 11:18 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 1 OF 3
(Pages 1-290)
Brendan S. Maher
Daniel L. Geyser
Douglas D. Geyser
STRIS & MAHER LLP
6688 N. Central Expy., Suite 1650
Dallas, TX 75206
Telephone: (214) 396-6630
Facsimile: (210) 978-5430
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: (213) 995-6800
Facsimile: (213) 261-0299
peter.stris@strismaher.com
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
'
Case 2:16-cv-04109-AB-PLA Document 167 Filed 12/29/16 Page 1 of 3 Page ID #:5300
1 RYAN G. BAKER (SBN 214036)
rbaker@bakermarCJ!!art. com
2 JAIME MARQUART (SBN 200344)
jmarquart@bak.ermarquart. com
3 SCOTT M. 'MALZAHN (SBN 229204)
smalzahn@bakermar_q_uart. com
4 BRIAN T. GRACE (SBN 307826)
bgr_~e@bakermarquart. com
5 BAKERMARQUARTLLP
2029 Century Park East, Floor 16
6 Los Angeles, CA 90067
Telephone: (424) 652-7800
7 Facsunile: (424) 652-7850
8 PETER K . STRIS (SBN 216226)
p~er. stris@strismaher. com
9 BREND~S. MAHER (SBN 217043)
brendan.maher@strismaher. com
10 ELIZABETH BRANNEN (SBN 226234)
elizabeth. brannen@strismaher. com
11 DANIELL. GEYSER (SBN 230405)
danieLgeyser@strismaher. com
12 STRIS & MABER LLP
725 South Fi~eroa Street, Suite 1830
13 Los Angeles, CA 900 17
Telephone: (213) 995-6800
14 Facsimile: (213) 261-0299
15 DAVID W. QUINTO (SBN 106232)
d®into@vtdangel. com
16 3007 FrariKlin Canyon Drive
Beverly Hills CA 90210
17 Telephone: (213) 604-1777
Facsunile: (732) 377-0388
18
Attorneys (or Def?ndant and
19 Counterc(aimant VidAngel, Inc.
20
21
22
23
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
WESTERN DIVISION
DISNEY ENTERPRISES, INC.;
24 LUCASFILMLTD. LLC·
TWENTIETH CENTURY FOX FILM
25 CORPORATION; and WARNER
BROS. ENTERTAINMENT INC.,
26
Plaintiffs,
27
v.
28
- A.1 -
Case No. 2: 16-CV -041 09-AB (PLAx)
DECLARATION OF DAVID
QUINTO
Judge: Hon. Andre Birotte Jr.
Action Filed: June 9, 2016
DECLARATION OF DAVID QUINTO
- - - - - - - -·
Case 2:16-cv-04109-AB-PLA Document 167 Filed 12/29/16 Page 2 of 3 Page ID #:5301
1 VIDANGEL, INC.,
2
Defendant.
3
4 VIDANGEL, INC.,
5
6
Counterclaimant,
v.
7 DISNEY ENTERPRISES, INC. ;
LUCASFILM LTD. LLC~T
8 TWENTIETH CENTURr FOX FILM
CORPORATION; and WARNER
9 BROS . ENTERTAINMENT, INC. ,
10
Counterclaim Defendants.
11
12
13
14
15
16
17
18
19
20
21
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27
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DECLARATION OF DAVID QUINTO
Case 2:16-cv-04109-AB-PLA Document 167 Filed 12/29/16 Page 3 of 3 Page ID #:5302
1 I, David Quinto, declare as follows:
2
1.
I am the General Counsel of VidAngel, Inc. I have personal knowledge
3 of the facts set forth herein and if called and sworn as a witness, I could and would
4 testify competently hereto.
5
2.
Earlier today, this Court issued an Order that denied VidAngel's
6 application for a temporary stay. Given the denial of the requested stay, VidAngel
7 employees at VidAngel were immediately directed to shut the company's movie8 streaming servers completely, such that it is no longer possible to stream a movie from
9 VidAngel. Even customers who currently own tens of thousands of discs are unable to
10 watch the content they own. Notwithstanding VidAngel' s efforts to avoid having to
11 shut down completely, it is not now technologically possible for VidAngel to comply
12 fully with the Court' s Order with respect to plaintiffs' titles while at the same time
13 filtering and streaming titles released by the many, many studios that have neither sued
14 VidAngel nor expressed any complaint concerning its service. VidAngel has therefore
15 been forced to shut down its entire business as a result of the entry of the preliminary
16 injunction and the denial of a stay.
17
3.
I hope VidAngel's action today moots plaintiffs' Ex Parte Application for
18 Order to Show Cause re: Contempt against VidAngel. Plaintiffs sought only to compel
19 compliance with the preliminary injunction and VidAngel is now in full compliance
20 with it.
21
I declare under penalty of perjury that the foregoing is true and correct. Executed
22 this 29th day of December, 2016 in Los Angeles, California.
23
24
25
26
David Quinto
27
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- A.3 -
1
DECLARATION OF DAVID QUINTO
Case 2:16-cv-04109-AB-PLA Document 166 Filed 12/29/16 Page 1 of 5 Page ID #:5295
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.: CV 16-04109-AB (PLAx)
Title:
Date:
December 29, 2016
Disney Enterprises, Inc. et al v. VidAngel Inc.
Present: The Honorable
ANDRÉ BIROTTE JR., United States District Judge
Carla Badirian
Deputy Clerk
N/A
Court Reporter
Attorneys Present for Plaintiffs:
Attorneys Present for Defendants:
None Appearing
None Appearing
Proceedings:
[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 (Dkt. No. 147)
This matter is before the court on Defendant VidAngel, Inc.’s (“VidAngel”) ex parte
application to stay the Court's December 12, 2016 preliminary injunction order granting
Plaintiffs’ Disney Enterprises, Inc., Lucasfilm Ltd. LLC, Twentieth Century Fox Film
Corporation, and Warner Bros. Entertainment Inc. (“Plaintiffs”) Motion for Preliminary
Injunction. (Dkt. No. 144, “Order.”) The Courts Order enjoined VidAngel from
copying, streaming, transmitting or otherwise publicly performing or displaying any of
Plaintiffs’ copyrighted works. (Id.) VidAngel was also enjoined from circumventing
technological measures protecting Plaintiffs’ copyrighted works or engaging in any
activity that violates Plaintiffs anti-circumvention right under § 1201 of the Copyright Act,
17 U.S.C. §1201(a), or infringing Plaintiffs’ exclusive rights under § 106 of the Copyright
Act, 17 U.S.C. § 106. (Id.) VidAngel requests that the Order be stayed in its entirety
pending resolution of its appeal of the Court's Order to the Ninth Circuit. VidAngel
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alternatively moves this Court to stay its Order pending VidAngel's motion to the Ninth
Circuit for a stay of the injunction which VidAngel intends to file should the instant motion
be denied.
For the reasons set forth below, the court DENIES VidAngel's motion for a stay in
its entirety.
I.
LEGAL STANDARD
Federal Rule of Civil Procedure 62(c) provides that "[w]hile an appeal is pending
from an interlocutory order or final judgment that grants . . . an injunction, the court may
suspend, modify, restore, or grant an injunction on terms for bond or other terms that
secure the opposing party's rights." In determining whether to issue a stay pending an
interlocutory appeal, courts must consider: “(1) whether the stay applicant has made a
strong showing that he is likely to succeed on the merits; (2) whether the applicant will be
irreparably injured absent a stay; (3) whether issuance of the stay will substantially injure
the other parties interested in the proceeding; and (4) where the public interest lies.”
Hilton v. Braunskill, 481 U.S. 770, 776, 107 S. Ct. 2113, 95 L. Ed. 2d 724 (1987). "The
first two factors of the traditional standard are the most critical." Nken v. Holder, 556 U.S.
418, 434, 129 S. Ct. 1749, 173 L. Ed. 2d 550 (2009).
In applying these factors, the Ninth Circuit employs a "sliding scale" approach
whereby "the elements of the . . . test are balanced, so that a stronger showing of one
element may offset a weaker showing of another." Alliance for the Wild Rockies v. Cottrell,
632 F.3d 1127, 1131 (9th Cir. 2011); see also Leiva-Perez v. Holder, 640 F.3d 962, 964-66
(9th Cir. 2011) (noting that the sliding scale test for preliminary injunctions described in
Alliance for the Wild Rockies is the "essentially the same" as the test used in the stay
context, and holding that this approach "remains in place" following the Supreme Court's
decision in Nken). The Ninth Circuit “has adopted and applied a version of the sliding
scale approach under which a preliminary injunction could issue where the likelihood of
success is such that ‘serious questions going to the merits were raised and the balance of
hardships tips sharply in [plaintiff's] favor.’” Alliance for the Wild Rockies, 632 F.3d at
1131-32. "Serious questions" are those which are "substantial, difficult, and doubtful, as
to make them fair ground for litigation and thus for more deliberative investigation."
Senate of State of Cal. v. Mosbacher, 968 F.2d 974, 977-78 (9th Cir. 1992) (citing Gilder v.
PGA Tour, Inc., 936 F.2d 417, 422 (9th Cir.1991)); see also Republic of the Philippines v.
Marcos, 862 F.2d 1355, 1362 (9th Cir. 1988) ("'serious questions' refers to questions which
cannot be resolved one way or the other at the hearing on the injunction and as to which the
court perceives a need to preserve the status quo lest one side prevent resolution of the
questions or execution of any judgment by altering the status quo").
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II.
DISCUSSION
a. Likelihood of Success on the Merits
VidAngel's application for a stay raises the same arguments made in its original
opposition to Plaintiffs' motion for a preliminary injunction. (Dkt. No. 42) The Court
addressed each of VidAngel's arguments in its Order, and will not repeat the analysis here.
For the reasons set forth in the Order, the Court determined that the Plaintiffs have
demonstrated a strong likelihood of success on the merits of their claims that VidAngel’s
service violates Plaintiffs’ rights pursuant to § 1201(a) of the Digital Millennium
Copyright Act (“DMCA”), 17 U.S.C. § 1201(a), and infringes Plaintiffs’ exclusive rights
under § 106 of the Copyright Act, id. § 106.
A district court's decision regarding preliminary injunctive relief is subject to limited
review. Harris v. Bd. of Supervisors, L.A. Cnty, 366 F.3d 754, 760 (9th Cir. 2004) (review
"limited and deferential”) The Ninth Circuit will reverse a district court's issuance of a
preliminary injunction only if the district court abused its discretion by basing its decision
on an erroneous legal standard or on clearly erroneous factual findings. Alliance for the
Wild Rockies, 632 F.3d at 1131. Moreover, the Court’s factual findings are reviewed for
clear error and will not be reversed "as long as [the] findings are plausible in light of the
record viewed in its entirety.” Nat'l Wildlife Fed'n v. Nat'l Marine Fisheries Serv., 422
F.3d 782, 795 (9th Cir. 2005). Considering the deferential standard of review and the
Court’s determination that the Plaintiffs have demonstrated a strong likelihood of success
on the merits of its claims, VidAngel has not shown that it is likely to prevail on the merits
of the appeal.
b. Balance of the Hardships
VidAngel raises similar arguments from its original opposition regarding the harms
it will suffer if the injunction is not stayed. Specifically, VidAngel contends that the
injunction “threatens to destroy VidAngel’s unique market position and its market value”
and will cause “serious financial loss.” (Dkt. No. 147 at 12.) VidAngel also asserts that
the injunction threatens to damage customer goodwill. (Id.) The Court addressed these
arguments by noting that “[Defendants] cannot complain of the harm that will befall it
when properly forced to desist from its infringing activities." Triad Sys. Corp. v.
Southeastern Express Co., 64 F.3d 1330, 1338 (9th Cir. 1995). “Where the only hardship
that the defendant will suffer is lost profits from an activity which has been shown likely to
be infringing, such an argument in defense 'merits little equitable consideration [on an
appeal from a preliminary injunction].'" Id. (citing Concrete Mach. Co. v. Classic Lawn
Ornaments, Inc., 843 F.2d 600, 612 (1st Cir. 1988); accord Apple Comput., Inc. v. Franklin
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Comput. Corp., 714 F.2d 1240, 1255 (3d Cir. 1983) (in motion for preliminary injunction,
district court should not consider the “devastating effect” of the injunction on the
infringer’s business). (Order at 21.)
The Court determined that the Plaintiffs demonstrated a likelihood of imminent,
irreparable injury in the absence of an injunction. (Order at 16-20.) The Court
specifically found that VidAngel’s service caused irreparable harm by undermining
Plaintiffs’ negotiating position with licensees and also by damaging goodwill with
licensees, some of whom had specifically referenced “unlicensed services like
VidAngel’s…during negotiation meetings.” (Id. at 18.) VidAngel argues that the
Plaintiffs goodwill with licensees will be “largely unaffected pending the outcome on
appeal considering this Court's ruling in Plaintiffs' favor in the Order.” (Dkt. No. 147 at
13.) The Court is not persuaded by this argument. The evidence in the record shows that
Plaintiffs’ irreparable harms specifically arise from VidAngel’s unlicensed use of
Plaintiff’s works. Allowing VidAngel to continue offering the Plaintiff’s copyrighted
works without a license will only increase these harms.
Based on the foregoing, the Court holds that the balance of the hardships tips sharply
in the favor of the Plaintiffs.
c. Public Interest
VidAngel has not sufficiently shown that the public interest supports a stay of the
preliminary injunction. Plaintiffs have shown a likelihood of success on the merits of
their claims that VidAngel’s service violates § 1201(a), and § 106 of the Copyright Act.
As the Court noted in its Order, "it is virtually axiomatic that the public interest can only be
served by upholding copyright protections and correspondingly, preventing the
misappropriation of skills, creative energies, and resources which are invested in the
protected work." Warner Bros. Entm't, Inc. v. WTV Sys., 824 F. Supp. 2d 1003, 1015 (C.D.
Cal. 2011) (citing Apple Computer, Inc. v. Franklin Computer Corp., 714 F.2d 1240, 1255
(3rd Cir. 1983)). VidAngel essentially restates its argument that an injunction severely
undercuts “the public interest in protecting every person’s right to watch filtered content in
private.” (Oppo. at 32.) However, VidAngel has not refuted the evidence in the record
that indicates that ClearPlay offers a filtering service to Google Play users who access
authorized streams from GooglePlay’s licensed service. (Bennett Decl. Ex. A. at 5-6.)
VidAngel’s assertions regarding Clearplay’s filtering service are immaterial to the Court’s
analysis.1 The presence of market alternatives to VidAngel’s filtering service belies its
claim that an injunction would effectively “end the public’s ability to watch filtered
movies.” (Oppo. at 33.)
1 VidAngel argues that that ClearPlay “does not provide a legal filtering alternative” and is “technically inferior” to
VidAngel’s service. (Dkt. No. 147 at 14.)
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d. Conclusion
For the foregoing reasons, the Court finds that VidAngel has not shown a likelihood
that it will prevail on its appeal, nor has it shown that the balance of hardships tips sharply
in its favor or that the public interest is best served by a stay. Therefore, the Court denies
VidAngel’s motion for a stay in its entirety.
IT IS SO ORDERED.
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Case 2:16-cv-04109-AB-PLA Document 161 Filed 12/22/16 Page 1 of 13 Page ID #:5219
1 GLENN D. POMERANTZ (SBN 112503)
glenn.pomerantz@mto.com
2 KELLY M. KLAUS (SBN 161091)
kelly.klaus@mto.com
3 ROSE LEDA EHLER (SBN 296523)
rose.ehler@mto.com
4 ALLYSON R. BENNETT (SBN 302090)
allyson.bennett@mto.com
5 MUNGER, TOLLES & OLSON LLP
355 South Grand Avenue, Thirty-Fifth Floor
6 Los Angeles, California 90071-1560
Telephone: (213) 683-9100
7 Facsimile: (213) 687-3702
8 Attorneys for Plaintiffs
9
UNITED STATES DISTRICT COURT
10
CENTRAL DISTRICT OF CALIFORNIA
11
WESTERN DIVISION
12
13
DISNEY ENTERPRISES, INC.;
14 LUCASFILM LTD. LLC;
TWENTIETH CENTURY FOX FILM
15 CORPORATION and WARNER
BROS. ENTERTAINMENT INC.,
16
Plaintiffs and CounterDefendants,
17
18
vs.
19 VIDANGEL, INC.,
20
Defendant and CounterClaimant.
Case No. 16-cv-04109-AB (PLAx)
PLAINTIFFS’ EX PARTE
APPLICATION FOR AN ORDER
TO SHOW CAUSE WHY
VIDANGEL SHOULD NOT BE
HELD IN CONTEMPT FOR
VIOLATING THE PRELIMINARY
INJUNCTION ORDER (DKT. 144)
Judge: Hon. André Birotte Jr.
Filed concurrently:
(1) Declaration of Kelly M. Klaus
(2) [Proposed] Order to Show Cause
21
22
23
24
25
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- A.9 -
EX PARTE APP. FOR ORDER TO SHOW CAUSE
16-CV-04109-AB (PLAX)
Case 2:16-cv-04109-AB-PLA Document 161 Filed 12/22/16 Page 2 of 13 Page ID #:5220
1
EX PARTE APPLICATION
2 TO ALL PARTIES AND THEIR ATTORNEYS OF RECORD:
3
PLEASE TAKE NOTICE that Plaintiffs Disney Enterprises, Inc., Lucasfilm
4 Ltd. LLC, Twentieth Century Fox Film Corporation and Warner Bros.
5 Entertainment Inc. (collectively, “Plaintiffs”) will and hereby do apply ex parte for
6 an Order to show cause as to why VidAngel should not be held in contempt for
7 violating this Court’s Preliminary Injunction Order (Dkt. 144). Plaintiffs apply to
8 the Court pursuant to Local Rule 7-19 and this Court’s Standing Order on ex parte
9 applications. Plaintiffs base this application on this notice of application and
10 application, the attached memorandum of points and authorities, the attached
11 Declaration of Kelly M. Klaus, the other documents in the record referenced in the
12 memorandum and the proposed Order.
13
Plaintiffs have good cause for this application. The Preliminary Injunction
14 clearly proscribed VidAngel’s continued ripping, copying and streaming of
15 Plaintiffs’ copyrighted works. Plaintiffs have presented clear and convincing
16 evidence that VidAngel has violated the Order. Supp. Klaus Decl. (Dkt. 156) Exs.
17 A-B. VidAngel admits its continuing violation of the Order and has no valid excuse
18 for refusing to comply. Civil contempt sanctions are therefore proper.
19
Plaintiffs’ counsel has served a copy of this application and all supporting
20 papers on VidAngel’s counsel. In accordance with Local Rule 7-19, the names,
21 addresses, telephone numbers and e-mail addresses of VidAngel’s counsel are
22 attached at Appendix A.
23
Plaintiffs’ counsel provided notice of this ex parte application to VidAngel’s
24 counsel on December 21, 2016. VidAngel indicated that it would oppose.
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-1EX PARTE APP. FOR ORDER TO SHOW CAUSE
16-CV-04109-AB (PLAX)
Case 2:16-cv-04109-AB-PLA Document 161 Filed 12/22/16 Page 3 of 13 Page ID #:5221
1 DATED: December 22, 2016
MUNGER, TOLLES & OLSON LLP
2
3
4
5
By:
/s/ Kelly M. Klaus
KELLY M. KLAUS
Attorneys for Plaintiffs
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-2EX PARTE APP. FOR ORDER TO SHOW CAUSE
16-CV-04109-AB (PLAX)
Case 2:16-cv-04109-AB-PLA Document 161 Filed 12/22/16 Page 4 of 13 Page ID #:5222
1
MEMORANDUM OF POINTS AND AUTHORITIES
2
VidAngel is flagrantly disobeying the Court’s Preliminary Injunction Order
3 (Dkt. 144). VidAngel has no valid justification for refusing to comply with the
4 Court’s Order. The law does not allow VidAngel to unilaterally stay a Court Order
5 by simply requesting a stay. VidAngel does not point to any technical inability to
6 comply with the Preliminary Injunction. VidAngel’s current cries of hardship (in
7 the declaration of its CEO (Dkt. 158)) are nothing more than the predictable
8 consequences of ceasing its illegal business model. VidAngel is arguing
9 inconvenience, not inability to comply with the Injunction. Inconvenience is not a
10 basis for refusing to comply with an Injunction, and it does not excuse VidAngel’s
11 contempt. VidAngel has been on notice that an injunction could issue for at least six
12 months now and has only itself to blame for any hardship that flows from its
13 continued pattern of seeking forgiveness rather than permission for violating the
14 law.
VidAngel has brazenly defied the injunction for ten days (and counting)—
15
16 going so far as to expand it service, adding new releases owned by Plaintiffs even
17 after the Court issued the Injunction, and then cavalierly describing that conduct as
18 “not intended to be disrespectful” (while simultaneously saying that VidAngel will
19 start doing it again if the Court grants a stay). The willfulness of VidAngel’s
20 contempt is demonstrated by VidAngel’s unilateral decision to continue operating
21 without first seeking this Court’s permission to continue infringing Plaintiffs’ works
22 during the pendency of its stay request. Plaintiffs request this Court’s immediate
23 intervention to order VidAngel to respect the Court’s Order and stop its
24 infringement. 1
25
26
1
Plaintiffs will appear by telephone or in person at any time the Court wants to
27 hold a hearing on this request. That said, the Ninth Circuit has “repeatedly held []
that finding a party in civil contempt without a full-blown evidentiary hearing does
28 not deny due process to a contemnor.” United States v. Ayres, 166 F.3d 991, 995
-1-
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1
2
ARGUMENT
“[C]ourts have inherent power to enforce compliance with their lawful orders
3 through civil contempt.” Fed. Trade Comm’n v. Productive Mktg., Inc., 136 F.
4 Supp. 2d 1096, 1107 (C.D. Cal. 2001) (quoting Spallone v. United States, 493 U.S.
5 265, 276 (1990)). To obtain a civil contempt order, Plaintiffs must show by clear
6 and convincing evidence that VidAngel is violating the Preliminary Injunction.
7 Ayres, 166 F.3d at 994. Here, VidAngel admits it is continuing to operate in the
8 face of this Court’s order to stop, and says it will continue to do so unless and until
9 this Court and the Ninth Circuit deny its stay applications.
10
VidAngel continues to stream all of Plaintiffs’ copyrighted works listed in
11 Exhibit A to the Complaint and numerous of Plaintiffs’ other works. See Supp.
12 Klaus Decl. (Dkt. 156); Ehler Decl. (Dkt. 154). Those works comprise more than
13 half of the 2,500+ movies and television shows that VidAngel streams. FAC (Dkt.
14 77) ¶ 59 (as of September, VidAngel had more than 2,500 titles); Harmon Decl.
15 (Dkt. 158) ¶ 9 (estimating that 56% of the content VidAngel streams is owned or
16 licensed by Plaintiffs). Compounding the injury, VidAngel continued to add new
17 works released by Plaintiffs on DVD to VidAngel’s “New Releases” after the
18 Preliminary Injunction issued. See Supp. Klaus Decl. ¶ 7, Exs. A, B. VidAngel
19 admits all of this. Harmon Decl. ¶¶ 9, 15.
20
To avoid contempt, VidAngel bears the burden of showing that it is unable to
21 comply with the Order. FTC v. Affordable Media, LLC, 179 F.3d 1228, 1239 (9th
22 Cir.1999) (once the moving party has met its burden, “[t]he burden then shifts to the
23 contemnors to demonstrate why they were unable to comply.”). VidAngel has not
24 even attempted to make such a showing. Instead, it tries to excuse its disobedience
25 on the grounds that complying with the order would be a hardship. But the
26
27 (9th Cir. 1999) (“Because civil contempt sanctions are viewed as nonpunitive and
avoidable, fewer procedural protections for such sanctions have been required.”
28 (quoting United Mine Workers of Am. v. Bagwell, 512 U.S. 821, 831 (1994)).
-2-
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1 Preliminary Injunction order was granted based on the very determination by this
2 Court that the hardship to VidAngel from complying is outweighed by the hardship
3 to Plaintiffs from VidAngel’s continued ripping, copying, and streaming of
4 Plaintiffs’ copyrighted works. The question of balance of hardships has been
5 decided, and the result was the Preliminary Injunction Order. VidAngel is fully able
6 to comply with the Injunction. The inconvenience to VidAngel of doing so is
7 irrelevant. Hence, each of the two arguments VidAngel advances are meritless.
First, VidAngel points to the fact that it asked the Court to stay the
8
9 Preliminary Injunction pending appeal. Harmon Decl. ¶ 15. That is irrelevant.
10 Requesting a stay does not stay the Preliminary Injunction. See Tekkno Labs., Inc.
11 v. Perales, 933 F.2d 1093, 1099 (2d Cir. 1991) (“[T]he party to whom the injunction
12 is directed acts (or fails to act) at its peril if it declines to comply while waiting for
13 decision on a stay application.”). The law is clear that VidAngel must comply with
14 the Order, “unless and until this or another court has relieved [it] of that
15 responsibility, through a stay, reversal or modification of the order.” Armstrong v.
16 Brown, 857 F. Supp. 2d 919, 948 (N.D. Cal.), order enforced (Aug. 28, 2012), order
17 aff’d, appeal dismissed, 732 F.3d 955 (9th Cir. 2013). Even if VidAngel were
18 unaware of the law—which it does not claim—ignorance of the law would not
19 excuse its contempt. See In re Dual-Deck Video Cassette Recorder Antitrust Litig.,
20 10 F.3d 693, 695 (9th Cir. 1993) (“The contempt ‘need not be willful,’ and there is
21 no good faith exception to the requirement of obedience to a court order.”).
Second, VidAngel relies on a procedurally improper declaration from its
22
23 CEO, Neal Harmon. 2 Harmon Decl ¶¶ 3-13. To be clear, Mr. Harmon does not say
24
2
VidAngel was obligated to put into its Opposition to Plaintiffs’ Motion for
Preliminary Injunction any and all evidence supporting its argument that compliance
26 with Plaintiffs’ requested injunction (which the Court granted) would cause
27 VidAngel hardship. VidAngel’s post-hoc attempt to offer this evidence by way of
Mr. Harmon’s current declaration is an improper motion for reconsideration. School
28 Dist. No. 1J, Multnomah County v. ACandS, Inc., 5 F.3d 1255, 1263 (9th Cir. 1993)
-325
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1 that VidAngel lacks the technical ability to comply with the Preliminary Injunction.
2 His point instead is that complying with the Injunction on two (or many) services
3 through which VidAngel illegally streams Plaintiffs’ content could cause VidAngel
4 logistical headaches and customer “confusion.” Id. ¶ 4. Specifically, Mr. Harmon
5 asserts that if VidAngel complies and removes Plaintiffs’ works, for a period of
6 several weeks, the Roku and Apple “apps” will not identify Plaintiffs’ titles as
7 having been removed, so customers who select Plaintiffs’ content through those
8 apps may experience “confusion” and “ill-will” toward VidAngel if the movies do
9 not appear after customers have paid VidAngel to stream them. Id. ¶¶ 4-10. That
10 is—VidAngel’s customers would make a purchase and then be annoyed when that
11 title was not available for streaming and contact VidAngel for a refund.
12
VidAngel’s legal duty is to comply with the Preliminary Injunction—which
13 VidAngel plainly can do. The fact that customers may be annoyed with VidAngel is
14 irrelevant. Mr. Harmon’s worry about customers being angry at VidAngel makes it
15 clear that VidAngel is not trying to preserve the status quo. Instead, VidAngel is
16 trying to maintain and expand its customer base through the illegal use of Plaintiffs’
17 copyrighted works, notwithstanding the injunction. Nothing in Mr. Harmon’s
18 declaration justifies VidAngel’s willful non-compliance with the Preliminary
19 Injunction:
20
VidAngel’s claimed inability to modify its “apps” for in-app transactions
21 involving Plaintiffs’ movies does not justify non-compliance: Mr. Harmon asserts
22 that a large number of VidAngel customers access Plaintiffs’ works through “apps,”
23
(“The overwhelming weight of authority is that the failure to file documents in an
24 original motion or opposition does not turn the late filed documents into ‘newly
25 discovered evidence’” justifying reconsideration). The alleged facts in Paragraphs
3-13 of Mr. Harmon’s declaration were available to VidAngel when it opposed
26 Plaintiffs’ Motion and when VidAngel moved for a stay. Mr. Harmon’s excuse that
27 he “began to investigate how VidAngel could comply with the injunction” only after
the injunction issued does not justify this post-hoc filing. Harmon Decl. ¶ 2. The
28 Court should strike Paragraphs 3-13 of Mr. Harmon’s declaration.
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1 using Roku, Apple or similar services. Harmon Decl. ¶ 3. Mr. Harmon asserts that
2 the Roku and Apple services are now in “holiday blackout periods.” Id. As a result,
3 he asserts, VidAngel cannot remove the icons for Plaintiffs’ movies from the app
4 interface displays (although it can remove the works themselves), and VidAngel
5 customers will experience “confusion” if Plaintiffs’ works do not appear after the
6 customers have selected them. Id. ¶ 4. Mr. Harmon claims that this issue leaves
7 VidAngel with an all-or-nothing choice to remove all titles from Roku and Apple if
8 VidAngel wants to avoid the resulting customer annoyance. Id. ¶¶ 4-8.
9
The “confusion” and “massive customer support issue[s]” that Mr. Harmon
10 claims to fear are problems entirely of VidAngel’s own creation and can be
11 solved—in fact, solved easily by discontinuing its illegal streaming business.
12 VidAngel chose to build a business based on infringing Plaintiffs’ rights. It further
13 waited until after the Court issued the Preliminary Injunction to start thinking about
14 complying with the Injunction that it should have been expecting for months. Id.
15 ¶ 2.
16
The risk of VidAngel suffering consumer “ill will,” id. ¶ 10, if it cannot
17 continue to infringe Plaintiffs’ copyrights, is not a valid claim of hardship. See
18 Triad Sys. Corp. v. Se Express Co., 64 F.3d 1330, 1338 (9th Cir. 1995). VidAngel
19 has been ordered to stop streaming Plaintiffs’ works to its customers, and its
20 customers have no right to obtain streaming of those works through VidAngel’s
21 illegal service.
22
Mr. Harmon’s declaration ignores VidAngel’s post-Injunction responsibility
23 for the claimed Apple “blackout,” as well as all of the streaming platforms where
24 VidAngel faces none of the purported risks of consumer “confusion”: Mr. Harmon
25 asserts that VidAngel now is in the “holiday window for Apple” as the result of
26 Apple’s “two-day review period.” Id. ¶ 3. That holiday window runs from
27 December 23-27. See Klaus Decl. (attached hereto) Ex. B. That means, while Mr.
28 Harmon and his counsel were writing the declaration yesterday, December 21,
- A.16 -
-5EX PARTE APP. FOR ORDER TO SHOW CAUSE
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Case 2:16-cv-04109-AB-PLA Document 161 Filed 12/22/16 Page 9 of 13 Page ID #:5227
1 VidAngel could have been updating the Apple app to remove Plaintiffs’ titles.
2 Nothing prevented VidAngel from updating the Apple app at any time between
3 December 12 and December 21. Mr. Harmon instead complains about VidAngel
4 being in a corner into which it has painted itself. VidAngel’s intransigence is
5 inequitable and does not shield it from contempt.
Mr. Harmon’s declaration does not claim VidAngel would have any problems
6
7 with immediately removing Plaintiffs’ content from the numerous other platforms
8 through which it streams Plaintiffs’ content. These include streams from
9 VidAngel’s website, as well as other apps, such as Amazon Fire and Google Play.
VidAngel’s claim that complying with the injunction jeopardizes its right to
10
11 stream other copyright owners’ content is irrelevant: Mr. Harmon asserts that, if
12 VidAngel has “to shut down our entire system immediately or disable in-app
13 purchasing across the board,” VidAngel will not be able to stream the one movie it
14 is licensed to stream and the 1,000+ titles from non-Plaintiffs that VidAngel has no
15 license to stream. Harmon Decl. ¶¶ 5-6. Mr. Harmon’s complaints are inapposite.
16 VidAngel is under Court Order to remove Plaintiffs’ works. How VidAngel
17 accomplishes that task and whether it decides to continue to stream non-Plaintiffs’
18 works if they will not enter into a covenant not to sue is VidAngel’s problem, not
19 Plaintiffs’. 3
VidAngel engages in robust communications with its users—they will not be
20
21 under any illusion why Plaintiffs’ works are not available for streaming: Mr.
22 Harmon asserts that VidAngel customers who supposedly “permanently own[]”
23
24
25
26
27
28
3
VidAngel’s worry about customer annoyance is irrelevant, as discussed. It also is
disingenuous. VidAngel already has said that it tells customers that movies are
“out-of-stock” if the number of DVDs metaphorically “sold” to customers exceeds
the number of DVDs in VidAngel’s “vault.” Harmon Decl. in support of Opp. to
Prelim. Inj. (Dkt. 41) ¶ 54(f). VidAngel is fully willing to bear customer annoyance
when needed as part of the operation of its illegal service. VidAngel cannot use
similar annoyance as a basis for refusing to comply with the Injunction.
-6-
- A.17 -
EX PARTE APP. FOR ORDER TO SHOW CAUSE
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Case 2:16-cv-04109-AB-PLA Document 161 Filed 12/22/16 Page 10 of 13 Page ID #:5228
1 discs in the “vault” will be annoyed if they cannot watch the underlying movies on2 demand “with no explanation.” Harmon Decl. ¶ 9. This and other assertions about
3 customer confusion and ill-will are beside the point and are contrary to the facts.
4
VidAngel communicates with its customers constantly via email, Facebook,
5 Twitter and its “blog,” including about this lawsuit and the Preliminary Injunction.
6 See, e.g., Ehler Decl. in support of Prelim. Inj. (Dkt. 30) Exs. G-I, K-M, O-Q.
7 VidAngel has an entire section of its blog devoted to this litigation. See Legal
8 Battle, VidAngel.com, available at http://blog.vidangel.com/category/legal/ (last
9 visited Dec. 22, 2016). Indeed, VidAngel posted Mr. Harmon’s declaration to that
10 same blog site, and thus has communicated to its customer base the potential
11 limitations of VidAngel’s in-app offerings. Klaus Decl. (attached hereto) Ex. C.
12
VidAngel claims to have raised $10 million from its users to litigate this case.
13 Ehler Decl. in support of Opp. to App. to Stay (Dkt. 154) Ex. H. VidAngel has gone
14 public with the announcement of the “launch of VidAngel Studios.” Id. Exs. G, H.
15 And VidAngel produced and posted to the Internet a “Special Announcement,”
16 informing customers that VidAngel will continue operating as usual while seeking a
17 stay. Id. Ex. H.
18
VidAngel’s customers are well aware of the Preliminary Injunction.
19 VidAngel can replace Plaintiffs’ works with a video feed explaining the fact that it
20 must comply with the Injunction; it can deal with customer complaints or requests
21 for refund; and it can further communicate with its user base through the numerous
22 communication channels VidAngel actively uses. All these options are available to
23 VidAngel immediately and any inconvenience to VidAngel is the direct result of its
24 decision to operate an infringing service.
25
26
27
*
*
*
The question on this contempt motion is only whether VidAngel is able to
28 comply with the Injunction. Plainly, the answer is yes. VidAngel simply does not
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1 want to comply. The Preliminary Injunction is in effect, VidAngel continues to
2 violate it and expand its infringement, and the Court should accordingly hold
3 VidAngel in contempt. And while the question of hardship does not matter for the
4 present motion, it bears noting that VidAngel’s flagrant violation of the injunction
5 provides further evidence that the balance of the equities counsels against
6 VidAngel’s pending motion for a stay. See Apple, Inc. v. Samsung Elecs. Co. Ltd.,
7 No. 12-CV-00630-LHK, 2012 WL 2576136, at *2 (N.D. Cal. July 3, 2012)
8 (“Ultimately, whether to grant a stay of a preliminary injunction pending appeal is a
9 matter of equitable discretion, and the propriety of its issue is dependent upon the
10 circumstances of the particular case.”) (quotation marks and alteration omitted); see
11 also Precision Instrument Mfg. Co. v. Auto. Maint. Mach. Co., 324 U.S. 806, 814-15
12 (1945) (“The guiding doctrine in this case is the equitable maxim that ‘he who
13 comes into equity must come with clean hands.’”).
14
A coercive monetary sanction is appropriate here. “Sanctions for civil
15 contempt may be imposed to coerce obedience to a court order.” Xcentric Ventures,
16 LLC v. Stanley, No. CV-07-954-PHXGMS, 2009 WL 113563, at *4 (D. Ariz. Jan.
17 16, 2009) (citing United States v. Mine Workers, 330 U.S. 258, 303-04 (1947);
18 Perry v. O'Donnell, 759 F.2d 702, 705 (9th Cir. 1985)). Plaintiffs seek VidAngel’s
19 compliance and ask that this Court impose a per diem fine sufficient to coerce
20 VidAngel to comply with the Injunction. Productive Mktg., Inc., 136 F. Supp. 2d at
21 1112 (“imposition of the proposed per diem fine will provide an incentive for
22 [contemnor] to comply with the court’s Order” as proper for civil contempt) (citing
23 Ayres, 166 F.3d at 994). A coercive penalty of $10,000 to $20,000 per day is
24 appropriate. CBS Broad. Inc. v. FilmOn.com, Inc., 814 F.3d 91 (2d Cir. 2016)
25 (upholding fine of $10,000 per day for violation of injunction and noting that a
26 different district court had previously warned that the same company would be fined
27 $20,000 per day for any future violations of the court’s injunction).
28
- A.19 -
-8EX PARTE APP. FOR ORDER TO SHOW CAUSE
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Case 2:16-cv-04109-AB-PLA Document 161 Filed 12/22/16 Page 12 of 13 Page ID #:5230
1 DATED: December 22, 2016
MUNGER, TOLLES & OLSON LLP
2
3
4
5
By:
/s/ Kelly M. Klaus
KELLY M. KLAUS
Attorney for Plaintiffs
6
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13
14
15
16
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- A.20 -
-9EX PARTE APP. FOR ORDER TO SHOW CAUSE
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Case 2:16-cv-04109-AB-PLA Document 161 Filed 12/22/16 Page 13 of 13 Page ID #:5231
1
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APPENDIX A
VidAngel’s counsel and their contact information are:
Ryan G. Baker
rbaker@bakermarquart.com
Jaime Marquart
jmarquart@bakermarquart.com
Scott M. Malzahn
smalzahn@bakermarquart.com
Brian T. Grace
bgrace@bakermarquart.com
BAKER MARQUART LLP
2029 Century Park East, Sixteenth Floor
Los Angeles, California 90067
Telephone: (424) 652-7800
Facsimile: (424) 652-7850
Maxwell M. Blecher
mblecher@blechercollins.com
Donald R. Pepperman
dpepperman@blechercollins.com
Taylor C. Wagniere
twagniere@blechercollins.com
BLECHER COLLINS & PEPPERMAN, P.C.
515 S. Figueroa St., Suite 1750
Los Angeles, California 90071
Telephone: (213) 622-4222
Facsimile: (213) 622-1656
Peter K. Stris
peter.stris@strismaher.com
Brendan Maher
brendan.maher@strismaher.com
Elizabeth Brannen
elizabeth.brannen@strismaher.com
Daniel Geyser
daniel.geyser@strismaher.com
STRIS & MAHER LLP
725 South Figueroa Street, Suite 1830
Los Angeles, California 90017
Telephone: (213) 995-6800
Facsimile: (213) 261-0299
David W. Quinto
dquinto@VidAngel.com
3007 Franklin Canyon Drive
Beverly Hills, California 90210
Telephone: (213) 604-1777
Facsimile: (732) 377-0388
27
28
- A.21 -
-10EX PARTE APP. FOR ORDER TO SHOW CAUSE
16-CV-04109-AB (PLAX)
Case 2:16-cv-04109-AB-PLA Document 158 Filed 12/21/16 Page 1 of 8 Page ID #:5208
1 Ryan G. Baker (BarNo. 214036)
rbaker@bakermarquart.com
2 Jaime Marquart (Bar No. 200344)
jmarquart@bakermarguart.com
3 Scott M. Mafzahn (Bar No. 229204)
smalzahn@bakermarquart.com
4 BrianT. Grace (Bar No. 307826)
bgrace@bakermarquart.com
5 BAKER MARQUART LLP
2029 Century Park East, Sixteenth Floor
6 Los Angeles, California 90067
Telephone: (424) 652-7800
7 Facsimile: (424) 652-7850
8 PeterK. Stris (BarNo. 216226)
peter. stris@strismaher. com
9 Brendan Maher (!3ar No. 217043)
brendan.maher@strismaher.com
10 Elizabeth Brannen~ar No. 226234)
elizabeth.brannen strismaher.com
11 Daniel Geys~r
Bar o. 230405)
daniel.ge_y~er strismaher.com
12 STRIS & M
RLLP
725 South Figueroa Street;.. Suite 1830
13 Los Angeles, California 9u0 17
Telephone: (213) 995-6800
14 Facsimile: (213) 261-0299
David W. Quinto (Bar No. 106232)
dquinto@ VidAngel. com
3007 Frallklin Canyon Drive
Beverly Hillsf California 9021 o
Telephone: 213) 604-1777
Facsimile: 732) 377-0388
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.;
LUCASFILMLTD. LLC;
TWENTIETH CENTURY FOX FILM
CORPORATION; AND WARNER
BROS. ENTERTAINMENT, INC.,
26
27
28
- A.22 -
Plaintiffs,
vs.
CASE NO. 16-cv-04109-AB (PLAx)
DECLARATION OF NEAL
HARMON IN SUPPORT OF
VIDANGEL, INC.'S EX PARTE
APPLICATION TO STAY
PRELIMINARY INJUNCTION
PENDING APPEAL OR..
ALTERNATIVEL~ PENDING
DECISION BY THE NINTH
DECLARATION OF NEAL HARMON IN
SUPPORT OF EX PARTE APPLICATION TO
STAY
Case 2:16-cv-04109-AB-PLA Document 158 Filed 12/21/16 Page 2 of 8 Page ID #:5209
1
VIDANGEL, INC.,
Defendant.
2
3
CIRCUIT ON STAY PENDING
APPEAL
The Hon. Andre Birotte Jr.
Date Action Filed: June 9, 2016
4
5
VIDANGEL, INC.,
6
Counterclaimant,
7
8
vs.
10
DISNEY ENTERPRISES, INC.;
LUCASFILMLTD. LLC;
TWENTIETH CENTURY FOX FILM
CORPORATION; AND WARNER
BROS. ENTERTAINMENT, INC.,
11
Counterclaim Defendants.
9
12
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necessarily have to block access to any works we are licensed to filter and stream
(because the works catalog and purchasing system are coupled together).
19
6.
The rights for our content are controlled by over 125 studios or
20
distributors, the vast majority of whom have neither joined in the litigation nor
21
expressed any complaint to VidAngel. Since the injunction issued, we have been
22
contacting them to let them know that ifVidAngel is unsuccessful in obtaining a
23
stay of the preliminary injunction, it will cease filtering and streaming them and will
24
also cease buying new DVD and Blu-ray discs of their movies unless they are
25
willing to enter into a covenant not to sue without waiver of any legal position or
26
argument for the duration of the appeal. To date, one such company-MGM-has
27
rejected our request for a covenant not to sue and we have yet to hear from many
28
2
- A.25 -
DECLARATION OF NEAL HARMON IN
SUPPORT OF EX PARTE APPLICATION TO
STAY
Case 2:16-cv-04109-AB-PLA Document 158 Filed 12/21/16 Page 5 of 8 Page ID #:5212
1
others.
2
7.
Even ifVidAngel were able to update its apps despite the blackout
3
4
nothing option. As a technical matter, VidAngel has the ability completely to
7
disable in-app purchasing for all titles, but it cannot use the existing in-app
8
purchasing functionality to restrict certain titles that have previously been made
9
available for purchase. On the other hand, we cannot tum off in-app purchases
10
altogether because doing so would prevent us from selling and/or renting other
11
content.
12
0
the respective platform providers make in-app purchasing available as an ali-or-
6
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made available for purchase, rolling it back is not an easy process. This is because
5
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period, it is not an easy process to modify in-app purchasing. Once a title has been
8.
In addition, until VidAngel can update its apps after the blackout
00
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period, removing titles would also prevent customers from being able to use the app
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without having movies simply disappear from the apps without notice.
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consumer ill will, we need time to make our apps ready to explain what is happening
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indicated that, absent a stay, it might sever relations with VidAngel as early as next
14
week.
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titles they own. This was not intended to be disrespectful or a flout of anything, and
18
VidAngel has asked for a stay. Nevertheless, to address the concern identified in the
supplemental declaration, VidAngel will not add any other titles owned or licensed
20
~
17
19
~
:!-
by plaintiffs unless and until it obtains a stay of the preliminary injunction.
16.
21
In conclusion, I would like to emphasize that VidAngel wishes to
22
operate in a fully lawful manner and fully respects the authority of this Court. It is,
23
and always has been, VidAngel 's intent to comply fully and in all respects with all
24
orders the Court has issued or may issue. But in view of the facts that VidAngel has
25
now offered its service for just under two years; the plaintiffs waited 11 months after
26
receiving written notice explaining VidAngel's service simply to file their complaint
27
(and never sent any preliminary cease-and-desist letters); the plaintiffs never sought
28
5
- A.28 -
DECLARATION OF NEAL HARMON IN
SUPPORT OF EX PARTE APPLICATION TO
STAY
Case 2:16-cv-04109-AB-PLA Document 158 Filed 12/21/16 Page 8 of 8 Page ID #:5215
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a temporary restraining order but took another four months after filing suit to
2
conduct discovery and have their motion heard; and the Court understandably took
3
several weeks to consider the parties' various arguments and issue its ruling,
4
VidAngel requests that it be allowed a reasonable time to comply fully with the
5
terms ofthe preliminary injunction if no stay is granted in the interim.
6
7
8
I declare under penalty of perjury of the laws of the United States of
America that the foregoing is true and correct.
Executed on 21 51 day of Decem
Provo, Utah.
9
10
11
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Neal Harmon
12
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19
20
21
22
23
24
25
26
27
281r---------------------------------------------------_,
6
- A.29 -
DECLARATION OF NEAL HARMON IN
SUPPORT OF EX PARTE APPLICATION TO
STAY
Case 2:16-cv-04109-AB-PLA Document 149 Filed 12/14/16 Page 1 of 6 Page ID #:5098
1 Ryan G. Baker (Bar No. 214036)
rbaker@bakermarquart.com
2 Jaime Marquart (Bar No. 200344)
jmarquart@bakermarquart.com
3 Scott M. Malzahn (Bar No. 229204)
smalzahn@bakermarquart.com
4 Brian T. Grace (Bar No. 307826)
bgrace@bakermarquart.com
5 BAKER MARQUART LLP
2029 Century Park East, Sixteenth Floor
6 Los Angeles, California 90067
Telephone: (424) 652-7800
7 Facsimile: (424) 652-7850
8 Peter K. Stris (Bar No. 216226)
peter.stris@strismaher.com
9 Brendan Maher (Bar No. 217043)
brendan.maher@strismaher.com
10 Elizabeth Brannen (Bar No. 226234)
elizabeth.brannen@strismaher.com
11 Daniel Geyser (Bar No. 230405)
daniel.geyser@strismaher.com
12 STRIS & MAHER LLP
725 South Figueroa Street, Suite 1830
13 Los Angeles, California 90017
Telephone: (213) 995-6800
14 Facsimile: (213) 261-0299
15 David W. Quinto (Bar No. 106232)
dquinto@VidAngel.com
16 3007 Franklin Canyon Drive
Beverly Hills, California 90210
17 Telephone: (213) 604-1777
Facsimile: (732) 377-0388
18
19 Attorneys for Defendant and
Counterclaimant VidAngel, Inc.
20
UNITED STATES DISTRICT COURT
21
CENTRAL DISTRICT OF CALIFORNIA
22
WESTERN DIVISION
23
DISNEY ENTERPRISES, INC.;
CASE NO. CV16-04109-AB (PLAx)
24 LUCASFILM LTD. LLC;
TWENTIETH CENTURY FOX FILM
VIDANGEL, INC.’S NOTICE OF
APPEAL FROM ORDER
25 CORPORATION; AND WARNER
BROS. ENTERTAINMENT, INC.,
GRANTING MOTION FOR
PRELIMINARY INJUNCTION;
26
Plaintiffs,
REPRESENTATION STATEMENT
27
vs.
PRELIMINARY INJUNCTION
APPEAL
28
- A.30 -
NOTICE OF APPEAL AND REPRESENTATION STATEMENT
Case 2:16-cv-04109-AB-PLA Document 149 Filed 12/14/16 Page 2 of 6 Page ID #:5099
1
VIDANGEL, INC.,
Defendant.
2
3 VIDANGEL, INC.,
4
Counterclaimant,
5
6
vs.
DISNEY ENTERPRISES, INC.;
7 LUCASFILM LTD. LLC;
TWENTIETH CENTURY FOX FILM
8 CORPORATION; AND WARNER
BROS. ENTERTAINMENT, INC.,
9
10
Counterclaim Defendants.
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
- A.31 -
1
NOTICE OF APPEAL AND REPRESENTATION STATEMENT
Case 2:16-cv-04109-AB-PLA Document 149 Filed 12/14/16 Page 3 of 6 Page ID #:5100
1
Notice of Appeal
2
3
4
5
6
7
Notice is hereby given that VidAngel, Inc. (“VidAngel”), defendant and
counter-claimant in the above-captioned action, hereby appeals to the United States
Court of Appeals for the Ninth Circuit from the Court’s Order Granting Plaintiff’s
Motion for Preliminary Injunction entered in this action on December 12, 2016 (Dkt.
No. 144). A copy of that order from which VidAngel takes its appeal is attached as
Exhibit A.
8
9 DATED: December 14, 2016
Respectfully submitted,
10
11
BAKER MARQUART LLP
2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
Tel: (424) 652-7800 ● Fax: (424) 652-7850
12
13
14
15
16
By: /s/ Jaime W. Marquart
Jaime W. Marquart
BAKER MARQUART LLP
2029 Century Park East, Sixteenth Floor
Los Angeles, California 90067
(424) 652-7800
(424) 652-7850 (facsimile)
Attorneys for Defendant/CounterclaimantAppellant VidAngel, Inc.
17
18
19
20
21
22
23
24
25
26
27
28
- A.32 -
1
NOTICE OF APPEAL AND REPRESENTATION STATEMENT
Case 2:16-cv-04109-AB-PLA Document 149 Filed 12/14/16 Page 4 of 6 Page ID #:5101
1
Representation Statement
2
Pursuant to Circuit Rule 3-2(b) and Federal Rule of Appellate Procedure 12(b),
3
the names, addresses and telephone numbers of the parties and their respective counsel
4
are as follows:
5
6
7
8
9
10
11
BAKER MARQUART LLP
2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
Tel: (424) 652-7800 ● Fax: (424) 652-7850
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
1.
Defendant/Counterclaimant-Appellant VidAngel, Inc.
Ryan G. Baker (Bar No. 214036)
rbaker@bakermarquart.com
Jaime Marquart (Bar No. 200344)
jmarquart@bakermarquart.com
Scott M. Malzahn (Bar No. 229204)
smalzahn@bakermarquart.com
Brian T. Grace (Bar No. 307826)
bgrace@bakermarquart.com
BAKER MARQUART LLP
2029 Century Park East, Sixteenth Floor
Los Angeles, California 90067
Telephone: (424) 652-7800
Facsimile: (424) 652-7850
Maxwell M. Blecher (Bar No. 26202)
mblecher@blechercollins.com
Donald R. Pepperman (Bar No. 109809)
dpepperman@blechercollins.com
Taylor C. Wagniere (Bar No. 293379)
twagniere@blechercollins.com
BLECHER COLLINS & PEPPERMAN, P.C.
515 S. Figueroa St., Suite 1750
Los Angeles, California 90071
Telephone: (213) 622-4222
Facsimile: (213) 622-1656
Peter K. Stris (Bar No. 216226)
peter.stris@strismaher.com
Brendan Maher (Bar No. 217043)
brendan.maher@strismaher.com
Elizabeth Brannen (Bar No. 226234)
elizabeth.brannen@strismaher.com
Daniel Geyser (Bar No. 230405)
daniel.geyser@strismaher.com
STRIS & MAHER LLP
725 South Figueroa Street, Suite 1830
Los Angeles, California 90017
Telephone: (213) 995-6800
Facsimile: (213) 261-0299
27
28
- A.33 -
2
NOTICE OF APPEAL AND REPRESENTATION STATEMENT
Case 2:16-cv-04109-AB-PLA Document 149 Filed 12/14/16 Page 5 of 6 Page ID #:5102
1
David W. Quinto (Bar No. 106232)
dquinto@VidAngel.com
VIDANGEL, INC.
3007 Franklin Canyon Drive
Beverly Hills, California 90210
Telephone: (213) 604-1777
Facsimile: (732) 377-0388
2
3
4
5
2.
6
7
Glenn D. Pomerantz (Bar No. 112503)
glenn.pomerantz@mto.com
Kelly M. Klaus (Bar No. 161091)
kelly.klaus@mto.com
Rose Leda Ehler (Bar No. 296523)
rose.ehler@mto.com
Allyson R. Bennett (Bar No. 302090)
allyson.bennett@mto.com
MUNGER, TOLLES & OLSON LLP
355 South Grand Avenue, Thirty-Fifth Floor
Los Angeles, California 90071-1560
Telephone: (213) 683-9100
Facsimile: (213) 687-3702
8
9
10
11
BAKER MARQUART LLP
12
2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
Tel: (424) 652-7800 ● Fax: (424) 652-7850
Plaintiffs/Counterdefendants-Appellees Disney Enterprises, Inc.,
LucasFilm Ltd., LLC, Twentieth Century Fox Film Corporation and
Warner Bros. Entertainment, Inc.
13
14
15
DATED: December 14, 2016
Respectfully submitted,
16
17
18
19
20
21
22
By: /s/ Jaime W. Marquart
Jaime W. Marquart
BAKER MARQUART LLP
2029 Century Park East, Sixteenth Floor
Los Angeles, California 90067
(424) 652-7800
(424) 652-7850 (facsimile)
Attorneys for Defendant/CounterclaimantAppellant VidAngel, Inc.
23
24
25
26
27
28
- A.34 -
3
NOTICE OF APPEAL AND REPRESENTATION STATEMENT
Case 2:16-cv-04109-AB-PLA Document 149 Filed 12/14/16 Page 6 of 6 Page ID #:5103
1
CERTIFICATE OF SERVICE
2
The undersigned hereby certifies that counsel of record who are deemed to have
3
consented to electronic service are being served with a copy of this document via the
4
Court’s CM/ECF system per Local Rule 5-4.7.2 on December 14, 2016.
5
6
7
/s/ Jaime W. Marquart
Jaime W. Marquart
8
9
10
11
BAKER MARQUART LLP
2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
Tel: (424) 652-7800 ● Fax: (424) 652-7850
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
- A.35 -
4
NOTICE OF APPEAL AND REPRESENTATION STATEMENT
Case 2:16-cv-04109-AB-PLA Document 148 Filed 12/14/16 Page 1 of 6 Page ID #:5069
1 Ryan G. Baker (Bar No. 214036)
rbaker@bakermarquart.com
2 Jaime Marquart (Bar No. 200344)
jmarquart@bakermarquart.com
3 Scott M. Malzahn (Bar No. 229204)
smalzahn@bakermarquart.com
4 Brian T. Grace (Bar No. 307826)
bgrace@bakermarquart.com
5 BAKER MARQUART LLP
2029 Century Park East, Sixteenth Floor
6 Los Angeles, California 90067
Telephone: (424) 652-7800
7 Facsimile: (424) 652-7850
8 Peter K. Stris (Bar No. 216226)
peter.stris@strismaher.com
9 Brendan Maher (Bar No. 217043)
brendan.maher@strismaher.com
10 Elizabeth Brannen (Bar No. 226234)
elizabeth.brannen@strismaher.com
11 Daniel Geyser (Bar No. 230405)
daniel.geyser@strismaher.com
12 STRIS & MAHER LLP
725 South Figueroa Street, Suite 1830
13 Los Angeles, California 90017
Telephone: (213) 995-6800
14 Facsimile: (213) 261-0299
15 David W. Quinto (Bar No. 106232)
dquinto@VidAngel.com
16 3007 Franklin Canyon Drive
Beverly Hills, California 90210
17 Telephone: (213) 604-1777
Facsimile: (732) 377-0388
18
19 Attorneys for Defendant and
Counterclaimant VidAngel, Inc.
20
UNITED STATES DISTRICT COURT
21
CENTRAL DISTRICT OF CALIFORNIA
22
WESTERN DIVISION
23
DISNEY ENTERPRISES, INC.;
CASE NO. CV16-04109-AB (PLAx)
24 LUCASFILM LTD. LLC;
TWENTIETH CENTURY FOX FILM
VIDANGEL, INC.’S NOTICE OF
APPEAL FROM ORDER
25 CORPORATION; AND WARNER
BROS. ENTERTAINMENT, INC.,
GRANTING MOTION FOR
PRELIMINARY INJUNCTION;
26
Plaintiffs,
REPRESENTATION STATEMENT
27
vs.
PRELIMINARY INJUNCTION
APPEAL
28
- A.36 -
NOTICE OF APPEAL AND REPRESENTATION STATEMENT
Case 2:16-cv-04109-AB-PLA Document 148 Filed 12/14/16 Page 2 of 6 Page ID #:5070
1
VIDANGEL, INC.,
Defendant.
2
3 VIDANGEL, INC.,
4
Counterclaimant,
5
6
vs.
DISNEY ENTERPRISES, INC.;
7 LUCASFILM LTD. LLC;
TWENTIETH CENTURY FOX FILM
8 CORPORATION; AND WARNER
BROS. ENTERTAINMENT, INC.,
9
10
Counterclaim Defendants.
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
- A.37 -
1
NOTICE OF APPEAL AND REPRESENTATION STATEMENT
Case 2:16-cv-04109-AB-PLA Document 148 Filed 12/14/16 Page 3 of 6 Page ID #:5071
1
Notice of Appeal
2
3
4
5
6
7
Notice is hereby given that VidAngel, Inc. (“VidAngel”), defendant and
counter-claimant in the above-captioned action, hereby appeals to the United States
Court of Appeals for the Ninth Circuit from the Court’s Order Granting Plaintiff’s
Motion for Preliminary Injunction entered in this action on December 12, 2016 (Dkt.
No. 144). A copy of that order from which VidAngel takes its appeal is attached as
Exhibit A.
8
9 DATED: December 14, 2016
Respectfully submitted,
10
11
BAKER MARQUART LLP
2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
Tel: (424) 652-7800 ● Fax: (424) 652-7850
12
13
14
15
16
By: /s/ Jaime W. Marquart
Jaime W. Marquart
BAKER MARQUART LLP
2029 Century Park East, Sixteenth Floor
Los Angeles, California 90067
(424) 652-7800
(424) 652-7850 (facsimile)
Attorneys for Defendant/CounterclaimantAppellant VidAngel, Inc.
17
18
19
20
21
22
23
24
25
26
27
28
- A.38 -
1
NOTICE OF APPEAL AND REPRESENTATION STATEMENT
Case 2:16-cv-04109-AB-PLA Document 148 Filed 12/14/16 Page 4 of 6 Page ID #:5072
1
Representation Statement
2
Pursuant to Circuit Rule 3-2(b) and Federal Rule of Appellate Procedure 12(b),
3
the names, addresses and telephone numbers of the parties and their respective counsel
4
are as follows:
5
6
7
8
9
10
11
BAKER MARQUART LLP
2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
Tel: (424) 652-7800 ● Fax: (424) 652-7850
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
1.
Defendant/Counterclaimant-Appellant VidAngel, Inc.
Ryan G. Baker (Bar No. 214036)
rbaker@bakermarquart.com
Jaime Marquart (Bar No. 200344)
jmarquart@bakermarquart.com
Scott M. Malzahn (Bar No. 229204)
smalzahn@bakermarquart.com
Brian T. Grace (Bar No. 307826)
bgrace@bakermarquart.com
BAKER MARQUART LLP
2029 Century Park East, Sixteenth Floor
Los Angeles, California 90067
Telephone: (424) 652-7800
Facsimile: (424) 652-7850
Maxwell M. Blecher (Bar No. 26202)
mblecher@blechercollins.com
Donald R. Pepperman (Bar No. 109809)
dpepperman@blechercollins.com
Taylor C. Wagniere (Bar No. 293379)
twagniere@blechercollins.com
BLECHER COLLINS & PEPPERMAN, P.C.
515 S. Figueroa St., Suite 1750
Los Angeles, California 90071
Telephone: (213) 622-4222
Facsimile: (213) 622-1656
Peter K. Stris (Bar No. 216226)
peter.stris@strismaher.com
Brendan Maher (Bar No. 217043)
brendan.maher@strismaher.com
Elizabeth Brannen (Bar No. 226234)
elizabeth.brannen@strismaher.com
Daniel Geyser (Bar No. 230405)
daniel.geyser@strismaher.com
STRIS & MAHER LLP
725 South Figueroa Street, Suite 1830
Los Angeles, California 90017
Telephone: (213) 995-6800
Facsimile: (213) 261-0299
27
28
- A.39 -
2
NOTICE OF APPEAL AND REPRESENTATION STATEMENT
Case 2:16-cv-04109-AB-PLA Document 148 Filed 12/14/16 Page 5 of 6 Page ID #:5073
1
David W. Quinto (Bar No. 106232)
dquinto@VidAngel.com
VIDANGEL, INC.
3007 Franklin Canyon Drive
Beverly Hills, California 90210
Telephone: (213) 604-1777
Facsimile: (732) 377-0388
2
3
4
5
2.
6
7
Glenn D. Pomerantz (Bar No. 112503)
glenn.pomerantz@mto.com
Kelly M. Klaus (Bar No. 161091)
kelly.klaus@mto.com
Rose Leda Ehler (Bar No. 296523)
rose.ehler@mto.com
Allyson R. Bennett (Bar No. 302090)
allyson.bennett@mto.com
MUNGER, TOLLES & OLSON LLP
355 South Grand Avenue, Thirty-Fifth Floor
Los Angeles, California 90071-1560
Telephone: (213) 683-9100
Facsimile: (213) 687-3702
8
9
10
11
BAKER MARQUART LLP
12
2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
Tel: (424) 652-7800 ● Fax: (424) 652-7850
Plaintiffs/Counterdefendants-Appellees Disney Enterprises, Inc.,
LucasFilm Ltd., LLC, Twentieth Century Fox Film Corporation and
Warner Bros. Entertainment, Inc.
13
14
15
DATED: December 14, 2016
Respectfully submitted,
16
17
18
19
20
21
22
By: /s/ Jaime W. Marquart
Jaime W. Marquart
BAKER MARQUART LLP
2029 Century Park East, Sixteenth Floor
Los Angeles, California 90067
(424) 652-7800
(424) 652-7850 (facsimile)
Attorneys for Defendant/CounterclaimantAppellant VidAngel, Inc.
23
24
25
26
27
28
- A.40 -
3
NOTICE OF APPEAL AND REPRESENTATION STATEMENT
Case 2:16-cv-04109-AB-PLA Document 148 Filed 12/14/16 Page 6 of 6 Page ID #:5074
1
CERTIFICATE OF SERVICE
2
The undersigned hereby certifies that counsel of record who are deemed to have
3
consented to electronic service are being served with a copy of this document via the
4
Court’s CM/ECF system per Local Rule 5-4.7.2 on December 14, 2016.
5
6
7
/s/ Jaime W. Marquart
Jaime W. Marquart
8
9
10
11
BAKER MARQUART LLP
2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
Tel: (424) 652-7800 ● Fax: (424) 652-7850
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
- A.41 -
4
NOTICE OF APPEAL AND REPRESENTATION STATEMENT
Case 2:16-cv-04109-AB-PLA Document 147 Filed 12/14/16 Page 1 of 24 Page ID #:5037
1 R):an G. Baker (BarNo. 214036)
rbaker@bakermarquart.com
2 Jaime Marquart (BarNo. 200344)
jmaR\uart~bakermarNmrt.com
3 Scott . Ma zahn (Bar o. 229204)
smalzahn@bakermarquart.com
4 BrianT. Grace (Bar No. 307826)
mce~bakermarauart.com
5 B
R ARQUA T LLP
2029 Century Park East, Sixteenth Floor
6 Los Angeles, California 90067
Telephone: ~424~ 652-7800
7 Facsimile: 424 652-7850
8 Peter K. Stris (Bar No. 216226)
Jreter .stris~strismaher.com
9 rendan Ma er ~ar No. 217043)
brendan.maher strismaher.com
10 Elizabeth Brannen ~ar No. 226234)
elizabeth.brannen strismaher.com
11 Daniel Geys~~~t o. 230405)
danielielfer strismaher.com
12 STRIS
RLLP
725 South Figueroa Street Suite 1830
13 Los Angeles, California 9601 7
Telephone: ~213~ 995-6800
14 Facsimile: 213 261-0299
15 David W. gyinto (Bar No. 106232)
d3uint~ idAngel.com
16 30 7 Fr lin Canton Drive
Beverly Hillf Cali omia 90210
17 Telephone: 213~ 604-1777
Facsimile: 732 377-0388
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.42 -
Plaintiffs,
vs.
CASE NO. CV16-04109-AB (PLAx)
VIDANGEL, INC.'S EX PARTE
APPLICATION TO STAY
PRELIMINARY INJUNCTION
PENDING APPEAL OR
ALTERNATIVEL~ PENDING
DECISION BY THE NINTH
CIRCUIT ON STAY PENDING
VIDANGEL'S EX PARTE APPLICATION TO STAY
PRELIMINARY INJUNCTION
Case 2:16-cv-04109-AB-PLA Document 147 Filed 12/14/16 Page 2 of 24 Page ID #:5038
1 VIDANGEL, INC.,
2
Defendant.
3
APPEAL
rFiled concurrently with: [PROPOSED]
Order; Declaration of Jaime W.
Marquart]
The Hon. Andre Birotte Jr.
4
Date Action Filed: June 9, 2016
5
6 VIDANGEL, INC.,
7
Counterclaimant,
8
9
vs.
DISNEY ENTERPRISES, INC.;
10 LUCASFILM LTD. LLC;
TWENTIETH CENTURY FOX FILM
11 CORPORATION; AND WARNER
BROS. ENTERTAINMENT, INC.,
12
13
Counterclaim Defendants.
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
- A.43 -
VIDANGEL'S EX PARTE APPLICATION TO STAY
PRELIMINARY INJUNCTION
Case 2:16-cv-04109-AB-PLA Document 147 Filed 12/14/16 Page 3 of 24 Page ID #:5039
1
TO THE COURT, ALL PARTIES AND THEIR ATTORNEYS OF RECORD:
2
PLEASE TAKE NOTICE that Defendant and Counterclaimant VidAngel,
3 Inc. ("VidAngel") hereby submits this ex parte application for the Court to stay its
4 December 12, 2016 order granting plaintiffs' motion for preliminary injunction (the
5 "Order'') pending appeal, or alternatively, pending a decision by the United States
6 Court of Appeals for the Ninth Circuit on an emergency motion for stay pending
7 appeal, which VidAngel will file if this Court denies this ex parte application.
8
Good cause exists to grant this motion because the immediate entry of the
9 preliminary injunction threatens to destroy VidAngel's unique market position and
10 its market value and goodwill before any resolution of this Court's preliminary
11 injunction order, let alone the merits, and would cause it serious and disproportionate
12 financialloss.
13
Pursuant to Local Rule 7-19, on December 13, 2016, Baker Marquart LLP
14 conferred with opposing counsel Kelly M. Klaus of Munger Tolles & Olson LLP via
15 email, including undertaking good faith efforts to advise counsel of the date and
16 substance of the proposed ex parte application. (See Declaration of Jaime W.
17 Marquart ("Marquart Decl.") ~ 2, filed concurrently herewith; see also id., Ex A.)
18 Opposing counsel responded to the meet and confer email by stating that it intends to
19 oppose this application.
20
Pursuant to the Court's procedure on ex parte applications, Baker Marquart
21 served opposing counsel with these ex parte papers by email on December 14, 2016,
22 and notified opposing counsel that any opposition to the ex parte application must be
23 filed not later than 24 hours (or one court day) after the filing. In accordance with
24 Local Rule 7-19, the names, addresses, telephone numbers and e-mail addresses of
25 Plaintiffs' counsel are attached at Appendix A.
26
This ex parte application is based on this Application, the Memorandum of
27 Points and Authorities, the declaration of Jaime Marquart filed concurrently, all other
281~------------------------~~~~~~~~~==~~=-~~~
VIDANGEL'S EX PARTE APPLICATION TO STAY
PRELIMINARY INJUNCTION
- A.44 -
Case 2:16-cv-04109-AB-PLA Document 147 Filed 12/14/16 Page 4 of 24 Page ID #:5040
1 papers and pleadings on file with this Court and all other matters of which this Court
2 may take judicial notice.
3
4
DATED: December 14,2016
BAKER MARQUART LLP
5
6
7
8
9
/s/ Jaime W. Marquart
Jaime W. Marquart
Scott M. Malzahn
Attorneys for Defendant and
Counterclaimant VidAngel, Inc.
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28~------------------------~~~----~~~~~~---------1
VIDANGEL'S EX PARTE APPLICATION TO STAY
PRELIMINARY INJUNCTION
- A.45 -
Case 2:16-cv-04109-AB-PLA Document 147 Filed 12/14/16 Page 5 of 24 Page ID #:5041
TABLE OF CONTENTS
1
2
3
Page(s)
MEMORANDUM OF POINTS AND AUTHORITIES ............................... . 1
INTRODUCTION ...................................................................... 1
4 I.
5 II.
PROCEDURAL BACKGROUND ............................................... ... 3
6 III.
LEGAL ARGUMENT ............................................................. ... 4
7
A.
Applicable Legal Standard .................................................. .4
8
B.
VidAngel 's Appeal Raises Novel Legal Questions That
Create a Substantial Likelihood that the Grant of a
Preliminary Injunction in This Case Will Be Reversed ................... 5
9
10
1.
This Court's Interpretation of the
Family Move Act Presents a Legal
Question of First Impression ......................................... 5
2.
VidAngel 's Appeal Raises Serious Questions
Concerning the Interplay between the DMCA
and Antitrust Law ....................................................... 8
3.
The Fair Use Defense Raises Novel Issues of Law
Justifying Reversal .................................................. ... 10
4.
There Is a Substantial Likelihood that the Order
Will be Reversed Because It Improperly Excuses
Plaintiffs' Unprecedented Delay in Seeking
an Injunction ............................................................. 11
11
12
13
14
15
16
17
18
19
20
21
C.
VidAngel Will Suffer Severe and Irreparable Harm
from the Injunction ........................................................... 12
D.
Plaintiffs Will Not Suffer Substantial Harm
from a Stay Pending Appeal. ............................................... 12
25
E.
The Public Interest Is Served by a Stay ...................................... 14
26 IV.
27
CONCLUSION ....................................................................... . 15
22
23
24
28
1 VIDANGEL'S EX PARTE APPLICATION TO STAY
PRELIMINARY INJUNCTION
- A.46 -
Case 2:16-cv-04109-AB-PLA Document 147 Filed 12/14/16 Page 6 of 24 Page ID #:5042
TABLE OF AUTHORITIES
1
Page(s)
2
3 Federal Cases
4 Am. Broad. Cos. v. Aereo, Inc.,
5
134 S. Ct. 2498 (2014) ............................................................................................. 6
6 Cabell v. Markham,
148 F.2d 737 (2d Cir. 1945) .................................................................................. 12
7
8 Citibank N.A. v. Citytrust,
756 F.2d 273 (2d Cir. 1985) .................................................................................. 16
9
10 County ofSonoma v. Fed. Housing Fin. Agency,
2011 WL4536894 (N.D. Cal. Sept. 30, 2011) ....................................................... 10
11
12
Davila v. Cty ofSan Joaquin,
2008 WL 4426669 (E.D. Cal. Sept. 26, 2008) ........................................................ 9
13
Gallardo v. Lynch,
14
818 F.3d 808 (9th Cir. 2016) ................................................................................. 14
15 Hanginout, Inc. v. Google, Inc.,
16
54 F. Supp. 3d 1109, 1132-33 (S.D. Cal. 2014) ................................................... 16
17 Hilton v. Braunskill,
18
481 u.s. 770(1987) ................................................................................................ 9
19 Huntsman v. Soderbergh,
No. 02-M-1662 (MJW), 2005 WL 1993421 (D. Colo. Aug. 17, 2005) ................ 11
20
21 Lopez v. Heckler,
713 F.2d 1432 (9th Cir. 1983) ........................................................................... 9, 10
22
23
24
25
26
27
MDY Indus., LLC v. Blizzard Entm 't, Inc.,
629 F.3d 928 (9th Cir. 2010) ..................................................................... 12, 13, 14
Oakland Trib., Inc. v. Chron. Pub. Co.,
762 F.2d 1374 (9th Cir. 1985) ............................................................................... 16
In re Pac. Gas and Elec. Co.,
2002 WL 32071634 (N.D. Cal. Nov. 14, 2002) .................................................... 10
28~----------------------~~~~~~~~~==~~~~~=-1
11 VIDANGEL'S EX PARTE APPLICATION TO STAY
PRELIMINARY INJUNCTION
- A.47 -
Case 2:16-cv-04109-AB-PLA Document 147 Filed 12/14/16 Page 7 of 24 Page ID #:5043
1 Silvester v. Harris,
No. 11-cv-2137, 2014 WL 6611592 (E.D. Cal. Nov. 20, 2014) ............................. 9
2
3
14
Stone v. INS,
514 u.s. 386 (1995) ······························································································ 12
H.R. REP. No. 108-670 (2004) ................................................................................... 12
15
H.R. REP. No. 109-33(1) ............................................................................................ 15
16
17 NIMMER ON COPYRIGHT§ 14.06[A][3][c] ......................................................... 16
18 Toward a Fair Use Standard, 103 Harv. L. Rev. 1105 (March 1990) ...................... 14
19
20
21
22
23
24
25
26
27
28~------------------------~~~~~==~~~~~~~~~1
111 VIDANGEL'S EX PARTE APPLICATION TO STAY
PRELIMINARY INJUNCTION
- A.48 -
Case 2:16-cv-04109-AB-PLA Document 147 Filed 12/14/16 Page 8 of 24 Page ID #:5044
1
MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF
2
VIDANGEL'S EX PARTE APPLICATION TO STAY PRELIMINARY
3
INJUNCTION PENDING APPEAL
4
INTRODUCTION
I.
On December 12, 2016, this Court granted Plaintiffs' 1 motion for a
5
6
preliminary injunction (the "Order").
7
questions of first impression against VidAngel, including finding that VidAngel is
8
"not the type of defendant" for which the Ninth Circuit intended to contemplate the
9
interplay between the DMCA and antitrust law. Order at 8. The Order recognized
10
that "[b]efore watching a particular movie or television episode, a customer must
11
purchase a physical DVD containing the title from VidAngel. Order at 3. But even
12
though Congress, in the FMA, expressly allowed filtering of performances
13
transmitted to a household for private home viewing and the Supreme Court, in
tJ)"' .. 14
Aereo, expressly reserved questions of cloud storage and made clear its intent to
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134 S. Ct. 2498, 2510-11 (20 14), the Order easily reached the technologically and
17
legally questionable conclusion that when VidAngel's customers purchase its DVDs
18
(which VidAngel spent over a third of its capital contributions to buy), they acquire
19
only "the authority to view the DVD, not to decrypt it." Order at 7. On these and
20
other novel issues, the Order resolved questions of exceptional importance and
21
extraordinary practical significance against VidAngel and its customers at every
22
turn, effectively destroying its business model and depriving the public of any
23
meaningful filtering option. It temporarily enjoins VidAngel from "circumventing
24
technological measures protecting Plaintiffs' copyrighted works on DVDs, Blu-rays,
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On December 12, 2016, the Court granted Plaintiffs' motion for a preliminary
17
18
injunction. The Court enjoined VidAngef from the following activities:
19
(1) circumventing technological measures protecting Plaintiffs'
copyrighted works on DVDs, Blu-ray discs, or any otlier medium;
{2) copying Plaintiffs' copyrighted works, including but not
limited to copying the works onto computers or servers; (3)
streaming, transmitting or otherwise puolicly performing or
displaying any of Plaintiffs' copyrighted works over the Internet
(through sucli websites as VidAngel.com), via web applications
(available through platforms sucli as the Windows App Store,
Apple's App Store, the Amazon App Store, Facebook or Google
Pfay), via _portable devices (sucli as through applications on
devices sucli as iPhones, iPads Android devices, smart phones or
tablets), via media streaming devices (such as Roku, Cliromecast
20
21
22
23
24
25
26
27
2
The injunction also applies to VidAngel's "officers, employees, attorneys, and
those acting in concert with them."
28
- A.51 -
3
VIDANGEL'S EX PARTE APPLICATION TO
STAY PRELIMINARY INJUNCTION
Case 2:16-cv-04109-AB-PLA Document 147 Filed 12/14/16 Page 11 of 24 Page ID #:5047
or Apple TV), or by means of any other device or process; or (4)
engagmg in any other activity that violates, directly or indirectly,
Plaintiffs anti-circumvention rights under§ 1201 of the Copyright
Act, 17 U.S. C. § 1201 (a), or infringing by any means, directly or
indirectly, Plaintiffs' exclusive nglits under § 106 of the
Copyright Act, 17 U.S.C. § 106.
1
2
3
4
(Dkt. 144.)
5
Pursuant to Federal Rule of Civil Procedure 62( c), VidAngel now seeks a stay
6
of the Order in its entirety pending appeal. Alternatively, VidAngel seeks a stay
7
pending a decision by the Ninth Circuit on a stay pending appeal. VidAngel intends
8
to file a Notice of Appeal shortly, and to pursue its appeal expeditiously.
9
III.
LEGAL ARGUMENT
10
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Federal Rule of Civil Procedure 62 vests the power to stay an order pending
12
appeal with the district court. For both the appellate court and the district court, the
13
factors regulating the issuance of a stay are generally the same: (1) the movant's
14
likelihood of prevailing on the merits of the appeal; (2) whether the movant will
15
suffer irreparable damage absent a stay; (3) the harm that other parties will suffer if
16
a stay is granted; and (4) the public interest. See Hilton v. Braunskill, 481 U.S. 770,
17
776 (1987); Lopez v. Heckler, 713 F.2d 1432, 1435-36 (9th Cir. 1983).
Applicable Legal Standard.
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section 106, the following are not infringements of copyright: . . . the making
imperceptible, by or at the direction of a member of a private household, of limited
portions of audio or video content of a motion picture, during a performance in or
transmitted to that household for private home viewing, from an authorized copy
of the motion picture, or the creation or provision of a computer program or other
23
technology that enables such making imperceptible and that is designed and
24
marketed to be used, at the direction of a member of a private household, for
25
such making imperceptible, if no fixed copy of the altered version of the motion
26
picture is created by such computer program or other technology."
27
~
The Copyright Act, 17 U.S.C. 11 0( 11) provides: "Notwithstanding the provisions of
22
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The case raises important questions concerning the construction of the FMA.
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a Legal Question of First Impression.
15
added.)
28
- A.53 -
(Emphasis
Specifically, this case raises the statutory interpretation question whether a
5
VIDANGEL'S EX PARTE APPLICATION TO
STAY PRELIMINARY INJUNCTION
Case 2:16-cv-04109-AB-PLA Document 147 Filed 12/14/16 Page 13 of 24 Page ID #:5049
1
service operating as described above does not violate any of the exclusive rights of
2
copyright or only a sub-section of those rights. It also raises the question whether a
3
performance "at the direction of a member of a private household" is a private
4
performance and, hence, not a violation of an exclusive right of copyright or
5
whether it is a "public" performance. There is a further statutory interpretation
6
question whether Congress intended that a system such as ClearPlay's would permit
7
filtering and streaming as authorized by the FMA given the undisputed evidence that
8
the ClearPlay streaming model could not have been implemented in 2005 when the
9
FMA took effect and that the ClearPlay model requires that it piggy-back on another
10
provider's service and can be provided only at the whim of such service provider as
11
it violates YouTube's terms and conditions. Finally, it raises the question whether
12
including an express prohibition of making altered copies impliedly means that it is
13
not a violation to make unaltered copies as a necessary step in providing the service
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authorized by the FMA pursuant to the doctrine of inclusio unius est exclusio
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In addition, this Court's Order represents the first time any court has
17
interpreted the language of the FMA in a "transmission" case involving a filtering
18
service that transmits a performance to private households via all modem mobile
devices for private viewing. 3 The Court reasoned that "[t]he statute clearly requires
20
that a performance or transmission of filtered content must come from an
21
"authorized copy" of the motion picture" and found that "[t]he digital content that
22
VidAngel streams to its customers is not from an authorized copy." !d. VidAngel
23
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contends that such a reading of the FMA renders the first and most important
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Aside from this case, the only other known decision involving the FMA Huntsman v. Soderbergh, No. 02-M-1662 (MJW), 2005 WL 1993421 (D. Colo.
Aug. 17, 2005) - concerns a service that supplied customers with a device that they
could use in their home to filter motion pictures in their possession.
28
- A.54 -
6
VIDANGEL'S EX PARTE APPLICATION TO
STAY PRELIMINARY INJUNCTION
Case 2:16-cv-04109-AB-PLA Document 147 Filed 12/14/16 Page 14 of 24 Page ID #:5050
1 provision of the FMA (the one that permits a third party to filter and stream content
2
of a disc owned by a consumer) meaningless, particularly in the world of modem
3
mobile devices.
4
5
"during a performance in or transmitted to that household for private home viewing,
7
from an authorized copy of the motion picture ...." 17 U.S.C. § 110(11) (emphasis
8
added).
9
VidAngel has explained in its opposition briefing, closed systems for video-on-
10
demand ("VOD") content prevent a third party from filtering VOD transmissions
11
without further permissions. Yet, the FMA was intended to allow for filtering to be
12
0
to filter "limited portions of audio or video content of a motion picture" either
6
a:
Under the FMA, Congress provided that it is not an infringement of copyright
transmitted to a private household without additional permissions.
The transmission language in the FMA must be given meaning.
As
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The FMA must be read to give it purpose. As Judge Learned Hand observed,
14
"it is one of the surest indexes of a mature and developed jurisprudence . . . to
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prov1s1on, 17 U.S.C. § 1201(a)(l)(A), at issue here. (Dkt. 48-1.)
24
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.
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the District of Columbia challenging the constitutionality of the precise DMCA
22
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As noted in VidAngel's opposition briefing, VidAngel's
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23
24
25
26
27
5
Indeed, one of Plaintiffs' fundamental objections to the FMA was about
editorial decisions;.. which Plaintiffs presumably viewed as significant. H.R. REP.
No. 109-33(1) at 6~.
6
Nor does it follow that the 49% of VidAngel customers who might watch
Plaintiffs' works without filters would have purchased them from a source other
than VidAngel. See Order at 15.
28
- A.58 -
10
VIDANGEL'S EX PARTE APPLICATION TO
STAY PRELIMINARY INJUNCTION
Case 2:16-cv-04109-AB-PLA Document 147 Filed 12/14/16 Page 18 of 24 Page ID #:5054
1 arguments are likely to succeed.
2
4.
There Is a Substantial Likelihood that the Order Will be
3
Reversed Because It Improperly Excuses Plaintiffs'
4
Unprecedented Delay in Seeking an Injunction.
5
The Court's grant of a preliminary injunction in the face of Plaintiffs'
6
unprecedented delay creates a substantial likelihood that the grant of a preliminary
7
injunction will be reversed by the Ninth Circuit. Even before eBay and Winter -
8
which mandated an actual showing (rather than a mere presumption) of irreparable
9
harm to obtain an injunction - Courts consistently refused to find irreparable harm
10
in the context of much shorter delays than the sixteen-month delay between
11
VidAngel's first letter to Plaintiffs and the Court's Order. Oakland Trib., Inc. v.
12
Chron. Pub. Co., 762 F.2d 1374, 1377 (9th Cir. 1985) ("long delay before seeking a
13
preliminary injunction implies a lack of urgency and irreparable harm."); 4
14
MELVILLE B. NIMMER & DAVID NIMMER, NIMMER ON COPYRIGHT§
15
14.06[A][3][c] (unreasonable delay can defeat irreparable injury and the delay "need
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17
Cal. 2014) (seven-month delay in filing suit, and even more before seeking
18
preliminary injunction, was inexcusable); Val eo In tell. Prop., Inc. v. Data Depth
19
Corp., 368 F. Supp. 2d 1121, 1128 (W.D. Wash. 2005) (three-month delay belied
20
claims of irreparable harm). These courts reasoned that denying an unreasonably
21
delayed request for injunctive relief furthers the purpose of such relief- to maintain
22
the status quo. See, e.g., Citibank N.A. v. Citytrust, 756 F.2d 273 (2d Cir. 1985)
23
(10-week delay following notice of infringement was unreasonable).
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As noted extensively in the Declaration of Neal Harmon dated September 12,
25
2016, VidAngel relied upon Plaintiffs' inaction to its detriment, investing
26
tremendous resources to develop its current business model and customer base
27
during the delay.
28
31.) Plaintiffs have sat on their rights, and the Order rewards that behavior, setting a
- A.59 -
(Declaration of Neal Harmon ("Harmon Decl."),
11
~~
25-
VIDANGEL'S EX PARTE APPLICATION TO
STAY PRELIMINARY INJUNCTION
Case 2:16-cv-04109-AB-PLA Document 147 Filed 12/14/16 Page 19 of 24 Page ID #:5055
1 precedent that encourages all copyright holders to wait as long as they like to seek
2
extraordinary relief. After eBay and Winter, there is no presumption of irreparable
3
harm; accordingly, Plaintiffs' protracted delay in seeking an injunction is accorded
4
even more weight. This delay negates any finding of irreparable harm as a matter of
5
law. None of the cases cited by Plaintiffs excuse their delay, and Plaintiffs' own
6
conduct in similar settings (such as WTV Systems) negates any reasonable inference
7
of irreparable harm.
8
C.
9
VidAngel Will Suffer Severe and Irreparable Harm From the
Injunction.
10
If the injunction is not stayed, VidAngel will suffer significant hardship. The
11
Order threatens to destroy VidAngel's unique market position and its market value
12
before any resolution on the merits and would cause it serious financial loss.
13
Although "over 80 of Plaintiffs' copyrighted works" were available at the time of
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the preliminary injunction motion, Order at 4, Plaintiffs are half of the major studios
O:::o::;~·
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in this country. The magnitude of the loss of the ability for VidAngel to conduct its
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business in light of the injunction ruling is undeniable, because the injunction was
C:0 U
17
not limited to those 80 works. And the Court's rationale on likelihood of success
18
impugns VidAngel's entire business model, and therefore harms its goodwill. As a
19
result of the Order, VidAngel's goodwill will be seriously damaged as customers
20
who have previously come to depend upon VidAngel to filter many popular motion
21
pictures will lose faith in the service. (Harmon Decl. at
22
filtering market will suffer as a result of this injunction.
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28
- A.65 -
APPENDIX A
VIDANGEL'S EX PARTE APPLICATION TO
STAY PRELIMINARY INJUNCTION
1
1
UNITED STATES DISTRICT COURT
2
CENTRAL DISTRICT OF CALIFORNIA - WESTERN DIVISION
3
HONORABLE ANDRÉ BIROTTE JR., U.S. DISTRICT JUDGE
4
5
6
7
8
9
10
11
12
DISNEY ENTERPRISES, INC.;
LUCASFILM LTD.LLC; TWENTIETH
CENTURY FOX FILM CORPORATION
AND WARNER BROS. ENTERTAINMENT
INC.,
)
)
)
)
)
)
PLAINTIFFS AND
)
COUNTERCLAIM DEFENDANTS,
)
)
vs.
) No. CV 16-04109-AB
)
VIDANGEL, INC.,
)
)
DEFENDANT AND
)
COUNTERCLAIMANT.
)
________________________________)
13
14
15
16
REPORTER'S TRANSCRIPT OF PROCEEDINGS
17
MONDAY, NOVEMBER 14, 2016
18
10:35 A.M.
19
LOS ANGELES, CALIFORNIA
20
21
22
____________________________________________________________
23
CHIA MEI JUI, CSR 3287, CCRR, FCRR
FEDERAL OFFICIAL COURT REPORTER
255 EAST TEMPLE STREET, ROOM 181-C
LOS ANGELES, CALIFORNIA 90012
cmjui.csr@gmail.com
24
25
CHIA MEI JUI, CSR 3287, CCRR, FCRR
UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA
- A.66 -
2
1
APPEARANCES OF COUNSEL:
2
FOR THE PLAINTIFFS AND COUNTERCLAIM DEFENDANTS:
MUNGER, TOLLES & OLSON LLP
BY: GLENN D. POMERANTZ, ATTORNEY AT LAW
BY: ALLYSON R. BENNETT, ATTORNEY AT LAW
355 SOUTH GRAND AVENUE
35TH FLOOR
LOS ANGELES, CALIFORNIA 90071
(213) 683-9132
- AND MUNGER, TOLLES & OLSON LLP
BY: KELLY M. KLAUS, ATTORNEY AT LAW
BY: ROSA LEDA EHLER, ATTORNEY AT LAW
560 MISSION STREET
27TH FLOOR
SAN FRANCISCO, 94105
(415) 512-4017
3
4
5
6
7
8
9
10
11
FOR THE DEFENDANT AND COUNTERCLAIMANT:
DAVID QUINTO, ATTORNEY AT LAW
3007 FRANKLIN CANYON DRIVE
BEVERLY HILLS, CALIFORNIA 90210-1633
(213) 604-1777
- AND BAKER MARQUART LLP
BY: RYAN G. BAKER, ATTORNEY AT LAW
BY: JAIME MARQUART, ATTORNEY AT LAW
BY: BRIAN T. GRACE, ATTORNEY AT LAW
2029 CENTURY PARK EAST
16TH FLOOR
LOS ANGELES, CALIFORNIA 90067
(424) 652-7800
12
13
14
15
16
17
18
19
20
21
22
23
24
25
CHIA MEI JUI, CSR 3287, CCRR, FCRR
UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA
- A.67 -
3
1
LOS ANGELES, CALIFORNIA; MONDAY, NOVEMBER 14, 2016
2
10:35 A.M.
3
- - THE CLERK:
4
5
Disney Enterprises, Inc., et al., versus VidAngel, Inc.
Counsel, please step forward and state your
6
7
appearances for the record.
MR. KLAUS:
8
9
Calling Item No. 2, CV 16-4109-AB,
Good morning, Your Honor.
Klaus from Munger, Tolles & Olson.
I'm Kelly
I am joined by my
10
colleagues, Rose Ehler, Allyson Bennett, and Glenn
11
Pomerantz, at counsel table for the plaintiffs.
MR. QUINTO:
12
Good morning, Your Honor.
David
13
Quinto, general counsel of VidAngel, Inc.
14
Marquart and Brian Grace of the Baker Marquart firm.
15
also have a video operator who will also show slides.
THE COURT:
16
17
MR. QUINTO:
Are we going to play the "Star Wars
The filtered version, Your Honor, a
lot shorter.
THE COURT:
20
21
We
Rogue One" movie?
18
19
With me are Jaime
No opening credits?
Just kidding.
All right.
Good morning to you all.
22
23
about today.
24
a chance to review the papers.
25
questions.
We have a lot to talk
The motion for preliminary injunction -- I had
I have a number of
I guess I will just start off -- I don't know if
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it's Mr. Quinto.
I want to make sure I understand the
2
business model, and I will ask some questions to help walk
3
me through it.
4
So customer says, "I want to watch 'Star Wars,'"
5
they purchase the DVD legally through VidAngel for $20.00,
6
let's just -- is that correct?
7
MR. QUINTO:
8
THE COURT:
9
10
Yes, Your Honor.
So then VidAngel decrypts the video in
order to make a version that can be streamed back to the
customer.
Is that correct?
11
MR. QUINTO:
12
streamed without the decryption.
13
filtered without the decryption.
THE COURT:
14
15
It could not be
It also could not be
It's decrypted for both filtering and
streaming purposes.
MR. QUINTO:
16
17
Sort of, yes.
Yes.
That is a technological
necessity today, and it was in 2005.
THE COURT:
18
So then the DVD is sold to the
19
customer, and then the DVD is then placed in a vault.
20
that correct?
MR. QUINTO:
21
Yes, Your Honor.
Is
Each DVD is
22
individually barcoded.
When a DVD is sold to a customer,
23
the customer owns a specific DVD that is identifiable by its
24
barcode.
25
firm go through and audit the vault to make sure that all
VidAngel has had an outside independent accounting
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the DVDs that are supposed to be there are there and to
2
confirm that no DVD has ever been sold to two customers
3
simultaneously, that there is a one-to-one correspondence
4
between the person who gets to use the DVD and the person
5
who owns the DVD.
6
THE COURT:
7
MR. QUINTO:
Okay.
And VidAngel even makes sure that the
8
customer cannot -- that the same customer cannot watch the
9
DVD on two devices simultaneously.
10
watch it only on one device.
11
So you are allowed to
upfront.
THE COURT:
12
Right.
The entire $20.00 is paid
Let me go through this just so
13
I understand.
14
streams the movie.
15
purchase the movie back for $19.00.
16
customer says yes or no.
The customer
VidAngel makes a request or offer to
Is that -- and then the
If the customer says yes, then you give them back
17
18
The $20.00 gets paid upfront.
$19.00.
What happens to that DVD?
MR. QUINTO:
19
Well, let me first note that
20
Your Honor's description is almost correct but not quite.
21
So the repurchase price for a DVD declines a dollar a day.
22
The repurchase price for a Blu-ray disk declines $2.00 a
23
day.
24
the DVD, the customer would get $19.00 in store credit.
So if a customer chooses to sell back within 24 hours,
If the customer waits two days --
25
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THE COURT:
1
2
He will get $18.00.
Let's assume they
do it in that same day.
MR. QUINTO:
3
I want to note that, at this point,
4
there are over 20,000 DVDs that have -- that have been held
5
by the customer so long that there is no sell-back value.
6
So they're being stored for the customers in perpetuity.
THE COURT:
7
8
I understand that, but just work with
me here.
9
MR. QUINTO:
10
THE COURT:
Yes, Your Honor.
Let's say the customer on that day,
11
they watch the movie, and they say, "Okay.
12
it back."
13
Okay?
14
vault in perpetuity?
15
customer now that they've bought it back?
Then VidAngel gives them a $19.00 store credit.
Then what happens to that DVD?
MR. QUINTO:
16
I want to sell
Does it remain in the
Or is it sold again to another
Yes, it can be sold to another
17
customer.
The analogy -- probably all of us, at least
18
members of the Bar are familiar with, would be the college
19
bookstore.
20
looked at the prices of the books, and we had heart
21
palpitations, and the people at the bookstore said, "But
22
take good care of the book.
23
book again next term, we will buy it back from you at the
24
end of the semester."
25
early hoping to find used and less expensive copies of the
We went there at the start of every term, and we
If the professor is using the
And we always went to the bookstore
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books.
It's the same thing.
THE COURT:
2
I understand.
So what happens, then,
3
the next day when someone wants to watch that same movie?
4
Are they sold a used copy of the video?
5
what's the price point on that, assuming my scenario, the
6
next day someone wants to watch that same movie?
MR. QUINTO:
7
Right.
Or are they sold --
The next customer would pay
8
$20.00 and would own that DVD for as long as he or she
9
wanted.
THE COURT:
10
11
And then, when they sell it back, then
VidAngel owns it to be able to resell to the next person.
MR. QUINTO:
12
That's correct.
And one of the
13
problems with this model is that, if VidAngel estimates that
14
2,500 people might want to own a DVD of a particular movie
15
simultaneously and VidAngel, therefore, buys 2,500 DVDs to
16
sell to its customers, if it guesses wrong and no more than
17
2,000 watch it at a time, VidAngel has purchased 2,000 --
18
has purchased 500 DVDs that will never be used.
On the other hand, if 3,000 people want to watch,
19
20
VidAngel has to send out of stock notices to 500 customers
21
saying, "Sorry.
We don't have it."
THE COURT:
22
That's the part I'm not sure I follow
23
then.
Because, if you buy 2,000 copies and on Day 1, 2,000
24
people buy it and sell it back; on Day 2, another 2,000
25
people want it.
Then it's available for sale; correct?
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MR. QUINTO:
1
2
VidAngel.
Yes, Your Honor.
THE COURT:
3
That would be the ideal situation for
And I am just trying to make sure I
4
understand.
5
reselling those DVDs; correct?
6
MR. QUINTO:
Yes.
8
THE COURT:
Right.
9
MR. QUINTO:
7
That's how VidAngel makes its money, by
That's where it derives its
revenue.
But it's not in the -- it doesn't
10
view itself as in the DVD sale and resale business.
11
value it adds is the filtering.
12
movies rented from VidAngel -- rented, used, sold -- sorry.
13
96 percent of the DVDs sold and watched are watched by
14
consumers who choose two or more filters.
THE COURT:
15
16
filters?
17
moment.
The
And 96 percent of all
What are generally those two or more
Because I was going to talk about that in a
There is some back-and-forth.
Are they really filtering for violence, profanity,
18
19
what have you?
Or are they just filtering out either the
20
opening or closing credits, if you know?
MR. QUINTO:
21
It's not just the credits.
And I
22
want to say something about the credits, Your Honor, because
23
that's, I think, a real canard.
The credit filter didn't exist so that people
24
25
could game the system.
It wasn't installed so that people
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could choose to filter something they didn't want to see
2
anyway and thereby watch a filtered movie -- thereby watch a
3
streamed movie for a lower price.
4
many movies contain outtakes in the credits.
5
most outrageous parts of the movie, some of the largest acts
6
of violence or the bloodiest scenes or the worst language
7
appear in those outtakes in the credits.
8
VidAngel customers insisted on having a closing credits.
Rather, Your Honor, today
That's why
But the system has been modified.
9
And often the
VidAngel
10
represented to the studios in July 2005 that, if they wanted
11
some modification to the system to the technology, VidAngel
12
would be happy to try to accommodate.
Now that Disney has raised that as an issue,
13
14
VidAngel requires that, to watch a movie, if you choose to
15
filter credits, you must also choose to filter something
16
else.
17
THE COURT:
What's that something else?
18
MR. QUINTO:
Well, Your Honor, if I may, I would
19
ask the Court's indulgence to watch a video that's about
20
2 1/2 minutes long.
21
it shows a -- it shows exactly what the consumer would see
22
if the consumer went to the VidAngel Web site.
23
somebody walking through the Web site, choosing the filters.
24
The Court can see what sorts of filters are available and
25
how that system works.
What it -- I will tell you.
It is --
And it shows
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THE COURT:
1
Mr. Klaus, I assume you are not
2
standing up just for exercise, and I assume you have some
3
issue with the Court watching the video.
4
be heard.
5
MR. KLAUS:
6
Two points.
So I will let you
Thank you, Your Honor.
One is that we do object to the
7
showing of the video that Mr. Quinto just described.
It was
8
provided to us on Saturday evening.
9
narration by someone -- we assume it's VidAngel's chief
10
operating officer -- but it contains narration that has
11
commentary on why she happens to be selecting particular
12
filters.
The video contains
The part that is very objectionable is that, at
13
14
the end of the video, there is a comment during the
15
sell-back process where the narrator says there is a certain
16
percentage of DVDs that are permanently owned.
Mr. Quinto, during his remarks just now, made a
17
18
reference to there being 20,000 DVDs that have been checked
19
out for so long that they are permanently owned.
20
in the record.
21
object to Mr. Quinto's attempt to bring that in in his
22
argument and also to bring it in through the video.
That's not
There is zero evidence of that, and so we
The other thing I would say, Your Honor, is I do
23
24
believe there were some points in the question and answering
25
where Mr. Quinto was describing the system that I would like
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the opportunity to be heard on.
2
flow of his question.
THE COURT:
3
I don't want to break the
I can assure you you will have an
4
opportunity to be heard.
5
I just was more focused on the
video.
Why don't we do this, Mr. Quinto.
6
7
through my questions.
8
Let me get
Let's hear the arguments, and then I
will decide if I need to see the video.
Mr. Klaus, I understand you are representing your
9
10
client.
It's not in front of a jury.
I would like to
11
think -- some might disagree that I have a modicum of
12
intelligence to filter out that which is relevant to these
13
proceedings and that which is not.
14
noted.
But your objection is
Let me kind of go through this, if I could.
Mr. Quinto, I thought you said 96 percent of the
15
16
people filter -- do some form of filtering in the -- when
17
they engage?
MR. QUINTO:
18
Choose more -- choose at least two
19
filters and frequently many more than two filters when they
20
watch the movie.
THE COURT:
21
Do you know specifically what those
22
filters are that they're choosing?
23
Is it closing credits?
MR. QUINTO:
24
25
Your Honor.
Is it opening credits?
Is it violence?
Is it profanity?
It's all matter of things,
I don't know the breakdown among the various
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categories.
VidAngel has 82 general categories of content
2
that can be filtered, including smoking, drinking, violence,
3
blood, guts, gore, sex.
THE COURT:
4
You don't keep statistics on what
5
things get filtered out -- or at least you don't have that
6
information today?
MR. QUINTO:
7
I don't have that information,
8
Your Honor, but the average number of filters selected is
9
far greater than two.
I do know that.
And although there are 82 general categories, if
10
11
one includes the subcategories, there are hundreds of
12
possible filters.
13
And when a consumer goes to the VidAngel site, the
14
consumer can go through the general categories and open them
15
up and look at all the subcategories and decide which
16
specific subcategories to include or can take out an entire
17
category.
And as this process goes on, the site will in real
18
19
time show where in the movie, if it's language, the movie
20
will be muted.
And when I say "muted" I mean only the voice
21
track is muted.
You still hear the background noises, the
22
music --
23
THE COURT:
I'm not challenging the filtering.
24
MR. QUINTO:
And if you choose to have scenes
25
deleted, it will show you where.
It will show you how much
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of the movie is being shorted.
2
THE COURT:
3
Let me go through some of the other questions that
Okay.
Fair enough.
4
I have for you.
5
this.
6
disputing -- that there is no fair use defense to the
7
Digital Millennium Copyright Act violation; is that correct?
Disney contends -- and I don't think you are
MR. QUINTO:
8
9
So I just want to make sure we're clear on
I'm sorry.
That there is no fair use
defense?
10
THE COURT:
11
MR. QUINTO:
Yes.
Yes, there is.
And if I may ask the
12
Court to give me a couple of minutes, I would walk the Court
13
through the DMCA argument because it is stuff and nonsense
14
for several reasons as I can demonstrate.
THE COURT:
15
I will give you an opportunity.
I
16
just want to make sure I understand these are the issues
17
that I had in going through the papers.
If I understand your papers correctly, you argue
18
19
that your business model doesn't violate the DMCA because
20
you buy these authorized copies of these DVDs and then sell
21
them to the customers and then the customers are then able
22
to watch the streamed content that they own without
23
violating the DMCA.
24
Is that a fair statement of your argument?
25
MR. QUINTO:
Not quite, Your Honor.
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THE COURT:
2
MR. QUINTO:
Okay.
Sure.
Tell me what I am missing.
The first sentence of the DMCA
3
at Section 1201(a)(1)(A) which is the section that VidAngel
4
is relying on and which, by the way, is the subject of a
5
pending action in the district court for the District of
6
Columbia, seeking to have that precise provision declared
7
unconstitutional.
The first sentence says:
(Reading:)
No persons shall -- no person shall
8
circumvent a technological measure that
9
10
effectively controls access to a work
11
protected under this title.
12
So there are two requirements for that to apply.
13
THE COURT:
I just want to make sure -- I am
14
seeing this stuff on the screen.
15
opposing counsel?
MR. QUINTO:
16
17
Has this been shared with
No, but this is just part of the
statute -THE COURT:
18
I understand but, Mr. Quinto.
You are
19
coming here, putting up these video screens.
20
going to have Disney jumping up in arms saying, "I haven't
21
seen this."
22
this whole PowerPoint, you should share it with opposing
23
counsel.
It seems to me, if you are going to go through
Mr. Klaus, I am sure you will object at the
24
25
Then I am
appropriate time.
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MR. KLAUS:
1
I will, Your Honor.
I have a complete
2
version of the statute that I am happy to hand up to
3
Your Honor, but I don't mind, for purposes of this
4
discussion right now, if Mr. Quinto goes through this
5
sentence.
6
THE COURT:
All right.
7
Go ahead, Mr. Quinto.
8
MR. QUINTO:
9
So I have bolded the two critical elements there.
Thank you.
10
First, there must be effective control; and, secondly, it
11
must be of a work protected under Title 17, which is the
12
Copyright Act.
We have submitted a declaration from our expert
13
14
which explains in some detail that the control is quite
15
ineffective.
16
there is not an effective control.
17
Mr. Klaus, refer to 17 USC 1201(b)(2)(B).
And if I may now,
This section defines what it means to have
18
19
But putting that aside, as a matter of law,
effective protection.
It says (reading:)
A technological measure effectively
20
21
protects a right of a copyright owner under
22
this title if the measure prevents, restricts,
23
or otherwise limits the exercise of a right of
24
a copyright owner under this title.
25
So the first requirement here is that there be a
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right of a copyright owner.
THE COURT:
2
3
Okay.
Let me stop you there because
Mr. Klaus is standing up.
4
So what is the issue, Mr. Klaus?
5
MR. KLAUS:
He is reading from the definition of
6
effective protection and Section 1201(b)(2)(B), whereas the
7
actual definition of what it means to effectively protect a
8
work for purposes of Section 1201(a)(1) is in a different
9
section.
10
It's in Section 1201(a)(3)(B).
And what that
section -- that's the one that's at issue here.
11
THE COURT:
Let me stop you there.
12
We're going to be here all day if we go through
13
this.
So just note where you have issue.
14
Then I will give
you a chance to respond.
15
Mr. Quinto, continue.
16
MR. QUINTO:
17
the right of a copyright owner.
18
involved.
19
that a service that meets the requirements of a Family Movie
20
Act is exempt from all the exclusive rights of copyright
21
under that statute, there is no right of a copyright owner
22
here to be protected because the studios don't have any of
23
the -- don't enjoy any of the exclusive rights of copyright
24
vis-à-vis a service operating as required by the Family
25
Movie Act.
So first it must effectively protect
So there must be a right
But under the Family Movie Act which provides
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THE COURT:
1
You are saying that this is exempt
2
under the Family Movie Act?
3
Family Movie Act?
Is that your contention?
MR. QUINTO:
4
That it's exempt under the
The Family Movie Act says that any
5
service operating in accordance with its terms -- that is,
6
17 USC Section 110, Subsection 11, that any service that
7
meets those requirements is -- does not violate any of the
8
exclusive rights of copyright, does not violate Section 106
9
which lists -- which sets forth all the exclusive rights
10
that copyright owners enjoy.
THE COURT:
11
So, Mr. Quinto, what's your response?
12
The plaintiff touched upon this -- Disney touched upon the
13
legislative history that suggests that the FMA was not
14
intended to be a defense to a DMCA violation.
I think there is some verbiage from Senator Hatch
15
16
specifically where he states it would not be a defense to
17
claim a violation of Section 1201, that the circumvention is
18
for the purpose of engaging in the conduct covered by this
19
new exemption in Section 110(11), which is FMA.
And then he further states that the FMA does not
20
21
provide any exemption from the anti-circumvention provisions
22
of Section 1201 of Title 17.
23
What's your response to that?
24
MR. QUINTO:
25
Well, several, Your Honor.
First,
the -- Senator Hatch's statement has to be read in
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conjunction with all the statements, all the numerous
2
statements in the legislative history, including statements
3
made by Disney's allies that the FMA, if it became law,
4
would provide a blanket immunity, would provide a complete
5
exemption for a service operating under the Family Movie
6
Act.
And, in fact, Disney's -- one of Disney's allies
7
8
making that point that there would be total immunity even
9
complained that, if the FMA became law, teenagers would be
10
deciding what the American public got to watch in the
11
privacy of their homes.
Now, obviously, it's the families who decide.
12
But
13
the point is that they recognized that the FMA would provide
14
a total immunity.
15
Very easy.
So how to reconcile those statements?
At the time, the state of the law was as it had
16
17
been for hundreds of years in Anglo American jurisprudence,
18
that there is no injury -- that there is no action, there is
19
no actionable harm absent injury, and, therefore, there had
20
to be an injury before there could be a legal wrong, de
21
minimis non curat lex.
All the cases at the time reflect -- and this is
22
23
even acknowledged by the Ninth Circuit in the MDY Industries
24
versus Blizzard Entertainment case at page 951, I believe --
25
that the cases had all required that there be some -- that
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for it to be actionable under the DMCA, there had to be a
2
nexus between the decryption and some kind of harm to the
3
studios.
And a long line of cases, including those from the
4
5
Federal Circuit and from the Second Circuit, had held that,
6
absent any kind of harm, any kind of injury, there could be
7
no actionable claim under the DMCA.
8
And, of course, the Family Movie Act represented a
9
grand compromise made by Congress that wanted to ensure that
10
American families had the right to enjoy filtered content
11
streamed to them for private in-home viewing,
12
notwithstanding that the studios had sued every company that
13
ever offered filtering services, including several companies
14
that, according to the Register of Copyrights, were
15
operating lawfully under existing law but were sued anyway.
And the directors were so opposed to the Family
16
17
Movie Act that they refused invitations from Congress to
18
provide somebody to testify.
19
Congress fashioned a system to attempt to protect the rights
20
of all stakeholders.
21
economic interests in that consumers were required to first
22
lawfully purchase a copy; so the studios were guaranteed a
23
revenue stream because they would sell DVDs.
The studios were protected in their
The directors were protected in that services such
24
25
So the grand bargain was that
as VidAngel were prohibited from making any fixed copy of
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the filtered work and from performing the filtered work
2
publicly.
3
would be the work that the directors had authorized.
So the only work the public would get to see
The consumers were protected because they would
4
5
have the right and the ability to watch filtered content in
6
their home, filtered to their specifications.
And finally, the fourth stakeholder, the
7
8
for-profit companies that Congress expressly envisioned
9
would provide the service, knowing that the studios
10
wouldn't, the for-profit companies such as VidAngel were
11
protected in that they would in theory be immune from
12
litigation.
13
And I might add that the studios were suing the
14
company called ClearPlay when the Family Movie Act became
15
law.
16
When it became law, the judge in the ClearPlay
17
action -- and the plaintiffs there included three of the
18
plaintiffs herein -- Disney, Warner Bros., and Fox.
19
THE COURT:
20
MR. QUINTO:
I know all about that.
Yeah.
The judge asked them, "Do you
21
have any claim left?" and they said, "No," and the action
22
was then dismissed.
So in all those copyright arguments, infringement
23
24
arguments that the studios make, are arguments that they
25
recognized were out the window in that case.
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So in light of this grand compromise, the point
1
2
was to create a system that did not depend on studio
3
consent.
So, obviously, if a service such as VidAngel
4
5
needed to say -- needed to go to the studios to say, "Well,
6
we have this wonderful statute, the FMA, but it means
7
nothing unless you will grant us permission to decrypt,"
8
would give the studios a veto power, the very thing that
9
Congress wanted to take away from the studios because
10
Congress knew the studios would never say yes.
So if one looks at the existing case law at the
11
12
time, all the cases said that there must be an injury before
13
you could bring an action under the DMCA.
Here there is not and cannot be any injury.
14
15
Remember, the history of the DMCA was it was enacted in
16
response to the rampant file sharing occurring in the music
17
industry and the -- there was a further concern that perhaps
18
one person might decrypt a file and a second person, perhaps
19
in another country, might then share that file worldwide.
20
And Congress wanted to find a way to reach that first person
21
who decrypted the file and thereby made the worldwide
22
infringement possible.
Here that potential does not exist.
23
There is no
24
file sharing occurring.
Everybody who watches content is
25
somebody who has first lawfully purchased a copy of the
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work.
2
watched by every VidAngel customer.
3
of file sharing.
There is no possibility
In short, there is no injury.
So under existing case law, there could not have
4
5
The studios have derived revenue from every DVD
been a claim under the DMCA.
Further, Your Honor, I would point out that the
6
7
MDY Industries versus Blizzard case that the studios want to
8
hang their hat on, addresses among other things at page 941,
9
addresses copyright misuse, which, as Your Honor knows, is
10
an affirmative defense that VidAngel has asserted in this
11
case.
The Ninth Circuit said (reading:)
12
Copyright misuse is a equitable
13
14
defense to copyright infringement, and the
15
remedy for copyright misuse is to deny the
16
copyright holder the right to enforce its
17
copyright during the period of misuse.
18
So while the misuse is occurring as to the party
19
alleging copyright misuse, the plaintiffs do not have an
20
enforceable copyright, and having an enforceable copyright
21
is a prerequisite to protection under the DMCA.
22
reason as well, the DMCA does not apply.
23
note in the same case, the same case, the Ninth Circuit at
24
page 951 addressed a situation we have here as well.
25
Ninth Circuit said --
So for that
Finally, I would
The
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(Reading:)
1
Concerning anti-trust
2
law, we note that there is no clear issue of
3
anti-competitive behavior in this case because
4
Blizzard does not seek to put a direct
5
competitor who offers a competing role-playing
6
game out of business and the parties have not
7
argued this issue.
8
defendant in a future case claims that a
9
plaintiff is attempting to enforce the DMCA
If a Section 1201(a)(2)
10
anti-circumvention right in a manner that
11
violates anti-trust law, we will then consider
12
the interplay between this new
13
anti-circumvention right and anti-trust law.
14
And that is precisely the situation here.
On
15
December 19, Your Honor will hear the studio's motion to
16
dismiss VidAngel's anti-trust counterclaim and, well, all
17
other counterclaims as well.
So, finally, Footnote 12 of that same opinion says
18
19
that -(Reading:)
20
Like the Chamberlain
21
Court -- referring to the Federal Circuit
22
decision, the principal Federal Circuit
23
decision that had held that there was no DMCA
24
action permissible absent injury -(Reading:)
25
Like the Chamberlain
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Court, we need not and do not reach
2
relationship between fair use under
3
Section 107 of the Copyright Act and
4
violations of Section 1201, citing
5
Chamberlain.
MDY has not claimed that Glider use
6
7
is a "fair use" of WoW's, World of Warcraft's,
8
dynamic literal [sic] elements.
9
we too leave open the question whether fair
Accordingly,
10
use might serve as an affirmative defense to a
11
prima facie violation of Section 1201.
12
So for those various reasons, I submit that the
13
studio DMCA argument is unfounded.
And when one goes back
14
to the legislative history to try to understand that
15
comment, I think it's quite clear, especially from other
16
similar remarks, that what Congress was saying or what
17
specific congressmen were saying was that you cannot rely on
18
the FMA to -- as an excuse to justify something that was
19
inexcusable to start with.
For example, the studios in their reply papers
20
21
contend that we had no answer to their point that the -- I'm
22
blanking.
Their point that their -- they had quoted language
23
24
saying that the FMA cannot be used to make legal conduct
25
that was unlawful to start with.
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Well, to start with, meaning that, if somebody had
1
2
done something in violation of copyright law, trying to
3
bring it under the penumbra of the Family Movie Act would
4
not then provide a defense.
Elsewhere in the congressional record, there is a
5
6
more specific reference to the notion that one could not,
7
say, obtain bootleg copies of a work and then filter and
8
stream them and thereby gain the protection of the Family
9
Movie Act because there was a copyright violation ab initio
10
at the very outset.
And that is precisely the point, that
11
you cannot sanitize something that was wrong at the outset
12
by trying to bring it under the FMA.
But when the FMA was enacted, it was and remains
13
14
today impossible to filter or stream filtered content,
15
indeed stream any kind of content without -- well, to stream
16
the filtered content without first decrypting it.
17
a technological measure then.
18
necessity now.
19
encrypted, it cannot be filtered, and a filtered work cannot
20
be transmitted.
That was
It's a technological
Nothing has changed.
While a work is
So absent the decryption, the FMA is meaningless.
21
22
And we have, as Your Honor may have seen, challenged the
23
studios to tell us what the FMA accomplished, what did the
24
FMA add to the law, what new right do people have to watch
25
filtered, streamed content that they didn't have before the
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FMA was enacted?
All we've been told is the FMA does not permit
2
3
this, the FMA does not permit that, the FMA prohibits
4
something else.
5
what did the FMA accomplish?
The studios have no answer to the question
And as I have just explained, it accomplished
6
7
allowing people, allowing American families to watch
8
filtered content filtered to their desire, to their
9
specifications, in the privacy of their homes without
10
suffering a veto from the studios or the directors.
THE COURT:
11
All right.
Mr. Quinto, let me hear
12
from Mr. Klaus as it relates to this issue, if I could,
13
please.
And I have some questions.
14
15
I would appreciate it,
if you wouldn't mind, answering them.
The question I had for you really was how -- could
16
17
you describe at least from your client's perspective a
18
scenario where a company could operate legally under the
19
FMA, if they're not licensed to stream movie content.
20
that an impossibility?
Is
Because you heard Mr. Quinto talk at length about
21
22
the fact that -- basically, he says that your client takes
23
the position that the FMA really is -- it can't be utilized
24
in a practical sense.
MR. KLAUS:
25
Yes, Your Honor.
He's wrong about
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that.
He's wrong about a number of things that he said.
2
There were a number of arguments that Mr. Quinto raised this
3
morning, many of them that are nowhere made in their
4
opposing papers.
I have tried to take notes on all of them.
But to the beginning, which is that the FMA
5
6
accomplished nothing when it was passed, absolutely false.
7
What Congress did was it decided that there -- there was
8
existing litigation going on in Utah at the time in 2004 and
9
2005.
There were two -- in general, two types of
10
11
services that were providing filtering.
There was one type
12
that was actually making edited copies of movies, the
13
CleanFlicks people.
14
cited.
And that's one of the cases that we
15
And it was clear from the language of the statute
16
that the CleanFlicks people who were making copies and then
17
distributing those copies of edited movies to users had no
18
defense.
19
defense either," and we can get to that in a moment.
And the Court said, "You don't have a fair use
There were another group of companies, one of
20
21
which the lead one was called ClearPlay.
Those were the
22
subject of the Huntsman case which Mr. Quinto has held out
23
the Huntsman decision as saying that the studios essentially
24
said "We have absolutely no claim against any service that
25
filters."
Absolutely false.
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What the Huntsman defendants, the ClearPlay
1
2
defendants, did was they provided a separate filter that,
3
when somebody had their own DVD lawfully purchased at home
4
in a ClearPlay machine, they could put their DVD in.
5
could put the ClearPlay filter technology that went over
6
it --
7
THE COURT:
And they would filter it.
8
MR. KLAUS:
-- and they could play it.
They
9
So the
idea that there was nothing accomplished in the studio's
10
view by the FMA is just false.
11
THE COURT:
How is that different from what
12
VidAngel does?
Aren't they -- they claim someone has
13
purchased the copy, they have filtered that copy, and then,
14
when they're done with it, they sell it back to the company
15
so someone else can purchase it and then filter it.
MR. KLAUS:
16
Well, that requires me to go back to
17
one of the first things that Mr. Quinto said in response to
18
your questions about how the service works.
19
some details I just want to make sure we're clear on.
And there were
I don't have a stack of DVDs with me, but if you
20
21
will indulge me, I will use my binder.
22
are too many in this case to demonstrate my point.
One of the things that Your Honor said, "Was is it
23
24
Unfortunately, there
the case that the user buys a DVD for $20.00?"
Mr. Quinto said, "Yes."
25
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You said, "VidAngel, then, decrypts the DVD?"
2
He said, "Yes."
3
What happens is at the beginning VidAngel buys a
That's wrong.
4
stack of DVDs or Blu-ray disks.
5
Imagine this has 500 or
2,000 and I take one.
If I am VidAngel, what I do is I take this one
6
7
DVD, and I rip it.
I use -- I use software that is plainly
8
circumvention software that's illegal for distribution in
9
the United States.
I know it's illegal for distribution in
10
the United States, and I use it to rip the movie out.
And
11
from that one DVD I have made a master copy that I then put
12
on to a server, just that one master copy.
All the others, the whole stack of 500 or 1,000
13
14
that they estimate is going to be used, those in the
15
cellophane, those get put in a vault.
16
barcode.
17
the fiction is that what the customer is buying and
18
streaming is the copy that's over here in the vault.
They have a little
And when somebody goes and says, "I am buying it,"
19
The reality is that, what the customer is seeing,
20
all of them, the thousands of customers who stream the same
21
movie over and over again, they're seeing the copy that was
22
taken from DVD Number 1, and that became the master copy.
THE COURT:
23
So let me ask you, then.
Would your
24
position change if every time someone purchased a DVD they
25
took one from that stack to the side and put it up on the
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server?
2
MR. KLAUS:
No.
3
THE COURT:
And rip it?
4
MR. KLAUS:
It would still be ripping.
5
still be copying.
6
It would
It would still be publicly performing the
movie.
THE COURT:
7
What's your response to the notion
8
that -- to Mr. Quinto's point that you can't filter without
9
ripping?
MR. KLAUS:
10
That is wrong.
We pointed out that
11
there is another service, one of their competitors,
12
ClearPlay, the same company that made the DVDs.
13
a service that -- they offer a service that works in
14
conjunction with authorized streams from Google Play.
They offer
So Google Play has licenses with copyright owners.
15
16
They stream -- they will stream movies to you, to you, to
17
everyone in this courtroom for a fee.
18
into it the acquisition cost of having to stream a copy.
And ClearPlay has a service.
19
The fee has built
What we know is what
20
Mr. Harmon has said is he thinks it's similar to the one
21
that VidAngel for a time was trying to use, but they have a
22
service that puts a filter over a stream.
Now, I can't tell you that I know all of the in's
23
24
and out's of it, but based on what we do know, it appears
25
that they have -- it appears to us at least, that what they
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have done is that ClearPlay has figured out a way to put a
2
filter on top of an authorized stream.
So there is some other way.
3
When he says that --
4
he points to us and says, "You have absolutely no answer."
5
He is just not reading our papers.
6
evidence that we put in that shows that there is some other
7
way to do it.
8
Act -- let me get to some of the points that Mr. Quinto
9
raised.
He is not reading the
Beyond that, Your Honor, the Family Movie
So the Family Movie Act -- it's a statute that
10
11
we're talking about here.
We heard a lot this morning about
12
there being a grand bargain, about there being an awareness
13
in the air that the existing law at the time said no injury.
14
None of that, by the way, none of that is in their papers.
15
It's not in their papers for good reason because we would
16
have shown that it was wrong.
So it's a statute.
17
And the first and best
18
evidence of what it means for purposes of construing the
19
statute is to look to see what the language is.
20
to hand up the language of the statute, Your Honor, if it
21
will be helpful.
I'm happy
22
THE COURT:
I think I have it.
23
MR. KLAUS:
Let me start with what the Family
24
Movie Act says.
25
statute.
Your Honor, I do have two copies of the
May I approach.
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THE COURT:
Yes.
2
MR. KLAUS:
I have copies --
3
THE COURT:
You have provided it to the defense?
4
MR. KLAUS:
Yes.
5
THE COURT:
All right.
6
MR. KLAUS:
Thank you.
7
The text of the statute of the FMA is at Tab 3,
8
Your Honor.
This is 17 USC Section 110.
And Section --
9
what Section 110 does is it sets out a whole bunch of
10
various exemptions to the exclusive rights of copyright.
11
The Family Movie Act happens to be in
12
paragraph 11, but the preamble, what introduces the entirety
13
of it is, notwithstanding the provisions of Section 106 --
14
doesn't say 1201 which is a separate section of the title --
15
the following are not infringements of copyright.
If Your Honor then skips ahead several pages to
16
17
the actual text -- what is not an infringement is the making
18
imperceptible.
19
conduct of making it imperceptible.
That conduct is not an infringement, the
And it describes what the requirements are for
20
21
something to be making imperceptible but not within it.
22
it makes clear that, if you are making imperceptible during
23
a performance and/or transmitted to the household, it has to
24
be from an authorized copy.
THE COURT:
25
Right.
And
But VidAngel says it is an
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authorized copy.
"We bought it.
2
bought it, and they bought it from us."
MR. KLAUS:
3
You get money from when we
So it's authorized.
But it's clearly not authorized,
4
Your Honor, for two reasons.
One is -- remember if we go
5
back to the example that I raised at the outset.
When Mr. Quinto is having something streamed, it's
6
7
not coming from the DVD that he supposedly bought.
8
coming from the copy that they created by ripping the DVD
9
that they had no authorization to do and the copy that they
10
made and then put onto a server that they have no
11
authorization to make.
12
that they are doing it.
It's
THE COURT:
13
That's not -- that is simply the way
It is not an authorized copy.
Let me play devil's advocate for a
14
second.
Isn't that really a function of semantics?
They
15
bought it.
16
And I assume you don't dispute that you got revenue from
17
that.
You don't dispute that they bought those copies.
Their purchase was authorized.
They have put this copy of this CD onto the server
18
19
to use multiple times, but it doesn't negate the fact that
20
their original purchase of the CD -- or DVD, I should say,
21
was an authorized purchase; correct?
MR. KLAUS:
22
The original DVD is itself -- the
23
movie that is on that particular DVD is an authorized copy.
24
The copy that is made to the computer server is
25
unauthorized.
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And that is the -- Your Honor, we think it's plain
1
2
from the language of the law, but if you look at the
3
Capitol Records versus the ReDigi case, that was the case
4
about moving the used iTunes store purchases, your downloads
5
from iTunes to a server.
6
"No.
7
reproduction rights."
You have made a new copy.
You have violated the
To answer your question, that is not an
8
9
And what Judge Sullivan said is,
authorized -- that's not an authorized copy.
THE COURT:
10
From your perspective, then, the only
11
authorized method to do this would be the ClearPlay model
12
where there is a DVD and somehow some way ClearPlay or --
13
has designed sort of a filter onto that DVD so, as it's
14
playing, it can filter.
MR. KLAUS:
15
Somebody can do that technology.
16
Somebody could actually try to go out and get a license.
17
And I do want to get under this point, Your Honor, because
18
Mr. Quinto said, "Copyright misuse.
19
why you can't enforce your rights."
That's another reason
Well, copyright misuse is alleged when they
20
21
amended their affirmative defenses in the case.
22
facts in to support it.
23
that they are relying on are their anti-trust allegations.
I presume that what the facts are
This is a preliminary injunction hearing,
24
25
They put no
Your Honor.
They are supposed to put in facts into the
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record, not just hurling statements that the studios don't
2
want this, the studios will never do this, the studios have
3
interfered with us at every turn without pointing to the
4
actual evidence showing it.
And the reason they're not doing it is they don't
5
6
have any evidence.
The business plan -- the business plan
7
of VidAngel from the get-go, when it went to this model, was
8
to try to develop a huge base of users so that then, when
9
they would come to the studios to negotiate a license, they
10
would have significant leverage during the licensing
11
negotiations.
I am getting a little ahead here, Your Honor, but
12
13
I would submit that goes directly to the balance of the
14
equities and the hardships and the fact that they have not
15
behaved equitably.
THE COURT:
16
Their argument is, look.
17
gnat become a hornet's nest.
18
approached you, all right.
19
You're not a problem.
20
Disney is says, "Time out.
You let the
I mean, when they first
Whatever.
Do your thing.
And now people are using it and
Houston, we have a problem."
21
MR. KLAUS:
Let me talk about their delay.
22
THE COURT:
I am asking these questions because I
23
just want to hear from the parties.
Your answer -- you cite
24
the cases that talk about litigation, the cost of
25
litigation, and things of that nature.
But I guess I really
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would like to hear from you, sort of, did Disney let this
2
gnat turn into a hornet's nest?
3
MR. KLAUS:
It's not that we let a gnat turn into
4
a hornet's nest.
It's the reality of the world that we live
5
in in 2015, 2016 is that there are a lot of gnats, and a lot
6
of the gnats go away and die of their own weight because
7
they just don't take off.
And the law -- the law says that we are entitled
8
9
to wait and we don't have to bring suit and we don't forfeit
10
the right to obtain a preliminary injunction if they turned
11
into a hornet in the meantime.
The reality is that my client spent -- once they
12
13
received Mr. Quinto's letters, which were not business
14
person to business letters.
15
litigator in this city.
16
business development people but to the general counsel of
17
the various companies.
18
letter that was saying, "Here is all the things we're doing.
19
We think we're legal.
20
disagree that we're legal."
Mr. Quinto is a very well-known
He addressed his letters not to
It had all the markings of being a
You go ahead and tell us if you
And, in fact, Mr. Harmon said that the one thing
21
22
he could identify that they might have done actually
23
concretely differently if they had been sued if they
24
perceived some sort of response was to then go off and force
25
us to litigate through the context of a declaratory judgment
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claim.
What the law says is -- again, this is the --
2
3
starting with the Arc of California case from the
4
Ninth Circuit -- makes it clear that courts are loath to
5
withhold injunctive relief on this basis alone, that you are
6
entitled to see what happens to the harm.
7
And the harm here, Your Honor, is not simply the
8
fact that they grew from 5,000 users during a limited beta
9
test as described in Mr. Quinto's letter to a hundred
10
thousand users and growing with many more projected into the
11
future when we filed suit.
12
continues to add works.
It's that this is a service that
So we have 79 titles listed in Exhibit A to the
13
14
Complaint.
They continue to add them.
If you go to
15
VidAngel today and go to what their press room and news says
16
is, the very first thing that you will see is a whole slew
17
of titles that they're going to add in November, a whole
18
slew of them, a whole bunch of pictures of the DVD covers.
And it says "Please stay tuned because there will
19
20
be more."
So Arc of California makes clear that, where you
21
have ongoing, continuing, worsening harm, that can justify
22
relief as well.
THE COURT:
23
Mr. Klaus, I appreciate you going back
24
and forth.
And I have some other questions -- I am sure you
25
have some other points -- but let's talk about, sort of,
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this issue for a minute, if we could, a little further.
The harm -- isn't the harm really economic?
2
3
Or is
there more than that?
MR. KLAUS:
The harm is definitely more than
6
THE COURT:
Tell me why.
7
MR. KLAUS:
For several reasons.
4
5
economic.
First of all,
8
just with respect to the idea that money damages would be
9
adequate here to compensate us for our loss -- wrong.
Just taking the 79 works that are at issue in the
10
11
Complaint, the potential statutory damages just for the
12
infringement of those works is $11.85 million.
13
are just those works.
14
continuing to accrue as they continue to add more.
And they're the ones that are
There is no evidence that VidAngel would be able
15
16
And those
to pay an actual damages award at the end of the case.
And if you look at the Second Circuit decision in
17
18
WPIX versus ivi, it's one of many cases.
But what the
19
Second Circuit said there was, "This defendant will not be
20
able to pay those damages at the end of the day.
21
that is that itself is irreparable harm."
Therefore,
Second point -- the other thing is that they are
22
23
the relationships that we have with our licensees like
24
Google Play, like Amazon and Apple's iTunes who come to us
25
and legitimately negotiate for and receive licenses.
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You have a service here that has decided that it
1
2
will appropriate for itself the decision of when, where, for
3
how much, under what circumstances, under what security
4
considerations, under what type of user experience they will
5
make our content available to build their business, to have
6
the money go from their revenues directly to the principals
7
and the owners of their company through their advertising
8
agency.
9
the back of our content.
They have made the decision to build a business on
And the cases are -- it's the WTV Systems or the
10
11
Zediva case from this district which outlines in detail the
12
type of harm -- and I will give you the cite for that,
13
Your Honor.
14
THE COURT:
I have the case up here.
15
MR. KLAUS:
Okay.
There is extensive discussion
16
in that opinion.
It's hardly alone.
They're also in the
17
BarryDriller.com cases from this district as well.
There is discussion of the fact that, when a
18
19
service comes in and says, "We're going to use your content,
20
we're going to build our business based on your content" --
21
and the cases say that that in itself is a harm, it harms
22
your relationship with your licensees.
As Mr. Cittadine says in his declaration -- he
23
24
points to examples of Fox titles that were attached to the
25
Complaint.
He says, "Those titles are right now within an
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1
exclusivity window for one of our authorized distributors."
2
This happened to be HBO.
We have a period of time where they're the only
3
4
ones -- they're the only service who can stream, and that is
5
there is an economic relationship there.
6
get that exclusive right.
7
copyright owner, have the right to determine.
It's something that we, as the
And when somebody like VidAngel comes in and says,
8
9
They pay money to
"We're going to help ourselves to this, we're going to
10
make -- we're going to decide what to do," that then, that
11
type of harm has been recognized repeatedly in the law as
12
being irreparable.
There is also the point, Your Honor, that there is
13
14
a -- one of the things that Judge Walter said in the Zediva
15
case is that there is a confusion of what consumer
16
expectations are and consumer beliefs are about what is
17
legal.
One of the other things that you will see if you
18
19
go to the VidAngel site -- and they have a whole blog
20
devoted to this lawsuit.
21
say "We're legal.
22
changing the minds of consumers about what is legal when we
23
submit, Your Honor, is the law is clear that what they are
24
doing in terms of ripping DVDs and circumventing is plainly
25
illegal and should be enjoined.
They have lots of statements that
What we're doing is legal."
And you are
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They are making copies to computer servers without
1
2
any authorization to do so, also illegal and infringement.
3
They are streaming, transmitting, performances of the same
4
movie, the same television shows to an enormous public
5
audience without any streaming license, the type that other
6
services have to obtain.
If there are other questions you have on the
7
8
adequacy of money damages -- I did want to turn back to the
9
1201.
THE COURT:
11
No, I don't have any further questions
MR. KLAUS:
10
Okay.
on that.
12
Let me turn back, if I may,
13
Your Honor, to the Section 1201 arguments.
14
we're clear, if you could turn in your binder, Your Honor --
15
I put the text of the DMCA.
16
Tab Number 1.
17
first sentence of Subsection (a)(1)(A) --
Section 1201 is behind
Just so we're clear, what it says is, the
(Reading:)
18
And just so
No person shall
19
circumvent a technological measure that
20
effectively controls access to a work
21
protected under this title.
22
Now, the definition section for this particular
23
subsection, circumventing access controls, is on the next
24
page at Subsection (a)(3).
25
subsection."
And it says "As used in this
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And this is important, Your Honor, because the
1
2
section that Mr. Quinto put up to try to make his argument
3
about there being some connection between a work being
4
protected under this title and the Family Movie Act deals
5
with a separate circumvention violation in a separate
6
definition.
The one that controls this case says, first, to
7
8
circumvent a technological measure means to descramble,
9
decrypt, otherwise avoid, bypass, remove the technological
10
measure without the authority of the copyright owner.
They admit in their answer, they admit in their
11
12
pleadings they circumvent.
13
encryption."
14
They say, "We remove the
they plainly do that.
We'll get to their defenses in a moment, but
The second point is they say a technological
15
16
measure effectively controls access to a work -- that's in
17
Subsection capital (B) -- if the measure, in the ordinary
18
course of its operation, requires the application of
19
information, a process, or treatment with the authority of
20
the copyright owner to gain access to the work.
That's what it means, whether there is -- whether
21
22
something effectively protects access to the work.
Now, Mr. Quinto made a reference to his expert,
23
24
Dr. Meldahl, having said in his declaration that the
25
protection measures that are at issue here on DVDs and
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Blu-ray disks don't effectively protect the right of a
2
copyright owner to secure access to the work.
This is an important point, Your Honor, because,
3
4
number one, it wasn't raised in their opposition brief.
We
5
did because Dr. Meldahl raised it -- respond to it in our
6
reply brief.
The point here on whether something effectively
7
8
controls access, Dr. Meldahl says, well, CSS, which is the
9
protection measures for DVDs, and AACS and DD Plus which are
10
for Blu-ray disks, those don't effectively control access
11
because there are all these illegal circumvention devices
12
that are out there like any DVD HD which they use.
13
Therefore, it doesn't control it.
Just to be clear, the cases, when somebody has
14
15
raised this argument, have squarely rejected it.
16
the 321 Studios against MGM case which we cite in our
17
papers.
18
cite in our papers where Judge Patel said this argument is
19
equivalent to somebody saying that, because there are
20
skeleton keys to break through locks, a lock doesn't
21
effectively control acts.
22
reading of the -- that's simply not a tenable reading of the
23
statute.
There is also the RealNetworks decision that we
And that is just not a tenable
Now, you have it so that the 1201 violation, we
24
25
There is
would submit, is established.
So then we go to the question
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1
of whether the Family Movie Act creates an exemption for
2
circumvention.
3
which I think makes clear that it is limited to Section 106.
4
With respect to the legislative history,
I went through the language of Section 110,
5
Your Honor asked about the statements that were made by
6
Senator Hatch who was the Senate sponsor of the bill.
7
statements are at Tab 5 of the binder.
And they are at the page at the bottom that has
8
9
His
the number Exhibit G, RJN 269.
And he was quite clear.
He
10
said it would not be a defense to a claim of violation of
11
Section 1201 that the circumvention is for the purpose of
12
engaging in the conduct covered by this new exemption in
13
Section 110(11).
Mr. Quinto threw up a whole bunch of statements
14
15
about why he thought the legislative history actually
16
supported his view that, even though the statute is plain,
17
that the Family Movie Act does not apply to or excuse the
18
Section 1201 violation, why he thought there was necessarily
19
some grand bargain.
What he doesn't point to is a single sentence
20
21
anywhere from any legislator that says something the
22
opposite of what Senator Hatch did.
23
the actual legislative -- if one looks beyond the statute
24
which is plain as can be, the only specific statement in --
25
by a member of Congress dealing with circumvention is what
And so if one looks at
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Senator Hatch said, and the other point in the legislative
2
history that we cited in our papers is that this wasn't an
3
oversight.
The House committee actually considered whether or
4
5
not to say specifically this has nothing to do with
6
Section 1201.
7
she thought that would be something that should be added,
8
and Register Peters sent a letter back which we put into the
9
record that said, "No, you don't need to have it."
They asked the Register of Copyrights whether
So it
10
showed that Congress actually considered what was being
11
discussed here and decided not to do it.
12
inadvertent.
It's not
It's not accidental.
Let me turn to fair use because you asked
13
14
Mr. Quinto if there was a concession by VidAngel that fair
15
use is not a defense to circumvention.
16
not conceding that even though they didn't say anything
17
about it in their opposition papers.
He said now they're
Just to be clear, Your Honor, this isn't an area
18
19
where there is not case law on this.
And I would ask
20
Your Honor to look -- the first and I think still the most
21
authoritative discussion of this is in Judge Kaplan's
22
decision in the Universal versus Reimerdes case.
23
on that is 111 F.Supp.2d 294, and the discussion is around
24
page 322.
The cite
And just to be clear, the Reimerdes case -- this
25
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1
was the big challenge to the constitutionality of the DMCA
2
circumvention provision.
3
led to -- this very opinion led to the case called
4
United States versus Corley which is the Second Circuit
5
decision which squarely rejected the constitutional denial
6
of fair use arguments that Mr. Quinto was trying to
7
incorporate by reference from the Green case in the
8
District of Columbia.
It was brought in New York.
It
I will get to that in a moment.
But what Judge Kaplan said in the Reimerdes case
9
10
is that this wasn't an oversight that fair use was not a
11
defense to a DMCA claim.
12
at Section 107 of Title 17.
13
starts by saying that notwithstanding the provisions of
14
Section 106 -- meaning fair use is a defense to the
15
violation of those exclusive rights.
16
a claim of circumvention.
The fair use defense is codified
Just like Section 110, it
It is not a defense to
What the judge said -- and I won't go through it
17
18
in excruciating detail -- but he said the legislative
19
history of the DMCA showed that Congress was encouraged to
20
extend the fair use defense to a claim of circumvention.
21
And Congress made the deliberate decision to say, no.
22
is separate.
23
law to break through the locks that protect these works.
24
What somebody does with the work later on when
25
That
What circumvention, it is a violation of the
they -- if and when they violate one of the exclusive rights
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1
of copyright, you then may be able to have that subject to a
2
fair use defense.
3
the violation itself, the act of circumventing is not
4
subject to a fair use defense.
But until the point where that happens,
Now, the other thing I would point out is that
5
6
there is a mechanism that Congress did put in place.
It's
7
called a Triennial Rulemaking Proceeding by the Librarian of
8
Congress.
9
come forward and they say, "We think that, when you balance
What happens is every three years various groups
10
the interests that Congress told you to balance in the
11
statute, this should be added to the list of enumerated
12
exemptions."
13
Congress has promulgated that covers VidAngel's defense
14
here, simply does not exist.
There is no exemption that the Librarian of
Beyond the Reimerdes case, there is
15
16
Judge Gutierrez's decision in this district in the
17
United States versus Crippen case, which clearly says fair
18
use is not a defense.
19
we cited from the Southern District that says that.
20
is no case that they cited on the other side that says that
21
fair use is a defense.
There is the Dish Network case that
There
They do say that the MDY Court said, "We don't
22
23
have to make the decision."
But that's not the
24
Ninth Circuit saying there is a fair use defense.
25
the Ninth Circuit saying, "We're not going to get involved
That's
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with this question."
So the state of the law now is that
2
there is no fair use defense to the circumvention claim.
And, Your Honor, if the -- so there is no Family
3
4
Movie Act defense to the circumvention claim.
There is no
5
fair use defense to the circumvention claim.
The -- there
6
is no -- they haven't even put in authority for the
7
proposition that copyright misuse, if they had supported it,
8
which they haven't, would be a defense to a circumvention
9
claim.
So what you have at the end of the day is they
10
11
are -- they have violated in the past.
They have made clear
12
they will continue to violate in the future the
13
anti-circumvention provision unless a court tells them, "No,
14
you can't rip disks.
15
stop doing it."
This is illegal conduct.
You have to
That in and of itself is one grounds for an
16
17
injunction.
There are two other claims that we've made,
18
Your Honor.
Happy to go into them with as much detail as
19
you would like.
The first is the violation of the reproduction
20
21
right and the violation of the reproduction right to make
22
the copy and to put it on the server so that it can be
23
streamed.
Again, we would -- the defenses that VidAngel
24
25
raises here -- they raise the Family Movie Act as a defense,
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but the Family Movie Act does not say -- simply does not say
2
that so long as you are filtering, you get to copy to your
3
heart's content, doesn't say it.
Is says, "You will not be liable for infringing
4
5
copyright by reason of the act of making imperceptible."
6
Doesn't say anything about "You also have a right under the
7
statute to make a copy."
Second thing they say on the violation of the
8
9
reproduction right.
They say, "Well, the copies that we're
10
making are intermediate copies because they are a means to
11
an end for us to be able to stream."
Well, there is nothing intermediate about the
12
13
copies that are made.
They're permanent.
They stay on the
14
server.
15
one copy that they ripped here that's their master copy.
16
That stays there.
It's the one copy, going back to my example, the
That's not intermediate or temporary.
And the other point is, Your Honor, the cases that
17
18
they are relying on, as we've pointed out, the Sega versus
19
Accolade and the Sony versus Connectix case, those
20
intermediate copying is a term of art in copyright law.
It deals with a very specific, very particular
21
22
situation where somebody makes a copy of the interface
23
between two computer programs to discover what the courts
24
have said are the functional elements to allow two computer
25
programs to interoperate.
That has nothing to do with what
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they're doing.
They're making copies so that they can
2
stream them to users and make money from the streaming
3
service that they operate.
Third claim is the public performance right.
4
And
5
the public performance right, I am happy to go through the
6
statutory definitions of this if you would like, Your Honor.
7
THE COURT:
Yes.
8
MR. KLAUS:
The defense on this -- twofold.
9
Family Movie Act, to the public performance right.
And as
10
said before, Your Honor, what they are doing is they are not
11
streaming from an authorized copy.
12
a master copy to a mass public audience.
They are streaming from
Nothing in the statute says you get a license to
13
14
do that, you are excused from the requirement if you are
15
going to operate a streaming business and actually stream
16
the movies yourself, that you are excused from that.
The other defense they raise is fair use.
17
18
of points on fair use.
19
establish at the preliminary injunction stage.
20
Perfect 10 versus Amazon.com case.
21
be clearer.
22
Couple
Number one, it's their burden to
will prevail on their fair use defense.
That's the
Ninth Circuit couldn't
They haven't come close to showing that they
Four factors under fair use, go through them
23
24
quickly, Your Honor.
First factor, ask whether the use is
25
commercial, whether it's transformative.
Plainly, it's
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commercial -- this is a for-profit enterprise that's going
2
on here -- and not transformative under the case law,
3
including the Worldwide Church of God case that we've cited
4
from this circuit, the Monge versus Maya Magazines case that
5
we've cited from this circuit, the Elvis Presley Enterprises
6
case.
7
to people for the same intrinsic purpose that we do.
They are showing movies.
They are streaming movies
The fact that they put filters on and that some
8
9
language may be skipped over or that some scenes may be cut
10
doesn't change the fact that they are streaming the movies.
THE COURT:
11
What about the notion that by taking
12
out -- whatever, smoking, foul language, violence?
13
that change the nature of the movie, therefore, at least,
14
from the defendant's perspective, making it transformative?
MR. KLAUS:
15
Doesn't
No, it doesn't, Your Honor, and for
16
the following reason, which is the movie that they are still
17
showing is "Star Wars."
18
they are advertising to people is "Star Wars."
19
or three minutes is taken out, it's no different than a
20
photograph being cropped in a particular way, which is the
21
case from the Ninth Circuit on the Monge case, the same
22
extrinsic purpose.
THE COURT:
23
That's not -- they're not -- what
And if two
Even though the violent portions of
24
the movie are taken out?
I don't think I have seen -- I am
25
just trying to think of a movie where, if you take out some
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1
of the violence, it could change the tenor of the movie.
2
The story is the same, but you are taking out the bloods and
3
guts.
MR. KLAUS:
4
You are taking out some things, but
5
the question under the case law is generally whether it's
6
the heart of the work.
THE COURT:
7
Your position is, even when you take
8
those things out, "Star Wars" is still "Star Wars," "Fast
9
and Furious" is still "Fast and Furious."
MR. KLAUS:
10
Absolutely, Your Honor.
And if it was
11
not that case, then when in airplane -- on the airplane when
12
you have seen a movie and it's sitting there so that
13
everybody in the plane can see right in the middle of the
14
cabin and they had -- it says "Edited for inflight service,"
15
what -- if what they were saying is right, that that's a
16
fair use to take that out and transform it in that way, that
17
that's transformative, then that would be a different work.
18
And nobody believes that, Your Honor.
19
that is somehow a different work.
THE COURT:
20
21
Nobody believes that
I think at least three or four people
over there do.
MR. KLAUS:
22
When I say "nobody," let me be clear.
23
No case has ever said that something like that is
24
transformative.
THE COURT:
25
I appreciate the clarification.
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MR. KLAUS:
Thank you, Your Honor.
2
The second point, the nature of the work, nature
3
of the work, movies, TV shows are at the heart of copyright
4
protection.
Third factor, the amount, the substantiality of
5
6
the use, with respect to the copying that's being done, it's
7
a hundred percent.
With respect to the amount and substantiality for
8
9
It's verbatim.
the stream -- now, you did ask the question, and we don't
10
know for certain, but I believe I heard Mr. Quinto say that
11
on average people select two filters.
And the --
12
THE COURT:
Ninety-six percent I think he said.
13
MR. KLAUS:
Ninety-six percent.
14
But the filters are taken out, still leave the
15
heart of the work.
That's what the question is.
16
question is is it the heart of the work?
THE COURT:
17
The
Is it -- I am going back to this
18
point.
I just want to make sure I understand.
19
view that there is no amount of filtering that really
20
changes a movie from the heart of its work?
MR. KLAUS:
21
Is it your
Your Honor, I can't imagine a filter
22
that would be applied here.
They certainly didn't come
23
forward with one in opposition here saying, "Look, user
24
Number 97,322, they took a two-hour movie and they applied
25
so many filters to it that what they got was 90 seconds or
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they got 2 1/2 minutes."
2
credible, Your Honor.
3
copying.
I just don't think that's
And, again, it's not verbatim
It's the heart of the work that's the test.
The fourth factor which the Supreme Court has said
4
5
is the most important factor is the effect of this on the
6
market for the work.
And a couple of points on that, Your Honor.
7
One
8
is, because it's a commercial use, there is a presumption
9
that they have to rebut that they don't harm the market.
10
And the second thing is that the question isn't -- well,
11
what if VidAngel just keeps operating its business this way?
12
That's not what the fourth factor says.
The
13
fourth factor says, "You don't just look at VidAngel.
You
14
look at what would happen if VidAngel was allowed to do this
15
and lots of other people were allowed to come in and copy.
16
What would the effect of that be on the market for the
17
work?"
18
And it doesn't take a lot of imagination here,
19
Your Honor, to think if what VidAngel is doing is legal,
20
there is nothing stopping another service from setting up a
21
DVD buying and streaming service.
22
The Family Movie Act is content neutral.
Doesn't
23
say what you have to take out, doesn't have a requirement of
24
what the percentage of content that's taken out so long as
25
it's limited.
Congress left that deliberately open.
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So you could have -- frankly, another motion
2
picture studio could decide -- one of my clients could
3
decide that they wanted another client's repertoire, and
4
they'll simply go out and buy the DVDs, and they'll put a
5
filter on.
6
particular type of filters.
They don't have to advertise it as being any
They can say, "You know what?
7
The last ten
8
seconds of the credit, here is the filter for that."
9
because the statute is content neutral, that could be done
10
And
that way.
There is no reason to think that Congress thought
11
12
that that was what it was doing with the Family Movie Act,
13
was setting up a massive end-run around these established
14
rights.
15
believe that that's not the type of use that if widespread
16
would disrupt and destabilize the entire system.
And there is no reason under the case law to
The other point I would say is, respect to
17
18
evidence that we put in, we put in evidence of user comments
19
that we found and users who have said repeatedly things
20
like, "I really like VidAngel.
21
when I don't use any or most of the filters."
22
cites to YouTube how-to videos that said, "Hey, there is a
23
great new service out there.
24
only a dollar a day."
It's a great service even
We put in
And do you know what?
It's
People who say on these YouTube videos, "I don't
25
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like paying 5.99 to iTunes, and so I will go to VidAngel and
2
I will use a -- I will take a snippet away, like at this
3
point in time the opening or the closing credits."
4
say, "This is the service that I will use and it's a dollar
5
alternative."
And they
That is, by the way, exactly the way that they
6
7
have marketed this service.
Just to be clear, to come back
8
to the question of the -- whether or not what's going on
9
here is that they're actually selling all that big stack of
10
DVDs and they're just engaging in the repeated sale, we
11
think, Your Honor, that the evidence is clear that the
12
sale/buyback, it's a gimmick.
13
in place so that, when they were sued, they would be able to
14
say, "Well, we're actually just streaming the content that
15
the user owns."
It's a gimmick that was put
What the evidence shows -- Mr. Quinto made
16
17
reference to 20,000 -- which is nowhere in the record about
18
there being 20,000 permanently owned copies.
19
been brought in for purposes of this hearing.
20
nothing in the record about that.
That has just
There is
But the important point is what they have said,
21
22
and when they have said this to the Securities and Exchange
23
Commission in the document that we submitted with our
24
supplemental request for judicial notice.
25
investment prospectus to investors.
This is their
There they have got to
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be honest.
They have got to completely open the kimono and
2
say, "Here is what's really going on."
And what they pointed out is that 99 1/2 percent
3
4
of all their million and a half transactions that have
5
happened so far have been short term.
6
short term is that the movie has been sold back within five
7
hours somebody having rented it.
8
way they promote the service.
And the definition of
Meaning that this is the
If you go to their Web site, Your Honor, the very
9
10
first thing you see on the landing page is a video that
11
says -- it doesn't say how does filtering work.
12
"How do you get one dollar movies and explained to you in 15
13
seconds."
14
the program to their users.
15
people and reminders to people.
16
back now."
17
the system.
That's the way they have advertised and marketed
It is full of incentives to
"Please sell your movie
And that's exactly the way that people have used
I -- I believe we've covered irreparable harm,
18
19
It says
their delay argument.
On the balance of the equities, Your Honor, very
20
21
briefly.
First of all, we think the law is clear in the
22
Ninth Circuit there is no hardship to a defendant from
23
having to comply with the law.
24
Triad case and the Cadence case from the Ninth Circuit that
25
we've cited.
Those are the -- that's the
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We also think that VidAngel here behaved
1
2
inequitably.
They decided deliberately that they would
3
pursue a strategy of seeking forgiveness rather than
4
permission.
And in the binder that you have, Your Honor,
5
6
behind Tab 7, one of the documents that we've put in, which
7
is Mr. Harmon responding to a user comment about why they've
8
got to go through this buy/sell back thing, this is what he
9
says in February of 2015.
Mr. Harmon says, "We'll have to
10
be" -- he says, "We can't change to a rental," in the bottom
11
paragraph, "We can't change to a rental unless we get
12
licensing from Hollywood.
13
do that.
14
vault them at our warehouse, and stream you a filtered
15
movie.
16
could come up with in order to offer you the value of a
17
Redbox while staying buttoned up legally."
We'll have to be a lot bigger to
Until then, we sell DVDs and Blu-rays to you,
The buyback system was the most creative way we
And then at Tab 13, Your Honor, there is an e-mail
18
19
from Mr. Harmon, the very top, September 29th, 2015.
20
This
is him talking to his main investors.
And what he says in that second paragraph -- this
21
22
is where he's talking about why they're going with the
23
dollar a day system.
24
model that -- this is the model that worked with consumers.
25
Based on our data, we need to get to around a 20 percent
He said, "It worked.
This is the
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1
increase in conversion rates to justify the loss in revenue
2
on the SD content" -- that means standard definition.
3
"Given the results, we're running with it because we think
4
it's going to better achieve our goal of building a
5
distribution platform.
6
possible."
We need to acquire users as fast as
The strategy here, Your Honor, always has been "We
7
8
will help ourselves to the plaintiffs' content.
9
decide how we will do it.
We will
We will do it in a way that
10
offers a price advantage, that offers availability
11
advantages to users, and we will build up a user base so
12
that, when we then go and try to negotiate licenses, we'll
13
have better leverage in those licensing negotiations."
14
Manifestly inequitable, Your Honor.
15
In terms of
the balancing of the equities, nothing to commend it.
The other point I will make, Your Honor, is there
16
17
are statements that VidAngel makes about the harm --
18
statements that VidAngel makes about the harm to its
19
employees and that it's a small start-up.
20
And we've pointed out again because we have the
21
SEC filing -- and they had to be open and honest with the
22
SEC -- turns out that, in the first half of this calendar
23
year, what they've made through their -- the Freudian slip
24
that Mr. Quinto made, their rental service, but whatever you
25
want to call it, their short-term transactions,
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$2.4 million.
The amount that they've turned around and
2
paid to Harmon Brothers, LLC, an Internet advertising
3
company that is owned by the same people who own this,
4
$2.2 million, Your Honor.
What they are doing is they are simply cycling the
5
6
money that they are making from exploiting our content and
7
paying it directly to themselves, to the owners of the
8
business.
Final factor, the public interest.
9
Public
10
interest is served by requiring that the law be complied
11
with.
12
alternatives that people can go to who really do want to
13
filter.
And as we pointed out as well, Your Honor, there are
And there is no --
14
THE COURT:
15
"alternatives," in the plural.
16
ClearPlay?
Isn't there really only this
Or is there another service out there?
MR. KLAUS:
17
Is there -- you are saying there are
The streaming service that I am aware
18
of is ClearPlay.
I do know that there is ClearPlay.
I
19
believe, although I can't quote just off the top of my head,
20
Your Honor -- there are other services that may provide the
21
DVD-type filtering.
22
THE COURT:
Other services apart from VidAngel?
23
MR. KLAUS:
When I say the "DVD filtering," what I
24
mean is somebody who has a DVD player at home and they get a
25
DVD and they then -- they are then able to watch it that
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way.
THE COURT:
2
Mr. Quinto, you are standing up.
3
there something you want to say?
4
MR. QUINTO:
Is
Yes, Your Honor.
The Court was very
5
generous in allowing me to explain VidAngel's case, and I
6
understand that the studios have a lot of argument they want
7
to present to the Court, but I am cognizant of the time and
8
hoping the Court will allow me a reasonable brief period to
9
respond -THE COURT:
10
Oh, no.
We may take a break, but you
11
all aren't going anywhere, if that's your concern, is that I
12
was going to shut off at 12:00.
13
intention.
14
You may be hungry, but you will have a chance to respond.
So you are going to have a chance to respond.
15
MR. QUINTO:
16
THE COURT:
17
I can live with hunger, Your Honor.
I'm sorry.
Mr. Klaus, is there
anything further you wish to add?
MR. KLAUS:
18
19
No, that's not my
Unless Your Honor has any other
questions -THE COURT:
20
I am just curious, while I have you up
21
here.
The defendants talk about a security bond.
22
your response to that?
MR. KLAUS:
23
What's
That a -- looking to the reasonable
24
precedence, what we've cited, the ones that have been
25
entered in cases in this district, including the WTV case,
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including in the BarryDriller cases, in the range of 50,000
2
to $250,000, they've asked for a security bond of
3
$50 million, which is orders of magnitude beyond anything
4
that we're aware of in any remotely analogous context.
I would point out, for example, they say that in
5
6
the Napster case there was a requirement of a $5 million
7
bond.
One was -- it seemed like a long time ago,
8
9
Couple things to take into consideration there.
in 2000, when Judge Patel enjoined the Napster service, it
10
had more than 56 -- maybe 70 million users.
It had drawn
11
significant investments, millions and millions of dollars of
12
investments.
13
Ninth Circuit thought merited a stay pending appeal.
14
out they lost on all of them, but the Ninth Circuit stayed
15
them.
And it also had arguments that the
Turned
We think, in this case, the liability is
16
17
absolutely clear that the idea that somehow this is -- we
18
are interfering with or destabilizing a business that
19
without an injunction will be worth billions of dollars is a
20
pie in the sky and that the bond that's required here should
21
be in line with the cases that -- the cases that we've
22
discussed, the BarryDriller case, the Zediva case -- again,
23
in the range in the low six figures.
24
even to the Napster level of the type of risk that we're
25
talking about on the other side.
Doesn't come close
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THE COURT:
1
2
Thank you.
Let me just check.
One
moment here.
3
Why don't we take a ten-minute recess.
4
eyesight is correct, we'll resume at 12:20, and then I will
5
give you an opportunity to respond.
6
until 1:30, although I would hope that we don't go until
7
then, but I'll give you an opportunity to respond at that
8
time.
I don't have anything
We'll take a ten-minute recess.
MR. QUINTO:
9
If my
Thank you, Your Honor.
(Recess taken 12:12 to 12:24 P.M.)
10
THE COURT:
11
Mr. Quinto, before you begin, I just
12
want to ask Mr. Klaus one last question, at least for now,
13
just so it doesn't escape my memory.
14
When you talk about irreparable harm in that vein,
15
you talk about -- and the goodwill, sort of, with licensees.
16
Did -- I just want to make sure I didn't miss the needle in
17
the haystack of paper that's been filed.
18
Have licensees specifically complained?
Was there
19
any sort of declarations that talk about, you know, iTunes,
20
Amazon, saying, "Hey, what's going on here?
21
when so-and-so doesn't have to do that?"
22
like that?
23
make sure -- whether or not I missed that.
Why am I paying
Is there anything
If there is not, that's fine.
I just want to
24
MR. KLAUS:
There is not, Your Honor.
25
THE COURT:
There isn't.
Okay.
Thank you.
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All right.
2
I do and first I beg to differ with
say.
3
4
Mr. Quinto, I'm sure you have a lot to
MR. QUINTO:
1
that last response from opposing counsel.
There was a licensee who complained in December,
5
6
complained to the studios in December 2015, specifically
7
concerning VidAngel's aggressive marketing techniques.
So that is the record with respect to complaints
8
9
10
with respect to licensees, that there was a complaint in
December 2015.
11
THE COURT:
12
MR. QUINTO:
Okay.
At the time -- well, VidAngel
13
launched its service as a private beta test in January 2015.
14
As I disclosed in my letter to the studios in July 2015, the
15
number of users had grown by 10,000 percent from the end of
16
January to the end of June.
17
tremendously when VidAngel went public with its service.
And, of course, it took off
I would note that the studios, Disney in
18
19
particular, opened a VidAngel account on August 6th, 2015.
20
Disney was represented, in the Zediva case, by Mr. Klaus and
21
his colleagues at Munger, Tolles.
The privilege log that we were given reflects
22
23
that, in August 2015, there were a number of communications
24
between the studios and Mr. Klaus.
25
clearly taking this seriously as of August 2015.
So the studios were
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The -- I mentioned a moment ago the Zediva case --
1
2
that is very instructive, Your Honor.
There the defendant,
3
Zediva, had been offering 138 movies for streaming.
4
July 2015, when I sent my letter to the studios, VidAngel
5
was already offering 750 movies, far more.
In
In Zediva, the studios waited 18 days to file
6
7
suit, just 18 days.
8
submitted a declaration of counsel that took pains to
9
explain that 18-day delay -- took pains to explain why that
10
And when they did so, your Honor, they
18-day delay should not be viewed as unreasonable.
11
The point, obviously, is that, when the studios
12
believe there is a pirate, believe they're being injured,
13
they know how to act quickly.
Here, I'm afraid to say, that, we believe, that
14
15
something quite different is at issue.
We have, as the
16
Court knows, made a Regulation A Plus stock offering
17
approved by the SEC.
18
VidAngel announced late last spring that it
19
planned to have the Regulation A Plus stock offering.
20
was shortly after that that the studios chose to file suit.
21
And that was consistent with the conduct the studios have
22
always engaged in with respect to VidAngel trying to prevent
23
it from offering its service by whatever means possible,
24
including earlier objecting to Google, allowing the service
25
to be based on the Chromecast device, persuading Google that
It
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Google would violate its terms of service agreements with
2
the studios if VidAngel could use the Chromecast device to
3
filter.
4
pulled the rug out from VidAngel.
And at several other times, the studios had also
So we believe that the Complaint was filed for the
5
6
purpose of trying to disrupt the Regulation A Plus stock
7
offering.
In support of that theory, Your Honor, I would
8
9
note that the studios did not request a temporary
10
restraining order, notwithstanding the claim that they were
11
being irreparably injured.
12
immediate preliminary injunction.
13
the preliminary injunction hearing for late October.
Why?
14
They also did not seek an
Rather, they scheduled
We believe, Your Honor, that they wanted to
15
schedule the preliminary injunction hearing so late that the
16
pendency of the preliminary injunction application would be
17
a proverbial, sort of, Damocles hanging over VidAngel during
18
its Regulation A Plus stock offering.
I am happy to say that VidAngel has completed its
19
20
Regulation A Plus stock offering.
21
$10 million in just a few days, and, notwithstanding the
22
threat from the studios, VidAngel has succeeded with that
23
and is moving forward.
That I submit is the true rationale for the
24
25
It raised over
studios' delay in bringing the action.
And I also note
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that, of the six major motion picture studios, Sony,
2
Universal, and MGM, who were extensively copied on in e-mail
3
messages, indeed the studios exchanged over 1,300 or
4
approximately 1,300 privileged e-mail messages concerning
5
VidAngel before they filed suit, Sony, MGM, and Universal
6
chose not to be involved and have expressed interest in
7
working with VidAngel if VidAngel can overcome the problem
8
caused by the collective bargaining agreement with the DGA.
THE COURT:
9
That's all interesting, but how is
10
that relevant to the decision on whether there should be a
11
preliminary injunction -- whether or not these other
12
companies are in the plaintiffs' chair as well?
MR. QUINTO:
13
I think it runs to irreparable
14
injury, Your Honor.
You have got three companies, three
15
major motion picture studios that are saying, no, there is
16
no irreparable injury that VidAngel is causing.
THE COURT:
17
Is that fair to say?
Are you saying,
18
by virtue of them not willing to pay lawyers exorbitant
19
fees, that they are saying they agree that there is no
20
irreparable harm?
MR. QUINTO:
21
The studios have been --
22
historically, been very quick to act when they believed --
23
when they really believed they were being irreparably
24
harmed.
THE COURT:
25
But in fairness, Mr. Quinto -- let me
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just stop you.
You don't know per se -- or do you know that
2
the other studios have said, "No, we don't care what
3
VidAngel does?"
4
they're not in the plaintiffs' chair, that's one thing.
5
I -- it's another to say, "We know that they are not
6
interested in this."
I mean, it's one thing to speculate because
MR. QUINTO:
7
But
I do know that VidAngel has had
8
communications with them, and I do know that they have said
9
that they would be willing to work with VidAngel to allow a
10
filtered streaming service but for the problems posed by the
11
group boycott and the DGA agreement.
12
THE COURT:
13
Let's move on.
MR. QUINTO:
I would note that the cost to them to
14
join in the litigation would have been fairly de minimis
15
given that they could have used the --
16
THE COURT:
Why don't we --
17
MR. QUINTO:
18
So Your Honor had asked earlier about the most
-- same counsel.
19
common filters selected.
I now have that answer.
The most
20
common is female nudity.
Following that are filters for the
21
F-bomb and the C word.
I believe that the average -- I'm not positive,
22
23
but I believe that the average number of filters selected by
24
VidAngel users when watching a given movie is 17.
25
event, 96 percent -- 96 percent select more than one.
In any
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And the studios have suggested unfairly that
1
2
VidAngel is simply an inexpensive, a cheaper, alternative to
3
watching streamed content provided by a provider the studios
4
have agreed to license.
That is factually incorrect.
5
Here is why.
When a
6
motion picture is released, it goes through a standard cycle
7
by which the studios attempt to maximize the revenue that
8
they derive from that motion picture.
9
appropriate.
And that's perfectly
First, a new release is shown theatrically in
10
11
first run motion picture theaters.
That's frequently done
12
even if it's a dog because foreign distribution agreements
13
require an American theatrical release.
So first is the theatrical release.
14
Then there
15
might be a release to second run motion picture theaters.
16
After that, the studios typically release a collectors
17
edition DVD or Blu-ray that has lots of extra content.
18
has outtakes.
19
actors, et cetera.
20
they are very expensive, and VidAngel does not buy them.
It
It has interviews with the director, the
And although those are sold as DVDs,
After that, the studios will release a motion
21
22
picture for streaming.
And at that point, services that
23
have a streaming license can offer that picture to their
24
customers.
25
for reasons the Court knows well.
But VidAngel doesn't have a streaming license
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So VidAngel customers are not able to watch a
1
2
movie when it's released for streaming.
THE COURT:
3
4
They are able to watch it.
They're
just not able to watch it on VidAngel.
MR. QUINTO:
5
Okay.
Fair enough.
They're not able
6
to watch a filtered movie, meaning they cannot watch it on
7
VidAngel.
8
want.
They can watch the unfiltered version if they
That's out there.
9
But if they want to watch a filtered version, they
10
have to wait until the studios finally sell DVDs and Blu-ray
11
disks where VidAngel buys them at retail.
Then and only then can VidAngel stream the
12
13
filtered content, and then and only then can VidAngel
14
customers watch filtered content.
So VidAngel is not competing with the streaming
15
16
services.
They get to offer content first.
A VidAngel
17
customer has to wait until the studios release the movie in
18
DVD and Blu-ray.
19
Then after that, the studios will typically
20
release a movie for pay television, for the pay cable
21
stations, and finally it will be released for what used to
22
be known as over-the-air television but the stations that --
23
you don't pay for it.
24
VidAngel is required to wait its turn.
THE COURT:
25
So there is that entire cycle, and
You are saying that VidAngel doesn't
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jump in line ahead of the other streaming companies that
2
have a license with, in this case, Disney?
MR. QUINTO:
3
As an almost universal rule, yes,
4
that's correct.
The studios have pointed to two exceptions.
5
One occurred in early 2015 before VidAngel had written to
6
the studios, and the other evidently occurred for purposes
7
of creating a record for this litigation because it occurred
8
earlier this year.
9
And we know from the limited discovery we've had
10
that the studios knew the release date, had determined the
11
release date several months before they released the movie,
12
and they had decided that, in that instance, they would sell
13
streaming customers the right to buy, as they define "buy,"
14
streamed content, at the same time that they would sell DVDs
15
and Blu-ray disks but they would delay for several days
16
releasing the movies to be streamed.
So a streaming customer could buy the movie at the
17
18
same time that VidAngel was offering its service, but a
19
streaming customer who wanted to watch a streamed unfiltered
20
movie without buying it had to wait, I believe, four days
21
after VidAngel acquired the DVDs.
22
Now, had the -- had that caused -- had the studios
23
believed that would cause an irreparable harm, I submit that
24
they would have sent a cease and desist letter to VidAngel,
25
they would have reached out to VidAngel to warn it to wait
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four days, they would have done something if they had
2
believed that there would be an irreparable injury.
3
didn't.
4
for the Court.
They
I would submit they were simply creating a record
Apart from those two instances, the streaming
5
6
companies under their licenses get the right to stream well
7
before the studios sell the DVDs and Blu-ray disks that
8
VidAngel depends on to offer its services.
Now, the studios have also tried to
9
10
mischaracterize VidAngel's interest in getting a streaming
11
license as somehow an acknowledgment by VidAngel that its
12
service is not lawful.
13
truth.
14
lawful under the Family Movie Act, as I have explained.
VidAngel believes that its current service is fully
THE COURT:
15
Nothing could be further from the
Let me stop you there.
Can we shift
16
then -- you heard Mr. Klaus talk at length about you making
17
copies of these movies onto a server and that violates the
18
production rights that they have.
19
that?
MR. QUINTO:
20
Sure.
What's your response to
I would like to, if I may,
21
just walk the Court through the FMA, through the language of
22
the FMA, and I will explain it in that context.
THE COURT:
23
In the interest of time -- I have
24
given you a lot of time.
25
FMA.
I don't need a recitation of the
I just want some answers to my questions.
Just walk
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me through.
What's incorrect about that point?
Do those
2
movies, the movies that the purchaser buys, are they copied?
3
Are they put on a server?
It seems to me these are somewhat yes-or-no
4
5
answers, but I'm not as knowledgeable as you all as it
6
relates to the -- how these movies or DVDs end up onto the
7
servers that stream it.
MR. QUINTO:
8
So --
Sure.
Well, Your Honor, Section 110
9
Subsection 11 of the FMA provides that the following are not
10
infringements of copyright -- the making imperceptible by or
11
at the direction of a member of a private household of
12
limited portions of audio or video content of a motion
13
picture during a performance transmitted to that household
14
for private home viewing from an authorized copy of the
15
motion picture.
From an authorized copy, not necessarily the
16
17
customer's authorized copy.
18
THE COURT:
So your point is "an authorized copy"
19
means just any authorized copy?
20
MR. QUINTO:
Yes, but let me keep going.
The
21
statute then provides -- if no fixed copy of the altered
22
version of the motion picture is created by such computer
23
program or other technology.
So what the FMA prohibited was not making an
24
25
intermediate copy or any copy of the original work.
It
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prohibited making a fixed copy of the altered version.
And this, again, reflects that you cannot
2
3
filter -- or at least in 2005, you could not filter a movie
4
and then transmit it without making a copy.
THE COURT:
5
What's your response to the Title
6
17 -- USC Section 1201 says "No person shall circumvent a
7
technological measure that effectively controls access to a
8
work protected under this title"?
MR. QUINTO:
9
10
Well, I have several responses,
Your Honor.
First, as I noted earlier, under 17 USC 110
11
12
Subsection 11, a service that -- a company that provides the
13
service described therein is not engaging in an infringement
14
of copyright.
15
Section 110 says, "the following are not infringements of
16
copyright."
That's what the entry -- the first line of
So where there is no copyright infringement, where
17
18
there is no violation of copyright, the DMCA, by its own
19
terms, doesn't apply.
20
Copyrights, Mary Beth Peters, is absolutely consistent with
21
that.
The letter from the Register of
She said that no modification of the DMCA was
22
23
required, obviously, because no modification -- she
24
recommended that DMCA not be -- that there not be an express
25
exception for the DMCA for the obvious reason that no
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express exception was needed.
A service that operates as
2
provided by Section 110 Subsection 11 does not infringe
3
copyright.
Further, the Ninth Circuit opinion in the Blizzard
4
5
case that I discussed earlier further says that there is no
6
infringement so long as a copyright owner is engaging in an
7
abuse of copyright and further says that the DMCA might not
8
apply when the -- it's being used in -- as part of an
9
anti-trust violation.
10
So for all those reasons, opposing
counsel is wrong in his construction of the FMA.
11
Does that sufficiently answer --
12
THE COURT:
13
MR. QUINTO:
It answers it.
There was also discussion about
14
whether it is or was possible to provide streamed, filtered
15
content without decryption.
There is no debate that, in 2005, that ability did
16
17
not exist.
As explained in the Meldahl declaration, there
18
is still no such ability today.
Now, what counsel was referring to is the fact
19
20
that ClearPlay -- and, by the way, Your Honor was correct.
21
ClearPlay is the only other surviving filtering company.
22
There are no other filtering companies out there.
What counsel was referring to is that ClearPlay
23
24
uses a system based on the same basic idea that VidAngel had
25
in 2014 with the Chromecast, that it would ride on top of
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someone else's system, allow someone else to decrypt, and
2
then would filter that content.
In VidAngel's case, the studios contacted Google
3
4
and said, "That is a violation of your terms and service
5
agreement with us."
6
litigation with VidAngel is concluded, the studios will go
7
back to YouTube and say, "You're violating our terms and
8
service agreement.
And I submit that the moment the studio
You have got to cut ClearPlay off."
So ClearPlay, at a minimum, is operating in
9
10
violation of a terms of use agreement imposed by the
11
studios.
But more to the point -- and this is reflected in
12
13
the Supplemental Declaration we provided from
14
Elizabeth Ellis, the ClearPlay system at its best is
15
extremely limited and offers the consumer, when it works,
16
offers the consumer a really unsatisfactory experience.
It works only with a standard definition stream.
17
18
So it doesn't work at all with high def or Blu-ray, and it's
19
error ridden.
20
frequent mistakes in its application, and, of course, it
21
works only if a consumer is also purchasing or obtaining
22
content through YouTube.
It's difficult to sign up for.
There are
The Google Play plus YouTube combination that
23
24
ClearPlay relies on was created in 2012.
25
It did not exist
in 2005.
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So as a legal matter, we submit that ClearPlay has
2
no right to do what it's doing and is being tolerated by the
3
studios because it is not very successful.
4
not growing, and the studios wish to say that it's an
5
alternative to what we're doing.
Its business is
6
Now, if we go back to first principles, Congress,
7
obviously, wanted to make filtered content available to the
8
American public on a reasonable basis.
9
raised a number of arguments that, if accepted, would
The studios have
10
benefit the studios not at all and would serve only to make
11
a service such as VidAngel prohibitively expensive and could
12
potentially be the death knell of cloud computing.
Here is why:
13
The studios contend that -- I can
14
imagine if this were several hundred years ago, they would
15
say, "It's okay to make handwritten copies of the Bible but
16
you can't use Gutenberg's printing press because it's an
17
unapproved technology," that we would have to separately
18
filter every DVD, but we couldn't do it just once.
19
have to filter every one, which, you know, doing that for
20
every DVD for every customer would mean that the customer
21
would have to pay thousands of dollars to watch a filtered
22
movie.
THE COURT:
23
24
Explain that to me.
We would
Why would they
have to pay thousands of dollars?
MR. QUINTO:
25
Because the process that VidAngel
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goes through is very expensive.
You first decrypt what's on
2
the disk and convert it into a Matroska file, which is an
3
intermediate file that is incapable of being viewed.
From there it's put into a different form of
4
5
intermediate file and various taggers in different parts of
6
the country -- and VidAngel uses a number of taggers and
7
deliberately uses taggers in different parts of the country
8
because they have different sensitivities.
9
through the same movie, and they tag things that they
10
So they all go
believe might be objectionable.
So as I said earlier, there are 82 general tagging
11
12
categories, but with the subcategories there are many
13
hundreds.
So you have a number of people doing this.
14
You
15
have somebody who has to watch and review to make sure that
16
all the tags are correctly placed --
17
THE COURT:
That happens now; right?
18
MR. QUINTO:
Yes.
19
THE COURT:
Okay.
20
MR. QUINTO:
But that happens once -- right now
21
that happens once per movie.
22
saying is that it should happen once per disk, which is
23
crazy.
THE COURT:
24
25
And what the studios are
But doesn't the filtering -- but it's
interesting because every user or customer might have
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different filters; correct?
2
MR. QUINTO:
3
THE COURT:
Correct.
So you are saying that your client has
4
done it one time and so they are able to filter out any of
5
all of the different 82 options when they click on?
MR. QUINTO:
6
What they do is they tag everything
7
that might be objectionable -- and the tags fall into 82
8
broad categories and numerous subcategories.
9
that's done, the movie is chopped up into little tiny
10
Then after
bits --
11
THE COURT:
12
MR. QUINTO:
I understand your point.
A maximum length is ten seconds, but
13
many, many bits are shorter.
14
second, two seconds.
15
has been tagged or frequently contained something -THE COURT:
16
Might be half a second, a
And those bits contain something that
Let me ask you this, Mr. Quinto.
Do
17
you believe that the FMA contemplated streaming when it was
18
enacted?
MR. QUINTO:
19
Of course, on its face, the making
20
imperceptible by or at the direction of a member of a
21
private household -- so private household telling third
22
party do something -- make imperceptible at my direction
23
limited portions of audio/video content of a motion picture
24
during a performance transmitted to that household for
25
private home viewing, in other words, streaming.
So you
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filter it, and then you transmit it or streamed.
I think it
2
couldn't be clearer that that's what the FMA intended.
And part of the problem -- as a side note, part of
3
4
the problem with the legislative history is, as the Court
5
knows, every two years Congress ends and we get a new
6
Congress.
7
is out the door and legislation has to be reintroduced in
8
the following Congress.
When one Congress ends, everything that's pending
So there was a Family Movie Act of 2004 that was
9
10
pending when that Congress ended.
Significantly, the 2004
11
version was not identical to the 2005 version.
12
version contemplated only the service or device used in the
13
house to filter content there.
The 2004
So it was only with the 2005 version that the
14
15
streaming was added.
And that was done actually at
16
ClearPlay's request because it could see that that was the
17
future, that consumer preferences would change, that
18
consumers would want to be able to watch content
19
immediately.
20
buy a disk or order a disk to be delivered to them.
21
wouldn't want to have to insert it into a special DVD player
22
at home and be tied to watching it on family television.
23
They might want to watch it on their laptop.
24
want to watch it on their iPad, on their tablet.
25
want to watch it on their smartphone.
They wouldn't want to have to go to a store to
They
They might
They might
They would want to
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have such freedom.
And that is what this portion of the Family Movie
2
3
Act allows.
And it's what -- it's why this portion is so
4
important because this is the portion that American families
5
today want to use.
6
available to the American public now.
This is how you make filtered content
But having to do the whole process -- and let me
7
8
just finish with the process of preparing a movie -- so it's
9
then -THE COURT:
10
11
the process.
I think I understand the process.
MR. QUINTO:
12
Mr. Quinto, I don't need you to finish
Okay.
So counsel stated incorrectly
13
that VidAngel keeps a -- or stores a permanent copy of the
14
filtered work.
15
those little tiny bits up in the cloud and then, when a
16
consumer requests a movie with specific filters, VidAngel
17
sends the instructions concerning what bits to transmit to
18
the consumer.
Not true.
THE COURT:
19
All VidAngel does is put all
I think what Mr. Klaus was saying
20
what's stored is not the filtered content.
It's the
21
original content.
22
VidAngel copies it and takes that copy -- puts it on the
23
cloud, for lack of a better term, and the actual DVD or
24
Blu-ray disk is stored.
25
copy that remains that is used over and over -- that is the
So someone wants to watch "Star Wars,"
That's stored.
But there is this
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source by which the filtering -- the filtering mechanism
2
pulls its information from.
3
that the person purchased.
MR. QUINTO:
4
It's not from that original DVD
I think he was talking about two
5
things, Your Honor.
6
a copy stored on the cloud.
THE COURT:
7
8
Yes, there is a sense in which there is
And you believe that that is
authorized?
9
MR. QUINTO:
10
THE COURT:
11
MR. QUINTO:
Clearly.
Why?
Well, again, let's go back to the
12
statute.
13
a copy, even though, if you -- if a third party were somehow
14
to intercept and collect all those bits, the third party
15
would have no way to arrange them to reconstitute the movie.
16
It's sort of like saying a book that has gone through a
17
shredder is still a book.
THE COURT:
I'm talking about the unfiltered
movie?
20
21
Are you talking about the filtered
MR. QUINTO:
18
19
Even assuming all those encrypted bits constitute
movie.
I think Mr. Klaus was talking about two things.
So first let's talk about what's stored in bits.
22
23
What's stored in those little tiny bits in the cloud, which
24
are floating around and would not be -- are not a copy in
25
the sense that, if you were somehow to gain access to the
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cloud and intercept those bits, you could say, "Aah, I have
2
got the movie."
It would be analogous to saying the book went
3
4
through a shredder.
5
there is a sense in which I have the book.
6
But it's not -- the book wouldn't be readable.
7
not watchable, and those bits are encrypted.
In a sense, yes.
The movie is
But importantly, at this point nothing is altered.
8
9
I have got all the shredded papers; so
Everything is tagged, and things are broken up into little
10
tiny bits that reflect the tags, but it's still the original
11
work up there.
Now, the statute -- going back to the statute --
12
13
says that the service is lawful if no fixed copy of the
14
altered version of the motion picture is created.
15
doesn't prohibit the creation of making a copy of the
16
original.
17
of the altered version.
It
What's prohibited is making a copy, a fixed copy
And the doctrine of the inclusion of one to the
18
19
exclusion of the other applies here.
Congress has expressly
20
said, "It's not a problem.
21
the altered version."
22
to make a copy of the unaltered version.
It's a problem only if you make
So implicit in that is that it's fine
Now, the second copy that I think Mr. Klaus was
23
24
talking about is so now you have all these little encrypted
25
bits floating around in the cloud, and a consumer chooses a
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movie and selects the filters.
So if the consumer selects what I believe is the
2
3
average number of filters selected, 17, bits that don't
4
include anything falling within those 17 categories will be
5
transmitted to the consumer.
Now, the bits are stored by Google in the cloud,
6
7
and Google's default is to keep that arrangement of bits for
8
24 hours in case any other consumer decides to order, to
9
request the same movie with the exact same filters during
10
that 24-hour period.
But that is simply Google's default.
11
It's not
12
something -- it's not necessary for the service.
It's not
13
something that Google -- that VidAngel requests.
It's
14
entirely unnecessary to VidAngel's service and is not
15
something that VidAngel is responsible for.
Now, I talked about the effect that Mr. Klaus's
16
17
argument would have on cloud computing.
Apart from the fact
18
that it would prohibitively expensive to go through this
19
whole process with respect to every disk as opposed to every
20
movie and apart from the fact that it would totally
21
undermine congressional intent to make filtered content
22
readily available to American families if carried to its
23
logical conclusion, it would be the death of the cloud
24
because you would have enormous numbers, enormous quantities
25
of identical works stored there.
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So, for example, if instead of having one copy of
2
a movie broken up into hundreds and hundreds of little bits
3
you had, say, 2,500 copies of that movie broken up into
4
2,500 times as many little bits, one can readily see how
5
quickly storage space in the cloud would be exhausted.
So for this reason, the cloud computing companies
6
7
intervened in the Aereo case to call this to -- this problem
8
to the attention of the Supreme Court.
And they also have their own technological
9
10
measures to try to weed out duplicate copies so that they
11
are not keeping 2,500 copies of something when one copy
12
would suffice.
And, again, Mr. Klaus's argument is totally
13
14
divorced from prejudice, from harm, from irreparable injury.
15
Whatever the effect on the studios is from having a movie
16
decrypted and being made available to VidAngel's users, that
17
effect is identical whether it's one copy that's decrypted
18
or 2,500 copies that are decrypted.
The effect on the studios is no different.
19
This
20
is just a case of the dog in the manger, the dog who gets no
21
benefit from being in the manger, occupies the manger to
22
deny the animals that would benefit, to deny them of that
23
benefit.
24
Now, let me turn to irreparable injury.
It's
25
preliminarily -- I note that it's -- and has been for five
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years now -- well established that irreparable injury may
2
not be presumed but must be proved.
3
that.
Winter and Salinger say
Irreparable injury is discussed only in the
4
5
declaration of Mr. Cittadine.
Mr. Cittadine begins with the
6
proposition that VidAngel is your stereotypical pirate,
7
maybe even an archetype pirate.
8
proposition.
But he starts with that
VidAngel is a pirate.
From there he says, "Well, based on the studio's
9
10
experience with pirates, we can anticipate the following
11
harms."
Now, as I said, VidAngel began offering its
12
13
service over 22 months ago.
14
2015.
15
August 6th, 2015.
16
It went public in August of
since then.
The studios have had an account since
And VidAngel has had incredible growth
In fact, the two best months for month-over-month
17
18
growth were November and December of 2015.
Notwithstanding
19
the 22-month history, the studios have not identified any
20
actual injury.
All they have is Mr. Cittadine's declaration that,
21
22
based on his experience with pirates, this is what could be
23
expected.
24
pirate?
25
dollars to buy authorized copies of plaintiffs' works.
But -- so that raises the question is VidAngel a
I submit that pirates don't spend millions of
Or
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studios' works.
Here, as of today, VidAngel has spent just
2
shy of $1.7 million to buy authorized copies of DVDs.
THE COURT:
3
Mr. Quinto, how do you respond to
4
Disney's contention that you or your client has pleaded
5
financial hardship and would not be able to pay off any
6
final judgment?
7
suggest that that fact in and of itself might make an
8
injunction appropriate.
And they cite to a number of cases that
MR. QUINTO:
9
As follows, Your Honor.
First, the
10
damages calculation was based on the assumption that the
11
studios would, A, prove willful copyright infringement, not
12
ordinary copyright infringement, but willful; and, B, based
13
on the assumption that having proved willful copyright
14
infringement, the Court would choose to award the maximum
15
statutory damages per infringement.
So we have -- those are two assumptions that I
16
17
don't think should -- two assumptions that should be
18
weighed.
Beyond that, VidAngel's monthly revenues are now
19
20
in excess of $1 million.
We've just completed a
21
Regulation A Plus stock offering, as Your Honor knows, in
22
which we terminated it after we had raised a little over
23
$10 million.
24
of money to pay any kind of reasonable damages award, should
25
there be one.
So that's now in the bank.
So there is plenty
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But I notice that in other cases such as ReDigi,
1
2
preliminary injunction was denied.
3
Court held that, because the defendant had kept very
4
accurate records, damages could be calculated and,
5
therefore, there was no need, it would be inappropriate to
6
impose a preliminary injunction.
So for those reasons, Your Honor, I submit that
7
8
In another case, the
there is no irreparable injury here.
THE COURT:
9
All right.
Can you talk a little bit
10
about claim of fair use.
And I guess I would like to hear a
11
little about, sort of, the transformative prong.
12
position that, once they apply the filter, it's now changed
13
the movie?
Is it your
It strikes me that, filter or not, "Trolls" is
14
15
"Trolls," "Star Wars" is "Star Wars."
16
curse word or a scene but the movie, the heart of the movie,
17
doesn't change, does it?
MR. QUINTO:
18
It may not have a
Your Honor, I wish the studios agreed
19
with that proposition because, if they agreed with it, they
20
would surely sell us a streaming license.
Their basis for withholding a streaming license is
21
22
that the filtering alters the content of the movie,
23
significantly changes the director's vision.
24
really the same thing, there is no basis to withhold the
25
streaming license.
But if it's
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I think it's self-evident that the -- that what we
1
2
do is transformative.
3
held that taking a thumbnail photo is a transformative
4
use -- using a thumbnail photo or republishing a thumbnail
5
is a transformative use of a full photograph even though
6
it's of the exact same image because it has a different
7
purpose.
10
of VidAngel customers who say they would not watch certain
movies without filtering, just wouldn't watch it at all.
THE COURT:
11
12
It satisfies a different need.
And here we have 50 percent of -- over 50 percent
8
9
For example, the Ninth Circuit has
Is the filter of content or just
opening credits?
MR. QUINTO:
13
No, no, no.
It's content.
14
opening credits was never an issue.
15
complaining about the closing credits.
16
The
The studios were
there was a very good reason for that.
And as I explained,
17
And, again, going back to my letter of last July,
18
I told the studios that, if they had any problems with what
19
we were doing, we would be happy to work with them, modify
20
our service.
Consistent with that, when we read in their papers
21
22
filed with this Court that they thought that allowing
23
filtering of a closing credits was a way to game the system,
24
we changed that and now you may still -- if you want to
25
filter closing credits, you have to filter something else as
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well.
That is no longer sufficient.
Another thing they complained of was the
2
3
automatic -- that consumers could choose -- when they
4
purchased a movie, they could choose the automatic sellback
5
feature.
Studios complained about that.
6
We eliminated it.
7
So now it's up to the consumer to decide -- the consumer no
8
longer has that option to have that done automatically.
9
consumer has to affirmatively go back to VidAngel when he or
The
10
she is done with the movie and say, "Now I want to sell it
11
back" and -- surprise.
12
over 24 hours; so VidAngel's profits have increased.
13
thank you, studios.
The average sellback time is now
So
So this is clearly transformative because it opens
14
15
movies to a new audience.
16
audiences, such as parents who might be willing to watch the
17
movies themselves, it opens the movie up further because
18
those parents who are willing to watch the movie themselves
19
might not be willing to watch with their children.
20
THE COURT:
21
MR. QUINTO:
22
use.
And even with respect to existing
That makes it transformative?
Yes.
Of course.
It's a different
It's a purpose.
Now, remember, with the thumbnail images, nothing
23
24
was filtered, nothing was removed.
It's just that the
25
thumbnail served a different purpose than the full
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high-resolution photograph because it allowed consumers to
2
quickly look at photographs and decide which ones they may
3
want to acquire in the high definition version.
THE COURT:
4
Okay.
I got your point, Counsel.
I'm
5
going to just give you a few minutes to wrap up because I
6
want to hear from the moving party before we end this
7
proceeding.
MR. QUINTO:
8
9
Counsel has also suggested that what
VidAngel is doing is somehow attempting an end-run around
10
established rights of copyright, and they've envisioned
11
filtering services that can filter anything.
Well, that problem was discussed in Congress, and
12
13
it's reflected in the legislative history.
Congress
14
considered trying to limit the content that could be
15
filtered to things that families find offensive or things
16
that the American Medical Association, the American
17
Pediatric Society had found, had declared that in over
18
2,000, studies could cause injury to -- permanent injury to
19
children such as the repeated exposure to violence on screen
20
as a child had been demonstrated to lead to a "propensed"
21
likelihood of exhibiting violent conduct by some
22
individuals, as adults.
So they considered that, but then they considered
23
24
the First Amendment and said, "Well, under the
25
First Amendment, we cannot allow -- we cannot decide that
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certain things can be eliminated but not other things."
So
2
owing to the First Amendment, they said, "Well, people have
3
to be able to filter whatever they want."
Now, counsel raised the specter, incorrectly, that
4
5
perhaps somebody could decide that it had an objection to
6
one thing and just filter that one thing out of movies and
7
go into competition with the streaming services -- maybe
8
just arbitrarily filter out the closing credits or the
9
opening credits.
Nonsense.
Under the Family Movie Act, it's the individual
10
11
family owner, family member, who decides what gets filtered.
12
So the individual member of the family purchasing the
13
content has to decide what is filtered, not some competitor
14
choosing to filter only credits and compete.
Secondly, as a practical matter, that doesn't work
15
16
anyway because the movie goes through the whole release
17
cycle, and, if you are trying to operate under the Family
18
Movie Act, as counsel has suggested, then you have to wait
19
until the movie comes out on DVD and Blu-ray disk.
So if Warner Bros. wanted to compete with
20
21
Universal, Universal would be able to stream its movies for
22
as long as it wanted before it released those movies on DVD,
23
and Warner Bros. wouldn't be able to compete by offering
24
some kind of filtering service until Universal had finally
25
released the content on DVD.
So the specter that one studio
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would compete with another is stuff and nonsense.
2
THE COURT:
3
MR. QUINTO:
4
Anything further, Mr. Quinto?
No, Your Honor, but I would like to
reserve three minutes, if I may, to respond to -THE COURT:
5
You have had over an hour -- or close
6
to an hour, I should say.
7
But let me -- I just have a couple of questions of -- I'm
8
sorry.
9
have an afternoon criminal calendar; so I have to get to
10
I am not inclined to do that.
I'm drawing a blank on the name -- Mr. Klaus.
And I
that in a moment as well.
Mr. Klaus, the question I have for you is I
11
12
thought I heard Mr. Quinto -- and I may have misheard it --
13
saying that the VidAngel -- they have to wait in line just
14
like everyone else.
15
don't gain an advantage or jump on consumer's access to
16
movies?
What's your response to that?
MR. KLAUS:
17
What's your response to that, that they
That's not true.
They wait in line
18
until the DVD release date.
19
release, they then go into competition with other services
20
who may or may not have access to the content in that
21
window.
THE COURT:
22
23
Who would not have access to the
content during that window?
MR. KLAUS:
24
25
And the moment there is a DVD
During that window.
And there are
some distributors, whether they are streaming services,
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whether they are sometimes subscription services like
2
Netflix, for example -THE COURT:
3
4
the time line.
5
date.
I just want to make sure I understand
You are suggesting a DVD gets released on X
Netflix may not be authorized to stream on that date.
6
MR. KLAUS:
Correct.
7
THE COURT:
ITunes, if a DVD is released, iTunes
8
may or may not be authorized to release on that date?
MR. KLAUS:
9
There are a couple of important
10
concepts that Mr. Quinto jumbled together, and let's be sure
11
that we break them apart.
One is he talks about whether they are available
12
13
for access on a streaming service.
And a streaming
14
service -- let's take iTunes, for example -- may have two
15
different types of streams that it can offer.
16
where you buy the movie through iTunes.
17
price, 19.99 to buy, than you would for the one-night
18
rental.
One is the --
You pay a higher
That's the essence of the window.
And depending on the particular company's
19
20
relationship with a particular service -- and it varies
21
because this is the subject of commercial negotiations
22
between copyright owners and services.
23
the ability to have the purchase where it's in your
24
permanent iTunes collection.
25
rent on a nightly or daily basis.
A service may get
It may have the ability to
They may get them on the
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same date.
They may get them on different dates.
2
Those are
two different points.
The DVD release date, however, once that is --
3
4
and, again, each studio makes its own decision about how it
5
wants -- how and when it will release its content.
The DVD release date may be the same date that you
6
7
have content that's available for purchase.
The DVD release
8
date may be the same date that you have content available
9
for a single day rental.
It really does depend.
But this idea that somehow they -- what Mr. Quinto
10
11
is saying is, "We're not in competition with those services
12
because we have to wait in line for the DVD," is just not
13
true.
14
movie for a day or a five-day or a week period, that may in
15
some cases be true, may not be true.
Whether he may be in competition on a particular
What is clear is that VidAngel views itself as
16
17
being in competition with these other services.
18
would -- if Mr. Quinto's statement is the Netflixes, the
19
other streaming services of the world, they serve a
20
different market that we don't care about.
21
an entire section that you can filter their movies for
22
things that are not available on Netflix if they don't view
23
themselves as being in competition with something that's
24
available on Netflix?
THE COURT:
25
Why else
Why do they have
Isn't the answer to that "We have
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these movies, but we have them in a format so that those
2
that might be offended by strong language, nudity, violence,
3
you can watch them through our service"?
MR. KLAUS:
4
Well, so -- but they -- my point to
5
you, Your Honor, is they are making them available for a
6
significantly lower price than they're available on the
7
other services.
8
them available for the price.
9
to this, Your Honor.
10
They are promoting the fact that they make
And users are not oblivious
And I just point to you to a couple of
examples of what we pointed out in our papers.
THE COURT:
11
Go ahead, briefly.
I remember reading
12
about the users saying, "Hey, I can get this quicker,
13
easier."
MR. KLAUS:
14
Yeah.
"We bought 'Star Wars'" -- I am
15
just reading from page 9 of our opening brief.
"We bought
16
'Star Wars.'
17
was, like, $5.00 to rent on Amazon.
18
the content cleaned, it's a great video service."
We sold it back for a total of $1.00 when it
Even if you don't need
19
Same comments to that effect on page 17.
20
THE COURT:
I am going to jump around for a
21
minute.
What's your response to -- what's the purpose of
22
the Family Movie Act?
23
a reason, to allow those individuals to watch content --
24
watch feature films, what have you, in a manner that is not
25
objectionable to that individual family.
The Family Movie Act was enacted for
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Subject to the requirements of the
2
statute, Your Honor, subject to the requirements of the
3
statute.
And the best evidence again of what Congress
4
5
ultimately intended, setting aside all the -- I have got one
6
version in 2004 and another version that the Congress in
7
2005 -- focusing on the language of the statute,
8
Your Honor -- what the language of the statute says is that
9
it has to be from an authorized copy.
When Mr. Quinto was going through his argument
10
11
about why it was clear that Congress intended for there be
12
streaming, he very noticeably stopped right before the
13
critical language that the transmission that is subject to
14
the exemption that the Family Movie Act creates has to be
15
from an authorized copy.
THE COURT:
16
Right.
But he says -- we've kind of
17
gone over this before.
18
I, customer, buy a DVD, and so I am -- VidAngel is giving
19
the customer that authorized copy.
MR. KLAUS:
20
He says it is an authorized copy.
But then, as I think Mr. Quinto
21
ultimately conceded when he said, in a sense, there is a
22
copy in the cloud, the copy in the cloud is a different
23
copy.
24
indulging in the fiction that the consumer owns the DVD,
25
even though only four people have ever requested to get
It is not the copy that the consumer -- even
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their DVD back and 99 1/2 percent have returned them as the
2
rental that Mr. Quinto described earlier today within the
3
five-hour period, even indulging that fiction, the copy from
4
which the movie is streamed, from which it is transmitted,
5
is the copy that they have made to the cloud.
They do apply filters to it, but it's still not an
6
7
authorized copy.
And, again, Your Honor beyond the language
8
of the statute, this is another area where the legislative
9
history actually did discuss this issue.
It's again in Senator Hatch's statement which is
10
11
at Tab 5 of my binder.
Senator Hatch said -- this is the
12
only -- by the way, the only legislative history that's in
13
the record that speaks to the question of transmission and
14
performance.
(Reading:)
15
An infringing
16
performance in a household or an infringing
17
transmission of a performance to a household,
18
those are not rendered non-infringing by
19
Section 110(11) by virtue of the fact that
20
limited portions of audio or video content to
21
the motion picture being performed are made
22
imperceptible during such performance or
23
transmission in a manner consistent with that
24
section.
25
The only legislative history, absolutely, the only
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one that speaks to this transmission issue is that
2
statement.
3
it is clear that what they are doing is plainly a
4
violation -- the only legislative history that's on point
5
specifically says that the argument that they are making is
6
wrong.
THE COURT:
7
8
So if the statute wasn't clear -- and we believe
All right.
Anything further,
Mr. Klaus?
MR. KLAUS:
9
One brief point, Your Honor, because
10
Mr. Quinto was very liberally saying that the plaintiffs in
11
this case had gone to Google and had directed Google not --
12
to shut off support, to stop the Chromecast filtering,
13
et cetera.
14
round with Mr. Harmon at his deposition on this to ask him
15
what the specific evidence was that he had.
We went round and round -- I went round and
16
We put this -- it's in -- Tab 15 of our binder are
17
all of the excerpts from Mr. Harmon's deposition transcript.
18
Between pages 273 and 277 are the pages in question, and I
19
said to Mr. Harmon -(Reading:)
20
Tell me every fact you
21
have to believe that one of the plaintiffs in
22
this case went to Google and said to Google,
23
"cut off service, cut off support for them.""
24
And Mr. and Mr. Harmon said, "Well,
25
I have seen things that I got from WikiLeaks"
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that suggest there are provisions and
2
contracts.
He says, "I am suspicious about the
3
4
timing."
5
And on page 277, I said to him -- and I am reading
6
277 of the deposition transcript.
7
Exhibit M from Miss Bennett's Reply Declaration.
(Reading:)
8
This was page 70 of
I want to be very
precise here, Mr. Harmon.
9
Do you believe that
10
a studio -- or multiple studios went to Google
11
and specifically said "Do not provide support
12
to VidAngel"?
ANSWER:
13
I don't have that
14
information, but that's what we believe based
15
on the facts that we have.
16
So I say that, Your Honor, when Mr. Quinto stands
17
here and says that we have constantly gone to other services
18
and told them not to do business with VidAngel, he has in
19
fact no evidence to support that.
20
that he's put in for the benefit of the hearing.
That's simply conjecture
21
THE COURT:
22
Mr. Quinto, do you have something urgent that you
23
need to bring to the Court's attention?
MR. QUINTO:
24
25
Thank you, Mr. Klaus.
I will limit myself to 30 seconds.
The Court may strictly --
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THE COURT:
1
2
here.
I wish I had my civil trial clock
I would put you to that, but go ahead.
3
MR. QUINTO:
Thank you, Your Honor.
4
First, if the studios were really concerned that
5
VidAngel, by relying on the Family Movie Act, can charge
6
consumers $1.00, they would license VidAngel to stream.
7
they did that, VidAngel would not only be happy to but would
8
be required to, by economics, charge as much as anybody
9
else.
If
Second, Mr. Klaus was incorrect about the number
10
11
of DVDs permanently owned.
12
are permanently owned that have no sellback value, and
13
that's over 20,000.
14
THE COURT:
15
It's 12 percent of all DVDs that
movies to come back?
16
MR. QUINTO:
17
THE COURT:
Twelve percent of people ask for the
Twelve percent of all DVDs -But he was talking about how many
18
people asked to have the movies sent back to them.
19
I think
that was four percent.
20
MR. KLAUS:
That was four disks total, Your Honor.
21
THE COURT:
Sorry.
22
MR. KLAUS:
And, again, I will say there is no
23
evidence in the record to support the 12 1/2 percent
24
statement that Mr. Quinto is now -THE COURT:
25
I am more concerned -- I think his
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point was how many people said, "Give me the DVD back"?
MR. QUINTO:
2
Somewhere around four, six, somewhere
3
in that vicinity.
But, of course, the DVD is unfiltered.
4
They have the right and VidAngel will mail it to them.
5
it's a true sale, not a rental.
So
But more to the point, people who want to watch
6
7
filtered content have kept over 20,000 DVDs that now have no
8
sellback value.
9
THE COURT:
10
MR. QUINTO:
Okay.
Final point, Your Honor.
The comment
11
that an infringing performance is not rendered acceptable
12
because it was decrypted and was transmitted under the --
13
filtered and transmitted under the Family Movie Act is
14
perfectly logical.
15
It means that, if somebody unlawfully obtains a
16
DVD, then it cannot be decrypted and filtered and thereby
17
gain the protection of the Family Movie Act.
18
means.
THE COURT:
19
All right.
That's what it
Thank you, both counsel.
20
I appreciate the robust arguments on both sides of this.
I
21
am going to take a little time to review some of my notes as
22
well as some of the evidence in the case, and the matter
23
will remain under submission until the Court issues its
24
final order.
25
So until then, thank you.
I am certain I will see you on December 19th.
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MR. KLAUS:
2
MR. QUINTO:
3
THE CLERK:
Thank you, Your Honor.
Thank you.
All rise.
This Court is in recess.
(Proceedings concluded at 1:41 p.m.)
4
--oOo--
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CERTIFICATE
2
3
I hereby certify that pursuant to Section 753,
4
Title 28, United States Code, the foregoing is a true and
5
correct transcript of the stenographically reported
6
proceedings held in the above-entitled matter and that the
7
transcript page format is in conformance with the
8
regulations of the Judicial Conference of the United States.
9
10
Date:
December 13, 2016.
11
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/S/ CHIA MEI JUI _______
15
Chia Mei Jui, CSR No. 3287
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23
24
25
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- A.169 -
MR. KLAUS: [48] 3/7 10/4 14/25 16/4
26/24 28/7 28/15 30/1 30/3 30/9 31/22
32/1 32/3 32/5 33/2 33/21 34/14 35/20
36/2 38/3 38/6 39/14 41/11 50/7 51/14
52/3 52/9 52/21 52/25 53/12 53/20
60/16 60/22 61/17 61/22 63/23 93/16
93/23 94/5 94/8 96/3 96/13 96/25
97/19 99/8 101/19 101/21 102/25
MR. QUINTO: [73] 3/11 3/17 4/6 4/10
4/15 4/20 5/6 5/18 6/2 6/8 6/15 7/6
7/11 7/25 8/5 8/8 8/20 9/17 11/17
11/23 12/6 12/23 13/7 13/10 13/24
14/1 14/15 15/7 16/15 17/3 17/23
20/19 61/3 61/14 63/8 64/2 64/11
67/12 67/20 68/6 68/12 68/16 70/4
71/2 72/19 73/7 73/19 74/8 75/12
77/24 78/17 78/19 79/1 79/5 79/11
79/18 81/11 82/3 82/8 82/10 82/19
87/8 88/17 89/12 90/20 91/7 93/2
100/23 101/2 101/15 102/1 102/9
103/1
THE CLERK: [2] 3/3 103/2
THE COURT: [118]
$
$1 [1] 87/20
$1 million [1] 87/20
$1.00 [2] 96/16 101/6
$1.7 [1] 87/2
$1.7 million [1] 87/2
$10 [2] 66/21 87/23
$10 million [2] 66/21 87/23
$11.85 [1] 38/12
$11.85 million [1] 38/12
$18.00 [1] 6/1
$19.00 [4] 5/15 5/18 5/24 6/12
$2.00 [1] 5/22
$2.2 [1] 60/4
$2.2 million [1] 60/4
$2.4 [1] 60/1
$2.4 million [1] 60/1
$20.00 [5] 4/5 5/10 5/13 7/8 28/24
$250,000 [1] 62/2
$5 [1] 62/6
$5 million [1] 62/6
$5.00 [1] 96/17
$50 [1] 62/3
$50 million [1] 62/3
'
'Star [3] 4/4 96/14 96/16
'Star Wars' [1] 96/14
'Star Wars,' [1] 4/4
'Star Wars.' [1] 96/16
--oOo [1] 103/5
/
/S [1] 104/14
1
1,000 [1] 29/13
1,300 [2] 67/3 67/4
10 [1] 50/20
10,000 percent [1] 64/15
106 [4] 17/8 32/13 44/3 46/14
107 [2] 24/3 46/12
10:35 [2] 1/18 3/2
- A.170 -
11 [8] 17/6 17/19 32/12 44/13 73/9
74/12 75/2 98/19
110 [12] 17/6 17/19 32/8 32/9 44/2
44/13 46/12 73/8 74/11 74/15 75/2
98/19
111 [1] 45/23
12 [1] 23/18
12 1/2 [1] 101/23
12 percent [1] 101/11
1201 [19] 14/3 15/17 16/6 16/8 16/9
17/17 17/22 23/7 24/4 24/11 32/14
41/9 41/13 41/15 43/24 44/11 44/18
45/6 74/6
12:00 [1] 61/12
12:12 [1] 63/10
12:20 [1] 63/4
12:24 [1] 63/10
13 [2] 58/18 104/10
138 [1] 65/3
14 [2] 1/17 3/1
15 [2] 57/12 99/16
16-04109-AB [1] 1/9
16-4109-AB [1] 3/4
1633 [1] 2/13
16TH [1] 2/17
17 [12] 15/11 15/17 17/6 17/22 32/8
46/12 68/24 74/6 74/11 84/3 84/4
96/19
1777 [1] 2/13
18 [2] 65/6 65/7
18-day [2] 65/9 65/10
181-C [1] 1/24
19 [1] 23/15
19.99 [1] 94/17
19th [1] 102/24
1:30 [1] 63/6
1:41 [1] 103/4
2
2 1/2 [2] 9/20 54/1
2,000 [7] 7/17 7/17 7/23 7/23 7/24 29/5
91/18
2,500 [6] 7/14 7/15 85/3 85/4 85/11
85/18
20 percent [1] 58/25
20,000 [6] 6/4 10/18 56/17 56/18
101/13 102/7
2000 [1] 62/9
2004 [5] 27/8 80/9 80/10 80/11 97/6
2005 [9] 4/17 9/10 27/9 74/3 75/16
76/25 80/11 80/14 97/7
2012 [1] 76/24
2014 [1] 75/25
2015 [15] 36/5 58/9 58/19 64/6 64/10
64/13 64/14 64/19 64/23 64/25 65/4
71/5 86/14 86/15 86/18
2016 [4] 1/17 3/1 36/5 104/10
2029 [1] 2/16
213 [2] 2/6 2/13
22 [1] 86/13
22-month [1] 86/19
24 [3] 5/23 84/8 90/12
24-hour [1] 84/10
255 [1] 1/24
269 [1] 44/9
273 [1] 99/18
277 [3] 99/18 100/5 100/6
27TH [1] 2/9
28 [1] 104/4
294 [1] 45/23
3
3,000 [1] 7/19
30 [1] 100/24
3007 [1] 2/12
321 [1] 43/16
322 [1] 45/24
3287 [2] 1/23 104/15
355 [1] 2/4
35TH [1] 2/5
4
4017 [1] 2/10
415 [1] 2/10
424 [1] 2/18
5
5,000 [1] 37/8
5.99 [1] 56/1
50 [1] 89/8
50 percent [1] 89/8
50,000 [1] 62/1
500 [4] 7/18 7/20 29/4 29/13
512-4017 [1] 2/10
56 [1] 62/10
560 [1] 2/8
6
604-1777 [1] 2/13
652-7800 [1] 2/18
683-9132 [1] 2/6
7
70 [1] 100/6
70 million [1] 62/10
750 [1] 65/5
753 [1] 104/3
7800 [1] 2/18
79 [2] 37/13 38/10
8
82 [5] 12/1 12/10 78/11 79/5 79/7
9
90 [1] 53/25
90012 [1] 1/24
90067 [1] 2/17
90071 [1] 2/5
90210-1633 [1] 2/13
9132 [1] 2/6
941 [1] 22/8
94105 [1] 2/9
951 [2] 18/24 22/24
96 [2] 68/25 68/25
96 percent [3] 8/11 8/13 11/15
97,322 [1] 53/24
99 1/2 [2] 57/3 98/1
A
A.M [2] 1/18 3/2
AACS [1] 43/9
Aah [1] 83/1
ab [3] 1/9 3/4 25/9
ab initio [1] 25/9
ability [5] 20/5 75/16 75/18 94/23 94/24
able [18] 7/11 13/21 38/15 38/20 47/1
49/11 56/13 60/25 70/1 70/3 70/4 70/5
79/4 80/18 87/5 92/3 92/21 92/23
about [59] 3/23 8/16 8/22 9/19 20/19
26/21 26/25 27/1 28/18 31/11 31/11
31/12 34/4 35/21 35/24 37/25 40/16
A
about... [42] 40/22 42/3 44/5 44/15
45/17 49/6 49/12 51/11 56/17 56/20
58/7 58/22 59/17 59/18 61/21 62/25
63/14 63/15 63/19 68/18 72/16 73/1
75/13 82/4 82/18 82/20 82/21 82/22
83/24 84/16 88/10 88/11 89/15 90/6
94/12 95/4 95/20 96/12 97/11 100/3
101/10 101/17
above [1] 104/6
above-entitled [1] 104/6
absent [4] 18/19 19/6 23/24 25/21
absolutely [8] 27/6 27/24 27/25 31/4
52/10 62/17 74/20 98/25
abuse [1] 75/7
acceptable [1] 102/11
accepted [1] 77/9
access [15] 14/10 41/20 41/23 42/16
42/20 42/22 43/2 43/8 43/10 74/7
82/25 93/15 93/20 93/22 94/13
accidental [1] 45/12
Accolade [1] 49/19
accommodate [1] 9/12
accomplish [1] 26/5
accomplished [4] 25/23 26/6 27/6 28/9
accordance [1] 17/5
according [1] 19/14
Accordingly [1] 24/8
account [2] 64/19 86/14
accounting [1] 4/24
accrue [1] 38/14
accurate [1] 88/4
achieve [1] 59/4
acknowledged [1] 18/23
acknowledgment [1] 72/11
acquire [2] 59/5 91/3
acquired [1] 71/21
acquisition [1] 30/18
act [43] 13/7 15/12 16/18 16/20 16/25
17/2 17/3 17/4 18/6 19/8 19/17 20/14
24/3 25/3 25/9 31/8 31/10 31/24 32/11
42/4 44/1 44/17 47/3 48/4 48/25 49/1
49/5 50/9 54/22 55/12 65/13 67/22
72/14 80/9 81/3 92/10 92/18 96/22
96/22 97/14 101/5 102/13 102/17
action [7] 14/5 18/18 20/17 20/21
21/13 23/24 66/25
actionable [3] 18/19 19/1 19/7
actors [1] 69/19
acts [2] 9/5 43/21
actual [7] 16/7 32/17 35/4 38/16 44/23
81/23 86/20
actually [11] 27/12 34/16 36/22 44/15
45/4 45/10 50/15 56/9 56/14 80/15
98/9
add [7] 20/13 25/24 37/12 37/14 37/17
38/14 61/17
added [3] 45/7 47/11 80/15
addressed [2] 22/24 36/15
addresses [2] 22/8 22/9
adds [1] 8/11
adequacy [1] 41/8
adequate [1] 38/9
admit [2] 42/11 42/11
adults [1] 91/22
advantage [2] 59/10 93/15
advantages [1] 59/11
advertise [1] 55/5
advertised [1] 57/13
advertising [3] 39/7 51/18 60/2
- A.171 -
advocate [1] 33/13
Aereo [1] 85/7
affirmative [3] 22/10 24/10 34/21
affirmatively [1] 90/9
afraid [1] 65/14
after [7] 65/20 69/16 69/21 70/19 71/21
79/8 87/22
afternoon [1] 93/9
again [17] 6/14 6/23 29/21 37/2 48/24
54/2 59/20 62/22 74/2 82/11 85/13
89/17 95/4 97/4 98/7 98/10 101/22
against [2] 27/24 43/16
agency [1] 39/8
aggressive [1] 64/7
ago [4] 62/8 65/1 77/14 86/13
agree [1] 67/19
agreed [3] 69/4 88/18 88/19
agreement [5] 67/8 68/11 76/5 76/8
76/10
agreements [2] 66/1 69/12
ahead [7] 15/7 32/16 35/12 36/19 71/1
96/11 101/2
air [2] 31/13 70/22
airplane [2] 52/11 52/11
al [1] 3/5
all [62] 3/21 3/22 4/25 6/17 8/11 11/24
12/15 15/6 16/12 16/20 17/9 18/1 18/1
18/22 18/25 19/20 20/19 20/23 21/12
23/16 26/2 26/11 27/4 29/13 29/20
30/23 32/5 35/18 36/17 36/18 38/7
43/11 56/9 57/4 57/21 61/11 62/14
64/1 67/9 73/5 75/9 76/18 77/10 78/8
78/16 79/5 81/14 81/14 82/12 82/14
83/4 83/24 86/21 88/9 89/10 97/5 99/7
99/17 101/11 101/16 102/19 103/3
allegations [1] 34/23
alleged [1] 34/20
alleging [1] 22/19
allies [2] 18/3 18/7
allow [6] 49/24 61/8 68/9 76/1 91/25
96/23
allowed [4] 5/9 54/14 54/15 91/1
allowing [5] 26/7 26/7 61/5 65/24 89/22
allows [1] 81/3
ALLYSON [2] 2/4 3/10
almost [2] 5/20 71/3
alone [2] 37/5 39/16
already [1] 65/5
also [20] 3/15 3/15 4/12 9/15 10/22
39/16 40/13 41/2 43/17 49/6 58/1
62/12 66/3 66/11 66/25 72/9 75/13
76/21 85/9 91/8
altered [6] 73/21 74/1 83/8 83/14 83/17
83/21
alternative [3] 56/5 69/2 77/5
alternatives [2] 60/12 60/15
alters [1] 88/22
although [4] 12/10 60/19 63/6 69/19
always [3] 6/24 59/7 65/22
am [29] 3/9 8/3 14/1 14/13 14/19 14/24
15/2 29/6 29/16 35/12 35/22 37/24
50/5 51/24 53/17 60/17 61/7 61/20
63/20 66/19 93/6 96/14 96/20 97/18
100/3 100/5 101/25 102/21 102/24
Amazon [3] 38/24 63/20 96/17
Amazon.com [1] 50/20
amended [1] 34/21
Amendment [3] 91/24 91/25 92/2
American [11] 18/10 18/17 19/10 26/7
69/13 77/8 81/4 81/6 84/22 91/16
91/16
among [2] 11/25 22/8
amount [4] 53/5 53/8 53/19 60/1
analogous [2] 62/4 83/3
analogy [1] 6/17
and/or [1] 32/23
ANDRÉ [1] 1/3
ANGELES [5] 1/19 1/24 2/5 2/17 3/1
Anglo [1] 18/17
animals [1] 85/22
announced [1] 65/18
another [17] 6/14 6/16 7/24 21/19
27/20 30/11 34/18 54/20 55/1 55/3
60/16 68/5 88/2 90/2 93/1 97/6 98/8
answer [10] 24/21 26/4 31/4 34/8 35/23
42/11 68/19 75/11 95/25 100/13
answering [2] 10/24 26/15
answers [3] 72/25 73/5 75/12
anti [11] 17/21 23/1 23/3 23/10 23/11
23/13 23/13 23/16 34/23 48/13 75/9
anti-circumvention [4] 17/21 23/10
23/13 48/13
anti-competitive [1] 23/3
anti-trust [6] 23/1 23/11 23/13 23/16
34/23 75/9
anticipate [1] 86/10
any [33] 16/22 16/23 17/4 17/6 17/7
17/21 19/6 19/6 19/25 20/21 21/14
25/15 27/24 35/6 41/2 41/5 41/10
43/12 44/21 55/5 55/21 61/18 62/4
63/19 68/24 73/19 73/25 79/4 84/8
86/19 87/5 87/24 89/18
anybody [1] 101/8
anything [10] 45/16 49/6 61/17 62/3
63/5 63/21 84/4 91/11 93/2 99/7
anyway [3] 9/2 19/15 92/16
anywhere [2] 44/21 61/11
apart [5] 60/22 72/5 84/17 84/20 94/11
appeal [1] 62/13
appear [1] 9/7
appearances [2] 2/1 3/7
appears [2] 30/24 30/25
Apple's [1] 38/24
application [3] 42/18 66/16 76/20
applied [2] 53/22 53/24
applies [1] 83/19
apply [7] 14/12 22/22 44/17 74/19 75/8
88/12 98/6
appreciate [4] 26/14 37/23 52/25
102/20
approach [1] 31/25
approached [1] 35/18
appropriate [4] 14/25 39/2 69/9 87/8
approved [1] 65/17
approximately [1] 67/4
arbitrarily [1] 92/8
Arc [2] 37/3 37/20
archetype [1] 86/7
are [157]
area [2] 45/18 98/8
aren't [2] 28/12 61/11
argue [1] 13/18
argued [1] 23/7
argument [14] 10/22 13/13 13/24 24/13
35/16 42/2 43/15 43/18 57/19 61/6
84/17 85/13 97/10 99/5
arguments [10] 11/7 20/23 20/24 20/24
27/2 41/13 46/6 62/12 77/9 102/20
arms [1] 14/20
around [9] 45/23 55/13 58/25 60/1
A
around... [5] 82/24 83/25 91/9 96/20
102/2
arrange [1] 82/15
arrangement [1] 84/7
art [1] 49/20
as [96] 7/8 7/8 8/10 9/13 12/18 13/14
15/15 16/24 18/16 19/25 20/10 21/4
22/9 22/18 22/22 22/24 23/17 24/10
24/18 25/22 26/6 26/12 27/23 34/13
37/9 37/22 38/14 39/17 39/23 40/6
40/11 41/24 44/24 48/18 48/18 48/25
49/2 49/18 50/9 54/24 55/5 59/5 59/5
60/11 60/11 64/13 64/14 64/25 65/10
65/15 67/12 69/19 70/22 71/3 71/13
72/11 72/14 73/5 73/5 73/5 74/11 75/1
75/6 75/8 75/17 77/1 77/11 78/11 80/3
80/4 84/19 85/4 86/12 87/1 87/9 87/21
88/1 89/15 89/25 90/16 91/19 91/20
91/22 92/15 92/18 92/22 92/22 93/10
95/16 95/23 97/20 98/1 101/8 101/8
102/21 102/22
aside [2] 15/15 97/5
ask [11] 4/2 9/19 13/11 29/23 45/19
50/24 53/9 63/12 79/16 99/14 101/14
asked [7] 20/20 44/5 45/6 45/13 62/2
68/18 101/18
asking [1] 35/22
asserted [1] 22/10
Association [1] 91/16
assume [5] 6/1 10/1 10/2 10/9 33/16
assuming [2] 7/5 82/12
assumption [2] 87/10 87/13
assumptions [2] 87/16 87/17
assure [1] 11/3
attached [1] 39/24
attempt [3] 10/21 19/19 69/7
attempting [2] 23/9 91/9
attention [2] 85/8 100/23
ATTORNEY [8] 2/3 2/4 2/7 2/8 2/12
2/15 2/15 2/16
audience [3] 41/5 50/12 90/15
audiences [1] 90/16
audio [3] 73/12 79/23 98/20
audio/video [1] 79/23
audit [1] 4/25
August [5] 64/19 64/23 64/25 86/13
86/15
August 2015 [2] 64/23 64/25
August 6th, 2015 [2] 64/19 86/15
authoritative [1] 45/21
authority [3] 42/10 42/19 48/6
authorization [3] 33/9 33/11 41/2
authorized [32] 13/20 20/3 30/14 31/2
32/24 33/1 33/2 33/3 33/12 33/17
33/21 33/23 34/9 34/9 34/11 40/1
50/11 73/14 73/16 73/17 73/18 73/19
82/8 86/25 87/2 94/5 94/8 97/9 97/15
97/17 97/19 98/7
automatic [2] 90/3 90/4
automatically [1] 90/8
availability [1] 59/10
available [15] 7/25 9/24 39/5 77/7 81/6
84/22 85/16 94/12 95/7 95/8 95/22
95/24 96/5 96/6 96/8
AVENUE [1] 2/4
average [6] 12/8 53/11 68/22 68/23
84/3 90/11
avoid [1] 42/9
award [3] 38/16 87/14 87/24
- A.172 -
aware [2] 60/17 62/4
awareness [1] 31/12
away [3] 21/9 36/6 56/2
B
back [39] 4/9 5/15 5/17 5/23 6/5 6/12
6/15 6/23 7/10 7/24 8/17 10/15 24/13
28/14 28/16 33/5 37/23 39/9 41/8
41/12 45/8 49/14 53/17 56/7 57/6
57/16 58/8 76/7 77/6 82/11 83/12
89/17 90/9 90/11 96/16 98/1 101/15
101/18 102/1
back-and-forth [1] 8/17
background [1] 12/21
BAKER [3] 2/14 2/15 3/14
balance [4] 35/13 47/9 47/10 57/20
balancing [1] 59/15
bank [1] 87/23
Bar [1] 6/18
barcode [2] 4/24 29/16
barcoded [1] 4/22
bargain [3] 19/18 31/12 44/19
bargaining [1] 67/8
BarryDriller [2] 62/1 62/22
BarryDriller.com [1] 39/17
base [2] 35/8 59/11
based [10] 30/24 39/20 58/25 65/25
75/24 86/9 86/22 87/10 87/12 100/14
basic [1] 75/24
basically [1] 26/22
basis [5] 37/5 77/8 88/21 88/24 94/25
be [148]
became [5] 18/3 18/9 20/14 20/16
29/22
because [53] 7/23 8/16 8/22 13/13
13/19 16/2 16/22 19/23 20/4 21/9 23/3
25/9 26/21 31/15 34/17 35/22 36/6
37/19 42/1 43/3 43/5 43/11 43/19
45/13 49/10 54/8 55/9 59/3 59/20 68/3
69/12 71/7 74/23 77/3 77/16 77/25
78/8 78/25 80/16 81/4 84/24 88/3
88/19 89/6 90/14 90/17 91/1 91/5
92/16 94/21 95/12 99/9 102/12
become [1] 35/17
been [23] 5/2 6/4 9/9 10/18 14/14
18/17 22/5 26/2 36/23 40/11 56/19
57/5 57/6 59/7 61/24 63/17 65/3 67/21
67/22 68/14 79/15 85/25 91/20
before [13] 18/20 21/12 25/25 50/10
63/11 67/5 71/5 71/11 72/7 91/6 92/22
97/12 97/17
beg [1] 64/3
began [1] 86/12
begin [1] 63/11
beginning [2] 27/5 29/3
begins [1] 86/5
behaved [2] 35/15 58/1
behavior [1] 23/3
behind [2] 41/15 58/6
being [25] 6/6 10/18 13/1 31/12 31/12
36/17 40/12 42/3 42/3 45/10 51/20
53/6 55/5 56/18 65/12 66/11 67/23
75/8 77/2 78/3 85/16 85/21 95/17
95/23 98/21
beliefs [1] 40/16
believe [22] 10/24 18/24 53/10 55/15
57/18 60/19 65/12 65/12 65/14 66/5
66/14 68/22 68/23 71/20 78/10 79/17
82/7 84/2 99/2 99/21 100/9 100/14
believed [4] 67/22 67/23 71/23 72/2
believes [3] 52/18 52/18 72/13
benefit [5] 77/10 85/21 85/22 85/23
100/20
BENNETT [2] 2/4 3/10
Bennett's [1] 100/7
best [4] 31/17 76/14 86/17 97/4
beta [2] 37/8 64/13
Beth [1] 74/20
better [3] 59/4 59/13 81/23
between [9] 5/4 19/2 23/12 24/2 42/3
49/23 64/24 94/22 99/18
BEVERLY [1] 2/13
beyond [6] 31/7 44/23 47/15 62/3
87/19 98/7
Bible [1] 77/15
big [2] 46/1 56/9
bigger [1] 58/12
bill [1] 44/6
billions [1] 62/19
binder [6] 28/21 41/14 44/7 58/5 98/11
99/16
BIROTTE [1] 1/3
bit [1] 88/9
bits [18] 79/10 79/13 79/14 81/15
81/17 82/12 82/14 82/22 82/23 83/1
83/7 83/10 83/25 84/3 84/6 84/7 85/2
85/4
blank [1] 93/8
blanket [1] 18/4
blanking [1] 24/22
Blizzard [4] 18/24 22/7 23/4 75/4
blog [1] 40/19
blood [1] 12/3
bloodiest [1] 9/6
bloods [1] 52/2
Blu [13] 5/22 29/4 43/1 43/10 58/13
69/17 70/10 70/18 71/15 72/7 76/18
81/24 92/19
Blu-ray [12] 5/22 29/4 43/1 43/10 69/17
70/10 70/18 71/15 72/7 76/18 81/24
92/19
Blu-rays [1] 58/13
bolded [1] 15/9
bomb [1] 68/21
bond [4] 61/21 62/2 62/7 62/20
book [7] 6/22 6/23 82/16 82/17 83/3
83/5 83/6
books [2] 6/20 7/1
bookstore [3] 6/19 6/21 6/24
bootleg [1] 25/7
both [3] 4/14 102/19 102/20
bottom [2] 44/8 58/10
bought [9] 6/15 33/1 33/2 33/2 33/7
33/15 33/15 96/14 96/15
boycott [1] 68/11
break [5] 11/1 43/20 46/23 61/10 94/11
breakdown [1] 11/25
BRIAN [2] 2/16 3/14
brief [5] 43/4 43/6 61/8 96/15 99/9
briefly [2] 57/21 96/11
bring [7] 10/21 10/22 21/13 25/3 25/12
36/9 100/23
bringing [1] 66/25
broad [1] 79/8
broken [3] 83/9 85/2 85/3
BROS [4] 1/6 20/18 92/20 92/23
Brothers [1] 60/2
brought [2] 46/2 56/19
build [4] 39/5 39/8 39/20 59/11
building [1] 59/4
B
CCRR [1] 1/23
CD [2] 33/18 33/20
built [1] 30/17
cease [1] 71/24
bunch [3] 32/9 37/18 44/14
cellophane [1] 29/15
burden [1] 50/18
CENTRAL [1] 1/2
business [18] 4/2 8/10 13/19 23/6 35/6
CENTURY [2] 1/6 2/16
35/6 36/13 36/14 36/16 39/5 39/8
certain [5] 10/15 53/10 89/9 92/1
39/20 50/15 54/11 60/8 62/18 77/3
102/24
100/18
certainly [1] 53/22
buttoned [1] 58/17
CERTIFICATE [1] 104/1
buy [16] 6/23 7/23 7/24 13/20 55/4
certify [1] 104/3
58/8 69/20 71/13 71/13 71/17 80/20
cetera [2] 69/19 99/13
86/25 87/2 94/16 94/17 97/18
chair [2] 67/12 68/4
buy/sell [1] 58/8
challenge [1] 46/1
buyback [2] 56/12 58/15
challenged [1] 25/22
buying [4] 29/16 29/17 54/21 71/20
challenging [1] 12/23
buys [5] 7/15 28/24 29/3 70/11 73/2
Chamberlain [3] 23/20 23/25 24/5
bypass [1] 42/9
chance [4] 3/24 16/14 61/13 61/14
change [8] 29/24 51/10 51/13 52/1
C
58/10 58/11 80/17 88/17
cabin [1] 52/14
changed [3] 25/18 88/12 89/24
cable [1] 70/20
changes [2] 53/20 88/23
Cadence [1] 57/24
changing [1] 40/22
calculated [1] 88/4
charge [2] 101/5 101/8
calculation [1] 87/10
cheaper [1] 69/2
calendar [2] 59/22 93/9
CALIFORNIA [9] 1/2 1/19 1/24 2/5 2/13 check [1] 63/1
checked [1] 10/18
2/17 3/1 37/3 37/20
CHIA [3] 1/23 104/14 104/15
call [2] 59/25 85/7
chief [1] 10/9
called [4] 20/14 27/21 46/3 47/7
child [1] 91/20
Calling [1] 3/4
can [38] 4/9 6/16 9/24 11/3 12/2 12/14 children [2] 90/19 91/19
12/16 13/14 27/19 28/15 34/14 34/15 choose [10] 8/14 9/1 9/14 9/15 11/18
11/18 12/24 87/14 90/3 90/4
37/21 40/4 44/24 48/22 50/1 52/13
chooses [2] 5/23 83/25
55/7 60/12 61/15 67/7 69/23 70/7
choosing [3] 9/23 11/22 92/14
70/12 70/13 72/15 77/13 85/4 86/10
chopped [1] 79/9
88/9 91/11 92/1 94/15 95/21 96/3
chose [2] 65/20 67/6
96/12 101/5
can't [10] 26/23 30/8 30/23 34/19 48/14 Chromecast [4] 65/25 66/2 75/25 99/12
Church [1] 51/3
53/21 58/10 58/11 60/19 77/16
circuit [24] 18/23 19/5 19/5 22/12 22/23
canard [1] 8/23
cannot [13] 5/8 5/8 21/14 24/17 24/24 22/25 23/21 23/22 37/4 38/17 38/19
46/4 47/24 47/25 50/20 51/4 51/5
25/11 25/19 25/19 70/6 74/2 91/25
51/21 57/22 57/24 62/13 62/14 75/4
91/25 102/16
89/2
CANYON [1] 2/12
circumstances [1] 39/3
capital [1] 42/17
circumvent [5] 14/9 41/19 42/8 42/12
Capitol [1] 34/3
74/6
Capitol Records [1] 34/3
circumventing [3] 40/24 41/23 47/3
care [3] 6/22 68/2 95/20
circumvention [20] 17/17 17/21 23/10
carried [1] 84/22
case [65] 18/24 20/25 21/11 22/4 22/7 23/13 29/8 42/5 43/11 44/2 44/11
44/25 45/15 46/2 46/16 46/20 46/22
22/11 22/23 22/23 23/3 23/8 27/22
48/2 48/4 48/5 48/8 48/13
28/22 28/24 34/3 34/3 34/21 37/3
cite [6] 35/23 39/12 43/16 43/18 45/22
38/16 39/11 39/14 40/15 42/7 43/16
87/6
45/19 45/22 45/25 46/3 46/7 46/9
cited [8] 27/14 45/2 47/19 47/20 51/3
47/15 47/17 47/18 47/20 49/19 50/20
51/5 57/25 61/24
51/2 51/3 51/4 51/6 51/21 51/21 52/5
cites [1] 55/22
52/11 52/23 55/14 57/24 57/24 61/5
citing [1] 24/4
61/25 62/6 62/16 62/22 62/22 64/20
Cittadine [3] 39/23 86/5 86/5
65/1 71/2 75/5 76/3 84/8 85/7 85/20
Cittadine's [1] 86/21
88/2 99/11 99/22 102/22
city [1] 36/15
cases [19] 18/22 18/25 19/4 21/12
27/13 35/24 38/18 39/10 39/17 39/21 civil [1] 101/1
claim [18] 17/17 19/7 20/21 22/5 27/24
43/14 49/17 61/25 62/1 62/21 62/21
28/12 37/1 44/10 46/11 46/16 46/20
87/6 88/1 95/15
48/2 48/4 48/5 48/9 50/4 66/10 88/10
categories [7] 12/1 12/1 12/10 12/14
claimed [1] 24/6
78/12 79/8 84/4
claims [2] 23/8 48/17
category [1] 12/17
clarification [1] 52/25
cause [2] 71/23 91/18
cleaned [1] 96/18
caused [2] 67/8 71/22
CleanFlicks [2] 27/13 27/16
causing [1] 67/16
- A.173 -
clear [26] 13/4 23/2 24/15 27/15 28/19
32/22 37/4 37/20 40/23 41/14 41/16
43/14 44/3 44/9 45/18 45/25 48/11
52/22 56/7 56/11 57/21 62/17 95/16
97/11 99/2 99/3
clearer [2] 50/21 80/2
clearly [5] 33/3 47/17 64/25 82/9 90/14
ClearPlay [22] 20/14 20/16 27/21 28/1
28/4 28/5 30/12 30/19 31/1 34/11
34/12 60/16 60/18 60/18 75/20 75/21
75/23 76/8 76/9 76/14 76/24 77/1
ClearPlay's [1] 80/16
click [1] 79/5
client [5] 11/10 26/22 36/12 79/3 87/4
client's [2] 26/17 55/3
clients [1] 55/2
clock [1] 101/1
close [3] 50/21 62/23 93/5
closing [8] 8/20 9/8 11/23 56/3 89/15
89/23 89/25 92/8
cloud [15] 77/12 81/15 81/23 82/6
82/23 83/1 83/25 84/6 84/17 84/23
85/5 85/6 97/22 97/22 98/5
cmjui.csr [1] 1/25
Code [1] 104/4
codified [1] 46/11
cognizant [1] 61/7
colleagues [2] 3/10 64/21
collect [1] 82/14
collection [1] 94/24
collective [1] 67/8
collectors [1] 69/16
college [1] 6/18
Columbia [2] 14/6 46/8
combination [1] 76/23
come [10] 35/9 38/24 47/9 50/21 53/22
54/15 56/7 58/16 62/23 101/15
comes [3] 39/19 40/8 92/19
coming [3] 14/19 33/7 33/8
commend [1] 59/15
comment [4] 10/14 24/15 58/7 102/10
commentary [1] 10/11
comments [2] 55/18 96/19
commercial [4] 50/25 51/1 54/8 94/21
Commission [1] 56/23
committee [1] 45/4
common [2] 68/19 68/20
communications [2] 64/23 68/8
companies [11] 19/13 20/8 20/10 27/20
36/17 67/12 67/14 71/1 72/6 75/22
85/6
company [9] 19/12 20/14 26/18 28/14
30/12 39/7 60/3 74/12 75/21
company's [1] 94/19
compensate [1] 38/9
compete [4] 92/14 92/20 92/23 93/1
competing [2] 23/5 70/15
competition [6] 92/7 93/19 95/11 95/13
95/17 95/23
competitive [1] 23/3
competitor [2] 23/5 92/13
competitors [1] 30/11
complained [6] 18/9 63/18 64/5 64/6
90/2 90/6
complaining [1] 89/15
complaint [5] 37/14 38/11 39/25 64/9
66/5
complaints [1] 64/8
complete [2] 15/1 18/4
completed [2] 66/19 87/20
C
completely [1] 57/1
complied [1] 60/10
comply [1] 57/23
compromise [2] 19/9 21/1
computer [5] 33/24 41/1 49/23 49/24
73/22
computing [3] 77/12 84/17 85/6
conceded [1] 97/21
conceding [1] 45/16
concepts [1] 94/10
concern [2] 21/17 61/11
concerned [2] 101/4 101/25
concerning [4] 23/1 64/7 67/4 81/17
concession [1] 45/14
concluded [2] 76/6 103/4
conclusion [1] 84/23
concretely [1] 36/23
conduct [8] 17/18 24/24 32/18 32/19
44/12 48/14 65/21 91/21
Conference [1] 104/8
confirm [1] 5/2
conformance [1] 104/7
confusion [1] 40/15
Congress [31] 19/9 19/17 19/19 20/8
21/9 21/10 21/20 24/16 27/7 44/25
45/10 46/19 46/21 47/6 47/8 47/10
47/13 54/25 55/11 77/6 80/5 80/6 80/6
80/8 80/10 83/19 91/12 91/13 97/4
97/6 97/11
congressional [2] 25/5 84/21
congressmen [1] 24/17
conjecture [1] 100/19
conjunction [2] 18/1 30/14
connection [1] 42/3
Connectix [1] 49/19
consent [1] 21/3
consider [1] 23/11
consideration [1] 62/7
considerations [1] 39/4
considered [5] 45/4 45/10 91/14 91/23
91/23
consistent [4] 65/21 74/20 89/21 98/23
constantly [1] 100/17
constitute [1] 82/12
constitutional [1] 46/5
constitutionality [1] 46/1
construction [1] 75/10
construing [1] 31/18
consumer [21] 9/21 9/22 12/13 12/14
40/15 40/16 76/15 76/16 76/21 80/17
81/16 81/18 83/25 84/2 84/5 84/8 90/7
90/7 90/9 97/23 97/24
consumer's [1] 93/15
consumers [9] 8/14 19/21 20/4 40/22
58/24 80/18 90/3 91/1 101/6
contacted [1] 76/3
contain [2] 9/4 79/14
contained [1] 79/15
contains [2] 10/8 10/10
contemplated [2] 79/17 80/12
contend [2] 24/21 77/13
contends [1] 13/5
content [56] 12/1 13/22 19/10 20/5
21/24 25/14 25/15 25/16 25/25 26/8
26/19 39/5 39/9 39/19 39/20 49/3
54/22 54/24 55/9 56/14 59/2 59/8 60/6
69/3 69/17 70/13 70/14 70/16 71/14
73/12 75/15 76/2 76/22 77/7 79/23
80/13 80/18 81/5 81/20 81/21 84/21
- A.174 -
88/22 89/11 89/13 91/14 92/13 92/25
93/20 93/23 95/5 95/7 95/8 96/18
96/23 98/20 102/7
contention [2] 17/3 87/4
context [3] 36/25 62/4 72/22
continue [4] 16/15 37/14 38/14 48/12
continues [1] 37/12
continuing [2] 37/21 38/14
contracts [1] 100/2
control [6] 15/10 15/14 15/16 43/10
43/13 43/21
controls [7] 14/10 41/20 41/23 42/7
42/16 43/8 74/7
conversion [1] 59/1
convert [1] 78/2
copied [2] 67/2 73/2
copies [25] 6/25 7/23 13/20 25/7 27/12
27/16 27/17 31/24 32/2 33/15 41/1
49/9 49/10 49/13 50/1 56/18 72/17
77/15 81/22 85/3 85/10 85/11 85/18
86/25 87/2
copy [68] 7/4 19/22 19/25 21/25 28/13
28/13 29/11 29/12 29/18 29/21 29/22
30/18 32/24 33/1 33/8 33/9 33/12
33/18 33/23 33/24 34/6 34/9 48/22
49/2 49/7 49/14 49/15 49/15 49/22
50/11 50/12 54/15 73/14 73/16 73/17
73/18 73/19 73/21 73/25 73/25 74/1
74/4 81/13 81/22 81/25 82/6 82/13
82/24 83/13 83/15 83/16 83/16 83/22
83/23 85/1 85/11 85/17 97/9 97/15
97/17 97/19 97/22 97/22 97/23 97/23
98/3 98/5 98/7
copying [4] 30/5 49/20 53/6 54/3
copyright [51] 13/7 15/12 15/21 15/24
16/1 16/17 16/20 16/21 16/23 17/8
17/10 20/23 22/9 22/13 22/14 22/15
22/16 22/17 22/19 22/20 22/20 24/3
25/2 25/9 30/15 32/10 32/15 34/18
34/20 40/7 42/10 42/20 43/2 47/1 48/7
49/5 49/20 53/3 73/10 74/14 74/16
74/17 74/18 75/3 75/6 75/7 87/11
87/12 87/13 91/10 94/22
Copyrights [3] 19/14 45/6 74/20
Corley [1] 46/4
CORPORATION [1] 1/6
correct [16] 4/6 4/10 4/20 5/20 7/12
7/25 8/5 13/7 33/21 63/4 71/4 75/20
79/1 79/2 94/6 104/5
correctly [2] 13/18 78/16
correspondence [1] 5/3
cost [3] 30/18 35/24 68/13
could [41] 4/11 4/12 8/25 9/1 11/14
18/20 19/6 21/13 22/4 25/6 26/12
26/16 26/18 28/4 28/5 28/8 34/16
36/22 38/1 41/14 52/1 55/1 55/2 55/2
55/9 58/16 66/2 68/15 71/17 72/12
74/3 77/11 80/16 83/1 86/22 88/4 90/3
90/4 91/14 91/18 92/5
couldn't [3] 50/20 77/18 80/2
counsel [19] 2/1 3/6 3/11 3/13 14/15
14/23 36/16 64/4 65/8 68/17 75/10
75/19 75/23 81/12 91/4 91/8 92/4
92/18 102/19
counterclaim [3] 1/8 2/2 23/16
COUNTERCLAIMANT [2] 1/12 2/11
counterclaims [1] 23/17
country [3] 21/19 78/6 78/7
couple [7] 13/12 50/17 54/7 62/7 93/7
94/9 96/9
course [7] 19/8 42/18 64/16 76/20
79/19 90/21 102/3
court [28] 1/1 1/23 9/24 10/3 13/12
13/12 14/5 23/21 24/1 27/18 47/22
48/13 54/4 61/4 61/7 61/8 65/16 69/25
72/4 72/21 80/4 85/8 87/14 88/3 89/22
100/25 102/23 103/3
Court's [2] 9/19 100/23
courtroom [1] 30/17
courts [2] 37/4 49/23
covered [3] 17/18 44/12 57/18
covers [2] 37/18 47/13
crazy [1] 78/23
create [1] 21/2
created [4] 33/8 73/22 76/24 83/14
creates [2] 44/1 97/14
creating [2] 71/7 72/3
creation [1] 83/15
creative [1] 58/15
credible [1] 54/2
credit [4] 5/24 6/12 8/24 55/8
credits [19] 3/20 8/20 8/21 8/22 9/4 9/7
9/8 9/15 11/22 11/23 56/3 89/12 89/14
89/15 89/23 89/25 92/8 92/9 92/14
criminal [1] 93/9
Crippen [1] 47/17
critical [2] 15/9 97/13
cropped [1] 51/20
CSR [2] 1/23 104/15
CSS [1] 43/8
curat [1] 18/21
curious [1] 61/20
current [1] 72/13
curse [1] 88/16
customer [29] 4/4 4/10 4/19 4/22 4/23
5/8 5/8 5/13 5/16 5/17 5/23 5/24 5/25
6/5 6/10 6/15 6/17 7/7 22/2 29/17
29/19 70/17 71/17 71/19 77/20 77/20
78/25 97/18 97/19
customer's [1] 73/17
customers [13] 5/2 6/6 7/16 7/20 9/8
13/21 13/21 29/20 69/24 70/1 70/14
71/13 89/9
cut [4] 51/9 76/8 99/23 99/23
CV [2] 1/9 3/4
cycle [3] 69/6 70/23 92/17
cycling [1] 60/5
D
daily [1] 94/25
damages [9] 38/8 38/11 38/16 38/20
41/8 87/10 87/15 87/24 88/4
Damocles [1] 66/17
data [1] 58/25
date [13] 71/10 71/11 93/18 94/5 94/5
94/8 95/1 95/3 95/6 95/6 95/8 95/8
104/10
dates [1] 95/1
DAVID [2] 2/12 3/12
day [18] 5/21 5/23 6/2 6/10 7/3 7/6
7/23 7/24 16/12 38/20 48/10 55/24
58/23 65/9 65/10 95/9 95/14 95/14
Day 1 [1] 7/23
Day 2 [1] 7/24
days [7] 5/25 65/6 65/7 66/21 71/15
71/20 72/1
DD [1] 43/9
DD Plus [1] 43/9
de [2] 18/20 68/14
de minimis [1] 68/14
D
dealing [1] 44/25
deals [2] 42/4 49/21
death [2] 77/12 84/23
debate [1] 75/16
December [7] 23/15 64/5 64/6 64/10
86/18 102/24 104/10
December 19 [1] 23/15
December 19th [1] 102/24
December 2015 [2] 64/6 64/10
decide [12] 11/8 12/15 18/12 40/10
55/2 55/3 59/9 90/7 91/2 91/25 92/5
92/13
decided [5] 27/7 39/1 45/11 58/2 71/12
decides [2] 84/8 92/11
deciding [1] 18/10
decision [14] 23/22 23/23 27/23 38/17
39/2 39/8 43/17 45/22 46/5 46/21
47/16 47/23 67/10 95/4
declaration [9] 15/13 39/23 42/24 65/8
75/17 76/13 86/5 86/21 100/7
declarations [1] 63/19
declaratory [1] 36/25
declared [2] 14/6 91/17
declines [2] 5/21 5/22
decrypt [5] 21/7 21/18 42/9 76/1 78/1
decrypted [7] 4/14 21/21 85/16 85/17
85/18 102/12 102/16
decrypting [1] 25/16
decryption [5] 4/12 4/13 19/2 25/21
75/15
decrypts [2] 4/8 29/1
def [1] 76/18
default [2] 84/7 84/11
defendant [7] 1/11 2/11 23/8 38/19
57/22 65/2 88/3
defendant's [1] 51/14
defendants [5] 1/8 2/2 28/1 28/2 61/21
defense [32] 13/6 13/9 17/14 17/16
22/10 22/14 24/10 25/4 27/18 27/19
32/3 44/10 45/15 46/11 46/11 46/14
46/15 46/20 47/2 47/4 47/13 47/18
47/21 47/24 48/2 48/4 48/5 48/8 48/25
50/8 50/17 50/22
defenses [3] 34/21 42/13 48/24
define [1] 71/13
defines [1] 15/18
definitely [1] 38/4
definition [8] 16/5 16/7 41/22 42/6 57/5
59/2 76/17 91/3
definitions [1] 50/6
delay [6] 35/21 57/19 65/9 65/10 66/25
71/15
deleted [1] 12/25
deliberate [1] 46/21
deliberately [3] 54/25 58/2 78/7
delivered [1] 80/20
demonstrate [2] 13/14 28/22
demonstrated [1] 91/20
denial [1] 46/5
denied [1] 88/2
deny [3] 22/15 85/22 85/22
depend [2] 21/2 95/9
depending [1] 94/19
depends [1] 72/8
deposition [3] 99/14 99/17 100/6
derive [1] 69/8
derived [1] 22/1
derives [1] 8/6
descramble [1] 42/8
- A.175 -
describe [1] 26/17
described [4] 10/7 37/9 74/13 98/2
describes [1] 32/20
describing [1] 10/25
description [1] 5/20
designed [1] 34/13
desire [1] 26/8
desist [1] 71/24
destabilize [1] 55/16
destabilizing [1] 62/18
detail [4] 15/14 39/11 46/18 48/18
details [1] 28/19
determine [1] 40/7
determined [1] 71/10
develop [1] 35/8
development [1] 36/16
device [4] 5/10 65/25 66/2 80/12
devices [2] 5/9 43/11
devil's [1] 33/13
devoted [1] 40/20
DGA [2] 67/8 68/11
did [19] 21/2 25/23 26/5 27/7 28/2 36/1
41/8 43/5 44/22 47/6 53/9 63/16 65/7
66/9 66/11 75/16 76/24 98/9 101/7
didn't [7] 8/24 9/1 25/25 45/16 53/22
63/16 72/3
die [1] 36/6
differ [1] 64/3
different [22] 16/8 28/11 51/19 52/17
52/19 65/15 78/4 78/5 78/7 78/8 79/1
79/5 85/19 89/6 89/7 90/21 90/25
94/15 95/1 95/2 95/20 97/22
differently [1] 36/23
difficult [1] 76/19
Digital [1] 13/7
direct [1] 23/4
directed [1] 99/11
direction [3] 73/11 79/20 79/22
directly [3] 35/13 39/6 60/7
director [1] 69/18
director's [1] 88/23
directors [4] 19/16 19/24 20/3 26/10
disagree [2] 11/11 36/20
disclosed [1] 64/14
discover [1] 49/23
discovery [1] 71/9
discuss [1] 98/9
discussed [5] 45/11 62/22 75/5 86/4
91/12
discussion [6] 15/4 39/15 39/18 45/21
45/23 75/13
Dish [1] 47/18
disk [8] 5/22 78/2 78/22 80/20 80/20
81/24 84/19 92/19
disks [8] 29/4 43/1 43/10 48/14 70/11
71/15 72/7 101/20
dismiss [1] 23/16
dismissed [1] 20/22
DISNEY [12] 1/5 3/5 9/13 13/5 14/20
17/12 20/18 35/20 36/1 64/18 64/20
71/2
Disney's [4] 18/3 18/7 18/7 87/4
dispute [2] 33/15 33/16
disputing [1] 13/6
disrupt [2] 55/16 66/6
distributing [1] 27/17
distribution [4] 29/8 29/9 59/5 69/12
distributors [2] 40/1 93/25
district [11] 1/1 1/2 1/3 14/5 14/5 39/11
39/17 46/8 47/16 47/19 61/25
District of [2] 14/5 46/8
DIVISION [1] 1/2
divorced [1] 85/14
DMCA [24] 13/13 13/19 13/23 14/2
17/14 19/1 19/7 21/13 21/15 22/5
22/21 22/22 23/9 23/23 24/13 41/15
46/1 46/11 46/19 74/18 74/22 74/24
74/25 75/7
do [60] 6/2 10/6 10/23 11/6 11/16
11/21 12/9 20/20 22/19 24/1 25/24
29/6 30/24 31/7 31/24 33/9 34/11
34/15 34/17 35/2 35/18 40/10 41/2
42/14 45/5 45/11 47/22 49/25 50/14
51/7 52/21 54/14 55/23 57/12 58/13
59/9 59/9 60/12 60/18 63/21 64/3 68/1
68/7 68/8 73/1 77/2 77/18 79/6 79/16
79/22 81/7 87/3 89/2 93/6 95/20 98/6
100/9 100/11 100/18 100/22
doctrine [1] 83/18
document [1] 56/23
documents [1] 58/6
does [24] 6/13 17/7 17/8 17/20 21/23
22/22 23/4 26/2 26/3 28/12 32/9 44/17
46/24 47/14 49/1 49/1 57/11 68/3
69/20 75/2 75/11 81/14 88/17 95/9
doesn't [27] 8/9 13/19 32/14 33/19
43/13 43/20 44/20 49/3 49/6 51/10
51/12 51/15 54/18 54/22 54/23 57/11
62/23 63/13 63/21 69/24 70/25 74/19
76/18 78/24 83/15 88/17 92/15
dog [3] 69/12 85/20 85/20
doing [18] 33/12 35/5 36/18 40/21
40/24 48/15 50/1 50/10 54/19 55/12
60/5 77/2 77/5 77/19 78/14 89/19 91/9
99/3
dollar [5] 5/21 55/24 56/4 57/12 58/23
dollars [5] 62/11 62/19 77/21 77/24
86/25
don't [51] 3/25 7/21 11/1 11/6 11/25
12/4 12/5 12/7 13/5 15/3 16/22 16/23
27/18 28/20 33/15 33/16 35/1 35/5
36/7 36/9 36/9 41/10 43/1 43/10 45/9
47/22 51/24 53/9 54/1 54/9 54/13 55/5
55/21 55/25 63/3 63/5 63/6 68/1 68/2
68/16 70/23 72/24 81/10 84/3 86/24
87/17 93/15 95/20 95/22 96/17 100/13
done [13] 25/2 28/14 31/1 36/22 53/6
55/9 69/11 72/1 79/4 79/9 80/15 90/8
90/10
door [1] 80/7
downloads [1] 34/4
Dr. [3] 42/24 43/5 43/8
Dr. Meldahl [3] 42/24 43/5 43/8
drawing [1] 93/8
drawn [1] 62/10
drinking [1] 12/2
DRIVE [1] 2/12
duplicate [1] 85/10
during [13] 10/14 10/17 22/17 32/22
35/10 37/8 66/17 73/13 79/24 84/9
93/23 93/24 98/22
DVD [64] 4/5 4/18 4/19 4/21 4/22 4/23
5/2 5/4 5/5 5/9 5/18 5/21 5/24 6/13 7/8
7/14 8/10 22/1 28/3 28/4 28/24 29/1
29/7 29/11 29/22 29/24 33/7 33/8
33/20 33/22 33/23 34/12 34/13 37/18
43/12 54/21 60/21 60/23 60/24 60/25
69/17 70/18 77/18 77/20 80/21 81/23
82/2 92/19 92/22 92/25 93/18 93/18
94/4 94/7 95/3 95/6 95/7 95/12 97/18
D
DVD... [5] 97/24 98/1 102/1 102/3
102/16
DVD-type [1] 60/21
DVDs [30] 5/1 6/4 7/15 7/18 8/5 8/13
10/16 10/18 13/20 19/23 28/20 29/4
30/12 40/24 42/25 43/9 55/4 56/10
58/13 69/19 70/10 71/14 71/21 72/7
73/6 87/2 101/11 101/11 101/16 102/7
dynamic [1] 24/8
E
e-mail [3] 58/18 67/2 67/4
each [2] 4/21 95/4
earlier [7] 65/24 68/18 71/8 74/11 75/5
78/11 98/2
early [2] 6/25 71/5
early 2015 [1] 71/5
easier [1] 96/13
EAST [2] 1/24 2/16
easy [1] 18/15
economic [4] 19/21 38/2 38/5 40/5
economics [1] 101/8
edited [3] 27/12 27/17 52/14
edition [1] 69/17
effect [7] 54/5 54/16 84/16 85/15 85/17
85/19 96/19
effective [4] 15/10 15/16 15/19 16/6
effectively [12] 14/10 15/20 16/7 16/16
41/20 42/16 42/22 43/1 43/7 43/10
43/21 74/7
EHLER [2] 2/8 3/10
either [2] 8/19 27/19
elements [3] 15/9 24/8 49/24
eliminated [2] 90/6 92/1
Elizabeth [1] 76/14
Elizabeth Ellis [1] 76/14
Ellis [1] 76/14
else [9] 9/16 9/17 26/4 28/15 76/1
89/25 93/14 95/17 101/9
else's [1] 76/1
Elsewhere [1] 25/5
Elvis [1] 51/5
Elvis Presley [1] 51/5
employees [1] 59/19
enacted [5] 21/15 25/13 26/1 79/18
96/22
encouraged [1] 46/19
encrypted [4] 25/19 82/12 83/7 83/24
encryption [1] 42/13
end [12] 6/24 10/14 38/16 38/20 48/10
49/11 55/13 64/15 64/16 73/6 91/6
91/9
end-run [2] 55/13 91/9
ended [1] 80/10
ends [2] 80/5 80/6
enforce [3] 22/16 23/9 34/19
enforceable [2] 22/20 22/20
engage [1] 11/17
engaged [1] 65/22
engaging [5] 17/18 44/12 56/10 74/13
75/6
enjoined [2] 40/25 62/9
enjoy [3] 16/23 17/10 19/10
enormous [3] 41/4 84/24 84/24
enough [2] 13/2 70/5
ensure [1] 19/9
entered [1] 61/25
enterprise [1] 51/1
ENTERPRISES [3] 1/5 3/5 51/5
- A.176 -
ENTERTAINMENT [2] 1/6 18/24
exorbitant [1] 67/18
entire [5] 5/10 12/16 55/16 70/23 95/21 expectations [1] 40/16
entirely [1] 84/14
expected [1] 86/23
entirety [1] 32/12
expensive [5] 6/25 69/20 77/11 78/1
entitled [3] 36/8 37/6 104/6
84/18
entry [1] 74/14
experience [4] 39/4 76/16 86/10 86/22
expert [2] 15/13 42/23
enumerated [1] 47/11
explain [5] 61/5 65/9 65/9 72/22 77/23
envisioned [2] 20/8 91/10
explained [5] 26/6 57/12 72/14 75/17
equitable [1] 22/13
89/15
equitably [1] 35/15
explains [1] 15/14
equities [3] 35/14 57/20 59/15
exploiting [1] 60/6
equivalent [1] 43/19
exposure [1] 91/19
error [1] 76/19
express [2] 74/24 75/1
escape [1] 63/13
expressed [1] 67/6
especially [1] 24/15
expressly [2] 20/8 83/19
essence [1] 94/18
extend [1] 46/20
essentially [1] 27/23
extensive [1] 39/15
establish [1] 50/19
established [4] 43/25 55/13 86/1 91/10 extensively [1] 67/2
extra [1] 69/17
estimate [1] 29/14
extremely [1] 76/15
estimates [1] 7/13
extrinsic [1] 51/22
et [3] 3/5 69/19 99/13
eyesight [1] 63/4
et cetera [2] 69/19 99/13
even [20] 5/7 18/8 18/23 44/16 45/16
F
48/6 51/23 52/7 55/20 62/24 69/12
F-bomb [1] 68/21
82/12 82/13 86/7 89/5 90/15 96/17
F.Supp.2d [1] 45/23
97/23 97/25 98/3
face [1] 79/19
evening [1] 10/8
facie [1] 24/11
event [1] 68/25
fact [18] 18/7 26/22 33/19 35/14 36/21
ever [4] 5/2 19/13 52/23 97/25
every [16] 6/19 19/12 22/1 22/2 29/24 37/8 39/18 51/8 51/10 75/19 84/17
84/20 86/17 87/7 96/7 98/19 99/20
35/3 47/8 77/18 77/19 77/20 77/20
100/19
78/25 80/5 84/19 84/19 99/20
factor [7] 50/24 53/5 54/4 54/5 54/12
everybody [2] 21/24 52/13
54/13 60/9
everyone [2] 30/17 93/14
factors [1] 50/23
everything [3] 79/6 80/6 83/9
facts [4] 34/22 34/22 34/25 100/15
evidence [15] 10/20 31/6 31/18 35/4
factually [1] 69/5
35/6 38/15 55/18 55/18 56/11 56/16
fair [30] 13/2 13/6 13/8 13/24 24/2 24/7
97/4 99/15 100/19 101/23 102/22
24/9 27/18 45/13 45/14 46/6 46/10
evident [1] 89/1
46/11 46/14 46/20 47/2 47/4 47/17
evidently [1] 71/6
47/21 47/24 48/2 48/5 50/17 50/18
exact [2] 84/9 89/6
50/22 50/23 52/16 67/17 70/5 88/10
exactly [3] 9/21 56/6 57/16
example [8] 24/20 33/5 49/14 62/5 85/1 fairly [1] 68/14
fairness [1] 67/25
89/2 94/2 94/14
fall [1] 79/7
examples [2] 39/24 96/10
falling [1] 84/4
exception [2] 74/25 75/1
false [3] 27/6 27/25 28/10
exceptions [1] 71/4
familiar [1] 6/18
excerpts [1] 99/17
families [6] 18/12 19/10 26/7 81/4
excess [1] 87/20
84/22 91/15
Exchange [1] 56/22
family [41] 16/18 16/19 16/24 17/2 17/3
exchanged [1] 67/3
17/4 18/5 19/8 19/16 20/14 25/3 25/8
exclusion [1] 83/19
31/7 31/10 31/23 32/11 42/4 44/1
exclusive [8] 16/20 16/23 17/8 17/9
44/17 48/3 48/25 49/1 50/9 54/22
32/10 40/6 46/15 46/25
55/12 72/14 80/9 80/22 81/2 92/10
exclusivity [1] 40/1
92/11 92/11 92/12 92/17 96/22 96/22
excruciating [1] 46/18
96/25 97/14 101/5 102/13 102/17
excuse [2] 24/18 44/17
far [3] 12/9 57/5 65/5
excused [2] 50/14 50/16
fashioned [1] 19/19
exempt [3] 16/20 17/1 17/2
fast [3] 52/8 52/9 59/5
exemption [7] 17/19 17/21 18/5 44/1
FCRR [1] 1/23
44/12 47/12 97/14
feature [2] 90/5 96/24
exemptions [2] 32/10 47/12
February [1] 58/9
exercise [2] 10/2 15/23
FEDERAL [4] 1/23 19/5 23/21 23/22
exhausted [1] 85/5
fee [2] 30/17 30/17
Exhibit [3] 37/13 44/9 100/7
fees [1] 67/19
exhibiting [1] 91/21
exist [5] 8/24 21/23 47/14 75/17 76/24 female [1] 68/20
few [2] 66/21 91/5
existing [6] 19/15 21/11 22/4 27/8
fiction [3] 29/17 97/24 98/3
31/13 90/15
F
figured [1] 31/1
figures [1] 62/23
file [11] 21/16 21/18 21/19 21/21 21/24
22/3 65/6 65/20 78/2 78/3 78/5
filed [5] 37/11 63/17 66/5 67/5 89/22
filing [1] 59/21
FILM [1] 1/6
films [1] 96/24
filter [41] 8/24 9/1 9/15 9/15 11/12
11/16 25/7 25/14 28/2 28/5 28/7 28/15
30/8 30/22 31/2 34/13 34/14 53/21
55/5 55/8 60/13 66/3 74/3 74/3 76/2
77/18 77/19 79/4 80/1 80/13 88/12
88/14 89/11 89/25 89/25 91/11 92/3
92/6 92/8 92/14 95/21
filtered [39] 3/18 4/13 9/2 12/2 12/5
19/10 20/1 20/1 20/5 20/6 25/14 25/16
25/19 25/19 25/25 26/8 26/8 28/13
58/14 68/10 70/6 70/9 70/13 70/14
75/14 77/7 77/21 81/5 81/14 81/20
82/18 84/21 90/24 91/15 92/11 92/13
102/7 102/13 102/16
filtering [24] 4/14 8/11 8/18 8/19 11/16
12/23 19/13 27/11 49/2 53/19 57/11
60/21 60/23 75/21 75/22 78/24 82/1
82/1 88/22 89/10 89/23 91/11 92/24
99/12
filters [26] 8/14 8/16 9/23 9/24 10/12
11/19 11/19 11/22 12/8 12/12 27/25
51/8 53/11 53/14 53/25 55/6 55/21
68/19 68/20 68/23 79/1 81/16 84/1
84/3 84/9 98/6
final [4] 60/9 87/6 102/10 102/24
finally [6] 20/7 22/22 23/18 70/10 70/21
92/24
financial [1] 87/5
find [3] 6/25 21/20 91/15
fine [2] 63/22 83/21
finish [2] 81/8 81/10
firm [2] 3/14 4/25
first [39] 5/19 14/2 14/7 15/10 15/25
16/16 17/24 19/21 21/20 21/25 25/16
28/17 31/17 35/17 37/16 38/7 41/17
42/7 45/20 48/20 50/24 57/10 57/21
59/22 64/3 69/10 69/11 69/14 70/16
74/11 74/14 77/6 78/1 82/22 87/9
91/24 91/25 92/2 101/4
First Amendment [3] 91/24 91/25 92/2
five [4] 57/6 85/25 95/14 98/3
five-day [1] 95/14
five-hour [1] 98/3
fixed [5] 19/25 73/21 74/1 83/13 83/16
floating [2] 82/24 83/25
FLOOR [3] 2/5 2/9 2/17
flow [1] 11/2
FMA [32] 17/13 17/19 17/20 18/3 18/9
18/13 21/6 24/18 24/24 25/12 25/13
25/21 25/23 25/24 26/1 26/2 26/3 26/3
26/5 26/19 26/23 27/5 28/10 32/7
72/21 72/22 72/25 73/9 73/24 75/10
79/17 80/2
focused [1] 11/4
focusing [1] 97/7
follow [1] 7/22
following [7] 32/15 51/16 68/20 73/9
74/15 80/8 86/10
follows [1] 87/9
Footnote [1] 23/18
Footnote 12 [1] 23/18
- A.177 -
goal [1] 59/4
God [1] 51/3
goes [9] 12/13 12/18 15/4 24/13 29/16
35/13 69/6 78/1 92/16
going [35] 3/16 8/16 13/17 14/20 14/21
16/12 27/8 29/14 37/17 37/23 39/19
39/20 40/9 40/9 40/10 47/25 49/14
50/15 51/1 53/17 56/8 57/2 58/22 59/4
61/11 61/12 61/13 63/20 73/20 83/12
89/17 91/5 96/20 97/10 102/21
gone [4] 82/16 97/17 99/11 100/17
good [6] 3/8 3/12 3/22 6/22 31/15
89/16
goodwill [1] 63/15
Google [15] 30/14 30/15 38/24 65/24
65/25 66/1 76/3 76/23 84/6 84/13
99/11 99/11 99/22 99/22 100/10
Google Play [4] 30/14 30/15 38/24
76/23
Google's [2] 84/7 84/11
gore [1] 12/3
got [14] 18/10 33/16 53/25 54/1 56/25
57/1 58/8 67/14 76/8 83/2 83/4 91/4
97/5 99/25
GRACE [2] 2/16 3/14
grand [6] 2/4 19/9 19/18 21/1 31/12
44/19
grant [1] 21/7
great [3] 55/20 55/23 96/18
greater [1] 12/9
Green [1] 46/7
grew [1] 37/8
grounds [1] 48/16
group [2] 27/20 68/11
groups [1] 47/8
growing [2] 37/10 77/4
grown [1] 64/15
G
growth [2] 86/15 86/18
gain [5] 25/8 42/20 82/25 93/15 102/17 guaranteed [1] 19/22
game [3] 8/25 23/6 89/23
guess [3] 3/25 35/25 88/10
general [7] 3/13 12/1 12/10 12/14
guesses [1] 7/16
27/10 36/16 78/11
Gutenberg's [1] 77/16
generally [2] 8/15 52/5
Gutierrez's [1] 47/16
generous [1] 61/5
guts [2] 12/3 52/3
get [31] 5/24 6/1 11/6 12/5 20/2 27/19
29/15 31/8 33/1 34/16 34/17 35/7 40/6 H
had [59] 3/23 4/24 6/20 13/17 18/16
42/13 46/8 47/25 49/2 50/13 57/12
18/19 18/25 19/1 19/5 19/10 19/12
58/11 58/25 60/24 70/16 72/6 80/5
20/3 23/23 24/21 24/23 25/1 26/16
93/9 94/22 94/25 95/1 96/12 97/25
27/17 28/3 33/9 36/17 36/23 48/7
get-go [1] 35/7
52/14 59/21 62/10 62/10 62/12 64/15
gets [5] 5/4 5/13 85/20 92/11 94/4
65/3 66/3 68/7 68/18 71/5 71/9 71/10
getting [2] 35/12 72/10
71/12 71/20 71/22 71/22 71/22 72/1
gimmick [2] 56/12 56/12
give [10] 5/17 13/12 13/15 16/13 21/8 75/24 85/3 86/14 86/15 87/22 88/3
89/18 91/17 91/17 91/20 92/5 92/24
39/12 63/5 63/7 91/5 102/1
given [5] 59/3 64/22 68/15 68/24 72/24 93/5 99/11 99/11 99/15 101/1
half [3] 57/4 59/22 79/13
gives [1] 6/12
hand [3] 7/19 15/2 31/20
giving [1] 97/18
handwritten [1] 77/15
GLENN [2] 2/3 3/10
hang [1] 22/8
Glider [1] 24/6
hanging [1] 66/17
gmail.com [1] 1/25
happen [2] 54/14 78/22
gnat [3] 35/17 36/2 36/3
happened [2] 40/2 57/5
gnats [2] 36/5 36/6
happens [12] 5/18 6/13 7/2 10/11 29/3
go [43] 4/25 5/12 11/14 12/14 13/3
32/11 37/6 47/2 47/8 78/17 78/20
14/21 15/7 16/12 21/5 28/16 33/4
78/21
34/16 35/7 36/6 36/19 36/24 37/14
happy [8] 9/12 15/2 31/19 48/18 50/5
37/15 39/6 40/19 43/25 46/17 48/18
66/19 89/19 101/7
50/5 50/23 55/4 56/1 57/9 58/8 59/12
60/12 63/6 76/6 77/6 78/8 80/19 82/11 hardly [1] 39/16
hardship [2] 57/22 87/5
84/18 90/9 92/7 93/19 96/11 101/2
for-profit [3] 20/8 20/10 51/1
force [1] 36/24
foregoing [1] 104/4
foreign [1] 69/12
forfeit [1] 36/9
forgiveness [1] 58/3
form [2] 11/16 78/4
format [2] 96/1 104/7
forth [3] 8/17 17/9 37/24
forward [4] 3/6 47/9 53/23 66/23
foul [1] 51/12
found [2] 55/19 91/17
four [8] 50/23 52/20 71/20 72/1 97/25
101/19 101/20 102/2
four percent [1] 101/19
fourth [4] 20/7 54/4 54/12 54/13
fourth factor [2] 54/4 54/13
fourth stakeholder [1] 20/7
FOX [3] 1/6 20/18 39/24
FRANCISCO [1] 2/9
FRANKLIN [1] 2/12
frankly [1] 55/1
freedom [1] 81/1
frequent [1] 76/20
frequently [3] 11/19 69/11 79/15
Freudian [1] 59/23
front [1] 11/10
full [3] 57/14 89/5 90/25
fully [1] 72/13
function [1] 33/14
functional [1] 49/24
Furious [2] 52/9 52/9
further [13] 17/20 21/17 22/6 38/1
41/10 61/17 72/12 75/4 75/5 75/7
90/17 93/2 99/7
future [4] 23/8 37/11 48/12 80/17
H
hardships [1] 35/14
harm [21] 18/19 19/2 19/6 37/6 37/7
37/21 38/2 38/2 38/4 38/21 39/12
39/21 40/11 54/9 57/18 59/17 59/18
63/14 67/20 71/23 85/14
harmed [1] 67/24
Harmon [10] 30/20 36/21 58/7 58/9
58/19 60/2 99/14 99/19 99/24 100/9
Harmon's [1] 99/17
harms [2] 39/21 86/11
has [67] 4/24 5/2 7/17 7/18 7/20 9/9
9/13 10/10 12/1 14/14 17/25 21/25
22/10 24/6 25/18 27/22 28/12 29/4
30/15 30/17 30/19 30/20 31/1 32/23
34/13 39/1 40/11 43/14 44/8 45/5
47/13 49/25 52/23 54/4 56/18 57/6
59/7 60/24 61/18 66/19 66/22 68/7
69/17 69/18 69/18 70/17 77/1 78/15
79/3 79/15 80/7 82/16 83/19 85/25
86/15 87/1 87/4 89/2 89/6 90/8 90/9
91/8 92/13 92/18 97/9 97/14 100/18
hat [1] 22/8
Hatch [5] 17/15 44/6 44/22 45/1 98/11
Hatch's [2] 17/25 98/10
have [215]
haven't [4] 14/20 48/6 48/8 50/21
having [11] 9/8 22/20 30/18 33/6 42/24
57/7 57/23 81/7 85/1 85/15 87/13
haystack [1] 63/17
HBO [1] 40/2
HD [1] 43/12
he [44] 6/1 7/8 16/5 17/16 17/20 26/22
27/1 29/2 30/20 31/3 31/4 31/5 31/5
33/7 36/15 36/22 39/23 39/25 44/9
44/9 44/15 44/18 44/20 45/15 46/18
53/12 58/8 58/10 58/21 58/23 82/4
86/7 86/9 90/9 94/12 95/13 97/12
97/16 97/17 97/21 99/15 100/3 100/18
101/17
he's [4] 26/25 27/1 58/22 100/20
head [1] 60/19
hear [8] 11/7 12/21 23/15 26/11 35/23
36/1 88/10 91/6
heard [8] 10/4 11/1 11/4 26/21 31/11
53/10 72/16 93/12
hearing [5] 34/24 56/19 66/13 66/15
100/20
heart [8] 6/20 52/6 53/3 53/15 53/16
53/20 54/3 88/16
heart's [1] 49/3
held [7] 6/4 19/5 23/23 27/22 88/3 89/3
104/6
help [3] 4/2 40/9 59/8
helpful [1] 31/21
here [47] 6/8 14/19 15/25 16/10 16/12
16/22 21/14 21/23 22/24 23/14 29/18
31/11 35/12 36/18 37/7 38/9 39/1
39/14 42/25 43/7 45/11 47/14 48/25
49/15 51/2 53/22 53/23 54/18 55/8
56/9 57/2 58/1 59/7 61/21 62/20 63/2
63/20 65/14 69/5 77/13 83/19 87/1
88/8 89/8 100/9 100/17 101/2
hereby [1] 104/3
herein [1] 20/18
Hey [3] 55/22 63/20 96/12
high [3] 76/18 91/1 91/3
high-resolution [1] 91/1
higher [1] 94/16
HILLS [1] 2/13
- A.178 -
him [3] 58/20 99/14 100/5
his [17] 10/17 10/21 11/2 36/15 39/23
42/2 42/23 42/24 44/6 44/16 58/20
64/21 75/10 86/22 97/10 99/14 101/25
historically [1] 67/22
history [15] 17/13 18/2 21/15 24/14
44/4 44/15 45/2 46/19 80/4 86/19
91/13 98/9 98/12 98/25 99/4
holder [1] 22/16
Hollywood [1] 58/12
home [7] 19/11 20/6 28/3 60/24 73/14
79/25 80/22
homes [2] 18/11 26/9
honest [2] 57/1 59/21
Honor [101] 3/8 3/12 3/18 4/7 4/21 6/9
8/2 8/22 9/3 9/18 10/5 10/23 11/25
12/8 13/25 15/1 15/3 17/24 22/6 22/9
23/15 25/22 26/25 28/23 31/7 31/20
31/24 32/8 32/16 33/4 34/1 34/17
34/25 35/12 37/7 39/13 40/13 40/23
41/13 41/14 42/1 43/3 44/5 45/18
45/20 48/3 48/18 49/17 50/6 50/10
50/24 51/15 52/10 52/18 53/1 53/21
54/2 54/7 54/19 56/11 57/9 57/20 58/5
58/18 59/7 59/14 59/16 60/4 60/11
60/20 61/4 61/15 61/18 63/9 63/24
65/2 65/7 66/8 66/14 67/14 68/18 73/8
74/10 75/20 82/5 87/9 87/21 88/7
88/18 93/3 96/5 96/9 97/2 97/8 98/7
99/9 100/16 101/3 101/20 102/10
103/1
Honor's [1] 5/20
HONORABLE [1] 1/3
hope [1] 63/6
hoping [2] 6/25 61/8
hornet [1] 36/11
hornet's [3] 35/17 36/2 36/4
hour [5] 53/24 84/10 93/5 93/6 98/3
hours [4] 5/23 57/7 84/8 90/12
house [2] 45/4 80/13
household [8] 32/23 73/11 73/13 79/21
79/21 79/24 98/16 98/17
Houston [1] 35/20
how [22] 8/4 9/25 12/25 18/14 26/16
28/11 28/18 39/3 55/22 57/11 57/12
59/9 65/13 67/9 73/6 81/5 85/4 87/3
95/4 95/5 101/17 102/1
how-to [1] 55/22
however [1] 95/3
huge [1] 35/8
hundred [3] 37/9 53/7 77/14
hundreds [5] 12/11 18/17 78/13 85/2
85/2
hunger [1] 61/15
hungry [1] 61/14
Huntsman [3] 27/22 27/23 28/1
hurling [1] 35/1
I
I'll [1] 63/7
I'm [15] 3/8 7/22 12/23 13/8 24/21
31/19 61/16 64/1 65/14 68/22 73/5
82/20 91/4 93/7 93/8
idea [5] 28/9 38/8 62/17 75/24 95/10
ideal [1] 8/1
identical [3] 80/11 84/25 85/17
identifiable [1] 4/23
identified [1] 86/19
identify [1] 36/22
illegal [6] 29/8 29/9 40/25 41/2 43/11
48/14
image [1] 89/6
images [1] 90/23
imagination [1] 54/18
imagine [3] 29/4 53/21 77/14
immediate [1] 66/12
immediately [1] 80/19
immune [1] 20/11
immunity [3] 18/4 18/8 18/14
imperceptible [9] 32/18 32/19 32/21
32/22 49/5 73/10 79/20 79/22 98/22
implicit [1] 83/21
important [6] 42/1 43/3 54/5 56/21 81/4
94/9
importantly [1] 83/8
impose [1] 88/6
imposed [1] 76/10
impossibility [1] 26/20
impossible [1] 25/14
in 2000 [1] 62/9
in 2014 [1] 75/25
in 2015 [1] 36/5
in's [1] 30/23
in-home [1] 19/11
inadvertent [1] 45/12
inappropriate [1] 88/5
INC [6] 1/5 1/7 1/10 3/5 3/5 3/13
incapable [1] 78/3
incentives [1] 57/14
inclined [1] 93/6
include [2] 12/16 84/4
included [1] 20/17
includes [1] 12/11
including [8] 12/2 18/2 19/4 19/13 51/3
61/25 62/1 65/24
inclusion [1] 83/18
incorporate [1] 46/7
incorrect [3] 69/5 73/1 101/10
incorrectly [2] 81/12 92/4
increase [1] 59/1
increased [1] 90/12
incredible [1] 86/15
indeed [2] 25/15 67/3
independent [1] 4/24
individual [3] 92/10 92/12 96/25
individually [1] 4/22
individuals [2] 91/22 96/23
indulge [1] 28/21
indulgence [1] 9/19
indulging [2] 97/24 98/3
Industries [2] 18/23 22/7
industry [1] 21/17
ineffective [1] 15/15
inequitable [1] 59/14
inequitably [1] 58/2
inexcusable [1] 24/19
inexpensive [1] 69/2
inflight [1] 52/14
information [5] 12/6 12/7 42/19 82/2
100/14
infringe [1] 75/2
infringement [14] 20/23 21/22 22/14
32/17 32/18 38/12 41/2 74/13 74/17
75/6 87/11 87/12 87/14 87/15
infringements [3] 32/15 73/10 74/15
infringing [5] 49/4 98/15 98/16 98/18
102/11
initio [1] 25/9
injunction [14] 3/23 34/24 36/10 48/17
50/19 62/19 66/12 66/13 66/15 66/16
I
J
injunction... [4] 67/11 87/8 88/2 88/6
injunctive [1] 37/5
injured [2] 65/12 66/11
injury [20] 18/18 18/19 18/20 19/6
21/12 21/14 22/3 23/24 31/13 67/14
67/16 72/2 85/14 85/24 86/1 86/4
86/20 88/8 91/18 91/18
insert [1] 80/21
insisted [1] 9/8
installed [1] 8/25
instance [1] 71/12
instances [1] 72/5
instead [1] 85/1
instructions [1] 81/17
instructive [1] 65/2
intelligence [1] 11/12
intended [4] 17/14 80/2 97/5 97/11
intent [1] 84/21
intention [1] 61/13
intercept [2] 82/14 83/1
interest [5] 60/9 60/10 67/6 72/10
72/23
interested [1] 68/6
interesting [2] 67/9 78/25
interests [2] 19/21 47/10
interface [1] 49/22
interfered [1] 35/3
interfering [1] 62/18
intermediate [7] 49/10 49/12 49/16
49/20 73/25 78/3 78/5
Internet [1] 60/2
interoperate [1] 49/25
interplay [1] 23/12
intervened [1] 85/7
interviews [1] 69/18
intrinsic [1] 51/7
introduces [1] 32/12
investment [1] 56/25
investments [2] 62/11 62/12
investors [2] 56/25 58/20
invitations [1] 19/17
involved [3] 16/18 47/25 67/6
iPad [1] 80/24
irreparable [14] 38/21 40/12 57/18
63/14 67/13 67/16 67/20 71/23 72/2
85/14 85/24 86/1 86/4 88/8
irreparably [2] 66/11 67/23
is [472]
isn't [7] 33/14 38/2 45/18 54/10 60/15
63/25 95/25
issue [15] 9/13 10/3 16/4 16/10 16/13
23/2 23/7 26/12 38/1 38/10 42/25
65/15 89/14 98/9 99/1
issues [2] 13/16 102/23
it [271]
it's [105]
Item [1] 3/4
its [33] 4/23 7/16 8/4 8/6 17/5 22/16
42/18 53/20 54/11 59/18 64/13 64/17
65/23 66/1 66/18 66/19 70/24 71/18
72/8 72/11 72/13 74/18 76/14 76/20
77/3 79/19 82/2 84/22 86/12 92/21
95/4 95/5 102/23
itself [9] 8/10 33/22 38/21 39/2 39/21
47/3 48/16 87/7 95/16
iTunes [10] 34/4 34/5 38/24 56/1 63/19
94/7 94/7 94/14 94/16 94/24
ivi [1] 38/18
JAIME [2] 2/15 3/13
lack [1] 81/23
January [2] 64/13 64/16
landing [1] 57/10
January 2015 [1] 64/13
language [16] 9/6 12/19 24/23 27/15
join [1] 68/14
31/19 31/20 34/2 44/2 51/9 51/12
joined [1] 3/9
72/21 96/2 97/7 97/8 97/13 98/7
JR [1] 1/3
laptop [1] 80/23
judge [11] 1/3 20/16 20/20 34/5 40/14 largest [1] 9/5
43/18 45/21 46/9 46/17 47/16 62/9
last [5] 55/7 63/12 64/4 65/18 89/17
Judge Gutierrez's [1] 47/16
late [3] 65/18 66/13 66/15
Judge Kaplan [1] 46/9
later [1] 46/24
Judge Kaplan's [1] 45/21
launched [1] 64/13
Judge Patel [2] 43/18 62/9
law [39] 2/3 2/4 2/7 2/8 2/12 2/15 2/15
Judge Sullivan [1] 34/5
2/16 15/15 18/3 18/9 18/16 19/15
Judge Walter [1] 40/14
20/15 20/16 21/11 22/4 23/2 23/11
judgment [2] 36/25 87/6
23/13 25/2 25/24 31/13 34/2 36/8 36/8
judicial [2] 56/24 104/8
37/2 40/11 40/23 45/19 46/23 48/1
JUI [3] 1/23 104/14 104/15
49/20 51/2 52/5 55/14 57/21 57/23
July [4] 9/10 64/14 65/4 89/17
60/10
July 2005 [1] 9/10
lawful [3] 72/12 72/14 83/13
July 2015 [2] 64/14 65/4
lawfully [4] 19/15 19/22 21/25 28/3
jumbled [1] 94/10
lawsuit [1] 40/20
jump [3] 71/1 93/15 96/20
lawyers [1] 67/18
jumping [1] 14/20
lead [2] 27/21 91/20
June [1] 64/16
least [9] 6/17 11/18 12/5 26/17 30/25
jurisprudence [1] 18/17
51/13 52/20 63/12 74/3
jury [1] 11/10
leave [2] 24/9 53/14
just [77] 3/20 3/25 4/6 5/12 6/7 8/3 8/19 led [2] 46/3 46/3
8/21 10/2 10/7 10/17 11/4 13/4 13/16 LEDA [1] 2/8
14/13 14/16 16/13 26/6 28/10 28/19
left [2] 20/21 54/25
29/12 31/5 35/1 35/23 36/7 38/8 38/10 legal [10] 18/20 24/24 36/19 36/20
38/11 38/13 41/13 41/16 43/14 43/21
40/17 40/21 40/21 40/22 54/19 77/1
45/18 45/25 46/12 51/25 53/18 54/1
legally [3] 4/5 26/18 58/17
54/11 54/13 56/7 56/10 56/14 56/18
legislation [1] 80/7
60/19 61/20 63/1 63/11 63/13 63/16
legislative [14] 17/13 18/2 24/14 44/4
63/22 65/7 66/21 68/1 70/4 72/21
44/15 44/23 45/1 46/18 80/4 91/13
72/25 72/25 73/19 77/18 81/8 85/20
98/8 98/12 98/25 99/4
87/1 87/20 89/10 89/11 90/24 91/5
legislator [1] 44/21
92/6 92/8 93/7 93/13 94/3 95/12 96/9 legitimately [1] 38/25
96/15
length [3] 26/21 72/16 79/12
justify [3] 24/18 37/21 59/1
less [1] 6/25
let [28] 5/12 5/19 10/3 11/6 11/14 13/3
K
16/2 16/11 26/11 29/23 31/8 31/23
Kaplan [1] 46/9
33/13 35/16 35/21 36/1 36/3 41/12
Kaplan's [1] 45/21
45/13 52/22 63/1 67/25 72/15 73/20
keep [3] 12/4 73/20 84/7
79/16 81/7 85/24 93/7
keeping [1] 85/11
let's [10] 4/6 6/1 6/10 11/7 37/25 68/12
keeps [2] 54/11 81/13
82/11 82/22 94/10 94/14
KELLY [2] 2/7 3/8
letter [8] 36/18 37/9 45/8 64/14 65/4
kept [2] 88/3 102/7
71/24 74/19 89/17
keys [1] 43/20
letters [3] 36/13 36/14 36/15
kidding [1] 3/20
level [1] 62/24
kimono [1] 57/1
leverage [2] 35/10 59/13
kind [8] 11/14 19/2 19/6 19/6 25/15
lex [1] 18/21
87/24 92/24 97/16
liability [1] 62/16
KLAUS [23] 2/7 3/9 10/1 11/9 14/24
liable [1] 49/4
15/17 16/3 16/4 26/12 37/23 61/16
liberally [1] 99/10
63/12 64/20 64/24 72/16 81/19 82/21 Librarian [2] 47/7 47/12
83/23 93/8 93/11 99/8 100/21 101/10 license [13] 34/16 35/9 41/5 50/13 69/4
Klaus's [2] 84/16 85/13
69/23 69/24 71/2 72/11 88/20 88/21
knell [1] 77/12
88/25 101/6
knew [2] 21/10 71/10
licensed [1] 26/19
know [23] 3/25 8/20 11/21 11/25 12/9 licensee [1] 64/5
20/19 29/9 30/19 30/23 30/24 53/10
licensees [5] 38/23 39/22 63/15 63/18
55/7 55/23 60/18 63/19 65/13 68/1
64/9
68/1 68/5 68/7 68/8 71/9 77/19
licenses [4] 30/15 38/25 59/12 72/6
knowing [1] 20/9
licensing [3] 35/10 58/12 59/13
knowledgeable [1] 73/5
light [1] 21/1
known [2] 36/14 70/22
like [26] 10/25 11/10 23/20 23/25 36/1
knows [5] 22/9 65/16 69/25 80/5 87/21 38/23 38/24 40/8 43/12 46/12 48/19
- A.179 -
L
L
making [24] 18/8 19/25 27/12 27/16
32/17 32/19 32/21 32/22 41/1 49/5
like... [15] 50/6 52/23 55/20 55/20 56/1
49/10 50/1 51/14 60/6 72/16 73/10
56/2 62/8 63/22 72/20 82/16 88/10
73/24 74/1 74/4 79/19 83/15 83/16
93/3 93/14 94/1 96/17
96/5 99/5
likelihood [1] 91/21
manger [3] 85/20 85/21 85/21
limit [2] 91/14 100/24
Manifestly [1] 59/14
limited [8] 37/8 44/3 54/25 71/9 73/12
manner [3] 23/10 96/24 98/23
76/15 79/23 98/20
many [13] 9/4 11/19 27/3 28/22 37/10
limits [1] 15/23
38/18 53/25 78/12 79/13 79/13 85/4
line [8] 19/4 62/21 71/1 74/14 93/13
101/17 102/1
93/17 94/4 95/12
market [4] 54/6 54/9 54/16 95/20
list [1] 47/11
marketed [2] 56/7 57/13
listed [1] 37/13
marketing [1] 64/7
lists [1] 17/9
markings [1] 36/17
literal [1] 24/8
MARQUART [4] 2/14 2/15 3/14 3/14
litigate [1] 36/25
Mary [1] 74/20
litigation [7] 20/12 27/8 35/24 35/25
Mary Beth [1] 74/20
68/14 71/7 76/6
mass [1] 50/12
litigator [1] 36/15
massive [1] 55/13
little [14] 29/15 35/12 38/1 79/9 81/15
master [5] 29/11 29/12 29/22 49/15
82/23 83/9 83/24 85/2 85/4 87/22 88/9
50/12
88/11 102/21
Matroska [1] 78/2
live [2] 36/4 61/15
matter [6] 11/24 15/15 77/1 92/15
LLC [1] 60/2
102/22 104/6
LLP [3] 2/3 2/7 2/14
maximize [1] 69/7
loath [1] 37/4
maximum [2] 79/12 87/14
lock [1] 43/20
may [35] 9/18 13/11 15/16 25/22 31/25
locks [2] 43/20 46/23
41/12 47/1 51/9 51/9 60/20 61/10
log [1] 64/22
61/14 72/20 86/1 88/15 89/24 91/2
logical [2] 84/23 102/14
93/4 93/12 93/20 93/20 94/5 94/8 94/8
long [10] 6/5 7/8 9/20 10/19 19/4 49/2
94/14 94/22 94/24 94/25 95/1 95/6
54/24 62/8 75/6 92/22
95/8 95/13 95/14 95/15 100/25
longer [2] 90/1 90/8
Maya [1] 51/4
look [10] 12/15 31/19 34/2 35/16 38/17
maybe [3] 62/10 86/7 92/7
45/20 53/23 54/13 54/14 91/2
MDY [4] 18/23 22/7 24/6 47/22
looked [1] 6/20
me [42] 3/13 4/3 5/12 5/19 6/8 11/6
looking [1] 61/23
11/14 13/3 13/12 14/1 14/21 16/2
looks [3] 21/11 44/22 44/23
16/11 26/11 28/16 28/20 28/21 29/23
LOS [5] 1/19 1/24 2/5 2/17 3/1
31/8 31/23 33/13 35/21 38/6 41/12
loss [2] 38/9 59/1
45/13 52/22 61/5 61/8 63/1 67/25
lost [1] 62/14
72/15 73/1 73/4 73/20 77/23 79/16
lot [10] 3/19 3/22 31/11 36/5 36/5
81/7 85/24 88/14 93/7 99/20 102/1
54/18 58/12 61/6 64/1 72/24
mean [5] 12/20 35/17 60/24 68/3 77/20
lots [3] 40/20 54/15 69/17
meaning [4] 25/1 46/14 57/7 70/6
low [1] 62/23
meaningless [1] 25/21
lower [2] 9/3 96/6
means [12] 15/18 16/7 21/6 31/18 42/8
LTD.LLC [1] 1/5
42/21 49/10 59/2 65/23 73/19 102/15
LUCASFILM [1] 1/5
102/18
meantime [1] 36/11
M
measure [10] 14/9 15/20 15/22 25/17
machine [1] 28/4
made [24] 10/17 18/3 19/9 21/21 27/3 41/19 42/8 42/10 42/16 42/17 74/7
measures [3] 42/25 43/9 85/10
29/11 30/12 33/10 33/24 34/6 39/8
mechanism [2] 47/6 82/1
42/23 44/5 46/21 48/11 48/17 49/13
Medical [1] 91/16
56/16 59/23 59/24 65/16 85/16 98/5
meets [2] 16/19 17/7
98/21
MEI [3] 1/23 104/14 104/15
Magazines [1] 51/4
Meldahl [4] 42/24 43/5 43/8 75/17
magnitude [1] 62/3
member [5] 44/25 73/11 79/20 92/11
mail [4] 58/18 67/2 67/4 102/4
92/12
main [1] 58/20
members [1] 6/18
major [2] 67/1 67/15
make [34] 4/1 4/9 4/25 8/3 13/4 13/16 memory [1] 63/13
mentioned [1] 65/1
14/13 20/24 24/24 28/19 33/11 39/5
merited [1] 62/13
40/10 42/2 47/23 48/21 49/7 50/2
messages [2] 67/3 67/4
53/18 59/16 63/16 63/23 77/7 77/10
method [1] 34/11
77/15 78/15 79/22 81/5 83/20 83/22
MGM [3] 43/16 67/2 67/5
84/21 87/7 94/3 96/7
middle [1] 52/13
makes [12] 5/7 5/14 8/4 32/22 37/4
might [20] 7/14 11/11 20/13 21/18
37/20 44/3 49/22 59/17 59/18 90/20
21/19 24/10 36/22 69/15 75/7 78/10
95/4
- A.180 -
78/25 79/7 79/13 80/23 80/23 80/24
87/7 90/16 90/19 96/2
Millennium [1] 13/7
million [11] 38/12 57/4 60/1 60/4 62/3
62/6 62/10 66/21 87/2 87/20 87/23
million and [1] 57/4
millions [3] 62/11 62/11 86/24
mind [2] 15/3 26/15
minds [1] 40/22
minimis [2] 18/21 68/14
minimum [1] 76/9
minute [4] 38/1 63/3 63/8 96/21
minutes [6] 9/20 13/12 51/19 54/1 91/5
93/4
mischaracterize [1] 72/10
misheard [1] 93/12
miss [2] 63/16 100/7
Miss Bennett's [1] 100/7
missed [1] 63/23
missing [1] 14/1
MISSION [1] 2/8
mistakes [1] 76/20
misuse [9] 22/9 22/13 22/15 22/17
22/18 22/19 34/18 34/20 48/7
model [7] 4/2 7/13 13/19 34/11 35/7
58/24 58/24
modicum [1] 11/11
modification [3] 9/11 74/22 74/23
modified [1] 9/9
modify [1] 89/19
moment [9] 8/17 27/19 42/13 46/8 63/2
65/1 76/5 93/10 93/18
MONDAY [2] 1/17 3/1
money [9] 8/4 33/1 38/8 39/6 40/5 41/8
50/2 60/6 87/24
Monge [2] 51/4 51/21
month [3] 86/17 86/17 86/19
month-over-month [1] 86/17
monthly [1] 87/19
months [3] 71/11 86/13 86/17
more [18] 7/16 8/14 8/15 11/4 11/18
11/19 25/6 37/10 37/20 38/3 38/4
38/14 62/10 65/5 68/25 76/12 101/25
102/6
morning [5] 3/8 3/12 3/22 27/3 31/11
most [7] 9/5 45/20 54/5 55/21 58/15
68/18 68/19
motion [16] 3/23 23/15 55/1 67/1 67/15
69/6 69/8 69/11 69/15 69/21 73/12
73/15 73/22 79/23 83/14 98/21
move [1] 68/12
movie [107]
movies [29] 8/12 9/4 27/12 27/17 30/16
50/16 51/6 51/6 51/10 53/3 57/12 65/3
65/5 71/16 72/17 73/2 73/2 73/6 89/10
90/15 90/17 92/6 92/21 92/22 93/16
95/21 96/1 101/15 101/18
moving [3] 34/4 66/23 91/6
Mr [3] 42/23 64/1 93/2
Mr. [87] 4/1 10/1 10/7 10/17 10/21
10/25 11/6 11/9 11/15 14/18 14/24
15/4 15/7 15/17 16/3 16/4 16/15 17/11
26/11 26/12 26/21 27/2 27/22 28/17
28/25 30/8 30/20 31/8 33/6 34/18
36/13 36/14 36/21 37/9 37/23 39/23
42/2 44/14 45/14 46/6 53/10 56/16
58/7 58/9 58/19 59/24 61/2 61/16
63/11 63/12 64/20 64/24 67/25 72/16
79/16 81/10 81/19 82/21 83/23 84/16
85/13 86/5 86/5 86/21 87/3 93/8 93/11
M
Mr.... [20] 93/12 94/10 95/10 95/18
97/10 97/20 98/2 99/8 99/10 99/14
99/17 99/19 99/24 99/24 100/9 100/16
100/21 100/22 101/10 101/24
Mr. and [1] 99/24
Mr. Cittadine [3] 39/23 86/5 86/5
Mr. Cittadine's [1] 86/21
Mr. Harmon [9] 30/20 36/21 58/7 58/9
58/19 99/14 99/19 99/24 100/9
Mr. Harmon's [1] 99/17
Mr. Klaus [21] 10/1 11/9 14/24 15/17
16/3 16/4 26/12 37/23 61/16 63/12
64/20 64/24 72/16 81/19 82/21 83/23
93/8 93/11 99/8 100/21 101/10
Mr. Klaus's [2] 84/16 85/13
Mr. Quinto [44] 4/1 10/7 10/17 10/25
11/6 11/15 14/18 15/4 15/7 16/15
17/11 26/11 26/21 27/2 27/22 28/17
28/25 31/8 33/6 34/18 36/14 42/2
44/14 45/14 46/6 53/10 56/16 59/24
61/2 63/11 67/25 79/16 81/10 87/3
93/12 94/10 95/10 97/10 97/20 98/2
99/10 100/16 100/22 101/24
Mr. Quinto's [5] 10/21 30/8 36/13 37/9
95/18
much [4] 12/25 39/3 48/18 101/8
multiple [2] 33/19 100/10
MUNGER [4] 2/3 2/7 3/9 64/21
music [2] 12/22 21/16
must [7] 9/15 15/10 15/11 16/16 16/17
21/12 86/2
muted [3] 12/20 12/20 12/21
my [21] 3/9 7/5 11/7 28/21 28/22 36/12
49/14 55/2 60/19 61/12 63/3 63/13
64/14 65/4 72/25 79/22 89/17 96/4
98/11 101/1 102/21
myself [1] 100/24
N
name [1] 93/8
Napster [3] 62/6 62/9 62/24
narration [2] 10/9 10/10
narrator [1] 10/15
nature [4] 35/25 51/13 53/2 53/2
necessarily [2] 44/18 73/16
necessary [1] 84/12
necessity [2] 4/17 25/18
need [11] 11/8 24/1 45/9 58/25 59/5
72/24 81/10 88/5 89/7 96/17 100/23
needed [3] 21/5 21/5 75/1
needle [1] 63/16
negate [1] 33/19
negotiate [3] 35/9 38/25 59/12
negotiations [3] 35/11 59/13 94/21
nest [3] 35/17 36/2 36/4
Netflix [4] 94/2 94/5 95/22 95/24
Netflixes [1] 95/18
Network [1] 47/18
neutral [2] 54/22 55/9
never [4] 7/18 21/10 35/2 89/14
new [10] 17/19 23/12 25/24 34/6 44/12
46/2 55/23 69/10 80/5 90/15
New York [1] 46/2
news [1] 37/15
next [6] 6/23 7/3 7/6 7/7 7/11 41/23
nexus [1] 19/2
night [1] 94/17
nightly [1] 94/25
Ninety [2] 53/12 53/13
- A.181 -
Ninety-six percent [2] 53/12 53/13
Ninth [15] 18/23 22/12 22/23 22/25
37/4 47/24 47/25 50/20 51/21 57/22
57/24 62/13 62/14 75/4 89/2
Ninth Circuit [14] 18/23 22/23 22/25
37/4 47/24 47/25 50/20 51/21 57/22
57/24 62/13 62/14 75/4 89/2
no [91] 1/9 3/4 3/20 5/2 5/16 6/5 7/16
13/6 13/8 14/8 14/8 14/16 16/21 18/18
18/18 18/19 19/7 20/21 21/23 22/2
22/3 23/2 23/23 24/21 26/4 27/17
27/24 30/2 31/4 31/13 33/9 33/10 34/6
34/21 38/15 41/10 41/18 45/9 46/21
47/12 47/20 48/2 48/3 48/4 48/6 48/13
51/15 51/19 52/23 53/19 55/11 55/14
57/22 60/13 61/10 61/12 67/15 67/16
67/19 68/2 73/4 73/21 74/6 74/17
74/18 74/22 74/23 74/25 75/5 75/16
75/18 75/22 77/2 82/15 83/13 85/19
85/20 88/5 88/8 88/24 89/13 89/13
89/13 90/1 90/7 93/3 100/19 101/12
101/22 102/7 104/15
nobody [3] 52/18 52/18 52/22
noises [1] 12/21
non [2] 18/21 98/18
non-infringing [1] 98/18
none [2] 31/14 31/14
nonsense [3] 13/13 92/9 93/1
not [167]
note [11] 5/19 6/3 16/13 22/23 23/2
64/18 66/9 66/25 68/13 80/3 85/25
noted [2] 11/14 74/11
notes [2] 27/4 102/21
nothing [15] 21/7 25/18 27/6 28/9 45/5
49/12 49/25 50/13 54/20 56/20 59/15
72/12 83/8 90/23 90/24
notice [2] 56/24 88/1
noticeably [1] 97/12
notices [1] 7/20
notion [3] 25/6 30/7 51/11
notwithstanding [6] 19/12 32/13 46/13
66/10 66/21 86/18
NOVEMBER [4] 1/17 3/1 37/17 86/18
now [46] 6/15 9/13 10/17 15/4 15/16
18/12 25/18 30/23 35/19 39/25 41/22
42/23 43/24 45/15 47/5 48/1 53/9
57/16 63/12 68/19 71/22 72/9 75/19
77/6 78/17 78/20 81/6 83/12 83/23
83/24 84/6 84/16 85/24 86/1 86/12
87/19 87/23 88/12 89/24 90/7 90/10
90/11 90/23 92/4 101/24 102/7
nowhere [2] 27/3 56/17
nudity [2] 68/20 96/2
number [19] 3/24 12/8 27/1 27/2 29/22
41/16 43/4 44/9 50/18 53/24 64/15
64/23 68/23 77/9 78/6 78/14 84/3 87/6
101/10
Number 1 [1] 29/22
Number 97,322 [1] 53/24
number one [2] 43/4 50/18
numbers [1] 84/24
numerous [2] 18/1 79/8
O
object [3] 10/6 10/21 14/24
objecting [1] 65/24
objection [2] 11/13 92/5
objectionable [4] 10/13 78/10 79/7
96/25
oblivious [1] 96/8
obtain [3] 25/7 36/10 41/6
obtaining [1] 76/21
obtains [1] 102/15
obvious [1] 74/25
obviously [5] 18/12 21/4 65/11 74/23
77/7
occupies [1] 85/21
occurred [3] 71/5 71/6 71/7
occurring [3] 21/16 21/24 22/18
October [1] 66/13
off [11] 3/25 36/7 36/24 60/19 61/12
64/16 76/8 87/5 99/12 99/23 99/23
offended [1] 96/2
offensive [1] 91/15
offer [8] 5/14 30/12 30/13 58/16 69/23
70/16 72/8 94/15
offered [1] 19/13
offering [12] 65/3 65/5 65/16 65/19
65/23 66/7 66/18 66/20 71/18 86/12
87/21 92/23
offers [5] 23/5 59/10 59/10 76/15 76/16
officer [1] 10/10
OFFICIAL [1] 1/23
often [1] 9/4
Oh [1] 61/10
okay [16] 5/6 6/11 6/13 13/2 14/1 16/2
39/15 41/12 63/25 64/11 70/5 77/15
78/19 81/12 91/4 102/9
OLSON [3] 2/3 2/7 3/9
once [7] 36/12 77/18 78/20 78/21
78/22 88/12 95/3
one [72] 3/17 5/3 5/3 5/10 7/12 10/6
12/11 16/10 18/7 21/11 21/18 24/13
25/6 27/11 27/13 27/20 27/21 28/17
28/23 29/5 29/6 29/11 29/12 29/25
30/11 30/20 33/4 36/21 38/18 40/1
40/14 40/18 42/7 43/4 44/22 44/23
46/25 48/16 49/14 49/15 50/18 53/23
54/7 55/2 57/12 58/6 62/8 63/1 63/12
68/3 68/4 68/25 71/5 77/19 79/4 80/6
83/18 85/1 85/4 85/11 85/17 87/25
92/6 92/6 92/25 94/12 94/15 94/17
97/5 99/1 99/9 99/21
one-night [1] 94/17
one-to-one [1] 5/3
ones [4] 38/13 40/4 61/24 91/2
ongoing [1] 37/21
only [27] 5/10 12/20 20/2 34/10 40/3
40/4 44/24 55/24 60/15 70/12 70/13
75/21 76/17 76/21 77/10 80/12 80/14
83/20 86/4 92/14 97/25 98/12 98/12
98/25 98/25 99/4 101/7
oOo [1] 103/5
open [5] 12/14 24/9 54/25 57/1 59/21
opened [1] 64/19
opening [8] 3/20 8/20 11/22 56/3 89/12
89/14 92/9 96/15
opens [2] 90/14 90/17
operate [4] 26/18 50/3 50/15 92/17
operates [1] 75/1
operating [7] 10/10 16/24 17/5 18/5
19/15 54/11 76/9
operation [1] 42/18
operator [1] 3/15
opinion [4] 23/18 39/16 46/3 75/4
opportunity [5] 11/1 11/4 13/15 63/5
63/7
opposed [2] 19/16 84/19
opposing [5] 14/15 14/22 27/4 64/4
75/9
O
page 941 [1] 22/8
page 951 [2] 18/24 22/24
opposite [1] 44/22
pages [3] 32/16 99/18 99/18
opposition [3] 43/4 45/17 53/23
pages 273 [1] 99/18
option [1] 90/8
paid [3] 5/10 5/13 60/2
options [1] 79/5
pains [2] 65/8 65/9
order [6] 4/9 58/16 66/10 80/20 84/8
palpitations [1] 6/21
102/24
paper [1] 63/17
orders [1] 62/3
papers [15] 3/24 13/17 13/18 24/20
ordinary [2] 42/17 87/12
27/4 31/5 31/14 31/15 43/17 43/18
original [7] 33/20 33/22 73/25 81/21
45/2 45/17 83/4 89/21 96/10
82/2 83/10 83/16
paragraph [3] 32/12 58/11 58/21
other [45] 7/19 10/23 13/3 22/8 23/17
paragraph 11 [1] 32/12
24/15 31/3 31/6 37/24 37/25 38/22
parents [2] 90/16 90/18
40/18 41/5 41/7 45/1 47/5 47/20 48/17
PARK [1] 2/16
49/17 50/17 54/15 55/17 59/16 60/20
part [6] 7/22 10/13 14/16 75/8 80/3
60/22 61/18 62/25 66/3 67/11 68/2
80/3
71/1 71/6 73/23 75/21 75/22 79/25
particular [11] 7/14 10/11 33/23 41/22
83/19 84/8 88/1 92/1 93/19 95/17
49/21 51/20 55/6 64/19 94/19 94/20
95/19 96/7 100/17
95/13
others [1] 29/13
parties [2] 23/6 35/23
otherwise [2] 15/23 42/9
parts [3] 9/5 78/5 78/7
our [23] 15/13 31/5 38/9 38/23 39/5
party [5] 22/18 79/22 82/13 82/14 91/6
39/9 39/20 40/1 43/5 43/16 43/18 45/2
passed [1] 27/6
56/23 58/14 58/25 59/4 60/6 76/7
past [1] 48/11
89/20 96/3 96/10 96/15 99/16
Patel [2] 43/18 62/9
ourselves [2] 40/9 59/8
pay [13] 7/7 38/16 38/20 40/5 67/18
out [50] 7/20 8/19 10/19 11/12 12/5
70/20 70/20 70/23 77/21 77/24 87/5
12/16 20/25 22/6 23/6 27/22 29/10
87/24 94/16
30/10 31/1 32/9 34/16 35/20 43/12
paying [3] 56/1 60/7 63/20
47/5 49/18 51/12 51/19 51/24 51/25
Pediatric [1] 91/17
52/2 52/4 52/8 52/16 53/14 54/23
pendency [1] 66/16
54/24 55/4 55/23 57/3 59/20 59/22
pending [4] 14/5 62/13 80/6 80/10
60/11 60/16 62/5 62/14 66/4 70/8
penumbra [1] 25/3
71/25 75/22 79/4 80/7 85/10 92/6 92/8
people [32] 6/21 7/14 7/19 7/24 7/25
92/19 96/10
8/24 8/25 11/16 25/24 26/7 27/13
out's [1] 30/24
27/16 35/19 36/16 51/7 51/18 52/20
outlines [1] 39/11
53/11 54/15 55/25 57/15 57/15 57/16
outrageous [1] 9/5
60/3 60/12 78/14 92/2 97/25 101/14
outset [3] 25/10 25/11 33/5
101/18 102/1 102/6
outside [1] 4/24
per [4] 68/1 78/21 78/22 87/15
outtakes [3] 9/4 9/7 69/18
perceived [1] 36/24
over [24] 6/4 28/5 29/18 29/21 29/21
percent [19] 8/11 8/13 11/15 53/7
30/22 51/9 52/21 66/17 66/20 67/3
53/12 53/13 57/3 58/25 64/15 68/25
70/22 81/25 81/25 86/13 86/17 87/22
68/25 89/8 89/8 98/1 101/11 101/14
89/8 90/12 91/17 93/5 97/17 101/13
101/16 101/19 101/23
102/7
percentage [2] 10/16 54/24
over-the-air [1] 70/22
Perfect [1] 50/20
overcome [1] 67/7
perfectly [2] 69/8 102/14
oversight [2] 45/3 46/10
performance [11] 32/23 50/4 50/5 50/9
owing [1] 92/2
73/13 79/24 98/14 98/16 98/17 98/22
own [9] 7/8 7/14 13/22 28/3 36/6 60/3
102/11
74/18 85/9 95/4
performances [1] 41/3
owned [6] 10/16 10/19 56/18 60/3
performed [1] 98/21
101/11 101/12
performing [2] 20/1 30/5
owner [11] 15/21 15/24 16/1 16/17
perhaps [3] 21/17 21/18 92/5
16/21 40/7 42/10 42/20 43/2 75/6
period [6] 22/17 40/3 61/8 84/10 95/14
92/11
98/3
owners [5] 17/10 30/15 39/7 60/7 94/22
permanent [4] 49/13 81/13 91/18 94/24
owns [5] 4/23 5/5 7/11 56/15 97/24
permanently [5] 10/16 10/19 56/18
101/11 101/12
P
permissible [1] 23/24
p.m [2] 63/10 103/4
page [12] 18/24 22/8 22/24 41/24 44/8 permission [2] 21/7 58/4
45/24 57/10 96/15 96/19 100/5 100/6 permit [2] 26/2 26/3
perpetuity [2] 6/6 6/14
104/7
person [11] 5/4 5/4 7/11 14/8 21/18
page 17 [1] 96/19
21/18 21/20 36/14 41/18 74/6 82/3
page 277 [1] 100/5
persons [1] 14/8
page 322 [1] 45/24
perspective [3] 26/17 34/10 51/14
page 70 [1] 100/6
persuading [1] 65/25
page 9 [1] 96/15
- A.182 -
Peters [2] 45/8 74/20
photo [2] 89/3 89/4
photograph [3] 51/20 89/5 91/1
photographs [1] 91/2
picture [15] 55/2 67/1 67/15 69/6 69/8
69/11 69/15 69/22 69/23 73/13 73/15
73/22 79/23 83/14 98/21
pictures [1] 37/18
pie [1] 62/20
pirate [5] 65/12 86/6 86/7 86/8 86/24
pirates [3] 86/10 86/22 86/24
place [2] 47/6 56/13
placed [2] 4/19 78/16
plain [3] 34/1 44/16 44/24
plainly [5] 29/7 40/24 42/14 50/25 99/3
plaintiff [2] 17/12 23/9
plaintiffs [8] 1/8 2/2 3/11 20/17 20/18
22/19 99/10 99/21
plaintiffs' [4] 59/8 67/12 68/4 86/25
plan [2] 35/6 35/6
plane [1] 52/13
planned [1] 65/19
platform [1] 59/5
play [7] 3/16 28/8 30/14 30/15 33/13
38/24 76/23
player [2] 60/24 80/21
playing [2] 23/5 34/14
pleaded [1] 87/4
pleadings [1] 42/12
please [4] 3/6 26/13 37/19 57/15
plenty [1] 87/23
plural [1] 60/15
plus [8] 43/9 65/16 65/19 66/6 66/18
66/20 76/23 87/21
point [44] 6/3 7/5 18/8 18/13 21/1 22/6
24/21 24/23 25/10 28/22 30/8 34/17
38/22 40/13 42/15 43/3 43/7 44/20
45/1 47/2 47/5 49/17 53/2 53/18 55/17
56/3 56/21 59/16 62/5 65/11 69/22
73/1 73/18 76/12 79/11 83/8 91/4 96/4
96/9 99/4 99/9 102/1 102/6 102/10
pointed [7] 30/10 49/18 57/3 59/20
60/11 71/4 96/10
pointing [1] 35/3
points [9] 10/6 10/24 31/4 31/8 37/25
39/24 50/18 54/7 95/2
POMERANTZ [2] 2/3 3/11
portion [3] 81/2 81/3 81/4
portions [4] 51/23 73/12 79/23 98/20
posed [1] 68/10
position [4] 26/23 29/24 52/7 88/12
positive [1] 68/22
possibility [1] 22/2
possible [5] 12/12 21/22 59/6 65/23
75/14
potential [2] 21/23 38/11
potentially [1] 77/12
power [1] 21/8
PowerPoint [1] 14/22
practical [2] 26/24 92/15
preamble [1] 32/12
precedence [1] 61/24
precise [2] 14/6 100/9
precisely [2] 23/14 25/10
preferences [1] 80/17
prejudice [1] 85/14
preliminarily [1] 85/25
preliminary [11] 3/23 34/24 36/10
50/19 66/12 66/13 66/15 66/16 67/11
88/2 88/6
P
provisions [4] 17/21 32/13 46/13 100/1
public [13] 18/10 20/2 41/4 50/4 50/5
preparing [1] 81/8
50/9 50/12 60/9 60/9 64/17 77/8 81/6
prerequisite [1] 22/21
86/13
present [1] 61/7
publicly [2] 20/2 30/5
Presley [1] 51/5
pulled [1] 66/4
press [2] 37/15 77/16
pulls [1] 82/2
presume [1] 34/22
purchase [9] 4/5 5/15 19/22 28/15
presumed [1] 86/2
33/17 33/20 33/21 94/23 95/7
presumption [1] 54/8
purchased [8] 7/17 7/18 21/25 28/3
prevail [1] 50/22
28/13 29/24 82/3 90/4
prevent [1] 65/22
purchaser [1] 73/2
prevents [1] 15/22
purchases [1] 34/4
price [8] 5/21 5/22 7/5 9/3 59/10 94/17
purchasing [2] 76/21 92/12
96/6 96/8
purpose [9] 17/18 44/11 51/7 51/22
prices [1] 6/20
66/6 89/7 90/22 90/25 96/21
prima [1] 24/11
purposes [6] 4/15 15/3 16/8 31/18
principal [1] 23/22
56/19 71/6
principals [1] 39/6
pursuant [1] 104/3
principles [1] 77/6
pursue [1] 58/3
printing [1] 77/16
put [31] 23/4 28/4 28/5 29/11 29/15
privacy [2] 18/11 26/9
29/25 31/1 31/6 33/10 33/18 34/21
private [7] 19/11 64/13 73/11 73/14
34/25 41/15 42/2 45/8 47/6 48/6 48/22
79/21 79/21 79/25
51/8 55/4 55/18 55/18 55/21 56/12
privilege [1] 64/22
58/6 73/3 78/4 81/14 99/16 100/20
privileged [1] 67/4
101/2
probably [1] 6/17
puts [2] 30/22 81/22
problem [9] 35/19 35/20 67/7 80/3 80/4
putting [2] 14/19 15/15
83/20 83/20 85/7 91/12
problems [3] 7/13 68/10 89/18
Q
proceeding [2] 47/7 91/7
quantities [1] 84/24
proceedings [4] 1/16 11/13 103/4
question [19] 10/24 11/2 24/9 26/4
104/6
26/16 34/8 43/25 48/1 52/5 53/9 53/15
process [9] 10/15 12/18 42/19 77/25
53/16 54/10 56/8 63/12 86/23 93/11
81/7 81/8 81/11 81/11 84/19
98/13 99/18
production [1] 72/18
questions [13] 3/25 4/2 11/7 13/3 26/14
profanity [2] 8/18 11/23
28/18 35/22 37/24 41/7 41/10 61/19
professor [1] 6/22
72/25 93/7
profit [3] 20/8 20/10 51/1
quick [1] 67/22
profits [1] 90/12
quicker [1] 96/12
program [2] 57/14 73/23
quickly [4] 50/24 65/13 85/5 91/2
programs [2] 49/23 49/25
QUINTO [49] 2/12 3/13 4/1 10/7 10/17
prohibit [1] 83/15
10/25 11/6 11/15 14/18 15/4 15/7
prohibited [4] 19/25 73/24 74/1 83/16
16/15 17/11 26/11 26/21 27/2 27/22
prohibitively [2] 77/11 84/18
28/17 28/25 31/8 33/6 34/18 36/14
prohibits [1] 26/3
42/2 42/23 44/14 45/14 46/6 53/10
projected [1] 37/10
56/16 59/24 61/2 63/11 64/1 67/25
promote [1] 57/8
79/16 81/10 87/3 93/2 93/12 94/10
promoting [1] 96/7
95/10 97/10 97/20 98/2 99/10 100/16
promulgated [1] 47/13
100/22 101/24
prong [1] 88/11
Quinto's [5] 10/21 30/8 36/13 37/9
propensed [1] 91/20
95/18
proposition [4] 48/7 86/6 86/8 88/19
quite [6] 5/20 13/25 15/14 24/15 44/9
prospectus [1] 56/25
65/15
protect [5] 16/7 16/16 19/19 43/1 46/23
quote [1] 60/19
protected [10] 14/11 15/11 16/22 19/20
quoted [1] 24/23
19/24 20/4 20/11 41/21 42/4 74/8
protection [8] 15/19 16/6 22/21 25/8
R
42/25 43/9 53/4 102/17
raise [2] 48/25 50/17
protects [2] 15/21 42/22
raised [11] 9/13 27/2 31/9 33/5 43/4
prove [1] 87/11
43/5 43/15 66/20 77/9 87/22 92/4
proved [2] 86/2 87/13
raises [2] 48/25 86/23
proverbial [1] 66/17
rampant [1] 21/16
provide [10] 17/21 18/4 18/4 18/13
range [2] 62/1 62/23
19/18 20/9 25/4 60/20 75/14 100/11
rates [1] 59/1
provided [6] 10/8 28/2 32/3 69/3 75/2 rather [3] 9/3 58/3 66/12
76/13
rationale [1] 66/24
provider [1] 69/3
ray [12] 5/22 29/4 43/1 43/10 69/17
provides [4] 16/18 73/9 73/21 74/12
70/10 70/18 71/15 72/7 76/18 81/24
providing [1] 27/11
92/19
provision [3] 14/6 46/2 48/13
- A.183 -
rays [1] 58/13
reach [2] 21/20 24/1
reached [1] 71/25
read [2] 17/25 89/21
readable [1] 83/6
readily [2] 84/22 85/4
reading [18] 14/7 15/19 16/5 22/12
23/1 23/20 23/25 31/5 31/5 41/18
43/22 43/22 96/11 96/15 98/15 99/20
100/5 100/8
real [2] 8/23 12/18
reality [3] 29/19 36/4 36/12
really [16] 8/18 26/16 26/23 33/14
35/25 38/2 53/19 55/20 57/2 60/12
60/15 67/23 76/16 88/24 95/9 101/4
RealNetworks [1] 43/17
reason [12] 22/22 31/15 34/18 35/5
49/5 51/16 55/11 55/14 74/25 85/6
89/16 96/23
reasonable [4] 61/8 61/23 77/8 87/24
reasons [7] 13/14 24/12 33/4 38/7
69/25 75/9 88/7
rebut [1] 54/9
receive [1] 38/25
received [1] 36/13
recess [4] 63/3 63/8 63/10 103/3
recitation [1] 72/24
recognized [3] 18/13 20/25 40/11
recommended [1] 74/24
reconcile [1] 18/14
reconstitute [1] 82/15
record [12] 3/7 10/20 25/5 35/1 45/9
56/17 56/20 64/8 71/7 72/3 98/13
101/23
records [2] 34/3 88/4
Redbox [1] 58/17
ReDigi [2] 34/3 88/1
refer [1] 15/17
reference [5] 10/18 25/6 42/23 46/7
56/17
referring [3] 23/21 75/19 75/23
reflect [2] 18/22 83/10
reflected [2] 76/12 91/13
reflects [2] 64/22 74/2
refused [1] 19/17
Register [4] 19/14 45/6 45/8 74/19
Regulation [6] 65/16 65/19 66/6 66/18
66/20 87/21
Regulation A [1] 65/16
Regulation A Plus [4] 65/19 66/18
66/20 87/21
regulations [1] 104/8
Reimerdes [4] 45/22 45/25 46/9 47/15
reintroduced [1] 80/7
rejected [2] 43/15 46/5
relates [2] 26/12 73/6
relationship [4] 24/2 39/22 40/5 94/20
relationships [1] 38/23
release [18] 69/10 69/13 69/14 69/15
69/16 69/21 70/17 70/20 71/10 71/11
92/16 93/18 93/19 94/8 95/3 95/5 95/6
95/7
released [8] 69/6 70/2 70/21 71/11
92/22 92/25 94/4 94/7
releasing [1] 71/16
relevant [2] 11/12 67/10
relief [2] 37/5 37/22
relies [1] 76/24
rely [1] 24/17
relying [4] 14/4 34/23 49/18 101/5
R
remain [2] 6/13 102/23
remains [2] 25/13 81/25
remarks [2] 10/17 24/16
remedy [1] 22/15
remember [4] 21/15 33/4 90/23 96/11
reminders [1] 57/15
remotely [1] 62/4
remove [2] 42/9 42/12
removed [1] 90/24
rendered [2] 98/18 102/11
rent [2] 94/25 96/17
rental [7] 58/10 58/11 59/24 94/18 95/9
98/2 102/5
rented [3] 8/12 8/12 57/7
repeated [2] 56/10 91/19
repeatedly [2] 40/11 55/19
repertoire [1] 55/3
reply [3] 24/20 43/6 100/7
reported [1] 104/5
REPORTER [1] 1/23
REPORTER'S [1] 1/16
represented [3] 9/10 19/8 64/20
representing [1] 11/9
reproduction [4] 34/7 48/20 48/21 49/9
republishing [1] 89/4
repurchase [2] 5/21 5/22
request [5] 5/14 56/24 66/9 80/16 84/9
requested [1] 97/25
requests [2] 81/16 84/13
require [1] 69/13
required [7] 16/24 18/25 19/21 62/20
70/24 74/23 101/8
requirement [4] 15/25 50/14 54/23 62/6
requirements [6] 14/12 16/19 17/7
32/20 97/1 97/2
requires [3] 9/14 28/16 42/18
requiring [1] 60/10
resale [1] 8/10
resell [1] 7/11
reselling [1] 8/5
reserve [1] 93/4
resolution [1] 91/1
respect [10] 38/8 44/4 53/6 53/8 55/17
64/8 64/9 65/22 84/19 90/15
respond [9] 16/14 43/5 61/9 61/13
61/14 63/5 63/7 87/3 93/4
responding [1] 58/7
response [13] 17/11 17/23 21/16 28/17
30/7 36/24 61/22 64/4 72/18 74/5
93/14 93/16 96/21
responses [1] 74/9
responsible [1] 84/15
restraining [1] 66/10
restricts [1] 15/22
results [1] 59/3
resume [1] 63/4
retail [1] 70/11
returned [1] 98/1
revenue [6] 8/7 19/23 22/1 33/16 59/1
69/7
revenues [2] 39/6 87/19
review [3] 3/24 78/15 102/21
ridden [1] 76/19
ride [1] 75/25
right [48] 3/21 5/12 7/7 8/8 15/4 15/6
15/21 15/23 16/1 16/17 16/17 16/21
19/10 20/5 22/16 23/10 23/13 25/24
26/11 32/5 32/25 35/18 36/10 39/25
40/6 40/7 43/1 48/21 48/21 49/6 49/9
- A.184 -
41/16 41/24 42/7 43/8 44/21 47/17
47/19 47/20 49/4 50/13 52/14 54/12
54/13 57/11 57/11 58/9 58/9 58/10
58/21 74/6 74/15 75/5 75/7 83/13 86/9
97/8 97/16 97/17 99/5 100/3 100/17
scenario [2] 7/5 26/18
scene [1] 88/16
scenes [3] 9/6 12/24 51/9
schedule [1] 66/15
scheduled [1] 66/12
screen [2] 14/14 91/19
screens [1] 14/19
SD [1] 59/2
se [1] 68/1
SEC [3] 59/21 59/22 65/17
second [17] 19/5 21/18 33/14 38/17
38/19 38/22 42/15 46/4 49/8 53/2
54/10 58/21 69/15 79/13 79/14 83/23
101/10
secondly [2] 15/10 92/15
seconds [6] 53/25 55/8 57/13 79/12
79/14 100/24
section [43] 14/3 14/3 15/18 16/6 16/8
16/9 16/9 16/10 17/6 17/8 17/17 17/19
17/22 23/7 24/3 24/4 24/11 32/8 32/8
32/9 32/13 32/14 41/13 41/15 41/22
42/2 44/2 44/3 44/11 44/13 44/18 45/6
46/12 46/12 46/14 73/8 74/6 74/15
S
75/2 95/21 98/19 98/24 104/3
said [58] 6/21 11/15 20/21 21/12 22/12 Section 106 [4] 17/8 32/13 44/3 46/14
22/25 27/1 27/18 27/24 28/17 28/23
Section 107 [2] 24/3 46/12
28/25 29/1 29/2 30/20 31/13 34/5
Section 110 [11] 17/6 17/19 32/8 32/9
34/18 36/21 38/19 40/14 42/24 43/18
44/2 44/13 46/12 73/8 74/15 75/2
44/10 45/1 45/9 45/15 46/9 46/17
98/19
46/18 47/22 49/24 50/10 52/23 53/12 Section 1201 [15] 14/3 16/6 16/8 16/9
54/4 55/19 55/22 56/21 56/22 58/23
17/17 17/22 23/7 24/4 24/11 41/13
68/2 68/8 74/22 76/4 78/11 83/20
41/15 44/11 44/18 45/6 74/6
86/12 91/24 92/2 97/21 98/11 99/19
secure [1] 43/2
99/22 99/24 100/5 100/11 102/1
Securities [1] 56/22
sale [5] 7/25 8/10 56/10 56/12 102/5
security [3] 39/3 61/21 62/2
sale/buyback [1] 56/12
see [14] 9/1 9/21 9/24 11/8 20/2 31/19
Salinger [1] 86/2
37/6 37/16 40/18 52/13 57/10 80/16
same [29] 5/8 6/2 7/1 7/3 7/6 22/23
85/4 102/24
22/23 23/18 29/20 30/12 41/3 41/4
seeing [3] 14/14 29/19 29/21
51/7 51/21 52/2 60/3 68/17 71/14
seek [2] 23/4 66/11
71/18 75/24 78/9 84/9 84/9 88/24 89/6 seeking [2] 14/6 58/3
95/1 95/6 95/8 96/19
seemed [1] 62/8
SAN [1] 2/9
seems [2] 14/21 73/4
sanitize [1] 25/11
seen [5] 14/21 25/22 51/24 52/12
satisfies [1] 89/7
99/25
Saturday [1] 10/8
Sega [1] 49/18
say [55] 6/10 6/11 8/22 10/23 12/20
select [2] 53/11 68/25
21/5 21/5 21/10 25/7 32/14 33/20
selected [4] 12/8 68/19 68/23 84/3
39/21 40/21 42/12 42/15 45/5 45/16
selecting [1] 10/11
46/21 47/9 47/22 49/1 49/1 49/3 49/6 selects [2] 84/1 84/2
49/8 49/9 52/22 53/10 54/23 55/7
self [1] 89/1
55/17 55/25 56/4 56/14 57/2 57/11
self-evident [1] 89/1
60/23 61/3 62/5 64/2 65/14 66/19
sell [19] 5/23 6/5 6/11 7/10 7/16 7/24
67/17 68/5 76/7 77/4 77/15 83/1 85/3
10/15 13/20 19/23 28/14 57/15 58/8
86/2 89/9 90/10 93/6 100/16 101/22
58/13 70/10 71/12 71/14 72/7 88/20
saying [29] 7/21 14/20 17/1 24/16
90/10
24/17 24/24 27/23 36/18 43/19 46/13 sell-back [2] 6/5 10/15
47/24 47/25 52/15 53/23 60/14 63/20 sellback [4] 90/4 90/11 101/12 102/8
67/15 67/17 67/19 70/25 78/22 79/3
selling [1] 56/9
81/19 82/16 83/3 93/13 95/11 96/12
semantics [1] 33/14
99/10
semester [1] 6/24
says [54] 4/4 5/16 5/17 10/15 14/7
Senate [1] 44/6
15/19 17/4 23/18 26/22 29/16 31/3
Senator [7] 17/15 17/25 44/6 44/22
31/4 31/24 32/25 35/20 36/8 37/2
45/1 98/10 98/11
37/15 37/19 39/19 39/23 39/25 40/8
Senator Hatch [4] 44/6 44/22 45/1
50/4 50/5 50/9 52/13 52/15 64/1 71/13
72/6 77/2 78/17 78/20 88/9 97/12
97/16 99/7 102/4 102/19
rights [13] 16/20 16/23 17/8 17/9 19/19
32/10 34/7 34/19 46/15 46/25 55/14
72/18 91/10
rip [4] 29/7 29/10 30/3 48/14
ripped [1] 49/15
ripping [4] 30/4 30/9 33/8 40/24
rise [1] 103/3
risk [1] 62/24
RJN [1] 44/9
robust [1] 102/20
Rogue [1] 3/17
role [1] 23/5
role-playing [1] 23/5
room [2] 1/24 37/15
ROSA [1] 2/8
Rose [1] 3/10
round [4] 99/13 99/13 99/13 99/14
rug [1] 66/4
rule [1] 71/3
Rulemaking [1] 47/7
run [4] 55/13 69/11 69/15 91/9
running [1] 59/3
runs [1] 67/13
RYAN [1] 2/15
S
sign [1] 76/19
significant [2] 35/10 62/11
Senator Hatch... [1] 98/11
significantly [3] 80/10 88/23 96/6
Senator Hatch's [1] 98/10
similar [2] 24/16 30/20
send [1] 7/20
simply [11] 33/11 37/7 43/22 47/14
sends [1] 81/17
49/1 55/4 60/5 69/2 72/3 84/11 100/19
sense [6] 26/24 82/5 82/25 83/5 83/5
simultaneously [3] 5/3 5/9 7/15
97/21
since [2] 86/14 86/16
sensitivities [1] 78/8
single [2] 44/20 95/9
sent [4] 45/8 65/4 71/24 101/18
site [6] 9/22 9/23 12/13 12/18 40/19
sentence [5] 14/2 14/7 15/5 41/17
57/9
44/20
sitting [1] 52/12
separate [5] 28/2 32/14 42/5 42/5
situation [4] 8/1 22/24 23/14 49/22
46/22
six [5] 53/12 53/13 62/23 67/1 102/2
separately [1] 77/17
skeleton [1] 43/20
September [1] 58/19
skipped [1] 51/9
September 29th, 2015 [1] 58/19
skips [1] 32/16
seriously [1] 64/25
sky [1] 62/20
serve [3] 24/10 77/10 95/19
slew [2] 37/16 37/18
served [2] 60/10 90/25
slides [1] 3/15
server [10] 29/12 30/1 33/10 33/18
slip [1] 59/23
33/24 34/5 48/22 49/14 72/17 73/3
small [1] 59/19
servers [2] 41/1 73/7
smartphone [1] 80/25
service [60] 16/19 16/24 17/5 17/6 18/5
smoking [2] 12/2 51/12
20/9 21/4 27/24 28/18 30/11 30/13
snippet [1] 56/2
30/13 30/19 30/22 37/11 39/1 39/19
so [139]
40/4 50/3 52/14 54/20 54/21 55/20
so-and-so [1] 63/21
55/23 56/4 56/7 57/8 59/24 60/16
Society [1] 91/17
60/17 62/9 64/13 64/17 65/23 65/24
software [2] 29/7 29/8
66/1 68/10 71/18 72/12 72/13 74/12
sold [12] 4/18 4/22 5/2 6/14 6/16 7/4
74/13 75/1 76/4 76/8 77/11 80/12
7/4 8/12 8/13 57/6 69/19 96/16
83/13 84/12 84/14 86/13 89/20 92/24
some [36] 4/2 8/17 9/5 9/11 10/2 10/24
94/13 94/14 94/20 94/22 96/3 96/18
11/11 11/16 13/3 15/14 17/15 18/25
99/23
19/2 26/14 28/19 31/3 31/6 31/8 34/12
services [20] 19/13 19/24 27/11 41/6
36/24 37/24 37/25 42/3 44/19 51/8
60/20 60/22 69/22 70/16 72/8 91/11
51/9 51/25 52/4 72/25 91/21 92/13
92/7 93/19 93/25 94/1 94/22 95/11
92/24 93/25 95/15 102/21 102/22
95/17 95/19 96/7 100/17
somebody [18] 9/23 19/18 21/25 25/1
sets [2] 17/9 32/9
28/3 29/16 34/15 34/16 40/8 43/14
setting [3] 54/20 55/13 97/5
43/19 46/24 49/22 57/7 60/24 78/15
several [10] 13/14 17/24 19/13 32/16
92/5 102/15
38/7 66/3 71/11 71/15 74/9 77/14
somehow [8] 34/12 52/19 62/17 72/11
sex [1] 12/3
82/13 82/25 91/9 95/10
shall [4] 14/8 14/8 41/18 74/6
someone [9] 7/3 7/6 10/9 28/12 28/15
share [2] 14/22 21/19
29/24 76/1 76/1 81/21
shared [1] 14/14
something [29] 8/22 9/1 9/15 9/17
sharing [3] 21/16 21/24 22/3
24/18 25/2 25/11 26/4 32/21 33/6 40/6
she [6] 7/8 10/11 45/7 74/22 74/23
42/22 43/7 44/21 45/7 52/23 61/3
90/10
65/15 72/1 79/14 79/15 79/22 84/12
shift [1] 72/15
84/13 84/15 85/11 89/25 95/23 100/22
short [4] 22/3 57/5 57/6 59/25
sometimes [1] 94/1
short-term [1] 59/25
somewhat [1] 73/4
shorted [1] 13/1
somewhere [2] 102/2 102/2
shorter [2] 3/19 79/13
Sony [3] 49/19 67/1 67/5
shortly [1] 65/20
sorry [6] 7/21 8/12 13/8 61/16 93/8
should [13] 14/22 33/20 40/25 45/7
101/21
47/11 62/20 65/10 67/10 78/22 87/17
sort [10] 4/11 34/13 36/1 36/24 37/25
87/17 87/24 93/6
63/15 63/19 66/17 82/16 88/11
show [4] 3/15 12/19 12/25 12/25
sorts [1] 9/24
showed [2] 45/10 46/19
source [1] 82/1
showing [5] 10/7 35/4 50/21 51/6 51/17
SOUTH [1] 2/4
shown [2] 31/16 69/10
Southern [1] 47/19
shows [7] 9/21 9/21 9/22 31/6 41/4
space [1] 85/5
53/3 56/16
speaks [2] 98/13 99/1
shredded [1] 83/4
special [1] 80/21
shredder [2] 82/17 83/4
specific [8] 4/23 12/16 24/17 25/6
shut [2] 61/12 99/12
44/24 49/21 81/16 99/15
shy [1] 87/2
specifically [7] 11/21 17/16 45/5 63/18
sic [1] 24/8
64/6 99/5 100/11
side [4] 29/25 47/20 62/25 80/3
specifications [2] 20/6 26/9
sides [1] 102/20
- A.185 -
specter [2] 92/4 92/25
speculate [1] 68/3
spend [1] 86/24
spent [2] 36/12 87/1
sponsor [1] 44/6
spring [1] 65/18
squarely [2] 43/15 46/5
stack [5] 28/20 29/4 29/13 29/25 56/9
stage [1] 50/19
stakeholder [1] 20/7
stakeholders [1] 19/20
standard [3] 59/2 69/6 76/17
standing [3] 10/2 16/3 61/2
stands [1] 100/16
Star [8] 3/16 51/17 51/18 52/8 52/8
81/21 88/15 88/15
Star Wars [7] 51/17 51/18 52/8 52/8
81/21 88/15 88/15
start [7] 3/25 6/19 24/19 24/25 25/1
31/23 59/19
start-up [1] 59/19
starting [1] 37/3
starts [2] 46/13 86/7
state [3] 3/6 18/16 48/1
stated [1] 81/12
statement [7] 13/24 17/25 44/24 95/18
98/10 99/2 101/24
statements [11] 18/1 18/2 18/2 18/14
35/1 40/20 44/5 44/7 44/14 59/17
59/18
states [9] 1/1 17/16 17/20 29/9 29/10
46/4 47/17 104/4 104/8
stations [2] 70/21 70/22
statistics [1] 12/4
statute [28] 14/17 15/2 16/21 21/6
27/15 31/10 31/17 31/19 31/20 31/25
32/7 43/23 44/16 44/23 47/11 49/7
50/13 55/9 73/21 82/12 83/12 83/12
97/2 97/3 97/7 97/8 98/8 99/2
statutory [3] 38/11 50/6 87/15
stay [3] 37/19 49/13 62/13
stayed [1] 62/14
staying [1] 58/17
stays [1] 49/16
stenographically [1] 104/5
step [1] 3/6
stereotypical [1] 86/6
still [14] 12/21 30/4 30/5 30/5 45/20
51/16 52/8 52/9 53/14 75/18 82/17
83/10 89/24 98/6
stock [7] 7/20 65/16 65/19 66/6 66/18
66/20 87/21
stop [6] 16/2 16/11 48/15 68/1 72/15
99/12
stopped [1] 97/12
stopping [1] 54/20
storage [1] 85/5
store [4] 5/24 6/12 34/4 80/19
stored [9] 6/6 81/20 81/24 81/24 82/6
82/22 82/23 84/6 84/25
stores [1] 81/13
story [1] 52/2
strategy [2] 58/3 59/7
stream [25] 19/23 25/8 25/14 25/15
25/15 26/19 29/20 30/16 30/16 30/18
30/22 31/2 40/4 49/11 50/2 50/15 53/9
58/14 70/12 72/6 73/7 76/17 92/21
94/5 101/6
streamed [15] 4/9 4/12 9/3 13/22 19/11
25/25 33/6 48/23 69/3 71/14 71/16
S
streamed... [4] 71/19 75/14 80/1 98/4
streaming [38] 4/15 29/18 41/3 41/5
50/2 50/11 50/11 50/15 51/6 51/10
54/21 56/14 60/17 65/3 68/10 69/22
69/23 69/24 70/2 70/15 71/1 71/13
71/17 71/19 72/5 72/10 79/17 79/25
80/15 88/20 88/21 88/25 92/7 93/25
94/13 94/13 95/19 97/12
streams [3] 5/14 30/14 94/15
STREET [2] 1/24 2/8
strictly [1] 100/25
strikes [1] 88/14
strong [1] 96/2
studies [1] 91/18
studio [7] 21/2 24/13 55/2 76/5 92/25
95/4 100/10
studio's [3] 23/15 28/9 86/9
studios [80] 9/10 16/22 19/3 19/12
19/20 19/22 20/9 20/13 20/24 21/5
21/8 21/9 21/10 22/1 22/7 24/20 25/23
26/4 26/10 27/23 35/1 35/2 35/2 35/9
43/16 61/6 64/6 64/14 64/18 64/24
64/24 65/4 65/6 65/11 65/20 65/21
66/2 66/3 66/9 66/22 67/1 67/3 67/15
67/21 68/2 69/1 69/3 69/7 69/16 69/21
70/10 70/17 70/19 71/4 71/6 71/10
71/22 72/7 72/9 76/3 76/6 76/11 77/3
77/4 77/8 77/10 77/13 78/21 85/15
85/19 86/14 86/19 87/11 88/18 89/14
89/18 90/6 90/13 100/10 101/4
studios' [2] 66/25 87/1
stuff [3] 13/13 14/14 93/1
subcategories [5] 12/11 12/15 12/16
78/12 79/8
subject [8] 14/4 27/22 47/1 47/4 94/21
97/1 97/2 97/13
submission [1] 102/23
submit [11] 24/12 35/13 40/23 43/25
66/24 71/23 72/3 76/5 77/1 86/24 88/7
submitted [3] 15/13 56/23 65/8
subscription [1] 94/1
subsection [9] 17/6 41/17 41/23 41/24
41/25 42/17 73/9 74/12 75/2
Subsection 11 [4] 17/6 73/9 74/12 75/2
Subsection capital [1] 42/17
substantiality [2] 53/5 53/8
succeeded [1] 66/22
successful [1] 77/3
such [11] 19/24 20/10 21/4 73/22
75/18 77/11 81/1 88/1 90/16 91/19
98/22
sued [4] 19/12 19/15 36/23 56/13
suffering [1] 26/10
suffice [1] 85/12
sufficient [1] 90/1
sufficiently [1] 75/11
suggest [2] 87/7 100/1
suggested [3] 69/1 91/8 92/18
suggesting [1] 94/4
suggests [1] 17/13
suing [1] 20/13
suit [5] 36/9 37/11 65/7 65/20 67/5
Sullivan [1] 34/5
supplemental [2] 56/24 76/13
support [7] 34/22 66/8 99/12 99/23
100/11 100/19 101/23
supported [2] 44/16 48/7
supposed [2] 5/1 34/25
supposedly [1] 33/7
- A.186 -
testify [1] 19/18
text [3] 32/7 32/17 41/15
than [12] 7/16 11/19 12/9 38/3 38/4
51/19 58/3 62/10 68/25 90/25 94/17
96/6
thank [14] 10/5 15/8 32/6 53/1 63/1
63/9 63/25 90/13 100/21 101/3 102/19
102/25 103/1 103/2
that [782]
that's [67] 7/12 7/22 8/4 8/6 8/23 9/7
9/19 10/19 16/10 16/10 27/13 29/2
29/8 29/18 33/11 34/9 34/18 42/16
42/21 43/22 47/23 47/24 49/15 49/16
50/19 51/1 51/17 52/15 52/17 53/6
T
53/15 54/1 54/3 54/12 54/24 55/15
Tab [7] 32/7 41/16 44/7 58/6 58/18
57/13 57/16 57/23 61/11 61/12 62/20
98/11 99/16
63/17 63/22 67/9 68/4 69/8 69/11 70/8
Tab 13 [1] 58/18
71/4 74/14 79/9 80/2 80/6 81/24 85/17
Tab 15 [1] 99/16
87/23 93/17 94/18 95/7 95/23 98/12
Tab 3 [1] 32/7
99/4 100/14 100/19 101/13 102/17
Tab 5 [2] 44/7 98/11
theaters [2] 69/11 69/15
Tab 7 [1] 58/6
theatrical [2] 69/13 69/14
Tab Number 1 [1] 41/16
theatrically [1] 69/10
table [1] 3/11
their [58] 18/11 19/20 20/6 20/6 22/8
tablet [1] 80/24
24/20 24/21 24/23 24/23 26/8 26/8
tag [2] 78/9 79/6
26/9 27/3 28/3 28/4 30/11 31/14 31/15
tagged [2] 79/15 83/9
33/17 33/20 34/21 34/23 35/16 35/21
taggers [3] 78/5 78/6 78/7
36/6 37/15 39/5 39/6 39/7 39/7 42/11
tagging [1] 78/11
42/11 42/13 43/4 45/17 49/15 50/18
tags [3] 78/16 79/7 83/10
50/22 56/24 57/4 57/9 57/14 57/19
take [19] 6/22 12/16 21/9 27/4 29/5
59/23 59/24 59/25 69/23 72/6 80/23
29/6 36/7 51/25 52/7 52/16 54/18
80/24 80/24 80/25 85/9 88/21 89/21
54/23 56/2 61/10 62/7 63/3 63/8 94/14 90/19 95/21 98/1
102/21
them [41] 5/17 6/12 12/14 13/21 19/11
taken [6] 29/22 51/19 51/24 53/14
20/20 25/8 26/15 27/3 27/4 29/20
54/24 63/10
37/14 37/18 48/13 48/18 50/2 50/23
takes [2] 26/22 81/22
58/14 62/14 62/15 67/18 68/8 68/13
taking [6] 38/10 51/11 52/2 52/4 64/25 69/20 70/11 80/20 82/15 85/22 89/19
89/3
94/11 94/25 95/1 96/1 96/3 96/5 96/8
talk [13] 3/22 8/16 26/21 35/21 35/24
98/1 99/23 100/18 101/18 102/4
37/25 61/21 63/14 63/15 63/19 72/16 themselves [4] 60/7 90/17 90/18 95/23
82/22 88/9
then [70] 4/8 4/18 4/19 4/19 5/15 5/17
talked [1] 84/16
6/12 6/13 7/2 7/10 7/10 7/23 7/25 11/7
talking [10] 31/11 58/20 58/22 62/25
13/20 13/21 13/21 14/19 16/13 17/20
82/4 82/18 82/20 82/21 83/24 101/17
20/22 21/19 23/11 25/4 25/7 25/17
talks [1] 94/12
27/16 28/13 28/15 29/1 29/11 29/23
techniques [1] 64/7
32/16 33/10 34/10 35/8 36/24 40/10
technological [11] 4/16 14/9 15/20
43/25 47/1 52/11 52/17 58/13 58/18
25/17 25/17 41/19 42/8 42/9 42/15
59/12 60/25 60/25 63/4 63/7 69/14
74/7 85/9
70/12 70/12 70/13 70/13 70/19 72/16
technology [5] 9/11 28/5 34/15 73/23
73/21 74/4 76/2 79/8 80/1 81/9 81/15
77/17
86/16 91/23 92/18 93/19 97/20 102/16
teenagers [1] 18/9
102/25
television [4] 41/4 70/20 70/22 80/22
theory [2] 20/11 66/8
tell [7] 9/20 14/1 25/23 30/23 36/19
there [180]
38/6 99/20
thereby [5] 9/2 9/2 21/21 25/8 102/16
telling [1] 79/21
therefore [6] 7/15 18/19 38/20 43/13
tells [1] 48/13
51/13 88/5
TEMPLE [1] 1/24
therein [1] 74/13
temporary [2] 49/16 66/9
these [17] 11/12 13/16 13/20 13/20
ten [4] 55/7 63/3 63/8 79/12
14/19 35/22 43/11 46/23 55/13 55/25
ten-minute [2] 63/3 63/8
67/11 72/17 73/4 73/6 83/24 95/17
tenable [2] 43/21 43/22
96/1
tenor [1] 52/1
they [256]
term [7] 6/19 6/23 49/20 57/5 57/6
they'll [2] 55/4 55/4
59/25 81/23
they're [24] 6/6 11/22 26/19 28/14
terminated [1] 87/22
29/21 35/5 37/17 38/13 39/16 40/3
terms [8] 17/5 40/24 59/14 66/1 74/19 40/4 45/15 49/13 50/1 50/1 51/17 56/9
76/4 76/7 76/10
56/10 58/22 65/12 68/4 70/3 70/5 96/6
test [3] 37/9 54/3 64/13
they've [6] 6/15 58/7 59/23 60/1 62/2
Supreme [2] 54/4 85/8
sure [21] 4/1 4/25 5/7 7/22 8/3 13/4
13/16 14/2 14/13 14/24 28/19 37/24
53/18 63/16 63/23 64/1 72/20 73/8
78/15 94/3 94/10
surely [1] 88/20
surprise [1] 90/11
surviving [1] 75/21
suspicious [1] 100/3
system [15] 8/25 9/9 9/11 9/25 10/25
19/19 21/2 55/16 57/17 58/15 58/23
75/24 76/1 76/14 89/23
Systems [1] 39/10
T
they've... [1] 91/10
thing [18] 7/1 10/23 21/8 35/18 36/21
37/16 38/22 47/5 49/8 54/10 57/10
58/8 68/3 68/4 88/24 90/2 92/6 92/6
things [24] 11/24 12/5 22/8 27/1 28/17
28/23 35/25 36/18 40/14 40/18 52/4
52/8 55/19 62/7 78/9 82/5 82/21 83/9
91/15 91/15 92/1 92/1 95/22 99/25
think [35] 8/23 11/11 13/5 17/15 24/15
31/22 34/1 36/19 44/3 45/20 47/9
51/24 51/25 52/20 53/12 54/1 54/19
55/11 56/11 57/21 58/1 59/3 62/16
67/13 80/1 81/11 81/19 82/4 82/21
83/23 87/17 89/1 97/20 101/18 101/25
thinks [1] 30/20
third [5] 50/4 53/5 79/21 82/13 82/14
this [150]
those [46] 8/5 8/15 9/7 11/21 17/7
18/14 19/4 20/23 24/12 27/17 27/21
29/14 29/15 33/15 38/12 38/12 38/13
38/20 39/25 43/10 46/15 49/19 52/8
57/23 59/13 69/19 72/5 73/1 75/9
79/14 81/15 82/12 82/14 82/23 83/1
83/7 84/4 87/16 88/7 90/18 92/22 95/1
95/11 96/1 96/23 98/18
though [6] 44/16 45/16 51/23 82/13
89/5 97/25
thought [8] 11/15 44/15 44/18 45/7
55/11 62/13 89/22 93/12
thousand [1] 37/10
thousands [3] 29/20 77/21 77/24
threat [1] 66/22
three [7] 20/17 47/8 51/19 52/20 67/14
67/14 93/4
threw [1] 44/14
through [39] 4/3 4/5 4/25 5/12 9/23
10/22 11/7 11/14 12/14 13/3 13/13
13/17 14/21 15/4 16/12 36/25 39/7
43/20 44/2 46/17 46/23 50/5 50/23
58/8 59/23 69/6 72/21 72/21 73/1
76/22 78/1 78/9 82/16 83/4 84/18
92/16 94/16 96/3 97/10
thumbnail [5] 89/3 89/4 89/4 90/23
90/25
tied [1] 80/22
time [25] 7/17 12/19 14/25 18/16 18/22
21/12 27/8 29/24 30/21 31/13 35/20
40/3 56/3 61/7 62/8 63/8 64/12 71/14
71/18 72/23 72/24 79/4 90/11 94/4
102/21
times [3] 33/19 66/3 85/4
timing [1] 100/4
tiny [4] 79/9 81/15 82/23 83/10
title [12] 14/11 15/11 15/22 15/24
17/22 32/14 41/21 42/4 46/12 74/5
74/8 104/4
Title 17 [3] 15/11 17/22 46/12
titles [4] 37/13 37/17 39/24 39/25
today [10] 3/23 4/17 9/3 12/6 25/14
37/15 75/18 81/5 87/1 98/2
together [1] 94/10
told [4] 26/2 47/10 89/18 100/18
tolerated [1] 77/2
TOLLES [4] 2/3 2/7 3/9 64/21
too [2] 24/9 28/22
took [5] 29/25 53/24 64/16 65/8 65/9
top [4] 31/2 58/19 60/19 75/25
total [4] 18/8 18/14 96/16 101/20
totally [2] 84/20 85/13
- A.187 -
touched [2] 17/12 17/12
track [1] 12/21
transactions [2] 57/4 59/25
transcript [5] 1/16 99/17 100/6 104/5
104/7
transform [1] 52/16
transformative [11] 50/25 51/2 51/14
52/17 52/24 88/11 89/2 89/3 89/5
90/14 90/20
transmission [5] 97/13 98/13 98/17
98/23 99/1
transmit [3] 74/4 80/1 81/17
transmitted [8] 25/20 32/23 73/13
79/24 84/5 98/4 102/12 102/13
transmitting [1] 41/3
treatment [1] 42/19
tremendously [1] 64/17
Triad [1] 57/24
trial [1] 101/1
tried [2] 27/4 72/9
Triennial [1] 47/7
Trolls [2] 88/14 88/15
true [8] 66/24 81/14 93/17 95/13 95/15
95/15 102/5 104/4
trust [6] 23/1 23/11 23/13 23/16 34/23
75/9
truth [1] 72/13
try [7] 9/12 24/14 34/16 35/8 42/2
59/12 85/10
trying [10] 8/3 25/2 25/12 30/21 46/6
51/25 65/22 66/6 91/14 92/17
tuned [1] 37/19
turn [9] 35/3 36/2 36/3 41/8 41/12
41/14 45/13 70/24 85/24
turned [3] 36/10 60/1 62/13
turns [1] 59/22
TV [1] 53/3
Twelve [2] 101/14 101/16
Twelve percent [2] 101/14 101/16
TWENTIETH [1] 1/5
two [32] 5/2 5/9 5/25 8/14 8/15 10/6
11/18 11/19 12/9 14/12 15/9 27/10
27/10 31/24 33/4 48/17 49/23 49/24
51/18 53/11 53/24 71/4 72/5 79/14
80/5 82/4 82/21 86/17 87/16 87/17
94/14 95/2
two-hour [1] 53/24
twofold [1] 50/8
type [9] 27/11 39/4 39/12 40/11 41/5
55/6 55/15 60/21 62/24
types [2] 27/10 94/15
typically [2] 69/16 70/19
61/6 79/11 81/11 94/3
unfairly [1] 69/1
unfiltered [4] 70/7 71/19 82/20 102/3
Unfortunately [1] 28/21
unfounded [1] 24/13
UNITED [7] 1/1 29/9 29/10 46/4 47/17
104/4 104/8
United States [4] 29/9 29/10 46/4 47/17
universal [7] 45/22 67/2 67/5 71/3
92/21 92/21 92/24
unlawful [1] 24/25
unlawfully [1] 102/15
unless [4] 21/7 48/13 58/11 61/18
unnecessary [1] 84/14
unreasonable [1] 65/10
unsatisfactory [1] 76/16
until [11] 47/2 58/13 63/6 63/6 70/10
70/17 92/19 92/24 93/18 102/23
102/25
up [30] 10/2 12/15 14/19 14/20 15/2
16/3 29/25 31/20 39/14 42/2 44/14
54/20 55/13 58/16 58/17 59/11 59/19
61/2 61/20 73/6 76/19 79/9 81/15 83/9
83/11 85/2 85/3 90/7 90/17 91/5
upfront [2] 5/11 5/13
upon [2] 17/12 17/12
urgent [1] 100/22
us [15] 6/17 10/8 21/7 25/23 30/25
31/4 33/2 35/3 36/19 36/25 38/9 38/24
49/11 76/5 88/20
USC [5] 15/17 17/6 32/8 74/6 74/11
use [50] 5/4 13/6 13/8 24/2 24/6 24/7
24/10 27/18 28/21 29/7 29/7 29/10
30/21 33/19 39/19 43/12 45/13 45/15
46/6 46/10 46/11 46/14 46/20 47/2
47/4 47/18 47/21 47/24 48/2 48/5
50/17 50/18 50/22 50/23 50/24 52/16
53/6 54/8 55/15 55/21 56/2 56/4 66/2
76/10 77/16 81/5 88/10 89/4 89/5
90/22
used [14] 6/25 7/4 7/18 8/12 24/24
29/14 34/4 41/24 57/16 68/15 70/21
75/8 80/12 81/25
user [8] 28/24 39/4 53/23 55/18 56/15
58/7 59/11 78/25
users [15] 27/17 35/8 37/8 37/10 50/2
55/19 57/14 59/5 59/11 62/10 64/15
68/24 85/16 96/8 96/12
uses [3] 75/24 78/6 78/7
using [3] 6/22 35/19 89/4
Utah [1] 27/8
utilized [1] 26/23
U
V
U.S [1] 1/3
ultimately [2] 97/5 97/21
unaltered [1] 83/22
unapproved [1] 77/17
unauthorized [1] 33/25
unconstitutional [1] 14/7
under [41] 14/11 15/11 15/21 15/24
16/18 16/21 17/2 17/2 18/5 19/1 19/7
19/15 21/13 22/4 22/5 22/21 24/2 25/3
25/12 26/18 34/17 39/3 39/3 39/4
41/21 42/4 49/6 50/23 51/2 52/5 55/14
72/6 72/14 74/8 74/11 91/24 92/10
92/17 102/12 102/13 102/23
undermine [1] 84/21
understand [15] 4/1 5/13 6/7 7/2 8/4
11/9 13/16 13/18 14/18 24/14 53/18
value [5] 6/5 8/11 58/16 101/12 102/8
varies [1] 94/20
various [6] 11/25 24/12 32/10 36/17
47/8 78/5
vault [6] 4/19 4/25 6/14 29/15 29/18
58/14
vein [1] 63/14
verbatim [2] 53/7 54/2
verbiage [1] 17/15
version [18] 3/18 4/9 15/2 70/7 70/9
73/22 74/1 80/11 80/11 80/12 80/14
83/14 83/17 83/21 83/22 91/3 97/6
97/6
versus [12] 3/5 18/24 22/7 34/3 38/18
45/22 46/4 47/17 49/18 49/19 50/20
51/4
V
very [23] 10/13 18/15 21/8 25/10 36/14
37/16 46/3 49/21 49/21 57/9 57/20
58/19 61/4 65/2 67/22 69/20 77/3 78/1
88/3 89/16 97/12 99/10 100/8
veto [2] 21/8 26/10
vicinity [1] 102/3
VIDANGEL [122]
VidAngel's [11] 10/9 23/16 47/13 61/5
64/7 72/10 76/3 84/14 85/16 87/19
90/12
video [17] 3/15 4/8 7/4 9/19 10/3 10/7
10/8 10/14 10/22 11/5 11/8 14/19
57/10 73/12 79/23 96/18 98/20
videos [2] 55/22 55/25
view [5] 8/10 28/10 44/16 53/19 95/22
viewed [2] 65/10 78/3
viewing [3] 19/11 73/14 79/25
views [1] 95/16
violate [6] 13/19 17/7 17/8 46/25 48/12
66/1
violated [2] 34/6 48/11
violates [2] 23/11 72/17
violating [2] 13/23 76/7
violation [21] 13/7 17/14 17/17 24/11
25/2 25/9 42/5 43/24 44/10 44/18
46/15 46/22 47/3 48/20 48/21 49/8
74/18 75/9 76/4 76/10 99/4
violations [1] 24/4
violence [8] 8/18 9/6 11/23 12/2 51/12
52/1 91/19 96/2
violent [2] 51/23 91/21
virtue [2] 67/18 98/19
vis [2] 16/24 16/24
vis-à-vis [1] 16/24
vision [1] 88/23
voice [1] 12/20
W
wait [10] 36/9 70/10 70/17 70/24 71/20
71/25 92/18 93/13 93/17 95/12
waited [1] 65/6
waits [1] 5/25
walk [4] 4/2 13/12 72/21 72/25
walking [1] 9/23
Walter [1] 40/14
want [46] 4/1 4/4 6/3 6/11 7/14 7/19
7/25 8/22 9/1 11/1 13/4 13/16 14/13
22/7 28/19 34/17 35/2 35/23 41/8
53/18 59/25 60/12 61/3 61/6 63/12
63/16 63/22 70/8 70/9 72/25 80/18
80/19 80/21 80/23 80/24 80/25 80/25
81/5 89/24 90/10 91/3 91/6 92/3 94/3
100/8 102/6
wanted [11] 7/9 9/10 19/9 21/9 21/20
55/3 66/14 71/19 77/7 92/20 92/22
wants [4] 7/3 7/6 81/21 95/5
Warcraft's [1] 24/7
warehouse [1] 58/14
warn [1] 71/25
WARNER [4] 1/6 20/18 92/20 92/23
Warner Bros [3] 20/18 92/20 92/23
Wars [8] 3/16 51/17 51/18 52/8 52/8
81/21 88/15 88/15
Wars' [1] 96/14
Wars,' [1] 4/4
Wars.' [1] 96/16
was [121]
wasn't [5] 8/25 43/4 45/2 46/10 99/2
watch [44] 4/4 5/8 5/10 6/11 7/3 7/6
- A.188 -
100/16
7/17 7/19 9/2 9/2 9/14 9/19 11/20
where [24] 8/6 10/15 10/25 12/19
13/22 18/10 20/5 25/24 26/7 60/25
12/25 16/13 17/16 26/18 34/12 37/20
70/1 70/3 70/4 70/6 70/6 70/7 70/9
39/2 40/3 43/18 45/19 47/2 49/22
70/14 71/19 77/21 78/15 80/18 80/23
51/25 58/22 70/11 74/17 74/17 94/16
80/24 80/25 81/21 89/9 89/10 90/16
94/23 98/8
90/18 90/19 96/3 96/23 96/24 102/6
whereas [1] 16/6
watchable [1] 83/7
whether [20] 24/9 42/21 42/21 43/7
watched [3] 8/13 8/13 22/2
44/1 45/4 45/6 50/24 50/25 52/5 56/8
watches [1] 21/24
63/23 67/10 67/11 75/14 85/17 93/25
watching [4] 10/3 68/24 69/3 80/22
94/1 94/12 95/13
way [24] 14/4 21/20 31/1 31/3 31/7
31/14 33/11 34/12 51/20 52/16 54/11 which [48] 11/12 11/13 12/15 14/3 14/4
15/11 15/14 16/18 17/9 17/9 17/19
55/10 56/6 56/6 57/8 57/13 57/16
22/9 27/5 27/21 27/22 32/14 36/13
58/15 59/9 61/1 75/20 82/15 89/23
39/11 43/8 43/9 43/12 43/16 44/3
98/12
44/24 45/8 46/4 46/5 47/17 48/8 51/16
we [139]
51/20 54/4 56/17 58/6 62/3 69/7 77/19
we'll [6] 42/13 58/9 58/12 59/12 63/4
78/2 78/22 82/1 82/5 82/23 83/5 87/22
63/8
91/2 98/4 98/4 98/10
we're [24] 13/4 16/12 28/19 31/11
while [4] 22/18 25/18 58/17 61/20
36/18 36/19 36/20 39/19 39/20 40/9
who [31] 3/15 5/4 5/5 8/14 18/12 21/21
40/9 40/10 40/21 40/21 41/14 41/16
47/25 49/9 56/14 59/3 62/4 62/24 77/5 21/24 21/25 23/5 27/16 29/20 38/24
40/4 44/6 55/19 55/25 60/3 60/12
95/11
we've [14] 26/2 48/17 49/18 51/3 51/5 60/24 64/5 67/2 71/19 78/15 85/20
89/9 90/16 90/18 92/11 93/20 93/22
57/18 57/25 58/6 59/20 61/24 62/21
102/6
71/9 87/20 97/16
whole [11] 14/22 29/13 32/9 37/16
Web [3] 9/22 9/23 57/9
37/17 37/18 40/19 44/14 81/7 84/19
Web site [3] 9/22 9/23 57/9
92/16
weed [1] 85/10
why [22] 9/7 10/11 11/6 34/19 38/6
week [1] 95/14
44/15 44/18 58/7 58/22 63/3 63/20
weighed [1] 87/18
65/9 66/14 68/16 69/5 77/13 77/23
weight [1] 36/6
81/3 82/10 95/17 95/20 97/11
well [38] 5/19 9/18 17/24 21/5 22/22
widespread [1] 55/15
22/24 23/16 23/17 25/1 25/15 28/16
WikiLeaks [1] 99/25
34/20 36/14 37/22 39/17 43/8 49/9
49/12 54/10 56/14 60/11 64/12 67/12 will [63] 3/15 3/25 4/2 6/1 6/23 7/18
9/20 10/3 11/3 11/8 12/18 12/20 12/25
69/25 72/6 73/8 74/9 82/11 86/1 86/9
12/25 13/15 14/24 15/1 16/13 21/7
90/1 91/12 91/24 92/2 93/10 96/4
23/11 23/15 28/21 28/21 30/16 31/21
99/24 102/22
35/2 37/16 37/19 38/19 39/2 39/4
well-known [1] 36/14
went [13] 6/19 6/24 9/22 28/5 35/7 44/2 39/12 40/18 46/8 48/12 49/4 50/22
56/1 56/2 56/2 56/4 59/8 59/8 59/9
64/17 83/3 86/13 99/13 99/13 99/22
59/9 59/11 59/16 61/8 61/14 62/19
100/10
63/4 69/21 70/19 70/21 72/22 76/6
were [41] 10/24 19/14 19/15 19/16
84/4 95/5 100/24 101/22 102/4 102/23
19/20 19/21 19/22 19/24 19/25 20/4
102/24
20/10 20/13 20/25 24/17 27/2 27/10
27/11 27/16 27/20 27/21 28/18 36/13 willful [3] 87/11 87/12 87/13
willing [5] 67/18 68/9 90/16 90/18
39/24 44/5 52/15 54/15 56/13 64/22
90/19
64/23 64/24 66/10 67/2 67/23 72/3
77/14 82/13 82/25 86/18 89/14 89/19 window [6] 20/25 40/1 93/21 93/23
93/24 94/18
101/4
Winter [1] 86/2
WESTERN [1] 1/2
wish [4] 61/17 77/4 88/18 101/1
what [127]
what's [21] 7/5 9/17 17/11 17/23 30/7 withhold [2] 37/5 88/24
56/8 57/2 61/21 63/20 72/18 73/1 74/5 withholding [1] 88/21
78/1 81/20 82/22 82/23 83/16 93/14
within [6] 5/23 32/21 39/25 57/6 84/4
93/16 96/21 96/21
98/2
whatever [6] 35/18 51/12 59/24 65/23 without [16] 4/12 4/13 13/22 25/15
85/15 92/3
25/16 26/9 30/8 35/3 41/1 41/5 42/10
when [68] 4/22 7/3 7/10 11/16 11/19
62/19 71/20 74/4 75/15 89/10
12/13 12/20 20/14 20/16 24/13 25/13 won't [1] 46/17
27/6 28/3 28/14 29/16 31/3 33/1 33/6 wonderful [1] 21/6
34/20 35/7 35/8 35/17 37/11 39/2
word [2] 68/21 88/16
39/18 40/8 40/22 43/14 46/24 46/25
words [1] 79/25
47/9 52/7 52/11 52/11 52/22 55/21
work [39] 6/7 14/10 15/11 16/8 20/1
56/13 56/22 59/12 60/23 62/9 63/14
20/1 20/2 20/3 22/1 25/7 25/18 25/19
63/21 64/17 65/4 65/7 65/11 67/22
41/20 42/3 42/16 42/20 42/22 43/2
67/23 68/24 69/5 70/2 75/8 76/15 79/5 46/24 52/6 52/17 52/19 53/2 53/3
79/17 80/6 80/10 81/15 85/11 89/21
53/15 53/16 53/20 54/3 54/6 54/17
90/3 90/9 95/5 96/16 97/10 97/21
57/11 68/9 73/25 74/8 76/18 81/14
W
work... [3] 83/11 89/19 92/15
worked [2] 58/23 58/24
working [1] 67/7
works [14] 9/25 28/18 30/13 37/12
38/10 38/12 38/13 46/23 76/15 76/17
76/21 84/25 86/25 87/1
world [3] 24/7 36/4 95/19
worldwide [3] 21/19 21/21 51/3
worsening [1] 37/21
worst [1] 9/6
worth [1] 62/19
would [121]
wouldn't [7] 20/10 26/15 80/19 80/21
83/6 89/10 92/23
WoW's [1] 24/7
WPIX [1] 38/18
wrap [1] 91/5
written [1] 71/5
wrong [11] 7/16 18/20 25/11 26/25
27/1 29/2 30/10 31/16 38/9 75/10 99/6
WTV [2] 39/10 61/25
Y
Yeah [2] 20/20 96/14
year [2] 59/23 71/8
years [5] 18/17 47/8 77/14 80/5 86/1
yes [27] 4/7 4/11 4/16 4/21 5/16 5/17
6/9 6/16 8/2 8/6 13/10 13/11 21/10
26/25 28/25 29/2 32/1 32/4 50/7 61/4
71/3 73/4 73/20 78/18 82/5 83/5 90/21
yes-or-no [1] 73/4
York [1] 46/2
you [221]
You're [2] 35/19 76/7
your [147]
your Honor [95] 3/8 3/18 4/7 4/21 6/9
8/2 8/22 9/3 9/18 10/23 11/25 12/8
13/25 15/1 15/3 17/24 22/6 22/9 23/15
25/22 26/25 28/23 31/7 31/20 31/24
32/8 32/16 33/4 34/1 34/17 34/25
35/12 37/7 39/13 40/13 40/23 41/13
41/14 42/1 43/3 44/5 45/18 45/20 48/3
48/18 49/17 50/6 50/10 50/24 51/15
52/10 52/18 53/21 54/2 54/7 54/19
56/11 57/9 57/20 58/5 58/18 59/7
59/14 59/16 60/4 60/11 60/20 61/4
61/15 61/18 63/24 65/2 65/7 66/8
66/14 67/14 68/18 73/8 74/10 75/20
82/5 87/9 87/21 88/7 88/18 93/3 96/5
96/9 97/2 97/8 98/7 99/9 100/16
101/20 102/10
Your Honor's [1] 5/20
yourself [1] 50/16
YouTube [5] 55/22 55/25 76/7 76/22
76/23
Z
Zediva [7] 39/11 40/14 62/22 64/20
65/1 65/3 65/6
zero [1] 10/20
- A.189 -
Case 2:16-cv-04109-AB-PLA Document 144 Filed 12/12/16 Page 1 of 22 Page ID #:4891
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UNITED STATES DISTRICT COURT
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CENTRAL DISTRICT OF CALIFORNIA
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DISNEY ENTERPRISES, INC.;
LUCASFILM LTD. LLC;
TWENTIETH CENTURY FOX FILM
CORPORATION and WARNER
BROS. ENTERTAINMENT, INC.,
Plaintiff,
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Case No. 2:16-cv-04109 – AB (PLAx)
ORDER GRANTING PLAINTIFFS’
MOTION FOR PRELIMINARY
INJUNCTION
v.
VIDANGEL, INC.,
Defendant.
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Pending before the Court is Plaintiffs’ Disney Enterprises, Inc., Lucasfilm Ltd.
LLC, Twentieth Century Fox Film Corporation, and Warner Bros. Entertainment Inc.
(“Plaintiffs”) Motion for Preliminary Injunction. (“Mot.” Dkt. No. 26-1.) Plaintiffs
seek to enjoin Defendant VidAngel Inc. (“VidAngel”) from [1] violating Plaintiffs’
rights pursuant to § 1201(a) of the Digital Millennium Copyright Act (“DMCA”), 17
U.S.C. § 1201(a), by circumventing technological measures that effectively control
access to Plaintiffs’ copyrighted works on DVDs and Blu-ray discs; and [2] infringing
by any means, directly or indirectly, Plaintiffs’ exclusive rights under § 106 of the
Copyright Act, id. § 106, including by reproducing or publicly performing Plaintiffs’
copyrighted works.
Plaintiffs bring this motion on the grounds that they are likely to succeed on the
merits of their claims and that they will suffer irreparable harm, absent an injunction.
- A.190 -
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Case 2:16-cv-04109-AB-PLA Document 144 Filed 12/12/16 Page 2 of 22 Page ID #:4892
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Plaintiffs contend that the balance of equities tips decidedly in their favor, and an
injunction is in the public interest. Furthermore, Plaintiffs contend that VidAngel’s
defenses to violating Plaintiff’s rights are meritless and thus Plaintiffs are entitled to a
preliminary injunction against Defendants. VidAngel filed an opposition and the
Plaintiffs filed their reply. The Court heard oral arguments from the parties on
November 14, 2016 and took the matter under submission. Upon consideration of the
parties’ arguments, papers and the case file, the court hereby GRANTS the motion for
preliminary injunction.
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I.
a. Factual and Procedural Background
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BACKGROUND
i. Plaintiffs and Their Copyrighted Works
Plaintiffs are in the business of producing and distributing motion pictures and
television programs. (“Compl.” Dkt. No 1 ¶ 19.) Plaintiffs invest considerable effort
and resources each year to develop, produce, distribute and publicly perform their
Copyrighted Works. (Id. at ¶ 25.) Plaintiffs own and have the exclusive U.S. rights to
reproduce and publicly perform their Copyrighted Works, including by means of
streaming those works over the internet to the public. (Id. at ¶ 25.) Plaintiffs
distribute and license their content for home entertainment across a number of
channels. (Id. at ¶ 27.) These include, among others: (1) physical Discs; (2) digital
download through services like iTunes, VUDU or Amazon Video; (3) on-demand
streaming for short-term viewing on a per transaction fee (e.g., iTunes Store or Google
Play Store); or (4) subscription on-demand streaming (e.g., Netflix or Hulu).
(Cittadine Decl. ¶ 9.)
Plaintiffs strategically release their content across different distribution
channels and to different licensees over time, a process called “windowing.” (Id.)
The value and price for each offering is tailored to the willingness of customers (and
licensees) to pay for those offerings. (Id.) Plaintiffs often negotiate higher licensing
fees in exchange for granting a licensee the exclusive right to perform a movie or
television show during a particular time period. (Id.) Plaintiffs assert that online and
digital distribution channels have become increasingly important revenue sources. (Id.
¶ 10.)
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i.
VidAngel’s Service
VidAngel offers more than 2,500 movies and television episodes for purchase
on its website. Answer/Counterclaim (“CC,” Dkt. No. 77 ¶ 59.) VidAngel purchases
physical copies of each of these titles in DVD format. (Id.) VidAngel enters each
DVD it has purchased into an inventory management application database and assigns
a unique barcode to each physical disc case. (Id. at ¶ 60.) VidAngel then uses a
commercially available software program to decrypt a copy of each individual title.
(Meldal Dec., ¶ 37(ii).) After decryption, VidAngel creates “intermediate” files.
(Oppo. at 17.) VidAngel tags the files for over 80 types of potentially objectionable
content. (Meldal Dec., ¶¶ 33-38.)
Before watching a particular movie or television episode, a customer
must purchase a physical DVD containing the title from VidAngel. (CC ¶ 63.) The
purchase price for each DVD is $20. (Id. ¶ 64.) To purchase a disc, users must logon
to the VidAngel website. First-time users are required to provide an email address to
establish a unique user ID and create a password. (Id.) Once a purchase transaction
has occurred, the disc is removed from available inventory and the title is transferred
to that customer’s unique user ID. (Id. at 65.) VidAngel typically maintains
possession of the physical DVD on behalf of the purchasers, but purchasers may
request that the DVD be sent to them or retrieve the DVD from VidAngel’s offices.
(Id. ¶ 63.)
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After a customer purchases a physical DVD they are shown a listing of the
various types of potentially objectionable content identified in the purchased work, as
well as the number of occurrences of each such type of content within the work. (Id.
¶ 62.) The user then selects the types of content he or she wishes to have silenced or
deleted. (Id.) Each user must apply at least one filter in order to view a video. (Id. ¶
30.) After selecting filters, a subscriber is able to view the stream instantaneously on
any VidAngel-supported device, including Roku, Apple TV, Smart TV, Amazon Fire
TV, Android, Chromecast, iPad/iPhone and desktop or laptop computers. (Id. ¶ 66.)
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Once a user has viewed a stream, the user may re-sell the DVD
back to VidAngel for a partial credit of the $20 purchase price. (Id. ¶ 68.) The
sellback price decreases $1 per night for standard definition (SD) purchases and $2
per night for high-definition (HD) purchases. (Id.) Once a user sells the movie back
to VidAngel, the user’s access to the title is terminated and the remaining balance is
credited back to the user’s VidAngel account. (Id.) For example: A $20 SD disk is
owned for 2 nights at $1 per night and sold back for $18 in sell-back credit. (Id.) If a
VidAngel customer keeps a DVD for more than 20 days, he or she can either view it
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through the VidAngel platform in perpetuity, sell it back for $1 or $2 in credit, or
VidAngel will send the DVD to the customer, if requested. (Id.)
At the time of this motion, VidAngel offered over 80 of Plaintiff’s copyrighted
works on their website. (Compl. Ex. A.; Ehler Decl. Ex. EE at Tr. 27:19-29:14.)
Plaintiffs have not provided authorization, permission or consent to VidAngel to copy
or publicly perform the Copyrighted Works, or to exercise any other rights affecting
their copyrights with respect to the Copyrighted Works. (Compl. ¶ 29.)
On June 9, 2016, Plaintiffs commenced this action by filing a complaint against
Defendants. (Complaint, Dkt. No. 1.) On July 5, 2016, Defendants filed an answer
and counterclaim. (Dkt. No. 11.) On August 22, 2016, Plaintiffs filed a Motion for
Preliminary Injunction. (Dkt. No. 27) On September 16, 2016, Defendants filed an
Amended Answer and Affirmative Defenses, as well as First Amended
Counterclaims. (Dkt. No. 77.)
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II.
LEGAL STANDARD
Injunctive relief is "an extraordinary remedy that may only be issued upon a
clear showing that plaintiff is entitled to such relief." Winter v. Natural Resources
Defense Council, 555 U.S. 7, 129 S. Ct. 365, 376, 172 L. Ed. 2d 249 (2008). The
purpose of a preliminary injunction is to preserve the status quo and the rights of the
parties until a final judgment on the merits can be rendered. U.S. Philips Corp. v.
KBC Bank N.V., 590 F.3d 1091, 1094 (9th Cir. 2010). A party seeking preliminary
injunctive relief must establish that they are (1) likely to succeed on the merits; (2)
that they are likely to suffer irreparable harm in the absence of preliminary relief; (3)
that the balance of equities tips in their favor and (4) that an injunction is in the public
interest. Am. Trucking Ass’n, Inc. v. City of Los Angeles, 559 F.3d 1046, 1052 (9th
Cir. 2009).
Alternatively, “‘serious questions going to the merits’ and a hardship balance
that tips sharply toward the plaintiff can support the issuance of an injunction,”
provided that the plaintiff also shows irreparable harm and that the injunction is in the
public interest. Alliance for the Wild Rockies v. Cottrell, 632 F.3d 1127, 1132 (9th
Cir. 2011); A “serious question” is one on which the movant “has a fair chance of
success on the merits.” Sierra On-Line, Inc. v. Phoenix Software, Inc., 739 F.2d 1415,
1421 (9th Cir. 1984).
The elements of this test are “balanced, so that a stronger showing of one
element may offset a weaker showing of another.” Alliance for the Wild Rockies, 622
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F.3d 1045, 1049–50 (9th Cir. 2010), rev’d on other grounds, 632 F.3d 1127 (9th Cir.
2011). However, the applicant must demonstrate that immediate or imminent
irreparable harm is likely: “Speculative injury does not constitute irreparable injury
sufficient to warrant granting a preliminary injunction. A plaintiff must do more than
merely allege imminent harm sufficient to establish standing; a plaintiff must
demonstrate immediate threatened injury as a prerequisite to preliminary injunctive
relief.” Caribbean Marine Servs. Co. v. Baldrige, 844 F.2d 668, 674 (9th Cir. 1988)
(emphasis in original) (internal citations omitted); see also Fin. & Sec. Prods. Ass’n v.
Diebold, Inc., Case No. C 04-04347 WHA, 2005 WL 1629813, *6 (N.D. Cal. July 8,
2005) (“Irreparable harm must not be speculative or merely alleged to be imminent . .
. .”).
"[A] preliminary injunction is customarily granted on the basis of procedures
that are less formal and evidence that is less complete than in a trial on the merits."
Univ. of Texas v. Camenisch, 451 U.S. 390, 395 (1981). Therefore, the Federal Rules
of Evidence do not strictly apply to preliminary injunction proceedings. See, e.g.,
Republic of the Philippines v. Marcos, 862 F.2d 1355, 1363 (9th Cir. 1988) (en banc);
Flynt Distrib. Co. v. Harvey, 734 F.2d 1389, 1394 (9th Cir. 1984). The Court is
permitted to consider inadmissible evidence in deciding a motion for a preliminary
injunction. Id. This flexibility exists because "[t]he urgency of obtaining a
preliminary injunction necessitates a prompt determination" and makes it difficult for
a party to procure supporting evidence in a form that would be admissible at trial. Id.
“While district courts may consider inadmissible evidence in the context of a
preliminary injunction, this does not mean that evidentiary issues have no relevance to
this proceeding. Such issues, however, properly go to weight rather than
admissibility.” Am. Hotel & Lodging Ass'n v. City of Los Angeles, 119 F. Supp. 3d
1177, 1185 (C.D. Cal. 2015) 1
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Both sides make numerous evidentiary objections. In light of the relaxed evidentiary standard for
preliminary injunction proceedings, the Court need not rule on admissibility. However, the Court has
considered the likely admissibility of the evidence in determining whether the Plaintiff demonstrated a
likelihood of success on the merits, for purposes of the preliminary injunction. Where the Court has
expressly relied on evidence that is subject to an evidentiary objection, the Court has overruled the objection.
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III.
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a. Plaintiffs Have Demonstrated A Likelihood of Success on the Merits.
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i. Plaintiffs’ DMCA Claim
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DISCUSSION
Section 1201(a)(1)(A) of the Digital Millennium Copyright Act provides that
“No person shall circumvent a technological measure that effectively controls access
to a work protected under this title.” A technological measure effectively controls
access to a copyrighted work if, “the measure, in the ordinary course of its operation,
requires the application of information, or a process or a treatment, with the authority
of the copyright owner, to gain access to the work.” 17 U.S.C. § 1201(a)(3)(B).
Plaintiffs use Content Scramble System technology (“CSS”), among other
technologies2, in order to prevent unauthorized access to the content on DVDs.
(Schumann Decl. ¶¶ 20, 27). “CSS is a technological measure that effectively
controls access to copyrighted works, namely, copyrighted DVD content.”
Realnetworks, Inc. v. DVD Copy Control Ass'n, 641 F. Supp. 2d 913, 933 (N.D. Cal.
2009).
Plaintiffs contend that VidAngel circumvents the technological protection
measures on Plaintiffs DVDs. The DMCA specifies that “to ‘circumvent a
technological measure’ means to descramble a scrambled work, to decrypt an
encrypted work, or otherwise to avoid, bypass, remove, deactivate, or impair a
technological measure, without the authority of the copyright owner.” 17 U.S.C. §
1201(a)(3)(A). VidAngel admits that it “uses a commercially available software
program to automatically allow read-access for the purpose of mounting the DVD
[and Blu-ray] files for uploading onto a computer, in the process removing restrictions
on DVD [and Blu-ray] encryption.” (Dkt. No. 77, ¶ 120(b)). VidAngel argues that
this activity doesn’t amount to circumvention because they are only decrypting DVDs
to allow them to be viewed in another way, a procedure known as re-formatting or
“space shifting.” (Oppo at 17.) VidAngel asserts that the practice of “space-shifting”
is legal when it is performed for disc purchasers who elect to have their DVD content
streamed to them rather than receiving the physical discs. (Id.) The Court finds no
support for VidAngel’s position.
Multiple courts have declined to adopt an exemption for space-shifting. In 321
Studios v. MGM Studios, Inc., 307 F. Supp. 2d 1085, 1096 (N.D. Cal. 2004), the court
held that the purchase of a DVD does not give to the purchaser the authority of the
copyright holder to decrypt CSS. The court in 321 Studios cited a Second Circuit
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The TPMs that protect Plaintiffs’ content on DVDs and Blu-ray discs include the CSS (for DVDs) and the
Advanced Access Content System (“AACS”) and/or BD+ (for Blu-ray discs). (Compl. ¶ 32.)
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decision that directly addressed issues of DVD copying and the DMCA. In Universal
City Studios v. Corley, 273 F.3d 429, 444 (2d Cir. 2001), the defendants argued "that
an individual who buys a DVD has the 'authority of the copyright owner' to view the
DVD, and therefore is exempted from the DMCA pursuant to subsection
1201(a)(3)(A) when the buyer circumvents an encryption technology in order to view
the DVD on a competing platform." The court responded that Section 1201(a)(3)(A)
only exempts from liability those “who would 'decrypt' an encrypted DVD with the
authority of a copyright owner, not those who would 'view' a DVD with the authority
of a copyright owner." Id. The purchase of a DVD only conveys the authority to
view the DVD, not to decrypt it.3 VidAngel has not offered any evidence that the
Plaintiffs have either explicitly or implicitly authorized DVD buyers to circumvent
encryption technology in order to view the DVD on a different platform such as
VidAngel’s streaming service.
The Librarian of Congress, and the Register of Copyrights, also recently
declined to adopt an exemption that would allow circumvention of access controls on
lawfully made and acquired audiovisual works for the purpose of noncommercial
space-shifting or format-shifting. Exemption to Prohibition on Circumvention of
Copyright Protection Systems for Access Control Technologies, 80 Fed. Reg. 65944
(Oct. 28, 2015) (to be codified at 37 C.F.R. pt. 201).
VidAngel also argues that the Family Home Movie Act of 2005 (“FMA”)
provides an exemption for decrypting DVDs for the purpose of accessing a disk to
filter audio and visual content. VidAngel asserts that the provisions of the FMA
render their circumvention lawful because “the making of a decrypted copy [is] the
necessary first step in making a lawfully purchased DVD capable of being filtered.”
(Dkt. 11 ¶ 61.) (Counter-Complaint). The FMA, codified in 17 U.S.C. § 110(11),
specifically carves out an exemption from copyright infringement for:
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“the making imperceptible, by or at the direction of a member of a
private household, of limited portions of audio or video content of a
motion picture, during a performance in or transmitted to that household
for private home viewing, from an authorized copy of the motion picture,
or the creation or provision of a computer program or other technology
that enables such making imperceptible and that is designed and
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VidAngel asserts that former Solicitor General Don Verrilli, “while representing the major record labels and
movie studios” in Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, 545 U.S. 913 (2005), assured the Supreme
Court that his clients agreed that space shifting is legal. (Oppo. at 17.) (emphasis added). However, Don
Verrilli specifically stated that “The 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.)) (emphasis added). This statement did not
involve movie studios, nor did it address space-shifting in the context of copying DVDs.
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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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17 U.S.C. § 110(11). Neither the plain language nor the legislative history of the
FMA support VidAngel’s position. In fact, the legislative history directly contradicts
VidAngel’s assertion that the FMA provides an exemption to the anti-circumvention
provisions of the DMCA. Senator Orrin Hatch, who introduced the FMA to the U.S.
Senate, stated that the FMA “does not provide any exemption from the anticircumvention provisions of section 1201 of title 17.” 150 Cong. Rec. S.11852-01 at
S11853 (Statement of Senator Hatch) (RJN Ex. G at 269).4 Senator Hatch further
stated that “It 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).” Id.
Finally, VidAngel states that in MDY Indus., LLC v. Blizzard Entm't, Inc., 629
F.3d 928, 951 (9th Cir. 2010) the Ninth Circuit court expressly cautioned against
DMCA application when, as here, antitrust issues are present. (Oppo at 18.) A close
reading of the MDY Indus. decision shows that the court actually declined to consider
the interplay between the anti-circumvention right and antitrust. MDY Indus., 629
F.3d at 950. The court advised that they would consider this issue “If a § 1201(a)(2)
defendant in a future case claims that a plaintiff is attempting to enforce its DMCA
anti-circumvention right in a manner that violates antitrust law.” VidAngel is not
alleged to have violated § 1201(a)(2) of the DMCA, which prohibits trafficking in
circumvention technology, and thus is not the type of defendant contemplated by the
court in MDY Indus. VidAngel’s remaining arguments also fail.5
For the foregoing reasons, Plaintiffs have shown a strong likelihood of success
on the merits of their claim that VidAngel has violated, and continues to violate,
section 1201(a)(1)(A) of the Digital Millenium Copyright Act by circumventing
technological measures that effectively control access to Plaintiffs’ copyrighted works
on DVDs and Blu-ray discs.
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Because legislative history is a matter of public record, which is not subject to reasonable dispute, the court
will take judicial notice of this item. See FED.R.EVID. 201(b). See also Palmer v. Stassinos, 348 F.Supp.2d
1070, 1077 (C.D. Cal. 2004) (taking judicial notice of legislative history materials…because they "constitute
judicial facts sufficiently capable of accurate and ready determination.")
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VidAngel makes a very brief assertion that the remedies section of the DMCA makes clear that to redress
violations, courts “may not impose a prior restraint on free speech,” 17 U.S.C. § 1203(b)(1). (Oppo. at 18.)
VidAngel has not sufficiently briefed this issue nor otherwise argued it before the court. Therefore the Court
will not reach this argument.
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ii. Plaintiffs’ Copyright Infringement Claims
Plaintiffs must satisfy two requirements to present a prima facie case of direct
infringement: (1) they must show ownership of the allegedly infringed material and
(2) they must demonstrate that the alleged infringers violate at least one exclusive
right granted to copyright holders under 17 U.S.C. § 106. Plaintiffs have sufficiently
demonstrated ownership of the copyrighted works identified in the complaint by
providing certificates of registration issued by the Copyright Office. (Klaus Decl.
Exs. A-RR.) A certificate of registration is "prima facie evidence of the validity of the
copyright and of the facts stated in the certificate." 17 U.S.C. § 410(c). VidAngel has
not disputed that it currently offers all of the works listed in Exhibit A to the
complaint and states that it will continue to offer these works and other future
releases, unless enjoined. (Ehler Decl. Ex. EE at Tr. 27:19-29:14; 30:3-20; 31:637:4.) VidAngel also does not dispute the validity of Plaintiffs' copyrights.
Therefore, the only factor at issue in this case is whether Defendants have violated at
least one exclusive right granted to Plaintiffs as copyright holders.
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1. VidAngel Violates Plaintiffs’ Exclusive Right To
Reproduce Their Works By Making Copies
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One of the rights granted by Section 106 of the Copyright Act is the exclusive
right "to reproduce the copyrighted work in copies." 17 U.S.C. § 106(1). VidAngel
admits to making copies of Plaintiffs’ works onto a computer system and third-party
servers. (Ehler Decl. Ex. EE at Tr. 58:1-4.) The Ninth Circuit in MAI Sys. Corp. v.
Peak Computer, Inc., 991 F.2d 511, 518 (9th Cir. 1993) stated that transferring digital
work “from a permanent storage device to a computer’s RAM [or storage]” infringes
the reproduction right.” Although, the MAI Sys. Corp. decision addressed the
infringement of computer software, the same analysis applies to the digital transfer
other types of copyrighted work. Tiffany Design, Inc. v. Reno-Tahoe Specialty, Inc.
55 F. Supp. 2d 1113, 1121 (D. Nev. 1999)(“ the digitization or input of any
copyrighted material, whether it be computer code or visual imagery, may support a
finding of infringement notwithstanding only the briefest of existence in a computer's
RAM.”)
VidAngel claims that their copies of Plaintiffs’ works are only “intermediate”
copies and not “copies” as defined by the Copyright Act. VidAngel’s process of
copying involves several steps. First, VidAngel decrypts the DVDs. (Oppo. at 17.)
After decryption, VidAngel creates “intermediate” files. (Id.) VidAngel tags the files
for over 80 types of content, and breaks them into approximately 1,300 fragments that
contain no more than 10 seconds of content, then encrypts those fragments, and stores
them in a secure, access-controlled location in the cloud. (Meldal Dec., ¶¶ 33-38.)
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VidAngel asserts that these fragments are not capable of being watched until
“VidAngel software assembles the segments in sequence, and for each segment
decrypts the content, displays it and then discards the segment.” (Meldal Dec., ¶
37(xiii)).
VidAngel contends that case law regarding the reproduction right under §
106(1) draws a clear distinction between unlawful copies, which can be viewed by
consumers, and lawful “intermediate” copies, which cannot be viewed. (Oppo. at 10.)
VidAngel argues that since their intermediate copies are unable to be viewed by
consumers, they are not “copies” as defined by the Copyright Act and, as a matter of
law, do not give rise to infringement claims. (Id.) Defendants cite the Ninth Circuit’s
decision in Sega Enters. v. Accolade, Inc., 977 F.2d 1510 (9th Cir. 1992) as support
for their proposition that “intermediate” copying does not violate the Copyright Act.
However, the court in Sega stated that “on its face, the language of 17 U.S.C. § 106(1)
unambiguously encompasses and proscribes ‘intermediate copying’” Id. at 1518. 17
U.S.C. § 101 provides that “in order to constitute a "copy" for purposes of the
Copyright Act, the allegedly infringing work must be fixed in some tangible form,
"from which the work can be perceived, reproduced, or otherwise communicated,
either directly or with the aid of a machine or device." (emphasis added). VidAngel’s
fragmented copies may not be able to be perceived directly by consumers, however
they are able to be perceived with the aid of VidAngel’s software. Thus the copying
performed by Defendants falls within the category of acts that are proscribed by the
statute.
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2. VidAngel Violates Plaintiffs’ Exclusive Right To Publicly
Perform Their Copyrighted Works
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Another of the rights granted by Section 106 of the Copyright Act is the
exclusive right "in the case of . . . motion pictures and other audiovisual works, to
perform the copyrighted work publicly." 17 U.S.C. § 106(4). What constitutes a
public performance for purposes of Section 106(4) is defined by the Copyright Act in
Section 101. “Under Section 101(2), the "transmit" clause, a performance is public if
someone: transmits or otherwise communicates a performance or display of the
work…to the public, by means of any device or process.” Warner Bros. Entm't, Inc.
v. WTV Sys., 824 F. Supp. 2d 1003, 1009 (C.D. Cal. 2011). A transmission is made
“to the public” if “the relationship between …the transmitter of the performance, and
the audience…is a commercial, ‘public’ relationship regardless of where the viewing
takes place.” Id. at 1010;
Plaintiffs assert that services like VidAngel’s violate the public performance
right, despite the fact that the performances are transmitted privately for in home
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viewing. The court in On Command Video Corporation v. Columbia Pictures
Industries, 777 F. Supp. 787 (N.D. Cal. 1991), held that a hotel’s “electronic rental”
system infringed the public performance right, despite the fact that the hotel’s service
transmitted performances from the main office to individual hotel rooms. The court
held that the “relationship between the transmitter of the performance…and the
audience,” was “a commercial, ‘public’ one regardless of where the viewing takes
place.” Id. at 788. Likewise, the court in Warner Bros. Entertainment Inc. v. WTV
Systems, Inc., held that a service which streamed the contents of DVDs from DVD
players purportedly assigned to individual users also violated the public performance
right. 824 F. Supp. 2d at 1006-07, 1010. The Supreme Court in Am. Broad. Cos. v.
Aereo, Inc., 134 S. Ct. 2498 (2014) (“Aereo”.), held that internet streaming of
copyrighted material captured from over-the-air broadcast signals by thousands of
separate antennae, each of which was purportedly assigned separately to individual
subscribers, infringed the public performance right.
VidAngel argues that their service does not engage in public performances
because VidAngel streams filtered versions of motion pictures created at the direction
of and owned by its customers. (Oppo. at 11.) VidAngel cites the Aereo decision as
support. There, the Supreme Court declared that a transmission of a copyrighted
program is not made to “the public” when it is made “to those who act as owners or
possessors of the relevant product.” Am. Broad. Cos. v. Aereo, Inc., 134 S. Ct. at
2510. Assuming arguendo that VidAngel’s buy/sellback service creates a valid
ownership interest in a DVD, this ownership would only apply to the physical DVD,
not the digital content that VidAngel streams to paying subscribers. Subscribers view
a stream from a master copy stored on a server, not a DVD temporarily “owned” by
the user. Furthermore, lawful ownership of a DVD only conveys authorization to
view the DVD, not to decrypt it for the purpose of viewing it on an alternative
platform. See discussion supra Section III.A.i. Therefore, VidAngel’s customers are
not lawful “owners or possessors” of the digital content that is streamed via
VidAngel’s service. Finally, VidAngel’s argument that Aereo holds that the public
performance right is not infringed when the user pays for something other than the
transmission of copyrighted works, is unsupported. (Oppo. at 11.) In Aereo, the
Supreme Court specifically stated that they had “not considered whether the public
performance right is infringed when the user of a service pays primarily for something
other than the transmission of copyrighted works.” For the foregoing reasons, the
Court holds that Plaintiffs have shown a strong likelihood of success on the merits of
their claims that VidAngel has violated, and continues to violate, 17 U.S.C. § 106(1)
and 17 U.S.C. § 106(4), by creating copies of Plaintiff’s copyrighted material, and
publicly performing Plaintiff’s copyrighted material.
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3. VidAngel’s FMA Defense for Copyright Infringement
The Family Home Movie Act is codified in 17 U.S.C § 110(11). It provides an
exemption from copyright infringement for:
the making imperceptible, by or at the direction of a member of a private
household, of limited portions of audio or video content of a motion
picture, during a performance in or transmitted to that household for
private home viewing, from an authorized copy of the motion picture, or
the creation or provision of 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.
Plaintiffs assert, and the Court agrees that the FMA exempts only (1) “the making
imperceptible” of limited portions of a motion picture; and (2) “the creation or
provision of a computer program or other technology that enables such making
imperceptible.” 17 U.S.C § 110(11). VidAngel’s contends that 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.
However, this assertion is unsupported by the clear language of the statute. (Oppo. at
12.) The statute clearly requires that a performance or transmission of filtered
content must come from an “authorized copy” of the motion picture. The digital
content that VidAngel streams to its customers is not from an authorized copy.
VidAngel streams from a digital copy that it acquires by circumventing technological
protection measures on Plaintiff’s DVDs in violation of § 1201(a) of the DMCA. See
discussion supra Sections III.A.i, III.A.ii.2. Furthermore, the requirement that the
filtered content come “from an authorized copy” is a clear indication that the FMA is
not intended to displace a copyright holder’s exclusive reproduction right under
section 106(1) of the Copyright Act. The last sentence of the FMA also provides that:
“Nothing in paragraph (11) shall be construed to imply further rights under section
106 of this title, or to have any effect on defenses or limitations on rights granted
under any other section of this title or under any other paragraph of this section.” 17
U.S.C § 110(11). This language directly contradicts VidAngel’s argument that a
filtering service that complies with the FMA, need not satisfy any other provisions of
the Copyright Act. (Oppo. at 15.) The evidence in the record and the unambiguous
language of the FMA show that (1) VidAngel’s service does not comply with the
express language of the FMA, and (2) The FMA does not provide a defense to
VidAngel’s violations of sections 106(1) and 106(4) of the Copyright Act.
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iii. VidAngel’s “Fair Use” Defense
VidAngel asserts that they are making "fair use" of the copyrighted works as
provided in 17 U.S.C. § 107 of the Copyright Act. The pertinent language of that
section reads as follows:
Notwithstanding the provisions of sections 106 and 106A, the fair
use of a copyrighted work, including such use by reproduction in copies
or phonorecords or by any other means specified by that section, for
purposes such as criticism, comment, news reporting, teaching (including
multiple copies for classroom use), scholarship, or research, is not an
infringement of a copyright. In determining whether the use made of a
work in any particular case is a fair use the factors to be considered shall
include:
(1) the purpose and character of the use, including whether such
use is of a commercial nature or is for nonprofit educational purposes;
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(2) the nature of the copyrighted work;
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(3) the amount and substantiality of the portion used in relation to
the copyrighted work as a whole; and
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(4) the effect of the use upon the potential market for or value of the
copyrighted work.
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1. Purpose and Character of the Use.
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The “purpose and character of use" factor in the fair use inquiry asks "to what
extent the new work is transformative" and does not simply "supplant" the original
work and whether the work's purpose was for or not-for-profit. Mattel Inc. v. Walking
Mt. Prods., 353 F.3d 792, (9th Cir. 2003) (citing Campbell v. Acuff-Rose Music, Inc.,
510 U.S. 569, 579 (1994)). VidAngel does not dispute that they profit from the use of
Plaintiffs’ works. Commercial use of copyrighted material is "presumptively an
unfair exploitation of the monopoly privilege that belongs to the owner of the
copyright.” Leadsinger, Inc. v. BMG Music Publ'g, 512 F.3d 522, 545 (9th Cir. 2008)
(citing Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417, 451 (1984)).
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VidAngel argues that their filtering service is transformative in that it alters the
content of the works as seen by different viewers in different ways. (Oppo. at 20.)
The Supreme Court has said that a use is transformative if it "adds something new,
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with a further purpose or different character, altering the first with new expression,
meaning or message." Campbell, 510 U.S. at 579. VidAngel’s service does not add
anything to Plaintiff’s works. It simply omits portions that viewers find objectionable.
The court in Clean Flicks of Colo. v. LLC v. Soderbergh, 433 F. Supp. 2d 1236 (D.
Colo. 2006), rejected a fair use defense from defendants that provided a service which
is similar to that of VidAngel. In Clean Flicks, the court ruled that defendants’ editing
of objectionable content was not transformative because it added nothing to the
copyrighted works, and only removed “a small percentage of most of the films.” Id. at
1241. Furthermore, the Ninth Circuit has held that works are transformative when
“the works use copy-righted material for purposes distinct from the purpose of the
original material.” Elvis Presley Enters. v. Passport Video, 349 F.3d 622, 629 (9th
Cir. 2003). Notwithstanding the edits made by users, VidAngel’s use of plaintiff’s
works serves the “same intrinsic entertainment value that is protected by Plaintiffs'
copyrights”, and is thus not transformative. Id. VidAngel’s commercial use of the
copyrighted works, coupled with non-transformative nature of the edited copies weigh
heavily in favor of the Plaintiffs under the first statutory factor in the fair use analysis.
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2. Nature of the Copyrighted Work
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“The second statutory factor, ‘the nature of the copyrighted work,’ § 107(2),
draws on Justice Story's expression, the ‘value of the materials used.’” Campbell v.
Acuff-Rose Music, Inc., 510 U.S. 569, 586 (1994) (citing Folsom v. Marsh, 9 F. Cas.
342, 348 (C.C.D. Mass. 1841)) “This factor calls for recognition that some works are
closer to the core of intended copyright protection than others, with the consequence
that fair use is more difficult to establish when the former works are copied.”
Campbell, 510 U.S. at 586. For example, the Ninth Circuit has held that “works such
as original songs, motion pictures, and photographs taken for aesthetic purposes, are
creative in nature and thus fit squarely within the core of copyright protection.” Elvis
Presley Enters. v. Passport Video, 349 F.3d 622, 629 (9th Cir. 2003) (citing Sony
Corp. v. Universal City Studios, Inc., 464 U.S. 417 (1984)). This factor also weighs in
favor of the Plaintiffs.
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3. Amount and Substantiality of the Portion Used in
Relation to the Copyrighted Work as a Whole
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The third factor in the fair use analysis evaluates both the quantity of the work
taken and the quality and importance of the portion taken. Campbell, 510 U.S. at 586.
“This factor calls for thought not only about the quantity of the materials used, but
about their quality and importance, too.” Id. at 577. The evidence in this case shows
that VidAngel copies Plaintiff’s works in their entirety. (Ehler Decl. Ex. EE at Tr.
112:19-113:2.) The Supreme Court in Campbell advised that the verbatim copying of
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"a substantial portion of the infringing work" is a relevant inquiry in the fair use
analysis. Id. at 588. VidAngel does not dispute that they copy a substantial portion of
the Plaintiff’s copyrighted works. Instead VidAngel simply states that their viewers
never watch exact copies of the original films, due to the requirement that each user
must apply at least one filter. Defendants also assert that the filtered versions of the
movies are not substitutes for the Plaintiff’s works. However, the Supreme Court in
Campbell held that “a work composed primarily of an original, particularly its heart,
with little added or changed, is more likely to be a merely superseding use, fulfilling
demand for the original. Id. The heart of a copyrighted work is the portion that is the
"most likely to be newsworthy and important in licensing serialization." Campbell,
510 U.S. at 586. Despite the fact that VidAngel’s service omits portions of each
work, the essential storyline, cinematography, and acting portrayals remain
unchanged. These elements are the heart of the movie. Courts consistently find that
the performance of the “heart” of a copyrighted work weighs against a fair use
determination. See Campbell, 510 U.S. at 586; Elvis Presley Enters., 349 F.3d at 630;
L.A. News Serv. v. Tullo, 973 F.2d 791, 798 (9th Cir. 1992). Arista Records LLC v.
Myxer Inc., 2011 U.S. Dist. LEXIS 109668 (C.D. Cal. Apr. 1, 2011). Accordingly,
the Court finds that this factor weighs in favor of the Plaintiffs.
4. Effect of the Use Upon the Potential Market For or
Value of the Copyrighted Work
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The fourth factor in the fair use analysis considers current market harm and
‘“whether unrestricted and widespread conduct of the sort engaged in by the defendant
. . . would result in a substantially adverse impact on the potential market’ for the
original.” Campbell, 510 U.S. at 590 (citations omitted). As discussed above,
Plaintiff’s use of Plaintiff’s copyrighted works is commercial and non-transformative.
The Ninth Circuit has held that when "the intended use is for commercial gain," the
likelihood of market harm "may be presumed." Leadsinger, Inc. v. BMG Music
Publ'g, 512 F.3d 522, 531. (9th Cir. Cal. 2008).
VidAngel argues that their service does not harm the market for Plaintiff’s
copyrighted works because filtered movies are not a substitute for Plaintiff’s
unfiltered movies. (Oppo. at 21.) VidAngel also asserts that their filtering service
actually increases the market for Disney’s works. (Id.) VidAngel attempts to support
their arguments by offering customer survey results that indicate that over 51% of
VidAngel customers would not watch their offerings without filtering. The survey
results are ultimately detrimental to VidAngel’s arguments. The fact that 49% of
VidAngel’s customers would view movies without filters shows that VidAngel’s
service does serve as an effective substitute for Plaintiff’s unfiltered works, for
approximately half of VidAngels users. Furthermore, the fact that VidAngel’s
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streams are “composed primarily” of Plaintiff’s works, including the heart of the
work, “with little added or changed” makes the streams “more likely to be a merely
superseding use, fulfilling demand for the original.” Campbell, 510 U.S. at 586.
Therefore, the Court finds that this factor also weighs in favor of the Plaintiffs.
At trial, the defendant in an infringement action bears the burden of proving fair
use. See Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 590 (1994). “Because
‘the burdens at the preliminary injunction stage track the burdens at trial,’ once the
moving party has carried its burden of showing a likelihood of success on the merits,
the burden shifts to the nonmoving party to show a likelihood that its affirmative
defense will succeed.” Perfect 10, Inc. v. Amazon.com, Inc., 508 F.3d 1146, 1158 (9th
Cir. 2007) (citing Gonzales v. O Centro Espirita Beneficente Uniao do Vegetal, 546
U.S. 418, 429 (2006). Plaintiffs have shown a likelihood of success on their DMCA
and Copyright Infringement claims, therefore VidAngel bears the burden of showing
that they are making fair use of the Plaintiffs Copyrighted works. Based on the
analysis of the aforementioned factors, the Court finds that VidAngel has not met this
burden.
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b. Plaintiffs Have Demonstrated A Likelihood of Imminent Irreparable
Injury.
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Following the Supreme Court’s decisions in eBay Inc. v. MercExchange,
L.L.C., 547 U.S. 388 (2006), and Winter v. Natural Resources Defense Council, 555
U.S. 7 (2006), the Ninth Circuit concluded that it is no longer appropriate to apply a
presumption of irreparable harm in trademark and copyright cases. See, e.g., Herb
Reed Enters., LLC v. Fla. Entm't Mgmt., 736 F.3d 1239, 1249 (9th Cir. 2013)
("Following eBay and Winter, we held that likely irreparable harm must be
demonstrated to obtain a preliminary injunction in a copyright infringement case. . . .”
It is not enough, moreover, that the claimed harm be irreparable; it must be imminent
as well. Caribbean Marine Servs. Co., Inc. v. Baldrige, 844 F.2d 668, 674 (9th Cir.
1988); see also Amylin Pharmaceuticals, Inc. v. Eli Lilly and Co., 456 Fed. Appx.
676, 679 (9th Cir. Cal. 2011) ("[E]stablishing a threat of irreparable harm in the
indefinite future is not enough"). Speculative injury does not constitute irreparable
injury sufficient to warrant granting a preliminary injunction. Caribbean Marine
Servs., 844 F.2d at 674 (citing Goldie's Bookstore, Inc. v. Superior Court, 739 F.2d
466, 472 (9th Cir. 1984)). Applying these standards, a party seeking injunctive relief
must adduce evidence of likely irreparable harm and may not rely on "unsupported
and conclusory statements regarding harm [the plaintiff] might suffer." Herb Reed
Enterprises, 736 F.3d at 1250. “Those seeking injunctive relief must proffer evidence
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sufficient to establish a likelihood of irreparable harm." Id. at 1251.
Plaintiffs argue that they will suffer irreparable harm in the absence of a
preliminary injunction. First, Plaintiffs argue that VidAngel’s service interferes with
their basic right to control how, when and through which channels consumers can
view their copyrighted works. (Mot. at 27.) Where defendants operate an “infringing
service without the normal licensing restrictions imposed by Plaintiffs, [it] interfere[s]
with Plaintiffs’ ability to control the use and transmission of their Copyrighted works,
thereby, causing irreparable injury.” Warner Bros. Entm't, Inc. v. WTV Sys., 824 F.
Supp. 2d 1003, 1012 (C.D. Cal. 2011). Plaintiffs’ provided a declaration from Tedd
Cittadine, Senior Vice President of Digital Distribution at 20th Century Fox Home
Entertainment. Cittadine testified that Plaintiffs’ exclusive rights under copyright are
critical to providing Plaintiffs the opportunity to earn a return on their substantial
investments. (Cittadine Decl. ¶¶ 7-8.) Plaintiffs exercise their rights through
agreements with authorized distributors. Some licenses grant the licensee an
exclusive time window for performing a title. (Id. ¶ 15.) The price for such a license
is based, in part, on the promise and scope of exclusivity. (Id.) Plaintiffs often
negotiate higher licensing fees in exchange for granting a licensee the exclusive right
to perform a movie or television show during a particular time period. (Id.) Because
VidAngel operates without any license and performs Plaintiffs’ works during
negotiated exclusivity periods it interferes with Plaintiffs’ exercise of their exclusive
rights and frustrates Plaintiffs’ ability to negotiate for similar rights in the future. (Id.
¶¶ 17, 36.)6
Second, Plaintiffs argue that VidAngel threatens harm to Plaintiffs’
relationships and goodwill with authorized distributors by undermining their ability to
provide licensed offerings. (Mot. at 28.) Plaintiffs assert that this harm continues to
grow as VidAngel adds more users and encourages them to stream through VidAngel
rather than a licensed service. Plaintiffs assert that this poses a threat to the businesses
of Plaintiffs’ legitimate licensees and, in turn, to Plaintiffs’ relationships with them
and the goodwill Plaintiffs have worked to create. (Cittadine Decl. ¶¶ 18-22.) Tedd
Cittadine states that Plaintiffs’ clients worry about unlicensed services in the market
that compete with their business on unfair terms. (Id. ¶ 19.) He also states that
licensees have complained in partnership meetings, and especially in negotiations, that
it is difficult to compete with services like VidAngel who do not act pursuant to
licensing restrictions. (Id.) Cittadine states that licensees specifically complain that it
is difficult to compete with unlicensed services’ low-cost offerings. (Id.)
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Cittadine declared that at the time of his declaration VidAngel was offering (at least) two of
Plaintiffs’ works—The Martian and Brooklyn—during periods these works are exclusive to an
authorized licensee, HBO. (Cittadine Decl. ¶ 30.)
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VidAngel argues that Plaintiff’s alleged harms are speculative and that there is
no evidence of actual harm to Plaintiffs other than the declaration of Tedd Cittadine.
(Oppo. at 27.) In Fox TV Stations, Inc. v. FilmOn X LLC, 966 F. Supp. 2d 30 (D.D.C.
2013), the court considered a similar argument in an analogous case. There, the
defendants, like VidAngel, operated an unlicensed service that transmitted the
plaintiff’s copyrighted performances over the internet. The plaintiffs argued that
defendant’s service caused several types of irreparable harm including “undermining
Plaintiff’s positions in negotiations” and damaging “Plaintiff’s goodwill with their
licensees.” Id. at 49. The defendants argued that plaintiff’s alleged harms were
“insufficiently speculative and ‘unsupported by any evidence.’” Id. at 50. The court
found that Plaintiffs had sufficiently supported their alleged harms “with evidence that
Defendant had not controverted, including a sworn declaration from a senior executive
who states that cable companies have already referenced businesses like [Defendant’s
business] in seeking to negotiate lower fees.” Id. Similarly, in ABC v. AEREO, Inc.,
874 F. Supp. 2d 373, (S.D.N.Y. 2012) the court held that harm to a plaintiff’s
negotiating position was not speculative where senior executives had provided sworn
statements indicating that licensees had expressed concerns about unlicensed service
providers in negotiations. (Id. at 388-89). Here, the Plaintiffs have provided
uncontroverted evidence that VidAngel operates their service without a license, and
offers Plaintiff’s works during exclusivity periods that Plaintiff negotiated with
licensees. Furthermore, Plaintiffs have offered Tedd Cittadine’s sworn declaration
stating that unlicensed services like VidAngel’s had been specifically referenced as a
concern during negotiation meetings with licensees. The Court finds that this is a
sufficient showing that VidAngel’s service undermines Plaintiffs negotiating position
with licensees and also damages goodwill with licensees.
VidAngel also contends that any damage their service might cause to Plaintiffs
is economic in nature and thus doesn’t qualify as irreparable harm. (Oppo. at 28-29.)
However, harm to one’s negotiating position and/or goodwill with licensees is
difficult to quantify. In Fox Television Stations, Inc. v. BarryDriller Content Sys.,
PLC, 915 F. Supp. 2d 1138, 1147 (C.D. Cal. 2012) the court held that harm to a
plaintiff’s negotiating position was irreparable because it was “neither easily
calculable, nor easily compensable."(quoting Warner Bros. Entm't, Inc. v. WTV Sys.,
824 F. Supp. 2d at 1013)). “And it is well-established that harm to one's reputation,
goodwill, or relationships-all of which may result from future copyright infringement
may constitute irreparable harm.” Kelly v. Primco Mgmt., 2015 U.S. Dist. LEXIS
181288 *, 2015 WL 10990368 (C.D. Cal. Jan. 12, 2015); See, e.g., Rent-A-Center,
Inc. v. Canyon Television & Appliance Rental, Inc., 944 F.2d 597, 603 (9th Cir. 1991)
(noting that damage to one's reputation or goodwill, because it is difficult to calculate,
qualifies as irreparable harm).
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VidAngel also asserts that Plaintiff’s delay in filing an injunction belies their
claims of irreparable harm. VidAngel states that they notified the Plaintiffs about
their service with two letters in July and August 2015. (Oppo. at 22.) VidAngel
asserts that these letters described their business model, including the fact that
VidAngel: (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 “re-purchase[s] the disc at a discount
from the sale price. . .based on the length of time the customer has owned the disc.”
(Id.) VidAngel added that it had grown from 43 to 4848 users in just under six
months. (Id.) Plaintiffs filed for a preliminary injunction on August 22, 2016. (Dkt.
No. 27.) VidAngel contends that Plaintiff’s delay of more than one year before
requesting a preliminary injunction is inconsistent with a claim of irreparable harm.
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Courts have held that “long delay before seeking a preliminary injunction
implies a lack of urgency and irreparable harm.” Oakland Trib., Inc. v. Chron. Pub.
Co., 762 F.2d 1374, 1377 (9th Cir. 1985). However, “delay is but a single factor to
consider in evaluating irreparable injury” and “courts are ‘loath to withhold relief
solely on that ground.’” Arc of Cal. v. Douglas, 757 F.3d 975, 990 (9th Cir. 2014)
(citing Lydo Enters., Inc. v. City of Las Vegas, 745 F.2d 1211, 1214 (9th Cir. 1984)).
Furthermore, “tardiness is not particularly probative in the context of ongoing,
worsening injuries.”
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Plaintiffs assert that when they first learned of VidAngel, it was in “limited
beta” and had fewer than 5,000 users—which would not lead legitimate streaming
licensees to “notice (let alone complain).” (Cittadine Decl. ¶¶ 35-36.) Plaintiffs state
that they monitored VidAngel and investigated their claims, and once VidAngel
started marketing itself more aggressively, expanded its content offering, and posed a
more significant threat of harm, Plaintiffs filed this action and sought a preliminary
injunction. Id. In, ABC v. AEREO, Inc., the court found no undue delay under
analogous circumstances. There, the plaintiffs “were aware of [the service’s]
existence for roughly a full year before seeking [an] injunction,” 874 F. Supp. 2d at
401. The court ruled that the plaintiffs’ delay, which was “based on the limited
availability of Aereo's service, its status in beta testing, and the prospect that litigation
was unnecessary until it became clear that Aereo posed a viable threat of harm,” was
reasonable and did not suggest that plaintiff’s harms were reparable. Id. Additionally,
VidAngel admits it intends to continue to stream Plaintiff’s works and add other
future releases, unless enjoined. (Ehler Decl. Ex. EE at Tr. 27:19-29:14; 30:3-20;
31:6-37:4.) Plaintiffs’ delay in seeking an injunction was reasonable under the
circumstances, their alleged irreparable harms are ongoing, and will likely only
increase absent an injunction.
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Based on the foregoing, the Court holds that Plaintiffs have sufficiently shown
that they will suffer irreparable harm in the absence of an injunction.
c. Balance of Hardships Weighs in Favor of the Plaintiffs
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An injunction may not issue unless the balance of hardships tips sharply in
favor of the moving party. International Jensen, Inc. v. Metrosound U.S.A., Inc., 4
F.3d 819, 822 (9th Cir. 1993). In this case, Plaintiffs have demonstrated that the
balance of hardships tips sharply in their favor. Defendants claim that an injunction
would cause them to suffer an unimaginable financial hardship. However, the Ninth
Circuit has held that “[Defendants] cannot complain of the harm that will befall it
when properly forced to desist from its infringing activities." Triad Sys. Corp. v.
Southeastern Express Co., 64 F.3d 1330, 1338 (9th Cir. 1995). “Where the only
hardship that the defendant will suffer is lost profits from an activity which has been
shown likely to be infringing, such an argument in defense 'merits little equitable
consideration [on an appeal from a preliminary injunction].'" Id. (citing Concrete
Mach. Co. v. Classic Lawn Ornaments, Inc., 843 F.2d 600, 612 (1st Cir. 1988);
accord Apple Computer, Inc. v. Formula Int'l, Inc., 725 F.2d 521, 523 (9th Cir. 1984)
(in motion for preliminary injunction, district court should not consider the
"devastating effect" of the injunction on the infringer's business.)
Accordingly, the Court concludes that the balance of hardships tips sharply in
favor of Plaintiffs.
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d. A Preliminary Injunction is in the Public Interest
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VidAngel argues that the public interest in protecting every person’s right to
watch filtered content in private would be severely undercut by the issuance of a
preliminary injunction. This argument strongly relies on VidAngel’s characterization
of its service as the only filtering service under the FMA that supports streaming
digital content to mobile devices, tablets, and Smart TV’s. However, the evidence in
the record shows that another filtering service, ClearPlay, offers filtering to Google
Play users who access authorized streams from GooglePlay’s licensed service.
(Bennett Decl. Ex. A. at 5-6.) An injunction in this case would not prevent VidAngel
or any other company from providing a filtering service similar to ClearPlay’s, and
thus wouldn’t negatively impact the public interest in watching filtered content in
private.
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On the other hand, "it is virtually axiomatic that the public interest can only be
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served by upholding copyright protections and correspondingly, preventing the
misappropriation of skills, creative energies, and resources which are invested in the
protected work." Warner Bros. Entm't, Inc. v. WTV Sys., 824 F. Supp. 2d 1003, 1015
(C.D. Cal. 2011) (citing Apple Computer, Inc. v. Franklin Computer Corp., 714 F.2d
1240, 1255 (3rd Cir. 1983)). Accordingly, the Court concludes that a preliminary
injunction is in the public interest.
IV.
AMOUNT OF SECURITY
Federal Rule of Civil Procedure 65(c) provides that "[t]he court may issue a
preliminary injunction or a temporary restraining order only if the movant gives
security in an amount that the court considers proper to pay the costs and damages
sustained by any party found to have been wrongfully enjoined or restrained." The
Ninth Circuit has recognized that Rule 65(c) invests the district court "with discretion
as to the amount of security required, if any." Barahona-Gomez v. Reno, 167 F.3d
1228, 1237 (9th Cir. 1999) (citing Doctor's Assoc., Inc. v. Stuart, 85 F.3d 975, 985 (2d
Cir. 1996).
VidAngel asks the court to impose a substantial bond of $50,000,000 because
an injunction threatens to put VidAngel out of business before any resolution on the
merits and would cause it serious financial loss. VidAngel contends that this
substantial bond is required because, “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). However, Defendants also admit that Plaintiffs
are well funded and established giants in the entertainment industry. (Oppo. at 35.)
Plaintiffs have considerable assets to respond in damages if VidAngel is found to have
been wrongfully enjoined.
19
20
21
22
23
24
25
Plaintiffs contend that analogous cases have required security bonds well below
$1 million. See, e.g., BarryDriller, 915 F. Supp. 2d at 1149 (rejecting request for $15
million bond in favor of $250,000); Zediva, 824 F. Supp. 2d at 1015 ($50,000);
FilmOn X, 966 F. Supp. 2d at 50 ($150,000). The Court finds no substantial
distinctions between this case and the cases cited by Plaintiffs. Based on the Court's
findings regarding Plaintiffs' likelihood of success on the merits, irreparable harm, the
balance of hardships and public interest, and considering the bond amounts in
analogous cases, the Court finds that a bond in the amount of two hundred and fifty
thousand dollars ($250,000.00) is satisfactory.
26
27
28
- A.210 -
21.
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1
V.
CONCLUSION
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
For the foregoing reasons, the Court GRANTS Defendant’s Motion for
Preliminary Injunction. (Dkt. No. 27.) Defendants, as well as their officers,
employees, attorneys, and those acting in concert with them are temporarily enjoined
from:
(1) circumventing technological measures protecting Plaintiffs’
copyrighted works on DVDs, Blu-ray discs, or any other medium;
(2) copying Plaintiffs’ copyrighted works, including but not limited to
copying the works onto computers or servers;
(3) streaming, transmitting or otherwise publicly performing or
displaying any of Plaintiffs’ copyrighted works over the Internet (through
such websites as VidAngel.com), via web applications (available through
platforms such as the Windows App Store, Apple’s App Store, the
Amazon App Store, Facebook or Google Play), via portable devices
(such as through applications on devices such as iPhones, iPads, Android
devices, smart phones or tablets), via media streaming devices (such as
Roku, Chromecast or Apple TV), or by means of any other device or
process; or
19
(4) engaging in any other activity that violates, directly or indirectly,
Plaintiffs anti-circumvention right under § 1201 of the Copyright Act, 17
U.S.C. §1201(a), or infringing by any means, directly or indirectly,
Plaintiffs’ exclusive rights under § 106 of the Copyright Act, 17 U.S.C. §
106.
20
Plaintiff is ordered to post a bond in the amount of $250,000.
17
18
21
IT IS SO ORDERED.
22
23
24
25
Dated: December 12, 2016
26
27
28
_______________________________________
HONORABLE ANDRÉ BIROTTE JR.
UNITED STATES DISTRICT COURT JUDGE
cc: FISCAL
- A.211 -
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EXHIBIT A
- A.212 -
Exhibit A
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Filed Pursuant to Rule 253(g)(2)
File No. 02410596
Offering Circular
October 19, 2016
VIDANGEL, INC.
249 N. University Ave.
Provo, Utah 84601
(760) 9338437
$5,000,000 Minimum Offering Amount (1,666,667 Shares of Class B Nonvoting Common Stock)
$11,250,000 Maximum Offering Amount (3,750,000 Shares of Class B Nonvoting Common Stock)
VIDANGEL, INC., a Delaware corporation, referred to herein as VidAngel or the Company, is offering a minimum of $5,000,000 and a
maximum of $11,250,000 of its Class B nonvoting common stock, or our Class B Common Stock. The offering will consist of a minimum of
1,666,667 and a maximum of 3,750,000 shares of our Class B Common Stock at an offering price of $3.00 per share, or the Offered Shares.
Unless terminated earlier by the Company in its sole discretion, this offering will terminate on the earliest to occur of (i) the date on which we sell
the maximum number of Offered Shares, or the Maximum Offering, (ii) the date on which the ruling is issued by the court on a motion for a
preliminary injunction in connection with litigation we are engaged in with Disney Enterprises, Inc., et al., or the Disney Litigation, or (iii)
December 31, 2016. See “DESCRIPTION OF THE BUSINESS – Legal Proceedings.” We refer to any of these three dates as the Termination
Date. The initial closing date will occur at the Company’s sole discretion and may be any date after the Company has received and accepted
subscriptions for at least the minimum number of Offered Shares and before the Termination Date. If, on the initial closing date, we have sold less
than the maximum Offered Shares, then we will hold one or more additional closings for additional sales, up to the maximum number of Offered
Shares, through the Termination Date. Purchases of Shares in excess of $5,000 must be transmitted by investors directly by either wire transfer or
electronic funds transfer via ACH to a noninterest bearing escrow account maintained by Issuer Direct. Purchases of Shares in the amount of
$5,000 or less may be submitted through an investor's VidAngel customer account in accordance with the billing information for such investor at
www.vidangel.com, and will not be held in the escrow account maintained by Issuer Direct, but will be held in a separate noninterest bearing
account held by VidAngel. Upon achieving the minimum offering amount and the initial closing of this offering, the proceeds for the offering will
be distributed to the Company and the Offered Shares will be issued to the investors. If the minimum offering amount is not sold, the proceeds
from the offering will be promptly returned to investors without interest. The minimum purchase requirement is fifty (50) Offered Shares ($150);
however, we can waive the minimum purchase requirement on a case to case basis in our sole discretion. We expect to commence the sale of the
Offered Shares as of the date on which the Offering Statement of which this Offering Circular is a part is declared qualified by the United States
Securities and Exchange Commission.
The date of this Offering Circular is October 19, 2016
- A.213 -
Exhibit A
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Price to
Public
Per Offered Share:
Minimum Offering Amount:
Maximum Offering Amount:
Proceeds to
Other
Persons
0.00 $
3.00 $
0
0.00 $ 5,000,000 $
0
0.00 $ 11,250,000 $
0
Expense
Reimbursements1
$
3.00 $
$ 5,000,000 $
$ 11,250,000 $
Proceeds to
Company2
1
2
We do not intend to use commissioned sales agents or underwriters. Please refer to the section entitled “PLAN OF DISTRIBUTION” of
this Offering Circular for additional information regarding distribution of the Offered Shares
Does not include estimated offering expenses including, without limitation, legal, accounting, printing, advertising, travel, marketing, blue
sky compliance and other expenses of this offering, as well as transfer agent fees and fees payable to Issuer Direct. Offering expenses are
estimated at $280,000 if the Minimum Offering Amount is raised and $430,000 if the Maximum Offering Amount is raised. See “PLAN OF
DISTRIBUTION”.
Generally, no sale may be made to you in this offering if the aggregate purchase price you pay is more than 10% of the greater of
your annual income or net worth. Different rules apply to accredited investors and nonnatural persons. Before making any
representation that your investment does not exceed applicable thresholds, we encourage you to review Rule 251(d)(2)(i)(C) of Regulation
A. For general information on investing, we encourage you to refer to www.investor.gov.
An investment in the Offered Shares is subject to certain risks and should be made only by persons or entities able to bear the
risk of and to withstand the total loss of their investment. Prospective investors should carefully consider and review the RISK
FACTORS, beginning on PAGE 6.
THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION, OR THE COMMISSION, DOES NOT PASS UPON
THE MERITS OR GIVE ITS APPROVAL TO ANY SECURITIES OFFERED OR THE TERMS OF THE OFFERING, NOR DOES IT
PASS UPON THE ACCURACY OR COMPLETENESS OF ANY OFFERING CIRCULAR OR OTHER SELLING
LITERATURE. THESE SECURITIES ARE OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION WITH THE
COMMISSION; HOWEVER, THE COMMISION HAS NOT MADE AN INDEPENDENT DETERMINATION THAT THE
SECURITIES OFFERED ARE EXEMPT FROM REGISTRATION.
This Offering Circular is following the offering circular format described in Part II of Form 1A.
- A.214 -
Exhibit A
RJN-6
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TABLE OF CONTENTS
SUMMARY
CAUTIONARY STATEMENT REGARDING FORWARDLOOKING STATEMENTS
RISK FACTORS
DILUTION
PLAN OF DISTRIBUTION
USE OF PROCEEDS TO ISSUER
DESCRIPTION OF OUR BUSINESS
DESCRIPTION OF OUR PROPERTIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITYHOLDERS
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS AND OTHER CONFLICTS OF INTEREST
SECURITIES BEING OFFERED
ERISA CONSIDERATIONS
REPORTS
INDEPENDENT AUDITORS
- A.215 -
Exhibit A
RJN-7
Page
1
5
6
19
20
23
24
30
31
35
37
39
40
41
45
47
47
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SUMMARY
This summary of the Offering Circular highlights material information contained elsewhere in this Offering Circular. Because it is a
summary, it may not contain all of the information that is important to your decision of whether to invest in the Offered Shares. To understand
this offering fully, you should read the entire Offering Circular carefully, including the Risk Factors section. The use of the words “we,” “us,”
“the Company,” “VidAngel,” or “our” refers to VidAngel, Inc., except where the context otherwise requires. The term “Bylaws” refers to the
bylaws of VidAngel, Inc. The term “Certificate” refers to VidAngel, Inc.’s certificate of incorporation, as amended. The “Stockholders
Agreement” refers to the Stockholders Agreement of VidAngel, Inc. The term “Governing Documents” refers to the Certificate, Bylaws and
Stockholders Agreement.
VidAngel, Inc. is the leading entertainment filtering company, giving families the choice to remove objectionable content from movies
they watch in their homes. By letting viewers customize content and watch “however the BLEEP they want”, VidAngel believes it offers the
greatest degree of personal choice in the entertainment marketplace.
The Company
In 2013, four brothers, Neal, Daniel, Jeffrey, and Jordan Harmon, founded VidAngel, a filtering company that gives viewers the choice to
remove objectionable content, such as violence, sex, nudity and/or language, from authorized copies of movies and television programs. The
Harmon brothers, as fathers of children aged newborn to ten, were searching for a better way to watch quality content with their kids. They
founded VidAngel to give their families, and all other families, greater personal choice in the movies and television programs they watch at home.
VidAngel’s purpose is not only to allow families to watch “however the BLEEP they want,” but to protect an individual’s legal right to customize
the content they watch at home. Today, management believes that VidAngel is the leading filtering company, with applications, or Apps, available
on all major platforms, and that the potential demand for VidAngel’s service is significant.
The Company was formed as a Utah limited liability company on October 22, 2013, pursuant to a Certificate of Formation filed with the
State of Utah’s Department of Commerce and that certain Operating Agreement of the Company, dated December 13, 2013, by and among the
Company and its members. Subsequently, the Company was converted into VidAngel, Inc., a Delaware corporation, on February 12, 2014,
pursuant to Articles of Conversion filed with the State of Utah’s Department of Commerce.
The Company has authorized capital stock consisting of 25,000,000 shares of common stock, par value $0.001 per share, or common
stock, of which 21,250,000 shares have been designated as Class A voting common stock, or the Class A Common Stock, and 3,750,000 have
been designated as Class B Common Stock.
Investors in this offering will acquire our Class B Common Stock and become holders of our Class B Common Stock, or our Class B
Common Stockholders, with respect to their ownership of Offered Shares. Upon investors’ receipt of Offered Shares purchased in this Offering,
they will become bound by our Bylaws, Certificate and Stockholders Agreement. Our Bylaws, Certificate and Stockholders Agreement govern
the various rights and obligations of our stockholders, including the Class B Common Stockholders.
On June 9, 2016, Disney Enterprises, Inc., Twentieth Century Fox Film Corporation, and Warner Bros. Entertainment, Inc. (three of the
six major studios), joined by LucasFilm Ltd., LLC, or, collectively, the Plaintiffs, filed a federal lawsuit against VidAngel, or the Disney
Litigation, alleging two claims: (a) copyright infringement, and (b) violation of the Digital Millennium Copyright Act (or the DMCA, codified at
17 U.S.C. Sections 120104). The Plaintiffs are seeking monetary damages, costs, and attorneys’ fees from VidAngel, as well as preliminary and
permanent injunctions prohibiting VidAngel from continuing to engage in the alleged violations. VidAngel contends that its business is expressly
allowed by the Family Movie Act of 2005 (or the FMA, largely codified at 17 U.S.C. Section 110(11)) and by the doctrine of "fair use)."
VidAngel has alleged counterclaims asserting that the Plaintiffs are engaged in anticompetitive behavior. The Disney Litigation is currently at a
very early stage. VidAngel plans to use a substantial portion of the proceeds of this offering to defend the Disney Litigation, including by
prosecuting its counterclaims, through appeal. If VidAngel loses the Disney Litigation, the loss will have a material adverse effect on VidAngel’s
financial condition and on its ability to continue business operations. See "RISK FACTORSWe are engaged in current litigation, the
outcome of which, if not favorable to VidAngel, would have a material adverse effect on us and our ability to continue our business
operations" on page 7 and "DESCRIPTION OF OUR BUSINESSLegal ProceedingsDisney Litigation" on page 28.
Taxation
We are taxed as a subchapter C Corporation, and, as such, we are required to pay federal income tax at the corporate tax rates on our
taxable income.
1
- A.216 -
Exhibit A
RJN-8
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Securities Offered
We are offering a minimum of 1,666,667 and a maximum of 3,750,000 shares of our Class B Common Stock in this offering with a
minimum purchase requirement of fifty (50) Offered Shares; however we can waive the minimum purchase requirement in our sole discretion. If
we sell at least the minimum number of Offered Shares, or the Minimum Offering, on or before the Termination Date, then we will close on the
Minimum Offering, or the Initial Closing, and this offering will continue until terminated on the earlier of (i) a ruling on the Disney Litigation; (ii)
the date on which we sell the maximum number of Offered Shares, or the Maximum Offering, or (iii) December 31, 2016. See “DESCRIPTION
OF THE BUSINESS – Legal Proceedings.” The Initial Closing will occur at the Company’s discretion on any date after the Company sells at
least the Minimum Offering and before the Termination Date. If on the Initial Closing date we have sold less than the Maximum Offering, we will
hold one or more additional closings, or Additional Closings, in our sole discretion for additional sales, up to the Maximum Offering, until the
Termination Date. Purchases of Shares in excess of $5,000 must be transmitted by investors directly by either wire transfer or electronic funds
transfer via ACH to a noninterest bearing escrow account maintained by Issuer Direct. Purchases of Shares in the amount of $5,000 or less may
be submitted through an investor's VidAngel customer account in accordance with the billing information for such investor at www.vidangel.com,
and will not be held in the escrow account maintained by Issuer Direct, but will be held in a separate noninterest bearing account held by
VidAngel. Upon the Initial Closing, the proceeds collected for such closing will be disbursed to the Company and the Offered Shares for such
closing will be issued to investors. If a closing does not occur for any reason, the proceeds for such closing will be promptly returned to investors,
without interest and without deduction.
Investors in the Offered Shares will become our Class B Common Stockholders. Our Class B Common Stock is common nonvoting
equity and contains no preferences as to other classes of our capital stock.
Class B Common Stockholders are not entitled to vote their Class B Common Stock, including in the election of directors. See
“SECURITIES BEING OFFERED – Description of Certificate and Bylaws.”
Our ability to pay dividends depends on both our achievement of positive cash flow and our Board’s discretion in declaring
dividends. For our most recent fiscal year ended December 31, 2015, we realized a net loss of $1,382,016. The Company has never declared or
paid cash dividends on its capital stock. The Company currently intends to retain any future earnings to finance the growth and development of its
business and therefore does not anticipate paying any cash dividends for the foreseeable future. The order and priority of our dividends is further
described in “SECURITIES BEING OFFERED – Dividends.”
Management
The Company is governed by our certificate of incorporation, as amended, or our Certificate, and our bylaws, or our Bylaws. The
following summary describes material provisions of our Certificate and our Bylaws as those documents pertain to the management of the
Company, but it is not a complete description of our Certificate, our Bylaws or any combination of the two. A copy of our Certificate and our
Bylaws are filed as exhibits to the Offering Statement of which this Offering Circular is a part. See “SECURITIES BEING OFFERED –
Description of Certificate of Formation and Bylaws.”
Board of Directors
Subject to our stockholders’ rights to consent to certain transactions as provided under the Delaware General Corporate Law, or DGCL,
the business and affairs of the Company are controlled by, and all powers are exercised by, our board of directors, or our Board. Our Board is
required to consist of not fewer than three (3) nor more than five (5) directors, the exact number to be set from time to time by the Board. Our
Board is comprised of Paul Ahlstrom, Neal Harmon and Dalton Wright. Our Board is elected each year at the annual meeting of Class A Common
Stockholders, to hold office until the next annual meeting and until their successors are elected and qualified. Any newly created directorships
resulting from an increase in the authorized number of directors and any vacancies occurring in our Board may be filled by the affirmative vote of
the remaining directors. A director may resign at any time, and the Class A Common Stockholders may remove a director at any time, with or
without cause, by the affirmative vote of a majority of stockholders voting in such decision. As Class B Stockholders, investors in this offering
will have no rights to vote in the election or removal of members of our Board.
The DGCL provides that stockholders of a Delaware corporation are not entitled to the right to cumulate votes in the election of directors
unless its certificate of incorporation provides otherwise. Our Certificate does not provide for cumulative voting.
Our Board may designate one or more committees. Such committees must consist of one or more directors. Any such committee, to the
extent permitted by applicable law, will have and may exercise all the powers and authority of the Board in the management of the business and
affairs of the Company.
2
- A.217 -
Exhibit A
RJN-9
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Officers
The Board has the authority to select the officers of the Company. Under our Bylaws, the officers are required to consist of a Chairman
of the Board, a Chief Executive Officer, or CEO, a Secretary and a Treasurer. In addition, the Board may elect one or more Vice Chairmen,
President, Chief Financial Officer and Vice Presidents, and such other offices as the Board may determine. Two or more of the aforementioned
offices may be held by the same person. Our officers are: (i) Neal Harmon, CEO; (ii) Jeffrey Harmon, Chief Marketing Officer; (iii) Elizabeth
Ellis, Chief Operating Officer, or COO; (iv) Patrick Reilly, Director of Finance and Secretary; and (v) David Quinto, General Counsel.
At the first meeting of the Board following the annual meeting of stockholders, the Board appoints the officers, however the Board may
also empower the CEO to appoint subordinate officers and agents for us. Each officer so elected holds office until such officer’s successor is
elected and qualified or until the officer’s earlier resignation or removal. Each officer is required to perform such duties as are provided in the
Bylaws or as the Board may from time to time determine. Subject to the rights, if any, of an officer under any employment agreement, any officer
may be removed, with our without cause, by the affirmative vote of a majority of the Board. An officer may resign at any time by giving notice to
the Board. Our CEO is in charge of the general affairs of the Company, subject to the oversight of the Board. In case any officer is absent, or for
any other reason the Board may deem sufficient, the CEO or the Board may delegate the powers and duties of such officer to any other officer or
to any director.
Transfer Restrictions
The Company’s Class B Common Stock is subject to the terms and conditions of our Stockholders Agreement. The following summary
describes material provisions of our Stockholders Agreement as this document pertains to our Class B Common Stock, but it is not a complete
description of our Stockholders Agreement. A copy of the form of our Stockholders Agreement is filed as an exhibit to the Offering Statement of
which this Offering Circular is a part. See “SECURITIES BEING OFFERED – Description of Stockholders Agreement.”
Investors in our Class B Common Stock will be subject to the restrictions on transfer set forth in our Stockholders Agreement. Under the
terms of our Stockholders Agreement, transfer of shares of our Class B Common Stock will be subject to a right of first refusal exercisable first
by the Company, second, by our Class A Common Stockholders, and, third, by our remaining Class B Common Stockholders party to the
Stockholders Agreement. Prior to any transfer or proposed transfer of shares, the transferring shareholder, or the Seller, is required to give written
notice to us and to the remaining stockholders of such proposed transfer. The certificates for our Class B Common Stock will be legended to
reflect these restrictions.
Summary Risk Factors
An investment in our Offered Shares involves a number of risks. See “RISK FACTORS,” of this Offering Circular. Some of the more significant
risks include those set forth below.
● An investment in our Offered Shares is a speculative investment, and therefore, no assurance can be given that you will realize your
investment objectives.
● We intend to retain all our earnings for the future operation and expansion of our business and do not anticipate making any cash
distributions at any time in the foreseeable future.
● Over our past two fiscal years, we have experienced aggregate net losses.
● We have limited operating history upon which to base an investment decision.
● We are new and face all the risks of an earlystage company.
● We are engaged in current litigation, the outcome of which, if not favorable to VidAngel, would have a material adverse effect on us and
our ability to continue business operations.
● If our efforts to attract and retain customers are not successful, our business will be adversely affected.
●
Changes in competitive offerings for entertainment video, including the potential rapid adoption of piracybased video offerings, could
adversely impact our business.
3
- A.218 -
Exhibit A
RJN-10
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● The longterm and fixed cost nature of our content commitments may limit our operating flexibility and could adversely affect our
liquidity and results of operations.
● If we are not able to manage change and growth, our business could be adversely affected.
● If we fail to maintain or, in new markets establish, a positive reputation with customers concerning our service, including the content we
offer and the ease of use and accuracy of our content filters, we may not be able to attract or retain customers, and our operating results
may be adversely affected.
● We face risks, such as unforeseen costs and potential liability in connection with content we acquire, filter and/or distribute through our
service.
● Any significant disruption in or unauthorized access to our computer systems or those of third parties that we utilize in our operations,
including those relating to cybersecurity or arising from cyberattacks, could result in a loss or degradation of service, unauthorized
disclosure of data, including customer and corporate information, or theft of intellectual property, including digital content assets, which
could adversely impact our business.
● If the technology we use in operating our business fails, becomes unavailable, or does not operate to expectations, our business and
operating results could be adversely impacted.
● Changes in how network operators handle and charge for access to data that travel across their networks could adversely impact our
business.
● Our reputation and relationships with customers would be harmed if our customer data, particularly billing data, were accessed by
unauthorized persons.
● If our trademarks and other proprietary rights are not adequately protected to prevent use or appropriation by our competitors, the value
of our brand and other intangible assets may be diminished, and our business may be adversely affected.
● Intellectual property claims against us could be costly and result in the loss of significant rights related to, among other things, our web
site, filtering technology, our recommendation and merchandising technology, title selection processes and marketing activities.
● We are engaged in legal proceedings that could cause us to incur unforeseen expenses and could occupy a significant amount of our
management's time and attention.
● We are dependent on our management to achieve our objectives, and our loss of, or inability to obtain, key personnel could delay or
hinder implementation of our business and growth strategies, which could adversely affect the value of your investment and our ability to
pay dividends.
● This is a fixed price offering and the fixed offering price may not accurately represent the current value of us or our assets at any
particular time. Therefore, the purchase price you pay for the Offered Shares may not be supported by the value of our assets at the time
of your purchase.
● We may change our operational policies and business and growth strategies without stockholder consent, which may subject us to
different and more significant risks in the future.
Interest of Management and Related Parties
We have entered into a Promotion and Services Agreement for marketing services with Harmon Brothers LLC, or HB, a company in
which our cofounders and executive officers, Neal Harmon and Jeffrey Harmon, own substantially all the equity. We have entered into an
Investors Rights and Voting Agreement with certain of our significant investors, creating certain board rights. We have also recently entered into
an employment agreement with our General Counsel.
Reporting Requirements under Tier II of Regulation A
Following this Tier II, Regulation A offering, we will be required to comply with certain ongoing disclosure requirements under Rule
257 of Regulation A. We will be required to file: an annual report with the SEC on Form 1K; a semiannual report with the SEC on Form 1SA;
current reports with the SEC on Form 1U; and a notice under cover of Form 1Z. The necessity to file current reports will be triggered by certain
corporate events. Parts I & II of Form 1Z will be filed by us if and when we decide to and are no longer obligated to file and provide annual
reports pursuant to the requirements of Regulation A.
4
- A.219 -
Exhibit A
RJN-11
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CAUTIONARY STATEMENT REGARDING FORWARDLOOKING STATEMENTS
This Offering Circular contains certain forwardlooking statements that are subject to various risks and uncertainties. Forwardlooking
statements are generally identifiable by use of forwardlooking terminology such as “may,” “will,” “should,” “potential,” “intend,” “expect,”
“outlook,” “seek,” “anticipate,” “estimate,” “approximately,” “believe,” “could,” “project,” “predict,” or other similar words or expressions.
Forwardlooking statements are based on certain assumptions, discuss future expectations, describe future plans and strategies, contain financial
and operating projections or state other forwardlooking information. Our ability to predict results or the actual effect of future events, actions,
plans or strategies is inherently uncertain. Although we believe that the expectations reflected in our forwardlooking statements are based on
reasonable assumptions, our actual results and performance could differ materially from those set forth or anticipated in our forwardlooking
statements. Factors that could have a material adverse effect on our forwardlooking statements and upon our business, results of operations,
financial condition, funds derived from operations, cash available for dividends, cash flows, liquidity and prospects include, but are not limited to,
the factors referenced in this Offering Circular, including those set forth below.
When considering forwardlooking statements, you should keep in mind the risk factors and other cautionary statements in this Offering
Circular. Readers are cautioned not to place undue reliance on any of these forwardlooking statements, which reflect our views as of the date of
this Offering Circular. The matters summarized below and elsewhere in this Offering Circular could cause our actual results and performance to
differ materially from those set forth or anticipated in forwardlooking statements. Accordingly, we cannot guarantee future results or
performance. Furthermore, except as required by law, we are under no duty to, and we do not intend to, update any of our forwardlooking
statements after the date of this Offering Circular, whether as a result of new information, future events or otherwise.
5
- A.220 -
Exhibit A
RJN-12
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#:4462
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RISK FACTORS
An investment in our Offered Shares is highly speculative and is suitable only for persons or entities that are able to evaluate the risks of
the investment. An investment in our Offered Shares should be made only by persons or entities able to bear the risk of, and to withstand the total
loss of, their investment. Prospective investors should consider the following risks before making a decision to purchase our Offered Shares. To
the best of our knowledge, we have included all material risks to investors in this section.
General Risks of an Investment in Us
An investment in our Offered Shares is a speculative investment and, therefore no assurance can be given that you will realize
your investment objectives.
No assurance can be given that investors will realize a return on their investments in us or that they will not lose their entire investment
in our Offered Shares. For this reason, each prospective investor of our Offered Shares should carefully read this Offering Circular. ALL SUCH
PERSONS OR ENTITIES SHOULD CONSULT WITH THEIR ATTORNEY OR FINANCIAL ADVISOR PRIOR TO MAKING AN
INVESTMENT.
We do not intend to pay dividends for the foreseeable future.
We intend to retain all of our earnings for the future operation and expansion of our business and do not anticipate making any cash
distributions at any time in the foreseeable future.
Over our past two fiscal years, we have experienced aggregate net losses.
We recorded net losses of $777,916 in fiscal 2014 and net losses of $1,382,016 in fiscal 2015, resulting in an aggregate net loss of
$2,159,932 over our last two fiscal years. If our ability to generate positive net income remains inconsistent in the future, the value of our Class B
Common Stock would likely be materially and adversely affected.
Our future indebtedness may limit our ability to declare and pay dividends and may affect our operations.
Although we don’t anticipate doing so in the near future, we may seek debt financing eventually to assist with the financing of our future
operations. Our ability to make principal and interest payments with respect to any such debt incurred depends on future performance, which
performance is subject to many factors, some of which will be outside of our control. In addition, most of such indebtedness will likely be secured
by substantially all of our assets and will contain restrictive covenants that limit our ability to distribute cash and to incur additional
indebtedness. Payment of principal and interest on such indebtedness, as well as compliance with the requirements and covenants of such
indebtedness, could limit our ability to pay dividends to our stockholders, if at all. Such leverage may also adversely affect our ability to finance
future operations and capital needs, or to pursue other business opportunities and make results of operations more susceptible to adverse business
conditions.
We have limited operating history upon which to base an investment decision.
We are an earlystage company in which you may lose your entire investment. We began operations in 2013. Because we have a limited
operating history, we are unable to provide significant data upon which to evaluate fully our prospects and an investment in our securities. Our
ability to succeed and generate operating profits and positive operating cash flow will depend on our ability, among other things, to:
● Develop and execute our business model;
● Attract and maintain an adequate customer base;
● Raise additional capital as contemplated in this offering, if necessary in the future;
● Pending and potential lawsuits threatening our ability to provide our services; and
● Attract and retain qualified personnel.
6
- A.221 -
Exhibit A
RJN-13
Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 11 of 79 Page ID
#:4463
Page 10 of 78
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We cannot be certain that our business strategy will be successful in the longterm because this strategy is still relatively new and even if
successful, we may face difficulty in managing our growth. As an earlystage company, we will be particularly susceptible to the risks and
uncertainties described in these risk factors.
We are new and face all the risks of an earlystage company.
We may encounter challenges and difficulties frequently experienced by earlystage companies; including:
● A lack of operating experience;
● Increasing net losses and negative cash flows;
● Insufficient revenue or cash flow to be selfsustaining;
● An unproven business model;
● Difficulties in managing rapid growth.
We are engaged in current litigation, the outcome of which, if not favorable to VidAngel, would have a material adverse effect on
us and our ability to continue our business operations.
We are currently engaged in the Disney Litigation, as well as litigation with ClearPlay, Inc., or the ClearPlay Litigation, and plan to use a
substantial amount of the proceeds of this offering in our defense in the Disney Litigation. If the Disney Litigation were to be decided against
VidAngel, it would have a material adverse effect on not only our financial condition but our ability to continue business operations. See
“DESCRIPTION OF THE BUSINESS – Legal Proceedings” below for a detailed summary of our current litigation.
Risks Related to Our Business
If our efforts to attract and retain customers are not successful, our business will be adversely affected.
We have experienced positive customer growth since launching the latest version of our service in December 2014. Our ability to
continue to attract customers will depend, in part, on our ability to consistently provide our customers with compelling content choices, a quality
experience for selecting and viewing TV shows and movies, and dynamic filtering solutions set to the customer’s preferences. Furthermore, the
relative service levels, content offerings, pricing and related features of competitors to our service may adversely impact our ability to attract and
retain customers. Our main direct competition is ClearPlay, Inc., or ClearPlay, which also offers a filtering service. Other entertainment video
providers that do not currently offer a filtering service, such as multichannel video programming distributors, Internetbased movie and TV
content providers (including those that provide pirated content) and brickandmortar DVD rental outlets, including without limitation Netflix,
Amazon Prime, Vimeo, Hulu, and Xfinity OnDemand, could become direct competitors in the future. If consumers do not perceive our service as
valuable, including if we introduce new or adjust existing features, adjust pricing or service offerings, or change the mix of content in a manner
that is not favorably received by them, we may not be able to attract and retain customers. In addition, many of our customers try our service
resulting from wordofmouth advertising from existing customers. If our efforts to satisfy our existing customers are not successful, we may not
be able to attract new customers, and, as a result, our ability to maintain and/or grow our business will be adversely affected. Customers may
cease to use our service for many reasons, including the need to cut household expenses, unsatisfactory availability of content, competitive
services providing a better value or experience, and customer service issues not being satisfactorily resolved. We must continually add new
customers both to replace departed customers and to grow our business beyond our current customer base. Given, in particular, that our content
costs are largely fixed in nature, we may not be able to adjust our expenditures or increase our (per customer) revenues commensurate with a
lowered growth rate such that our margins, liquidity and results of operation may be adversely impacted. If we are unable to compete successfully
with current and new competitors in retaining existing customers and attracting new customers, our business will be adversely affected. Further, if
excessive numbers of customers cease using our service, we may be required to incur significantly higher marketing expenditures than we
currently anticipate to replace these customers with new customers.
7
- A.222 -
Exhibit A
RJN-14
Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 12 of 79 Page ID
#:4464
Page 11 of 78
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Changes in competitive offerings for entertainment video, including the potential rapid adoption of piracybased video offerings,
could adversely impact our business.
The market for entertainment video is intensely competitive and subject to rapid change. Through new and existing distribution channels,
consumers have increasing options to access entertainment video. The various economic models underlying these channels include subscription,
transactional, adsupported and piracybased services. All have the potential to capture meaningful segments of the entertainment video market
and could offer filtering services in the future. Piracy, in particular, threatens to damage our business, as its fundamental proposition to consumers
is so compelling and difficult to compete against: virtually all content for free and some content available has already been edited for
objectionable content. Furthermore, in light of the compelling consumer proposition, piracy services are subject to rapid global growth.
Traditional providers of entertainment video, including broadcasters and cable network operators, as well as Internetbased ecommerce
entertainment video providers, are increasing their Internetbased video offerings. Several of these competitors have long operating histories, large
customer bases, strong brand recognition and significant financial, marketing and other resources. They may secure better terms from suppliers,
adopt more aggressive pricing, and devote more resources to product development, technology, infrastructure, content acquisitions and marketing.
New competitors may enter the market or existing providers may adjust their services with unique offerings or approaches to providing
entertainment video. Companies also may enter into business combinations or alliances that strengthen their competitive positions. If we are
unable to successfully or profitably compete with current and new competitors who do or may offer filtering services in the future, our business
will be adversely affected, and we may not be able to increase or maintain market share, revenues or profitability.
The longterm and fixed cost nature of our content commitments may limit our operating flexibility and could adversely affect
our liquidity and results of operations.
In connection with obtaining video content, we typically purchase significant quantities of physical DVDs or Bluray discs in
anticipation of customer demand, the payment terms of which are not tied to customer usage or the size of our customer base. Given the multiple
year duration and largely fixed cost nature of purchasing physical DVDs and Bluray discs, if customer acquisition and retention does not meet
our expectations, our margins may be adversely impacted. To the extent customer base and/or revenue growth do not meet our expectations, our
liquidity and results of operations could be adversely affected as a result of large capital expenditures for physical DVDs and Bluray discs. In
addition, the longterm and fixed cost nature of our purchasing physical DVDs and Bluray discs may limit our flexibility in planning for, or
reacting to changes in our business and the market segments in which we operate.
We are devoting more resources to the development, marketing and distribution of filtered content, including TV series and movies. We
believe that filtered content can help differentiate our service from other offerings, enhance our brand and otherwise attract and retain customers.
To the extent our ability to provide customers with custom content filters does not meet the Company’s and our customers’ expectations, in
particular, costs, viewing and popularity, our business, including our brand and results of operations may be adversely impacted.
If we are not able to manage change and growth, our business could be adversely affected.
We are expanding our operations, scaling our filtering service to effectively and reliably handle anticipated growth in both customers and
features related to our service, ramping up our ability to provide customers with custom content filters, as well as continuing to operate our
service within the U.S. As we scale up our filtering service, we are developing technology and utilizing thirdparty “cloud” storage services. As
we ramp up our offering of content filters, we are building out crowdsourcing expertise in a number of distinct roles, including video viewers,
video taggers, video reviewers and video publishers. If we are not able to manage the growing complexity of our business, including improving,
refining or revising our systems and operational practices related to our video operations and filtering content, our business may be adversely
affected. See “DESCRIPTION OF THE BUSINESS.”
If we fail to maintain or, in new markets establish, a positive reputation with customers concerning our service, including the
content we offer and the ease of use and accuracy of our content filters, we may not be able to attract or retain customers, and our
operating results may be adversely affected.
8
- A.223 -
Exhibit A
RJN-15
Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 13 of 79 Page ID
#:4465
Page 12 of 78
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We believe that a positive reputation is important to attract and retain customers who have a number of choices for obtaining
entertainment video. To the extent our content, particularly our content filters, is perceived as low quality, or our failure to sufficiently filter
offensive or otherwise undesired content to customers, our ability to establish and maintain a positive reputation may be adversely impacted.
Furthermore, to the extent our marketing, customer service and public relations efforts are not effective or create a negative consumer reaction,
our ability to establish and maintain a positive reputation may be adversely impacted. As we expand into new markets, we need to establish our
reputation with new customers. To the extent we are unsuccessful in creating positive impressions, our business in new markets may be adversely
impacted.
Changes in how we market our service could adversely affect our marketing expenses and our customer base may be adversely
affected.
We utilize a broad mix of marketing and publicrelations programs, including social media sites such as Facebook, YouTube and Twitter,
to promote our service to potential customers. We may limit or discontinue the use or support of certain marketing sources or activities if
advertising rates increase or if we become concerned that customers or potential customers deem certain marketing practices intrusive or
damaging to our brand. If the available marketing channels are curtailed, our ability to attract new customers may be adversely affected.
If companies that promote our service determine that we negatively impact their businesses, decide to compete more directly with our
business, enter a similar business, or choose to exclusively support our competitors, we may no longer have access to certain marketing channels.
If we are unable to maintain or replace our sources of customers with similarly effective sources, or if the cost of our existing sources increases,
our customer base and marketing expenses may be adversely affected.
We face risks, such as unforeseen costs and potential liability in connection with content we acquire, filter and/or distribute
through our service.
As a distributor of content, we face potential liability for negligence, copyright and trademark infringement, or other claims based on the
nature and content of the materials that we acquire, filter and/or distribute. We also may face potential liability for content used in promoting our
service, including marketing materials and features on our Web site such as customer reviews. As we expand our offering of content filters, we
have become responsible for costs of producing content maps and other features. We also take on risks associated with filters, such as producing
filters that do not seamlessly stream content but rather produce an unsatisfactory experience to the viewing customer. To the extent we do not
accurately anticipate costs or mitigate risks, including for content that we obtain but ultimately do not make available on our service, or if we
become liable for content we acquire, filter and/or distribute, our business may suffer. Litigation to defend such claims could be costly and the
expenses and damages arising from any liability or unforeseen production risks could harm our operating results. We may not be indemnified or
insured against such claims or costs of these types. See “DESCRIPTION OF OUR BUSINESS – Legal Proceedings.”
If studios, content providers, content distributors or other rights holders refuse to sell us their content or other rights on terms
acceptable to us, our business could be adversely affected.
Our ability to provide our customers with a filtering service depends on studios, content providers, wholesale content distributors and
other rights holders upon whom we rely to produce and/or provide us the content we redistribute, filter, and stream to our customers.
If the studios, content providers, wholesale content distributors and other rights holders are not willing or able to sell us physical content
on terms acceptable to us, our ability to filter content remotely to our customers would be adversely affected and/or our costs could increase.
Many of the methods by which we purchase physical media from the studios, content providers, wholesale content distributors or other rights
holders could cease offering new content to our service relatively quickly. The actions of such parties, as well as other actions we may take could
impair the availability of new content for streaming through our service on short notice. As competition increases, we may see the cost of
programming increase. We focus on programming an overall mix of content that delights our customers in a cost efficient manner. Within that
context, we are selective about the titles we purchase for inclusion in our service. If we do not maintain a compelling mix of content for filtering,
our customer acquisition and retention may be adversely affected.
9
- A.224 -
Exhibit A
RJN-16
Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 14 of 79 Page ID
#:4466
Page 13 of 78
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We rely upon a number of partners to make our service available on their devices.
We currently offer customers the ability to receive filtered content through a host of Internetconnected screens, including TVs, digital
video players, television settop boxes and mobile devices. We have agreements with various tech companies and distributors to make our service
available through the television settop boxes of such service providers. We intend to continue to broaden our capability to transmit filtered TV
shows and movies to other platforms and partners over time. If we are not successful in maintaining existing and creating new relationships, or if
we encounter technological, content licensing, regulatory or other impediments to delivering our filtered content to our customers via those
devices, our ability to grow our business could be adversely impacted. Furthermore, the devices are manufactured and sold by entities other than
us and while these entities should be responsible for the devices' performance, the connection between us and those devices may nonetheless
result in customer dissatisfaction toward the Company and such dissatisfaction could result in claims against us or otherwise adversely impact our
business. In addition, technology changes to our product functionality and offering of content filters may require that partners update their
devices. If partners do not update or otherwise modify their devices, our service and our customers’ use and enjoyment could be negatively
impacted.
Any significant disruption in or unauthorized access to our computer systems or those of third parties that we utilize in our
operations, including those relating to cybersecurity or arising from cyberattacks, could result in a loss or degradation of service,
unauthorized disclosure of data, including customer and corporate information, or theft of intellectual property, including digital content
assets, which could adversely impact our business.
Our reputation and ability to attract, retain and serve our customers is dependent upon the reliable performance and security of our
computer systems and those of third parties that we utilize in our operations. These systems may be subject to damage or interruption from
earthquakes, adverse weather conditions, other natural disasters, terrorist attacks, power loss, telecommunications failures, and cybersecurity
breaches. Interruptions in these systems, or with the Internet in general, could leave our service unavailable or degraded, or otherwise hinder our
ability to deliver filtered content to our customers. Service interruptions, errors in our software or the unavailability of computer systems used in
our operations could diminish the overall attractiveness of our service to existing and potential customers.
Our computer systems and those of third parties we use in our operations are vulnerable to cybersecurity breaches, including cyber
attacks such as computer viruses, denial of service attacks, physical or electronic breakins and similar disruptions. These systems periodically
experience directed attacks intended to lead to interruptions and delays in our service and operations as well as loss, misuse or theft of data. Any
attempt by hackers to obtain our data (including customer and corporate information) or intellectual property (including digital content assets),
disrupt our service, or otherwise access our systems, or those of third parties we use, if successful, could harm our business, be expensive to
remedy and damage our reputation. We have implemented certain systems and processes to thwart hackers and protect our data and systems. To
date hackers have not had a material impact on our service or systems however this is no assurance that hackers may not be successful in the
future. Our insurance does not cover expenses related to such disruptions or unauthorized access. Efforts to prevent hackers from disrupting our
service or otherwise accessing our systems are expensive to implement and may limit the functionality of or otherwise negatively impact our
service offering and systems. Any significant disruption to our service or access to our systems could result in a loss of customers and adversely
affect our business and results of operation.
We utilize our own communications and computer hardware systems located either in our facilities or in that of a thirdparty Web hosting
provider. In addition, we utilize thirdparty “cloud” computing services in connection with our business operations. We also utilize our own and
thirdparty content delivery networks to help us deliver TV shows and movies in high volume to our customers over the Internet. Problems faced
by us or our thirdparty Web hosting, "cloud" computing, or other network providers, including technological or businessrelated disruptions, as
well as cybersecurity threats, could adversely impact the experience of our customers.
10
- A.225 -
Exhibit A
RJN-17
Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 15 of 79 Page ID
#:4467
Page 14 of 78
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We rely upon certain third party cloud computing service providers to operate certain aspects of our service and any disruption
of or interference with our use of such services from our providers would impact our operations and our business would be adversely
impacted.
Several third party cloud computing services providers provide VidAngel with a distributed computing infrastructure platform for
business operations, or what is commonly referred to as a "cloud" computing service. We have designed our software and computer systems so as
to utilize data processing, storage capabilities and other services provided by such providers. Currently, we run the vast majority of our computing
using such third party cloud computing services. Given this, along with the fact that we cannot easily switch our operations to another cloud
provider, any disruption of or interference with our use of such services from our providers would impact our operations and our business would
be adversely impacted.
If the technology we use in operating our business fails, becomes unavailable, or does not operate to expectations, our business
and operating results could be adversely impacted.
We utilize a combination of proprietary and thirdparty technology to operate our business. This includes technology we have developed
or that has been assigned to us, such as our Content Delivery and Filtering Solution, Filter Curation Platform, and our Remote Media Ownership
Management. We also use technology to recommend and merchandise content to our consumers as well as to enable fast and efficient delivery of
content to our customers and their various consumer electronic devices. For example, we have built and deployed our video on a content delivery
network, or CDN. To the extent Internet Service Providers, or ISPs, do not interconnect with our CDN, or if we experience difficulties in its
operation, our ability to efficiently and effectively deliver our content and our offering of content filters to our customers could be adversely
impacted and our business and results of operation could be adversely affected. Likewise, if our recommendation and merchandising technology
does not enable us to predict and recommend titles that our customers will enjoy, our ability to attract and retain customers may be adversely
affected. We also utilize third party technology to help market our service, process payments, and otherwise manage the daily operations of our
business. If our technology or that of third parties we utilize in our operations fails or otherwise operates improperly, our ability to operate our
service, retain existing customers and add new customers may be impaired. Also, any harm to our customers’ personal computers or other devices
caused by software used in our operations could have an adverse effect on our business, results of operations and financial condition. See
“DESCRIPTION OF THE BUSINESS—Our Intellectual Property.”
If government regulations relating to the Internet or other areas of our business change, we may need to alter the manner in
which we conduct our business, or incur greater operating expenses.
The adoption or modification of laws or regulations relating to the Internet or other areas of our business could limit or otherwise
adversely affect the manner in which we currently conduct our business. In addition, the continued growth and development of the market for
online commerce may lead to more stringent consumer protection laws, which may impose additional burdens on us. If we are required to comply
with new regulations or legislation or new interpretations of existing regulations or legislation, this compliance could cause us to incur additional
expenses or alter our business model.
Changes in laws or regulations that adversely affect the growth, popularity or use of the Internet, including laws impacting net neutrality,
could decrease the demand for our service and increase our cost of doing business. The failure to adopt laws protecting strong net neutrality could
also increase the cost of doing business. On February 16, 2015, the U.S. Federal Communications Commission, or FCC, adopted net neutrality
rules intended, in part, to prevent network operators from discriminating against legal traffic that transverses their networks and to prevent
Internet Service Provider, or ISP, abuses at interconnection points. The FCC's authority to adopt these rules is currently under review by the U.S.
Circuit Court of Appeals for the District of Columbia. To the extent network operators attempt to use this ruling to extract fees from us to deliver
our traffic or otherwise engage in discriminatory practices, or if the U.S. Circuit Court of Appeals for the District of Columbia invalidates the
rules, our business could be adversely impacted. Within such a regulatory environment, coupled with potentially significant political and
economic power of local network operators, we could experience discriminatory or anticompetitive practices that could impede our growth,
cause us to incur additional expense or otherwise negatively affect our business.
11
- A.226 -
Exhibit A
RJN-18
Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 16 of 79 Page ID
#:4468
Page 15 of 78
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Changes in how network operators handle and charge for access to data that travel across their networks could adversely impact
our business.
We rely upon the ability of consumers to access our service through the Internet. If network operators block, restrict or otherwise impair
access to our service over their networks, our service and business could be negatively affected. To the extent that network operators implement
usage based pricing, including meaningful bandwidth caps, or otherwise try to monetize access to their networks by data providers, we could
incur greater operating expenses and our new customer acquisition and retention could be negatively impacted. Furthermore, to the extent
network operators create tiers of Internet access service and either charge us for or prohibit us from being available through these tiers, our
business could be negatively impacted.
Most network operators that provide consumers with access to the Internet also provide these consumers with multichannel video
programming. As such, many network operators have an incentive to use their network infrastructure in a manner adverse to our continued growth
and success. While we believe that consumer demand, regulatory oversight and competition will help check these incentives, to the extent that
network operators are able to provide preferential treatment to their data as opposed to ours or otherwise implement discriminatory network
management practices, our business could be negatively impacted.
Privacy concerns could limit our ability to collect and leverage our customer data and disclosure of customer data could
adversely impact our business and reputation.
In the ordinary course of business, and in particular in connection with merchandising our service to our customers, we collect and utilize
data supplied by our customers. We currently face certain legal obligations regarding the manner in which we treat such information. Other
businesses have been criticized by privacy groups and governmental bodies for attempts to link personal identities and other information to data
collected on the Internet regarding users' browsing and other habits. Increased regulation of data utilization practices, including selfregulation or
findings under existing laws that limit our ability to collect and use data, could have an adverse effect on our business. In addition, if we were to
disclose data about our customers in a manner that was objectionable to them, our business reputation could be adversely affected, and we could
face potential legal claims that could impact our operating results.
Our reputation and relationships with customers would be harmed if our customer data, particularly billing data, were accessed
by unauthorized persons.
We maintain personal data regarding our customers. This data is maintained on our own systems as well as those of third parties we use
in our operations. With respect to billing data, such as credit card numbers, we do not store such information on our servers, but rely on third party
services that are PCI DSS compliant for storing and accessing billing information. We take measures to protect against unauthorized intrusion into
our customers’ data. Despite those measures, we, our payment processing services and other thirdparty services we use could experience an
unauthorized intrusion into our customers’ data. In the event of such a breach, current and potential customers may become unwilling to provide
the information to us necessary for them to become customers. Additionally, we could face legal claims for such a breach. The costs relating to
any data breach could be material, and we currently do not carry insurance against the risk of a data breach. For these reasons, should an
unauthorized intrusion into our customers’ data occur, our business could be adversely affected.
We are subject to payment processing risk.
Our customers pay for our service using a variety of payment methods, including credit and debit cards. We rely on internal systems as
well as those of third parties to process payments. Acceptance and processing of these payment methods are subject to certain rules and
regulations and require payment of interchange and other fees. To the extent there are disruptions in our payment processing systems, increases in
payment processing fees, material changes in the payment ecosystem, such as large reissuances of payment cards, delays in receiving payments
from payment processors and/or changes to rules or regulations concerning payment processing, our revenue, operating expenses and operating
results could be adversely impacted. In addition, from time to time, we encounter fraudulent use of payment methods, which could impact our
results of operation, and, if not adequately controlled and managed, could create negative consumer perceptions of our service.
12
- A.227 -
Exhibit A
RJN-19
Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 17 of 79 Page ID
#:4469
Page 16 of 78
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If our trademarks and other proprietary rights are not adequately protected to prevent use or appropriation by our competitors,
the value of our brand and other intangible assets may be diminished, and our business may be adversely affected.
We rely and expect to continue to rely on a combination of proprietary information, invention assignment, noncompetition and
arbitration agreements with our employees, consultants and third parties with whom we have relationships, as well as trademark, copyright, patent
and trade secret protection laws, to protect our proprietary rights. We may also seek to enforce our proprietary rights through court proceedings.
We have applied and we expect to apply for trademark registrations and the issuance of patents from time to time. Such applications may not be
approved, third parties may challenge any copyrights, patents or trademarks issued to or held by us, third parties may knowingly or unknowingly
infringe our intellectual property rights, and we may not be able to prevent infringement or misappropriation without substantial expense to us. If
the protection of our intellectual property rights is inadequate to prevent use or misappropriation by third parties, the value of our brand and other
intangible assets may be diminished, competitors may be able to mimic our service and methods of operations more effectively, the perception of
our business and service to customers and potential customers may become confused in the marketplace, and our ability to attract customers may
be adversely affected.
We currently hold various domain names relating to our brand, including www.vidangel.com. Failure to protect our domain names could
adversely affect our reputation and brand and make it more difficult for customers to find our web site and our service. We may be unable,
without significant cost or at all, to prevent third parties from acquiring domain names that are similar to, infringe upon or otherwise decrease the
value of our trademarks and other proprietary rights.
Intellectual property claims against us could be costly and result in the loss of significant rights related to, among other things,
our web site, filtering technology, our recommendation and merchandising technology, title selection processes and marketing activities.
Trademark, copyright, patent and other intellectual property rights are important to us and other companies. Our intellectual property
rights extend to our technology, business processes and the content on our web site. From time to time, third parties may allege that we have
violated their intellectual property rights. If we are unable to obtain sufficient rights, successfully defend our use, develop noninfringing
technology, or otherwise alter our business practices on a timely basis in response to claims for infringement, misappropriation, misuse or other
violation of thirdparty intellectual property rights, our business and competitive position may be adversely affected. Many companies are
devoting significant resources to developing patents that could potentially affect many aspects of our business. There are numerous patents that
broadly claim means and methods of conducting business on the Internet. Defending against intellectual property claims, whether they are with or
without merit or are determined in our favor, would result in costly litigation and the diversion of technical and management personnel. It also
may result in our inability to use our current web site, streaming technology, our recommendation and merchandising technology or inability to
market our service and merchandise our products. As a result of such dispute, we may have to develop noninfringing technology, enter into
royalty or licensing agreements, adjust our merchandising or marketing activities or take other actions to resolve the claims. These actions, if
required, may be costly or unavailable on terms acceptable to us. We are currently engaged in litigation with Disney Enterprises, Inc., et. al., or
the Disney Litigation. An adverse decision from the court in connection with this litigation would adversely affect our financial condition and our
ability to continue business operations. See “DESCRIPTION OF THE BUSINESS – Legal Proceedings” below for a detailed summary of our
current litigation.
13
- A.228 -
Exhibit A
RJN-20
Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 18 of 79 Page ID
#:4470
Page 17 of 78
253G2
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We are engaged in legal proceedings that could cause us to incur unforeseen expenses and could occupy a significant amount of
our management's time and attention.
From time to time, we are subject to litigation or claims that could negatively affect our business operations and financial position. We
are currently involved in the Disney Litigation and plan to use a substantial amount of the proceeds of this offering in our defense. As we grow,
we expect the number of litigation matters against us to increase. These matters have included copyright infringements, which are typically
expensive to defend. Litigation disputes could cause us to incur unforeseen expenses, could occupy a significant amount of our management's
time and attention and could negatively affect our business operations and financial position. See “USE OF PROCEEDS TO ISSUER” and
“DESCRIPTION OF THE BUSINESS – Legal Proceedings” below for a detailed summary of our current litigation.
We may seek additional capital that may result in stockholder dilution or others having rights senior to those of our Class B
Common Stockholders.
From time to time, we may seek to obtain additional capital, either through equity, equitylinked or debt securities. The decision to obtain
additional capital will depend on, among other things, our business plans, operating performance and condition of the capital markets. If we raise
additional funds through the issuance of equity, equitylinked or debt securities, such securities may have rights, preferences or privileges senior
to the rights of our Class B Common Stock and our stockholders may experience dilution.
We may lose key employees or may be unable to hire qualified employees.
We rely on the continued service of our senior management, including our CEO and cofounder Neal Harmon, members of our executive
team, other key employees, and the hiring of new qualified employees. In our industry, there is substantial and continuous competition for highly
skilled business, product development, technical and other personnel. We may not be successful in recruiting new personnel and in retaining and
motivating existing personnel, which may be disruptive to our operations. See “DIRECTORS, EXECUTIVE OFFICERS AND
SIGNIFICANT EMPLOYEES.”
We are dependent on our management to achieve our objectives, and our loss of, or inability to obtain, key personnel could delay
or hinder implementation of our business and growth strategies, which could adversely affect the value of your investment and our ability
to pay dividends.
Our success depends on the diligence, experience and skill of our Board and officers. Neal Harmon is our director and our Chief
Executive Officer. Jeffrey Harmon is our Chief Marketing Officer. Elizabeth Ellis is our Chief Operating Officer. Patrick Reilly is our Director
of Finance. David Quinto is our General Counsel. With the exception of Mr. Quinto, we have neither employment agreements with, nor key man
insurance for, any of our officers and the loss of any of them, but particularly Messrs. Harmon, could harm our business, financial condition, cash
flow and results of operations. Any such event would likely result in a material adverse effect on your investment.
Risks Relating to the Formation and Internal Operation of the Company
You will have only limited rights regarding our management, therefore, you will not have the ability to actively influence the day
today management of our business and affairs.
Our Board will have sole power and authority over the management of the Company, subject only to the requirements of the DGCL. See
“SECURITIES BEING OFFERED – Description of Our Certificate of Incorporation and Bylaws.” Therefore, you will not have an active
role in the Company’s daytoday management. Further, as a holder of nonvoting common stock, you will have no right to vote in the election or
removal of directors, nor will you have the right to vote on major corporate actions that are subject to the approval of the Class A Stockholders.
14
- A.229 -
Exhibit A
RJN-21
Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 19 of 79 Page ID
#:4471
Page 18 of 78
253G2
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We may change our operational policies and business and growth strategies without stockholder consent, which may subject us
to different and more significant risks in the future.
Our Board determines our operational policies and our business and growth strategies. Our directors may make changes to, or approve
transactions that deviate from, those policies and strategies without a vote of, or notice to, our stockholders. This could result in us conducting
operational matters or pursuing different business or growth strategies than those contemplated in this Offering Circular. Under any of these
circumstances, we may expose ourselves to different and more significant risks in the future, which could materially and adversely affect our
business and growth.
Our management will have significant control over our operations by virtue of the equity ownership in us by entities controlled
by our director, cofounder and CEO, Neal Harmon.
Mr. Neal Harmon is one of our three directors, our cofounder and our CEO. Further, Harmon Ventures LLC owns 49.63% of the Class
A Common Stock of the Company and Harmon Ventures LLC is owned by Neal, Jeffery, and Daniel Harmon, who are brothers. Further, through
their respective ownership, they collectively control the voting of 8,938,520 shares of our Class A Common Stock. Messrs. Harmon collectively
control sufficient Class A Common Stock to significantly influence the election of our board of directors, and actions requiring the consent of a
majority of the Class A Common Stockholders and this will remain unchanged following completion of this offering. See “SECURITY
OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITY HOLDERS.”
The ability of a stockholder to recover all or any portion of such stockholder’s investment in the event of a dissolution or
termination may be limited.
In the event of a dissolution or termination of the Company, the proceeds realized from the liquidation of the assets of the Company will
be distributed among the stockholders, but only after the satisfaction of the claims of thirdparty creditors of the Company. The ability of a
stockholder to recover all or any portion of such stockholder’s investment under such circumstances will, accordingly, depend on the amount of
net proceeds realized from such liquidation and the amount of claims to be satisfied therefrom. There can be no assurance that the Company will
recognize gains on such liquidation, nor is there any assurance that common stockholders will receive a distribution in such a case.
The Board and our executive officers will have limited liability for, and will be indemnified and held harmless from, the losses of
the Company.
The Company will indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the
Company) by reason of the fact that he is or was a director, officer, employee or agent of the Company, or is or was serving at the request of our
Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses
(including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interest of the
Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. A successful
claim for such indemnification could deplete the Company’s assets by the amount paid. See “SECURITIES BEING OFFERED – Description
of Certificate of Incorporation and Bylaws” below for a detailed summary of the terms of our Certificate and Bylaws. Our Certificate and
Bylaws are filed as exhibits to the Offering Statement of which this Offering Circular is a part. See “SECURITIES BEING OFFERED –
Fiduciary Duties and Indemnification.”
The videofiltering industry is subject to rapid technological change. We must continue to enhance and improve our technology.
Our current software and related webbased technology is developed and in use. We may, however, use a substantial amount of the
proceeds of this offering to modify and enhance our current web site, filtering platform, content offering, and offering of content filters. We must
continue to enhance and improve the performance, functionality and reliability of the systems upon which our business model is built.
15
- A.230 -
Exhibit A
RJN-22
Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 20 of 79 Page ID
#:4472
Page 19 of 78
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The development of any software is characterized by rapid technological change, rapid introduction or changes in user requirements and
preferences, short development cycles, frequent introduction of new products and services, new technologies and the emergence of new industry
standards and practices that could render our existing technology obsolete. Our success will depend, in part, on our ability to continue to develop
new technologies to enhance our existing technology in order to address the varied needs of existing and new customers and respond to
technological advances and emerging industry standards and practices on a costeffective and timely basis. The development of our proprietary
technology involves significant technical and business risks. We may fail to use new technologies effectively or to adapt our proprietary
technology and systems to customer requirements or emerging industry standards. If we are unable to adapt to changing market conditions,
strategic partner and customer requirements or emerging industry standards, that will have a material adverse effect on our ability to succeed.
Our business may be subject to regulatory or legislative changes.
The Company may face government regulation and legal uncertainties in connection with its business. There may be a number of federal,
state or local legislative or regulatory proposals under consideration of which the Company is not aware or which may be considered or adopted
in the future. Any new legislation or regulation, or the application or interpretation of existing laws or regulations, may negatively impact the
Company’s growth, impose additional burden on the Company or alter how the Company does business. This could decrease the demand for our
services, increase our cost of doing business or otherwise have a material adverse effect on the Company’s business, results of operations and
financial condition.
Risks Related to Conflicts of Interest and Interested Transactions
We use the marketing services of HB, which is owned by our founders and officers, Neal Harmon and Jeffery Harmon.
Messrs. Neal Harmon and Jeffery Harmon hold ownership interests in HB, an advertising agency which is now known for several of the
world’s most successful viral video campaigns (including Squatty Potty with 100 million views, PooPourri with 36 million views, Purple with 45
million views, among others). HB is in the business of providing Internetbased and multimedia promotion and marketing services. The Harmon
brothers simultaneously started the ad agency HB at the inception of VidAngel so that our marketing team would have outside income. After we
had built a successful VidAngel product and began to rapidly grow, HB had already built a clientele and resources to service large ad campaigns
for its clients. VidAngel hired HB as an independent contractor after the terms and conditions to engage it was authorized and approved by the
Board. Mr. Neal Harmon recused himself from the decision. Although, the Board will continue to review the HB marketing agreement annually,
our cofounders, the Harmon brothers will continue to benefit from such agreement for so long as we engage them. See “INTEREST OF
MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS.”
Members of our Board and our executive officers will have other business interests and obligations to other entities.
Neither our directors nor our executive officers will be required to manage the Company as their sole and exclusive function and they
may have other business interests and may engage in other activities in addition to those relating to the Company, provided that such activities do
not compete with the business of the Company or otherwise breach their agreements with the Company. We are dependent on our directors and
executive officers to successfully operate the Company, and in particular Mr. Neal Harmon. Their other business interests and activities could
divert time and attention from operating our business.
Risks Related to the Offering and Lack of Liquidity
There has been no active public market for our Class B Common Stock prior to this offering, and an active trading market may
not be developed or sustained following this offering, which may adversely impact the market for shares of our Class B Common Stock
and, along with the restrictions in our Stockholders Agreement, make it difficult to sell your shares.
Prior to this offering, there was no active market for our Class B Common Stock. We do not know the extent to which investor interest
will lead to the development and maintenance of a liquid trading market, if at all. No assurance can be given that the market price of shares of our
Class B Common Stock will not fluctuate or decline significantly in the future or that Class B Common Stockholders will be able to sell their
shares when desired on favorable terms, or at all. Most transfers of the Offered Shares are also subject to other restrictions on transfer set forth in
our Stockholders Agreement.
16
- A.231 -
Exhibit A
RJN-23
Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 21 of 79 Page ID
#:4473
Page 20 of 78
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This is a fixed price offering and the fixed offering price may not accurately represent the current value of us or our assets at any
particular time. Therefore, the purchase price you pay for the Offered Shares may not be supported by the value of our assets at the time
of your purchase.
This is a fixed price offering, which means that the offering price for our Offered Shares is fixed and will not vary based on the
underlying value of our assets at any time. Our Board has determined the offering price in its sole discretion. The fixed offering price for our
Offered Shares has been based on an internal valuation analysis of the Company as a whole. Although we believe the valuation to be fair as of the
date it was determined, the fixed offering price established for our Offered Shares may not be supported by the current value of our Company or
our assets at any particular time.
The entire amount of your purchase price for your Offered Shares will not be available for investment in the Company.
A portion of the offering proceeds will be used to pay legal fees and expenses incurred in connection with the Disney Litigation, research and
development expenses, advertising and marketing expenses and general working capital for the operation and management of our Company. See “PLAN OF
DISTRIBUTION.” Thus, a portion of the gross amount of the offering proceeds will not be available for investment in the Company. See “USE OF
PROCEEDS TO ISSUER.”
If investors successfully seek rescission, we would face severe financial demands that we may not be able to meet.
Our Offered Shares have not been registered under the Securities Act of 1933, or the Securities Act, and are being offered in reliance
upon the exemption provided by Section 3(b) of the Securities Act and Regulation A promulgated thereunder. We represent that this Offering
Circular does not contain any untrue statements of material fact or omit to state any material fact necessary to make the statements made, in light
of all the circumstances under which they are made, not misleading. However, if this representation is inaccurate with respect to a material fact, if
this offering fails to qualify for exemption from registration under the federal securities laws pursuant to Regulation A, or if we fail to register the
Offered Shares or find an exemption under the securities laws of each state in which we offer the Offered Shares, each investor may have the right
to rescind his, her or its purchase of the Offered Shares and to receive back from the Company his, her or its purchase price with interest. Such
investors, however, may be unable to collect on any judgment, and the cost of obtaining such judgment may outweigh the benefits. If investors
successfully seek rescission, we would face severe financial demands we may not be able to meet and it may adversely affect any nonrescinding
investors.
Not All Investor Funds Will Be Held by a Third Party Escrow Agent.
Purchases of Shares in excess of $5,000 must be transmitted directly by investors by either wire transfer or electronic funds transfer via
ACH to a noninterest bearing escrow account maintained by Issuer Direct. Purchases of Shares in the amount of $5,000 or less may be submitted
through an investor's VidAngel customer account in accordance with the billing information for such investor at www.vidangel.com, and will not
be held in the escrow account maintained by Issuer Direct, but will be held in a separate noninterest bearing account held by VidAngel until the
Minimum Offering is sold.Upon achieving the minimum offering amount and the initial closing of this offering, the proceeds for the offering will
be distributed to the Company and the Offered Shares will be issued to the investors. If the Minimum Offering is not sold or the offering does not
close for any reason, the proceeds from the offering will be promptly returned to investors without interest in accordance with Securities
Exchange Act Rule 10b9. Although VidAngel will segregate offering proceeds we receive in a separate account, we will not be bound by the
terms and conditions of a legally enforceable escrow agreement regarding the escrow and disbursement of these funds.
Risks Related to Our Stock Ownership
Provisions in our governing documents and under Delaware law could discourage a takeover that stockholders may consider
favorable.
Our charter documents may discourage, delay or prevent a merger or acquisition that a stockholder may consider favorable because they
provide for a right of first refusal on behalf of the Company, and if the Company declines to exercise its rights to purchase a stockholder’s shares,
then that offer is extended to existing shareholders.
As a Delaware corporation, we are subject to certain Delaware antitakeover provisions. Under Delaware law, a corporation may not
engage in a business combination with any holder of 15% or more of its capital stock unless the holder has held the stock for three years or,
among other things, the board of directors has approved the transaction. Our board of directors could rely on Delaware law to prevent or delay an
acquisition of us.
17
- A.232 -
Exhibit A
RJN-24
Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 22 of 79 Page ID
#:4474
Page 21 of 78
253G2
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Financial forecasting may differ materially from actual results.
Given the dynamic nature of our business, and the inherent limitations in predicting the future, forecasts of our revenues, contribution
margins, net income and number of total and customers and other financial and operating data may differ materially from actual results. Such
discrepancies could cause a decline in the price of our Class B Common Stock.
Risks Related to Benefit Plan Investors
Fiduciaries investing the assets of a trust or pension or profit sharing plan must carefully assess an investment in our Company
to ensure compliance with ERISA.
In considering an investment in the Company of a portion of the assets of a trust or a pension or profitsharing plan qualified under
Section 401(a) of the Code and exempt from tax under Section 501(a), a fiduciary should consider (i) whether the investment satisfies the
diversification requirements of Section 404 of ERISA; (ii) whether the investment is prudent, since the Offered Shares are not freely transferable
and there may not be a market created in which the Offered Shares may be sold or otherwise disposed; and (iii) whether interests in the Company
or the underlying assets owned by the Company constitute “Plan Assets” under ERISA. See “ERISA CONSIDERATIONS.”
18
- A.233 -
Exhibit A
RJN-25
Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 23 of 79 Page ID
#:4475
Page 22 of 78
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DILUTION
VidAngel is offering a minimum of 1,666,667 and a maximum of 3,750,000 shares of our Class B Common Stock at an offering price
of $3.00 per share. We have previously issued stock options for the acquisition of Class A Common Stock pursuant to our Stock Incentive Plan
with a weighted average exercise price of $0.56 per share. We also closed three rounds of financing on November 28, 2015, during which we sold
Class A Common Stock for a weighted average price of $0.64 per share. The aggregate average price between the exercise price for stock options
issued pursuant to the Stock Incentive Plan and the price of shares of Class A Common Stock issued pursuant to the two rounds of financing on
November 18, 2015 is $0.62, or $2.38 less per share than the Offered Shares
Under our Stock Incentive Plan, we granted options exercisable for 1,022,811 shares of Class A Common Stock to our directors,
officers, employees and consultants as equity incentive compensation. The weighted average exercise price of those outstanding options is $0.56
per share, or $2.44 average less per share than the Offered Shares. Currently, there are outstanding (i) options exercisable for 10,000 shares of
Class A Common Stock with an expiration date of April 11, 2024, and an exercise price of $0.18; (ii) options exercisable for 79,311 shares of
Class A Common Stock with an expiration date of May 5, 2024, and an exercise price of $0.18; (iii) options exercisable for 10,000 shares of Class
A Common Stock with an expiration date of October 10, 2024, and an exercise price of $0.18; (iv) options exercisable for 10,000 shares of Class
A Common Stock with an expiration date of November 3, 2024 and a strike price of $0.30; (v) options exercisable for 225,000 shares of Class A
Common Stock with an expiration date of April 15, 2025, and an exercise price of $0.50; (vi) options exercisable for 135,500 shares of Class A
Common Stock with an expiration date of April 17, 2025, and an exercise price of $0.50; (vii) options exercisable for 70,000 shares of Class A
Common Stock with an expiration date of May 11, 2025, and an exercise price of $0.50; (viii) options exercisable for 70,000 shares of Class A
Common Stock with an expiration date of July 17, 2025, and an exercise price of $0.50; (ix) options exercisable for 120,000 shares of Class A
Common Stock with an expiration date of November 18, 2025, and an exercise price of $0.50; (x) options exercisable for 134,250 shares of Class
A Common Stock with an expiration date of February 11, 2026, and an exercise price of $0.82; and (xi) options exercisable for 158,750 shares of
Class A Common Stock with an expiration date of August 10, 2026, and an exercise price of $0.82. Of the outstanding stock options, options
exercisable for 326,000 shares of common stock were granted with no vesting period, and options exercisable for 696,811 of Class A Common
Stock have vesting periods between 36 to 48 months from their vesting dates which range from April 11, 2014 to July 20, 2016.
On November 28, 2015, VidAngel conducted three separate financings involving the issuance of convertible promissory notes during
which we raised an aggregate amount of $2,919,460 in exchange for the issuance of notes convertible into 3,526,896 shares of Class A Common
Stock with an average per share conversion price of $0.54, and sold an additional 1,065,755 shares of Class A Common Stock at a price of $0.94
per share. In the second convertible note financing, Alta Ventures Mexico Fund I, LP, of which our director, Paul Ahlstrom, is the managing
director, purchased convertible promissory notes convertible into 618,119 shares of Class A Common Stock for $409,397 with an average per
share conversion price of $0.66, or $2.34 average less per share than the Offered Shares, and purchased an additional 426,302 shares of Class A
Common Stock for $400,000, or $0.94 per share, which is $2.06 less than the Offered Shares.
19
- A.234 -
Exhibit A
RJN-26
Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 24 of 79 Page ID
#:4476
Page 23 of 78
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PLAN OF DISTRIBUTION
We are not selling the shares through commissioned sales agents or underwriters. We will use our existing website, www.vidangel.com,
to provide notification of the offering. This Offering Circular will be furnished to prospective investors at www.vidangel.com/invest via
download 24 hours per day, 7 days per week on our website. Our website and Issuer Direct’s website will be the exclusive means by which
prospective investors may subscribe in this offering.
The Offered Shares will be issued in one or more closings. For the Initial Closing and each subsequent Additional Closing, proceeds for
subscriptions over $5,000 must be transmitted directly by wire or electronic funds transfer via ACH to the specified bank account maintained by
Issuer Direct pursuant to the instructions in the subscription agreement. Such funds will be kept in a noninterest bearing escrow account
maintained by Issuer Direct until the Initial Closing and the Minimum Offering is sold. Proceeds for subscriptions of $5,000 or less will be held in
a separate noninterest bearing account by VidAngel until the Initial Closing and the Minimum Offering is sold, and may be submitted through an
investors VidAngel customer account in accordance with the billing information for such investor at www.vidangel.com. Upon each closing, any
proceeds collected for such closing will be disbursed to the Company and the Offered Shares for such closing will be issued to investors. We must
sell the Minimum Offering if any shares are to be sold at all. The separate noninterest bearing account will be opened by VidAngel prior to the
date of qualification of the offering statement of which this Offering Circular is a part and will remain open until the Termination Date. The
subscription agreement is available at www.vidangel.com/invest. If, on the Termination Date, investor funds are not received in respect of the
Minimum Offering, then all investor funds that were deposited into either the separate noninterest bearing account with us or into the escrow
account with Issuer Direct will be returned promptly to investors in accordance with Securities Exchange Act Rule 10b9.
Technology, AntiMoney Laundering and Transfer Agent Services
Issuer Direct has been engaged to provide certain technology, antimoney laundering and transfer agent services in connection with this
offering. The Company has agreed to pay Issuer Direct a facilitation fee equal to $5.00 per domestic investor for the antimoney laundering check
and technology services for each subscription agreement executed via electronic signature on www.vidangel.com. For transactions conducted on
Issuer Direct’s website, the Company has agreed to pay $25.00 for the same service. We have also engaged Issuer Direct to serve as transfer agent
for the offering and have agreed to pay a $2,500.00 account set up fee. Issuer Direct is also entitled to certain other itemized administrative fees,
including (i) up to $15.00 per investor (depending on whether subscription is by ACH or wire transfer) for processing incoming funds, (ii) $25.00
per physical stock certificate request (which will be only provided upon request and fee payment by the VidAngel customer requesting the
certificate), and (iii) $25.00 per wire transfer for outbound funds to us upon the closing of this offering. For the Company, the itemized fees
payable to Issuer Direct will not exceed a maximum of $150,000. Issuer Direct is not participating as an underwriter of the offering and will not
solicit any investment in the Company, recommend the Company's securities or provide investment advice to any prospective investor, or
distribute the Offering Circular or other offering materials to investors. All inquiries regarding this offering should be made directly to the
Company.
Offering Expenses. We are responsible for all offering fees and expenses, including the following: (i) fees and disbursements of our legal
counsel, accountants and other professionals we engage; (ii) fees and expenses incurred in the production of offering documents, including design,
printing, photograph, and written material procurement costs; (iii) all filing fees, including blue sky filing fees; (iv) all of the legal fees related to
the registration and qualification of the Offered Shares under state securities laws (not to exceed $600,000 in the aggregate); and (v) all costs of
Issuer Direct’s services.
Pricing of the Offering
Prior to the offering, there has been no public market for the Offered Shares. The initial public offering price was determined by us. The
principal factors considered in determining the initial public offering price include:
20
- A.235 -
Exhibit A
RJN-27
Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 25 of 79 Page ID
#:4477
Page 24 of 78
253G2
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●
the information set forth in this Offering Circular;
●
our history and prospects and the history of and prospects for the industry in which we compete;
●
our past and present financial performance;
●
our prospects for future earnings and the present state of our development;
●
the general condition of the securities markets at the time of this offering;
●
the status of litigation we are engaged in; and
●
other factors deemed relevant by us.
Investment Limitations
Generally, no sale may be made to you in this offering if the aggregate purchase price you pay is more than 10% of the greater of
your annual income or net worth. Different rules apply to accredited investors and nonnatural persons. Before making any
representation that your investment does not exceed applicable thresholds, we encourage you to review Rule 251(d)(2)(i)(C) of Regulation
A. For general information on investing, we encourage you to refer to www.investor.gov.
As a Tier 2, Regulation A offering, investors must comply with the 10% limitation to investment in the offering. The only investor in
this offering exempt from this limitation is an accredited investor, an “Accredited Investor,” as defined under Rule 501 of Regulation D. If you
meet one of the following tests you should qualify as an Accredited Investor:
(i) You are a natural person who has had individual income in excess of $200,000 in each of the two most recent years, or
joint income with your spouse in excess of $300,000 in each of these years, and have a reasonable expectation of reaching
the same income level in the current year;
(ii) You are a natural person and your individual net worth, or joint net worth with your spouse, exceeds $1,000,000 at the time
you purchase Offered Shares (please see below on how to calculate your net worth);
(iii) You are an executive officer or general partner of the issuer or a manager or executive officer of the general partner of the
issuer;
(iv) You are an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, or the Code, a
corporation, a Massachusetts or similar business trust or a partnership, not formed for the specific purpose of acquiring the
Offered Shares, with total assets in excess of $5,000,000;
(v) You are a bank or a savings and loan association or other institution as defined in the Securities Act, a broker or dealer
registered pursuant to Section 15 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, an insurance
company as defined by the Securities Act, an investment company registered under the Investment Company Act of 1940,
as amended, or the Investment Company Act, or a business development company as defined in that act, any Small
Business Investment Company licensed by the Small Business Investment Act of 1958 or a private business development
company as defined in the Investment Advisers Act of 1940;
(vi) You are an entity (including an Individual Retirement Account trust) in which each equity owner is an accredited investor;
(vii) You are a trust with total assets in excess of $5,000,000, your purchase of Offered Shares is directed by a person who either
alone or with his purchaser representative(s) (as defined in Regulation D promulgated under the Securities Act) has such
knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the
prospective investment, and you were not formed for the specific purpose of investing in the Offered Shares; or
21
- A.236 -
Exhibit A
RJN-28
Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 26 of 79 Page ID
#:4478
Page 25 of 78
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(viii) You are a plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state
or its political subdivisions, for the benefit of its employees, if such plan has assets in excess of $5,000,000.
Offering Period and Expiration Date
This offering will start on or after the date this Offering Circular is declared qualified by the SEC and will terminate on the Termination
Date.
Procedures for Subscribing
If you decide to subscribe for Offering Shares in this offering, you should:
Go to www.vidangel.com/invest, click on the “Invest Now” button and follow the procedures as described.
1.
Electronically receive, review, execute and deliver to us a subscription agreement; and
If your subscription price is greater than $5,000, deliver funds directly by wire or electronic funds transfer via ACH to the specified
2.
bank account maintained by VidAngel.
If your subscription price is $5,000 or less, you may (i) pay for your subscription price through a purchaser’s VidAngel customer
account in accordance with the billing information for such purchaser at www.vidangel.com. or, (ii) if greater than $1,000, transmit
funds directly by wire or electronic funds transfer via ACH to the specified account maintained by VidAngel per the instructions in the
subscription agreement we will bill your customer account in accordance with your billing information at www.vidangel.com.
3.
Any potential investor will have ample time to review the subscription agreement, along with their counsel, prior to making any final
investment decision.
The Company has engaged Issuer Direct to provide certain technology and administrative services in connection with the offering,
including the online platform by which subscribers may receive, review, execute and deliver subscription agreements electronically.
Right to Reject Subscriptions. After we receive your complete, executed subscription agreement and the funds required under the
subscription agreement have been received, we have the right to review and accept or reject your subscription in whole or in part, for any reason
or for no reason. We will return all monies from rejected subscriptions immediately to you, generally without interest and without deduction.
Acceptance of Subscriptions. Upon our acceptance of a subscription agreement, we will countersign the subscription agreement and
issue the shares subscribed at closing. Once you submit the subscription agreement and it is accepted, you may not revoke or change your
subscription or request your subscription funds. All accepted subscription agreements are irrevocable.
Under Rule 251 of Regulation A, nonaccredited, nonnatural investors are subject to the investment limitation and may only invest
funds which do not exceed 10% of the greater of the purchaser’s revenue or net assets (as of the purchaser’s most recent fiscal year end). A non
accredited, natural person may only invest funds which do not exceed 10% of the greater of the purchaser’s annual income or net worth (please
see below on how to calculate your net worth).
We may engage a brokerdealer registered with the Securities and Exchange Commission and a member of the Financial Industry
Regulatory Authority, to perform administrative functions in connection with this offering, such as serve as registered agent where required for
state blue sky requirements, but in no circumstance will such brokerdealer solicit a securities transaction, recommend our securities, or provide
investment advice to any prospective investor.
NOTE: For the purposes of calculating your net worth, or Net Worth, it is defined as the difference between total assets and total
liabilities. This calculation must exclude the value of your primary residence and may exclude any indebtedness secured by your primary
residence (up to an amount equal to the value of your primary residence). In the case of fiduciary accounts, net worth and/or income suitability
requirements may be satisfied by the beneficiary of the account or by the fiduciary, if the fiduciary directly or indirectly provides funds for the
purchase of the Offered Shares.
In order to purchase Offered Shares and prior to the acceptance of any funds from an investor, an investor will be required to represent,
to the Company’s satisfaction, that he is either an accredited investor or is in compliance with the 10% of net worth or annual income limitation
on investment in this offering.
22
- A.237 -
Exhibit A
RJN-29
Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 27 of 79 Page ID
#:4479
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USE OF PROCEEDS TO ISSUER
Net proceeds to the Company from this offering are anticipated to be $10,820,000, assuming we sell the Maximum Offering, and
$4,720,000, assuming we sell the Minimum Offering, following the payment of offering costs. Set forth below is a table showing the estimated
sources and uses of the proceeds from this offering.
Minimum
% of Offering
Maximum
% of Offering
Offering Amount
Offering
Proceeds
Proceeds
Gross Proceeds
$
5,000,000
100.00% $ 11,250,000
100.00%
Estimated Offering Expenses(1)
$
280,000
5.60% $
430,000
3.82%
Net Proceeds
$
4,720,000
94.40% $ 10,820,000
96.18%
Research and Development
$
500,000
10.00% $
2,000,000
17.78%
Advertising and Promotion
$
900,000
18.00% $
4,750,000
42.22%
Legal Fees and Expenses(2)
$ 2,000,000
40.00% $ 3,000,000
26.67%
Working Capital(3)
$
1,320,000
26.40% $
1,070,000
9.51%
Total Use of Proceeds
$
5,000,000
100.00% $ 11,250,000
100.00%
(1) Estimated offering expenses include legal, accounting, printing, advertising, travel, marketing, bluesky compliance and other expenses of
this offering, as well as transfer agent fees.
(2) Legal Fees and expenses associated with the Disney Litigation.
(3) We intend to use approximately 94.40% of the gross offering proceeds if the Minimum Offering is sold or 96.18% of the gross offering
proceeds if the Maximum Offering is sold to manage our business and provide working capital for operations. These amounts may be
used to pay expenses relating to salaries and other compensation to our officers, employees.
23
- A.238 -
Exhibit A
RJN-30
Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 28 of 79 Page ID
#:4480
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DESCRIPTION OF OUR BUSINESS
General
In 2013, four brothers, Neal, Daniel, Jeffrey, and Jordan Harmon, founded VidAngel, a filtering company that gives viewers the choice to
remove objectional content, such as violence, sex, nudity, and/or language, from authorized copies of movies and television programs released on
discs. The Harmon brothers, as fathers of children aged newborn to ten, were searching for a better way to watch quality content with their kids.
They founded VidAngel to give their families, and all other families, greater personal choice in the movies and television programs they watch at
home. VidAngel’s purpose is not only to allow families to watch “however the BLEEP they want,” but to protect an individual’s legal right to
customize the content they watch at home. Today, management believes that VidAngel is the leading filtering company with Apps, available on
all major platforms, and that the potential demand for our service is significant.
The Company was formed as a Utah limited liability company on October 22, 2013 pursuant to a Certificate of Formation filed with the
State of Utah’s Department of Commerce and that certain Operating Agreement of the Company, dated December 13, 2013, by and among the
Company and its members. Subsequently, the Company was converted into VidAngel, Inc. a Delaware corporation, on February 12, 2014,
pursuant to Articles of Conversion filed with the State of Utah’s Department of Commerce
The Operations of the Company
Management believes that VidAngel offers the greatest degree of personal choice in the entertainment marketplace by selling DVD and
Bluray movies and television shows on disc and providing its users the technology to filter and view their movies and TV shows remotely on
modern devices such as cell phones, tablets, set top boxes (e.g. Apple TV, Roku, Amazon Fire TV, etc.), computers and, we anticipate, in the
future, gaming consoles and smart TVs.
In connection with offering its filtering service, VidAngel resells DVD and Bluray movies and television shows on discs to our
customers for a fixed price of $20.00 per disc, or the Sale Price. Upon purchase of such disc, our customer agrees to have us retain physical
custody of the disc. Once our customer finishes watching the purchased content through its chosen platform, they may choose either to keep the
purchased title or sell the disc back to us at a reduced repurchase price, or the Repurchase Price. If customers elect to return their discs to us, the
Repurchase Price offered by VidAngel reflects the (i) format of the disc and (ii) total number of 24hour periods our customers have owned their
discs. The Repurchase Prices paid by VidAngel are currently the Sales Price less $1.00 per 24hour period for each DVD, and $2.00 per 24hour
period for each Bluray disc. Our customers have access to our content filtering technology for use with a specific disc for as long as they own
it. Our service allows our customers to direct their individual viewing experience by removing certain audio or video segments that contain
material considered objectionable by our customer. Once a customer chooses to sell the disc back to us, their access to our content filtering
technology for that disc terminates and VidAngel’s obligations to such customer are complete.
To provide a remote filtering service, VidAngel has developed the following core proprietary technologies:
1. Patentpending Remote Media Ownership Management System
2. Patentpending Crowdbased Tagging System
3. Patented Seamless Streaming and Filtering System
VidAngel believes that one of the most crucial systems in maintaining a lawful business is the first system for RMOM. This system
ensures that VidAngel does not sell any DVD or Bluray discs without owning the media. This system ensures that all copyright holders are
compensated for their copyrighted works. VidAngel engaged an independent third party to conduct a Service Organization Control Report, or
SOC 2 Type 1, to report on controls for the Processing Integrity Principle. The report, which is as of January 27, 2016, includes our Infrastructure,
Software, People, Procedures and Data.
24
- A.239 -
Exhibit A
RJN-31
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#:4481
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Under the direction of our CEO, VidAngel currently operates with five management teams: the Tech Team, the Marketing Team, the
Digital Content Team, the Finance Team and the Legal Team.
The Tech Team is led by our Director of Technology, Jarom McDonald, PhD, who oversees all technology employees and contractors
who contribute technical support, application development, and front and backend development and maintenance of the system. The Marketing
Team is led by our CMO who oversees the Director of Marketing and any marketing interns. The Marketing Team is responsible for all content
creation and advertising relating to the growth of the Company. The Digital Content Team is led by our COO, who oversees all employees
involved in customer service, inventory management, streaming and tagging. The Digital Content Team is responsible for providing users with
the best possible customer experience. The Finance Team is led by our Director of Finance who oversees all employees involved in finance,
accounting and purchasing. The Legal Team is led by our General Counsel, who is responsible for all Company legal matters and litigation
oversight.
Target Demographics
VidAngel offers its filtering and RMOM services to the U.S. movie and TV show home entertainment market, which is highly
competitive. The Company has examined various considerations with regards to the marketability and desirability for its services, including a cost
analysis compared to its closest competitors, examined the Company’s unique profile, and examined its target consumer markets. We believe our
core target market is the “Values Audience” segment, some 52 million adults of the U.S. population representing 37% of the entertainment market
whose religious faith is extremely important to them and is a part of their daily lives. The Company believes the Values Audience demonstrates
stronger overall concern about the explicit content that they, and their family members, are exposed to in TV shows and movies. VidAngel
believes that within the Values Audience segment, parents will tend to take a particular interest in the Company’s services.
Method of Distribution
VidAngel offers its filtering application and RMOM through a host of Internetconnected screens, including TVs, digital video players,
television settop boxes and mobile devices. VidAngel has agreements with various technology companies and distributors to make our service
available through the television settop boxes of service providers. Our Apps allow for purchasing of Bluray and DVD discs within the App,
which requires that we share between 20 and 30 percent of our revenue with these technology distribution partners for the discs purchased on their
platforms (Apple, Google, Amazon, and Roku). We intend to continue to broaden our capability to sell and deliver discs on other platforms and
partners over time. We rely on certain thirdparty cloud service providers to operate certain aspects of our business. For VidAngel to legally offer
filtered movies, users must own the disc while filtering it. To make this as affordable and userfriendly as possible, we have created an instant
“SellBack” option to buy the disc back from customers and put the credit from the repurchase into the customer’s VidAngel account.
Quick Overview: (using a $20.00 disc)
1. BUY THE DISC – Users pay the retail price of $20.00 as an initial credit card payment.
2. USER WATCH FILTERED Users choose their own filters according to their preferences and watch their disc on their favorite device.
3. USERS SELL THE DISC—When finished within 24 hours, users may sell back the disc, $18.00 for Bluray or $19.00 for DVD, for
instant credit to a user’s VidAngel account for their next purchase. Within 48 hours, users may sell back the disc for $16.00, for Bluray,
or $18.00, for DVD, of instant credit. The sell back price continues to decrease by $2.00 per day for Bluray’s, and $1.00 per day for
DVD’s until no sell back value remains.
When customers are ready for the next disc, the credit is already in the customer’s VidAngel account and will automatically be applied to
their purchase. Customers may continue to buy and sell discs with account credit and pay only $2.00 per Bluray disc. Customer’s credit cards
will be only charged if the customer’s account credit is lower than the retail price of the next disc the customer wishes to purchase. If a
customer’s account balance is less than the cost of the disc, the customer will be charged the small difference to bring the account balance up to
that amount. If the disc price is lower than the customer’s credit balance, the customer will have no charge and their purchase will be entirely
paid with credit. For example: If a customer has $15.00 in their account and wants to buy a $20.00 disc, the customer’s credit card will be
charged the $5.00 difference. When a customer sells the disc back after the $2.00 watch price, the customer’s VidAngel account will be credited
the remaining $18.00. As a customer continues to use the account credit, the customer may have small charges of varying sizes depending on the
retail price of the disc the customer purchases next.
25
- A.240 -
Exhibit A
RJN-32
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#:4482
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Marketing and Advertising
VidAngel utilizes a broad mix of marketing and public relations programs, including social media sites such as Facebook, Youtube and
Twitter, to promote our service to potential customers. VidAngel also relies extensively on wordofmouth from our existing customers who have
enjoyed a positive experience from use of our service. We also rely on the marketing services of HB, who is in the business of providing internet
based and multimedia promotion and marketing services, including the design, implementation and execution of promotional and webbased
advertising campaigns. See “Interest of Management and Others in Certain Transactions and Other Conflicts of Interest—Affiliated
Transactions.”
Cost Comparisons to our Competitors
When compared to our primary filtering competitor, ClearPlay, VidAngel believes we are substantially more attractive on the basis of
cost, filtering and efficiency. When compared to other streaming services, we believe VidAngel still represents a significantly better value
proposition on the basis of its unique RMOM. Whereas streaming services can cost up to $4$5 per a movie, VidAngel, through its RMOM,
permits a user to watch a movie for as little as $1 with the “SellBack” option.
Our Intellectual Property
We rely on a combination of patent, copyright, trademark and trade secret laws in the United States and other jurisdictions, as well as
license agreements and other contractual documents, to protect our proprietary technology. We rely on a number of registered and unregistered
trademarks to protect our brand. As of the date of this Offering Circular, we have one registered trademark “VidAngel,” and five unregistered
trademarks, “VidMap,” “VidTag,” “watch however the BLEEP you want,” “watch movies however the BLEEP they want,” and “watch movies &
TV however the BLEEP you want.” VidAngel, Inc. owns numerous Internet domain sights and websites, including: www.vidangel.com;
www.vidangle.com; www.viddevil.com; www.stopjarjar.com; www.cleantube.com; and www.kleentube.com. As of the date of this Offering
Circular, in the United States, we have been issued a U.S. patent for seamless streaming and filtering, filed on March 31, 2015 with an expiration
date of March 30, 2035, and have two patent applications for: (i) curating filters for audiovisual content, or Filter Curation Platform (U.S. Patent
Application No. 14/621972), and (ii) a method and system for a remote media ownership management, or RMOM, apparatus, system and method
(US. Patent Application No. 11/608165), pending for examination. Our patent and pending patents are discussed in further depth below.
Patents
Seamless streaming and filtering. We currently own a patent for a Seamless streaming and filtering (the “Streaming and Filter
Solution”) method and system (U.S Patent Application. No. 14/674,364, filed on March 31, 2015; U.S. Patent No. 9,363,561 issued on June 7,
2016) . The Streaming and Filtering Solution is designed to smoothly filter content streamed over HTTP Live Streaming, or HLS. HLS streams
content, e.g. movies, by dividing the content into a series of short media segment files. The client requests each of the media segment files
identified by the HLS index file, and the server transmits each media segment file upon the client’s request. The Streaming and Filtering Solution
generates a content map for a movie, the content map identifying all parts of a movie with filterable content (e.g. vulgarity, sex/nudity, violence,
etc.). The content map generates categories and subcategories of filterable elements (e.g. Vulgarity (category): “f“(subcategory)). The content
map may be generated in a variety of ways, e.g. by a human who watches a movie and documents the characteristics of filterable elements in the
movie; through a community or crowdbased approach; programmatically; or in any other way by which filterable elements may be identified.
For example, the content map may identify time periods during the movie which may be filtered for language, e.g., the “sh—“ word at minute:
second marker 45:39.545:40. A content map entry may include identification of the temporal (e.g. minute markers during the movie), spatial
(e.g., area of display to be cut, cropped, kept, blurred, or otherwise filtered), and audible (e.g. channels or other content aspects containing
filterable content) dimensions of filterable content in the movie (or other type of content), or other characteristics of a particular filterable element.
The client selects its own preferences, which may be based on a particular user or person, the physical location to which content is being
streamed, or any other criteria for determining how to filter content. For example, preferences may indicate that the “f“ should be entirely
muted, but that, for the “crap” word, the volume should be merely turned down halfway. The Streaming and Filtering Solution dynamically
generates a media segment file as directed by the user’s preferences, and the file is then transmitted to the client without ever placing the filtered
media segment file in fixed storage. Generating a filtered media segment may comprise omitting an entire segment, omitting one or more
chronological segments of the media segment file, completely muting all audio, partially turning down all sound, muting only one or more of all
of the audio channels, turning down the sound on one or more of the audio channels, turning up the sound on one or more audio channels,
cropping the video, blurring all or part of the video, replacing all or part of the video, or any other audio, visual, or other effect or manipulation
known in the art.
26
- A.241 -
Exhibit A
RJN-33
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#:4483
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Curating Filters for Audiovisual Content. We own a patent application for a curating filters for audiovisual content, or Filter Curation
Platform, method and system (U.S. Patent Application No. 14/621972 filed February 13, 2015. The Filter Curation Platform enables users to
curate and access custom filters to adapt the playback of audiovisual content. The Filter Curation Platform may enable users (i.e. video viewers,
video taggers, video reviewers and video publishers), which have different roles, to create one or more video tags for a movie, and thereby create
a full or partial video map for the movie. A video tag is a short description of a segment/clip of a multimedia file. A video tag includes a type,
start time, end time, and a category. Examples of video tag categories may include positive and negative categories, such as action, dramatic,
scary, alcohol/drugs, profane/crude language, sex/nudity, and violence, among other categories. A video tagger may create video maps for
audiovisual content. A video reviewer is a user who may review video maps for mistakes, make corrections, and provide feedback on the video
maps created by video taggers. A video publisher is a user who may prepare, finalize, and publish video maps to a multimedia portal. Multiple
video taggers may tag the same portions of a movie, and a video reviewer may access the video maps from multiple video taggers. The process
may be iterative in many ways, so that multiple video taggers, video reviewers and video publishers may prepare, review, edit and pass among
each other video maps in various orders and workflows. Once the video map has been published, the video viewer, via a media player interface
may define filters using a video map of the movie. The video viewer may customize the filter to display (or make audible) some categories or
specific segments of filterable content, but not others. Video maps may receive scores from video users, such as receiving one halo for poor
quality and up to five haloes for excellent quality. In some cases, video taggers, video reviewers and video publishers may receive cash
consideration for their services.
Apparatus, System and Method for Remote Media Ownership Management. We also own a patent application for a remote media
ownership management, or RMOM, apparatus, system and method (US. Patent Application No. 11/608165) filed December 7, 2006. RMOM is
an apparatus, system and method that allows a consumer to deposit physical media units, or PMUs or Content, such as music CDs or movies, with
the RMOM’s transfer facility, where such a deposit is listed on an ownership register, in exchange for the user’s ability to access their Content
remotely. Users are not only able to access the Content they have physically deposited with RMOM, but users are also able to buy and sell
Content to and from other users by use of the RMOM’s trading system. The RMOM may collect monetary commissions for the operator and
applicable taxes. The RMOM may further comprise a media verification component configured to identify damaged incoming Content as an
acceptable representation of ownership of the Content. For example, a music CD with scratches such that the media on the music CD is not
playable with the standard CD player may nevertheless clearly be a genuine copy of the music CD. In the example, depending upon the law where
the system operates, a digital media equivalent may be provided to the owning user of the damaged incoming Content when the owning user
requests access to the content of the music CD. The RMOM overcomes previous limitations in the art by allowing users to access and trade
Content without the constraints and risks of maintaining the Content at the location of the user.
In addition, we seek to protect our intellectual property rights by implementing a policy that requires all of our employees and
independent contractors involved in development of intellectual property on our behalf to enter into agreements acknowledging that all works or
other intellectual property generated or conceived by them on our behalf are our property, and assigning to us any rights, including intellectual
property rights, that they may claim or otherwise have in those works or property, to the extent allowable under applicable law.
Despite our efforts to protect our technology and proprietary rights through enforcement of our intellectual property rights, licenses and
other contractual protections, unauthorized parties may still copy or otherwise obtain and use our software and other technology. As we continue
to expand our operations, effective intellectual property protection, including copyright, trademark and trade secret protection may not be
available or may be limited in foreign countries. Significant impairment of our intellectual property rights could harm our business or our ability
to compete. Further, companies in the communications and technology industries frequently own large numbers of patents, copyrights and
trademarks and may threaten litigation or file suit against us based on allegations of infringement or other violations of intellectual property
rights. We are currently subject to, and expect to face in the future, allegations that we have infringed the intellectual property rights of third
parties, including our competitors and nonpracticing entities. See “DESCRIPTION OF OUR BUSINESS – Legal Proceedings.”
27
- A.242 -
Exhibit A
RJN-34
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#:4484
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Competition
Our primary competitor in providing a filtering service is ClearPlay. ClearPlay operates a membership feebased filtering service that
allows users to filter content they find objectionable. ClearPlay users select the movie they want to watch on ClearPlay’s website, then rent the
Standard Definition movie on Google Play, and return to the ClearPlay website where they select their filters before watching the movie.
ClearPlay offers hardware for use by users to watch filtered content on their TV, such as the ClearPlay BluRay and DVD Player and the
FilterStik. The FilterStik is a USBsized device that can be plugged into a viewing platform, such as a standard DVD player, in order to filter
content; however, no additional hardware is needed to use ClearPlay’s services from either a PC or Mac. It is possible for ClearPlay users to
transmit the filtered movie from their computer to TV by methods such as connecting their computer to their TV with an HDMI cable. As of
August 4, 2016, ClearPlay charges a membership fee of $7.99 a month or $79.99 annually. In addition to membership fees, ClearPlay users must
pay the full retail rental or purchase price for the content they intend to filter and view. VidAngel believes it offers a better value, as well as a
higher quality and more userfriendly service than ClearPlay for modern media consumption devices. ClearPlay and VidAngel were previously
engaged in litigation regarding patent rights. ClearPlay was also engaged in other litigation, which ultimately resulted in the invalidation of many
of ClearPlay’s patent claims. We believe ClearPlay will reassert one or more of its patent claims against us in the near future . Such litigation
could have a material adverse effect on our business operations were we not to prevail. See “Description of Our Business—ClearPlay
Litigation.”
Research and Development
During the fiscal years ended December 31, 2014 and 2015, we spent $35,990 and $310,754, respectively, on research and development
activities relating to our technology.
Employees
As of June 30, 2016, we employed a total of 20 fulltime and 24 parttime individuals. None of our employees are covered by a
collective bargaining agreement.
Legal Proceedings
VidAngel currently is, and from time to time might again become, involved in litigation. Litigation has the potential to cause us to incur
unexpected losses, some of which might not be covered by insurance but can materially affect our financial condition and its ability to continue
our business operations.
Disney Litigation
On June 9, 2016, the Plaintiffs initiated the Disney Litigation against VidAngel in the United States District Court for the Central District
of California, or the California District Court. They alleged two claims: (a) that VidAngel requires, but does not have, the Plaintiffs’ authorization
to make digital copies of the Plaintiffs’ copyrighted works and thus violates 17 U.S.C. Sections 106(1) and (4), and (b) that VidAngel violates
Section 1201 (a)(1)(A) of the DMCA by circumventing a technological measure that effectively controls access to works protected under the
Copyright Act. The Plaintiffs are seeking monetary damages, costs, and attorneys’ fees from VidAngel, as well as preliminary and permanent
injunctions prohibiting VidAngel from continuing to engage in the challenged conduct.
28
- A.243 -
Exhibit A
RJN-35
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#:4485
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VidAngel filed its Answer and CounterComplaint on July 12, 2016, asserting that its technology does not infringe on the Plaintiffs’
rights and otherwise complies with applicable law. Among other defenses, VidAngel argues that the circumvention of technological access
control measures in making digital copies of copyrighted works is: (a) authorized by the FMA, which permits the filtering and transmission of
copyrighted material owned by third parties, and (b) is further permitted under the DMCA by the “fair use” doctrine. VidAngel has also alleged
numerous counterclaims against the Plaintiffs, including that the Plaintiffs are engaging in an unreasonable restraint on interstate trade in violation
of Section 1 of the Sherman Antitrust Act and Section 4 of the Clayton Antitrust Act (codified at 15 U.S.C. Sections 1 and 5, respectively). The
Plaintiffs have reserved October 31, 2016, on the California District Court’s calendar to argue their motion seeking the entry of a preliminary
injunction. The Plaintiffs filed and served their motion on August 22, 2016. VidAngel filed and served its opposition to the motion on September
12, 2016, and the Plaintiffs filed a reply in support of the motion on October 3, 2016.
The Plaintiffs have additionally said that they plan to schedule a motion to dismiss VidAngel’s counterclaims for hearing on December
19, 2016.
Due to the nature of the claims and counterclaims, as well as the very early stage of the litigation, VidAngel is unable to predict the
eventual result or estimate the amount of any potential liability or recovery. VidAngel plans to use a substantial portion of the proceeds of this
offering to defend the Disney Litigation, including by prosecuting its counterclaims. If the Disney Litigation is decided adversely to VidAngel, it
would have a material adverse effect on VidAngel’s financial condition and its ability to continue business operations.
ClearPlay Litigation
In 2014, VidAngel (then doing business as VidAngel, LLC), responded to a contention by ClearPlay, Inc., or ClearPlay, that we were
infringing on certain ClearPlay patents by suing ClearPlay in the United States District Court for the Central District of California (the case later
moved to Utah). In doing so, we requested judicial determinations that our technology and service did not infringe eight patents owned by
ClearPlay and that the patents were invalid. In turn, ClearPlay counterclaimed against VidAngel alleging patent infringement. On February 17,
2015, the case was stayed pending inter parties review by the United States Patent and Trademark Office’s, or the USPTO’s, review of several of
ClearPlay’s patents. We were not a party to or involved in the USPTO’s review of those patents. Owing to those proceedings, on May 29, 2015,
the Utah trial court closed the case without prejudice to the parties’ rights to reassert any or all claims later. In July and August 2015, many of
ClearPlay’s patent claims, including many of the claims asserted against VidAngel, were ruled unpatentable by the USPTO. Some of ClearPlay’s
other patent claims were upheld and still others were never challenged in the USPTO. Following the USPTO’s rulings, ClearPlay appealed some
of the USPTO’s invalidity decisions to the United States Court of Appeals for the Federal Circuit. These findings of invalidity were all affirmed
by the court on August 16, 2016. The Utah District Court’s order staying this litigation instructed ClearPlay to contact the Court within two
weeks of the final Inter Partes Review decision after which the Court would set a telephonic status conference. It has been over a year since the
Inter Partes Review decisions were issued. We believe ClearPlay will reassert its surviving claims in the near future and that the litigation could
have a material adverse effect on VidAngel’s business operations if Clearplay were to prevail. See “RISK FACTORS We face risks, such as
unforeseen costs and potential liability in connection with content we acquire, filter and/or distribute through our service.” See
also “RISK FACTORS—We are engaged in current litigation, the outcome of which, if not favorable to VidAngel, would have a material
adverse effect on us and our ability to continue our business operations.”
29
- A.244 -
Exhibit A
RJN-36
Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 34 of 79 Page ID
#:4486
Page 33 of 78
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DESCRIPTION OF OUR PROPERTIES
As of the date of this Offering Circular, our primary assets are our Intellectual Property and the contracts we have entered into directly.
We lease our office facilities at 249 North University Avenue, Provo, Utah, under a monthtomonth lease. We currently rent our offices
for $1,750.00 a month. We do not currently own or lease any other real property. See “DESCRIPTION OF BUSINESS” for more information.
30
- A.245 -
Exhibit A
RJN-37
Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 35 of 79 Page ID
#:4487
Page 34 of 78
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Forward Looking Statements
This Offering Circular contains certain forwardlooking statements that are subject to various risks and uncertainties. Factors that might
cause or contribute to such differences include, but are not limited to, those discussed on Page 5 of this Offering Circular under the heading
“CAUTIONARY STATEMENT REGARDING FORWARDLOOKING STATEMENTS”.
We assume no obligation to revise or publicly release any revision to forwardlooking statements contained in the Offering Circular,
unless required by law.
Overview
VidAngel is a reseller of Bluray and DVD discs and offers a large variety of movies and TV shows on discs, in both formats, for
purchase on our website, www.vidangel.com. Upon purchase of such disc at the Sales Price, our customer agrees to have us retain physical
custody of the disc. As part of the purchase transaction, we include access to our proprietary and patented content filtering technology that
provides our customers with ultimate control over the purchased content and allows for seamless removal and/or muting of content deemed
objectionable by our customers. Once our customer finishes watching purchased content, they may choose to either keep the purchased title or to
sell the disc back to us at a reduced price. If customers elect to return their disc to us, the Repurchase Price offered by VidAngel reflects the (i)
format of the disc and (ii) total number of 24hour periods our customers own their discs. Our customers have access to our content filtering
technology for use with a specific disc for as long as they own it. Our service allows our customers to direct their individual viewing experience
by removing certain audio or video segments that contain material considered objectionable by our customer. Once a customer chooses to sell the
disc back to us, their access to our content filtering technology for that disc terminates and VidAngel’s obligations to such customer are complete.
Revenue Model
Each disc is sold to our customers for the Sales Price of $20.00 per disc. Upon purchase of such disc, our customer agrees to have us
retain physical custody of the disc. If customers elect to return their disc to us after viewing the purchased content, VidAngel offers a Repurchase
Price for the disc. The Repurchase Prices paid by VidAngel are currently the Sales Price less $1.00 per 24hour period for each DVD, and $2.00
per 24hour period for each Bluray disc.
VidAngel separates its revenue transactions into two (2) groups. Those groups are defined by the length of total time of disc ownership.
For clarity purposes, the groups are defined as “shortterm ownership” and “longterm ownership.” Currently, the majority of our transactions
exist within the shortterm ownership category. These customers currently account for 99.5% of all transactions through July 31, 2016. The
remaining 0.50% of all transactions are from the longterm ownership category.
For transactions in the shortterm ownership category, revenue is recognized on a daily basis for each 24hour period a disc is owned.
The amount of revenue recognized is equal to the Sales Price less the Repurchase Price and depends on the format of the disc. The average
revenue per transaction through July 31, 2016 was $1.54 for transactions in the shortterm ownership category.
For transactions in the longterm ownership category, revenue is recognized using a subscription model, or ratably over the expected
term/life of the customer. The average revenue per transaction through July 31, 2016 was $18.49 per transaction in the longterm ownership
category.
For our fiscal year ended December 31, 2015, we earned $415,517 in revenue, of which $383,288 is attributed to shortterm owners, and
$32,229 is attributable to longterm owners.
For the six months ended June 30, 2016, we earned $2,405,430 in revenue, of which $2,334,658 is attributed to shortterm owners, and
$70,772 is attributable to longterm owners.
Growth Opportunity
According to PricewaterhouseCoopers, transactionbased home video is the fastestgrowing segment of the streaming market, and is
projected to reach $8.5 billion by 2019 (with a 201419 Compound Annual Growth Rate or CAGR of 25.6%)1. Management believes that the
market for filtered content is largely untapped, as opposition from content creators and agreements with distribution channels and partners make
the process overly burdensome, and costly for the average consumer. In April 2005, the Family Entertainment and Copyright Act was signed into
law and included provisions that exempted as a violation of copyright law “…the creation or provision of a computer program or other
technology that enables…[the] making imperceptible [of limited portions of audio or video content of a motion picture,] and that is designed and
marketed to be used, at the direction of a member of a private household…”. In May 2016, VidAngel commissioned an independent thirdparty
study by the NRG Research Group to determine the percentage of American consumers who would be interested in or more likely to use a service
similar to VidAngel’s. The study estimated the size of the home entertainment audience at 140.2 million Americans, and indicates that 40% of
such audience said they will “definitely” or “probably” use the service, with 19% indicating that they will “definitely” use the service.
Pricewaterhouse Coopers Global Entertainment and Media Outlook 2015
1
31
- A.246 -
Exhibit A
RJN-38
Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 36 of 79 Page ID
#:4488
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Management believes that this study confirmed the existence of a significant market that is being underserved, and that VidAngel holds
the unique advantage of being the only company that currently provides this market with the ability to view and remove content on the most
popular devices and platforms available on the market today, such as cell phones, tablets, set top boxes (e,g. Apple TV, Roku Amazon Fire TV),
and computers, and, in the future, gaming consoles and Smart TVs. VidAngel began privately testing its technology in December 2014 and
launched publicly in August 2015. Since launching publicly in August of 2015 to the period ending June 30th, 2016, VidAngel has seen
significant growth and user adoption, with transaction growth of over 2,600% and user growth of over 1,800%. Management believes that this
growth is merely a small percentage of the potential market, and that as VidAngel continues to improve its technology, and releases new versions
of our application to work on the devices and platforms used by consumers today, that its growth will continue at a high rate for the foreseeable
future.
Growth Strategy
VidAngel employs a three pillar marketing strategy that includes digital acquisition, customer retention, and customer sharing:
Digital acquisition:
VidAngel uses highly targeted digital ads to attract customers, including:
● Marketing videos produced with innovative ad agency Harmon Brothers;
● Banner ads produced inhouse;
● Targeted advertising on Facebook, YouTube, Roku, and soon other settop box platforms; and
● Advertising with podcast and video channels
Customer activation and retention:
VidAngel continues to refine its customer acquisition funnel with rigorous A/B testing of customer emails, landing page layout, and
design of various platforms. VidAngel also keeps its customers active by engaging through entertaining emails, social media posts, blog posts,
customer service, and similar methods of outreach.
Customer sharing:
According to VidAngel customer surveys, roughly half the members of VidAngel’s customer base were referred by friends. To capitalize
on word of mouth advertising, VidAngel plans to continue incentivizing customers to share VidAngel with friends through the use of sharing
incentives and gamification.
Operating Results
VidAngel operates on a fiscal year basis from January to December.
First six month of Fiscal Year 2016 (1/1/2016 – 6/30/2016)
In the first six months of 2016, we focused our efforts on growth. We started by adding new content to the library of titles available for
purchase on our application in order to meet the demand of our existing customer base. We closed out fiscal year 2015 with approximately 1,500
titles available for purchase, and during the first six months of 2016 have added over 1,000 new titles. We continue to add new titles at an
increasing rate, and plan to continue for the foreseeable future.
In conjunction with adding new titles, we have continued to advertise our service aggressively. In the first six months of 2016, we spent
$2,353,396 on advertising related to our service. The aggressive advertising campaign resulted in the addition of over 144,700 new VidAngel
customers. Revenues generated from all customers during the first six months of 2016, were $2,405,430, an increase of 3,600% from the first six
months of 2015, or 578% of the total revenue from fiscal year 2015. We plan to maintain our aggressive spending on advertising, for the
foreseeable future, in order to further stimulate the growth of our customer base.
VidAngel had a net loss of $2,219,233 for the first six months of fiscal year 2016. This loss was largely related to the increased
advertising spend to fuel user growth.
Fiscal Year 2015 (1/1/2015 – 12/31/2015)
In fiscal year 2015, we began early beta testing of a new version of our service. The new service removed many of the obstacles that
limited the original version, and management believes it began to show promise immediately. Over the first eight months of fiscal year 2015,
VidAngel refined and improved the technology of the new version, while allowing a limited number of users to preview the service, and assist in
troubleshooting. The response from beta testers was promising and VidAngel generated revenues of $126,877 from January 1, 2015 through
August 31, 2015. In late August 2015, VidAngel opened access to the platform to the public, and began marketing the product aggressively. The
use of the service increased dramatically and VidAngel generated revenues of $288,640 from September 1, 2015, through December 31, 2015.
- A.247 -
32
Exhibit A
RJN-39
Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 37 of 79 Page ID
#:4489
Page 36 of 78
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Following the release to the general public, we became aware that the architecture of the current technology would not support the
growing user base, and we invested a significant amount of capital and resources into updating the architecture to handle a much larger user base,
and that could scale up to meet increased demand.
VidAngel had a net loss of $1,382,016 for the fiscal year ended December 31, 2015.
Fiscal Year 2014 (1/1/2014 12/31/2014)
In fiscal year 2014, VidAngel released the first version of its service that allowed customers to filter movies and videos available on
YouTube and the Google Play Hollywood library. Initial customer signup response was strong, but the service suffered from technical limitations,
no high definition content, limited support and an unstable customer experience. Actual usage was extremely low. Management began exploring
alternative strategies and, after creating the current model, the service was ultimately terminated.
VidAngel had a net loss of $777,916 for the fiscal year ended December 31, 2014.
Liquidity and Capital Resources
As of June 30, 2016, we had cash on hand of $1,480,525. We also expect that the proceeds from this offering will improve our financial
performance by providing additional capital necessary to advertise our service more aggressively and by enabling us to make our application
usable on additional device platforms, thereby making access to our service simpler, and by enhancing our service by improving the technology
for delivery to our customers. We have not identified any additional material internal or external sources of liquidity as of the date of this Offering
Circular.
Short Term Liquidity
VidAngel has no short term liquidity requirements as of the date of this Offering Circular.
LongTerm Liquidity
VidAngel has no long term liquidity requirements as of the date of this Offering Circular.
Trend Information
VidAngel experienced substantial monthly transaction growth since our public launch in August 2015. We processed and delivered
497,980 transactions for the month ended June 30, 2016, compared to 18,089 in August 2015, and have recognized over $2.4M in revenue related
to transactions for the first six (6) months of Fiscal Year 2016. The number of active users who purchased a disc in June 2016 was 110,251,
compared with 5,770 when we launched to the public in August 2015, which represents growth of over 1800%.
Our customer’s experience using our Apps, has improved significantly for every device on which our product is currently available. For
example, out of 5 stars possible, our Apple app store rating has increased from 2.5 stars to 4.9 stars; our Google Play app has improved to 4.8
stars; our Roku app to 4.5 stars; our Kindle app to 4.4 stars; and our Amazon Fire TV app to 4.6 stars.
Customer satisfaction has consistently grown as we’ve improved our technology over time as seen in the chart below. The percentage of
customers rating their experience with us as great has increased from just above 50 percent to over 80 percent. We are continuously testing and
working on changes to our technology and content delivery network which management believes will further increase the performance of our
product, and subsequently the customer satisfaction gains we have seen to date.
33
- A.248 -
Exhibit A
RJN-40
Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 38 of 79 Page ID
#:4490
Page 37 of 78
253G2
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Source: This chart was generated from 139,435 responses to a VidAngel survey sent to customers upon completion of a purchase transaction.
34
- A.249 -
Exhibit A
RJN-41
Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 39 of 79 Page ID
#:4491
Page 38 of 78
253G2
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DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
Subject to our stockholders’ rights to consent to certain transactions, the business and affairs of the Company are controlled by, and all
powers are exercised by, our Board. Our Board shall consist of not fewer than three (3) nor more than five (5) directors, the exact number to be set
from time to time by the Board. We currently have three directors: Neal Harmon, Paul Ahlstrom and Dalton Wright. Our Board shall be elected
each year, at the annual meeting of stockholders, to hold office until the next annual meeting and until their successors are elected and qualified.
Any newly created directorships resulting from an increase in the authorized number of directors and any vacancies occurring in our Board, may
be filled by the affirmative vote of a majority of the remaining directors. A director may resign at any time, and the stockholders may remove any
director or the entire Board at any time, with or without cause, by the affirmative vote of a majority of stockholders voting in such decision.
Our Board has retained our executive officers to manage our daytoday operations, our library of movies, our intellectual property and
other investments, subject to the supervision of our Board. Neal Harmon is currently our Chief Executive Officer, Patrick Reilly is currently our
Director of Finance, Elizabeth Ellis is currently our Chief Operating Officer and Jeffery Harmon is currently our Chief Marketing Officer. Our
executive officers have accepted their appointment, or nomination to be appointed, on the basis of the compensation to be paid to them. See
“COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS – Remuneration of Executive Officers and Managers of Our
Company” for more information. Our executive officers will serve for such period as the Board determines, subject to the terms of any
employment agreements we enter into with them, or their earlier death, resignation or removal. Our Board may remove our executive officers
subject to the terms of any employment agreements we enter into with them. See “COMPENSATION OF DIRECTORS AND EXECUTIVE
OFFICERS – Employment Agreements” for more information.
The individuals listed below are our executive officers and directors. The following table and biographical descriptions set forth certain
information with respect to the individuals who currently serve as our directors and executive officers:
Name
Position
Age
Neal Harmon*
Jeffery Harmon*
Elizabeth Ellis
Patrick Reilly
David Quinto
Chief Executive Officer, Director
Chief Marketing Officer
Chief Operating Officer
Director of Finance
General Counsel
38
33
39
35
61
Paul Ahlstrom
Director
53
Dalton Wright
Director
36
Term of
Office
October 2013
October 2013
June 2015
January 2014
August 2016
February
2014
February
2014
Hours/Year
(for part
time
employees)
n/a
n/a
n/a
n/a
n/a
n/a
n/a
*Neal Harmon and Jeffery Harmon are brothers.
Biographical Information
Biographical information regarding our directors and executive officers is set forth below.
Neal Harmon, Chief Executive Officer, Director. Neal has served as VidAngel, Inc.’s Chief Executive Officer since he helped cofound
the company in 2013. Neal is a member of Harmon Ventures LLC, a Utah limited liability company, the Company’s largest stockholder. He also is
a managing member of Harmon Brothers, LLC, a marketing agency he cofounded with his brothers. Neal worked for Orabrush, Inc. from 2009
to 2013, a company he cofounded, where he served in such capacities as Chief Operating Officer and as a member of the board. Since 2005, Neal
has also worked for the Neal S Harmon Company, a Utah corporation, as a consultant, entrepreneur and investor, engaging in such activities such
as designing and creating a trucking logistics dashboard to connect shippers and private fleets, among webbased and other projects. Neal
received his received his master’s degree from Brigham Young University in Instructional Psychology and Technology in 2002, and his
undergraduate degree from Brigham Young University in American Studies in 2001.
35
- A.250 -
Exhibit A
RJN-42
Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 40 of 79 Page ID
#:4492
Page 39 of 78
253G2
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Jeffery Harmon, Chief Marketing Officer. Jeffery is a cofounder and Chief Marketing Officer of VidAngel, Inc. He is currently a
managingmember of Harmon Brothers, LLC, a Utah limited liability company, which is an onlinefocused advertising and marketing company.
Jeffery cofounded Orabrush, Inc. in 2009 and served as its CEO from 20092010. He continued to serve as Chief Marketing Officer and Co
Founder of Orabrush from 2010 to 2013. He is currently active with other startup companies and concepts. He attended Brigham Young
University from 2006 to 2008, where he studied business marketing, tradition marketing, internet marketing and business administration.
Elizabeth Ellis, Chief Operating Officer. Liz has served as Chief Operating Officer at VidAngel, Inc. since 2016, where her duties
include overseeing all operating procedures and staffing. From 2009 until she started her tenure at VidAngel, Inc., Liz was the Director of Human
Relations and Office Manager at Orabrush, Inc., where she oversaw personnel and was responsible for various operational tasks. Liz holds a B.S.
from Brigham Young University.
Patrick Reilly, Director of Finance. Patrick began providing consulting services to VidAngel, Inc. in March 2014, and joined as the
Director of Finance in February 2016. Patrick oversees all accounting and finance duties, including but not limited to budgeting, forecasting,
auditing, financial statement preparation and funding at VidAngel, Inc. Patrick served as Financial Controller at Moki Mobility, Inc. a computer
software company, from 2013 to February 2016, where he was responsible for finance and accounting duties. From 2009 to 2013, Patrick was the
Vice President of Finance and Financial Controller at Allegiance, Inc., where he was responsible for all finance and accounting duties of the
company. Patrick graduated from Utah Valley University in 2005 with a B.S. in Business Administration with concentrations in finance and
banking.
David Quinto, General Counsel. David joined VidAngel, Inc. as our General Counsel in August 2016. David was a cofounder and
partner at Quinn Emanuel Urquhart & Sullivan LLP from 1987 through 2014, and along with Phyllis Kupferstein, founded Kupferstein Manuel &
Quinto, LLP in 2014. From 2015 through 2016, David was a partner with the international, full service firm Davis Wright Tremaine LLP. He has
represented numerous “Fortune 500” companies, including Avery Dennison, Lockheed Martin, Samsung, Louis Vuitton, Mattel, Johnson
Controls, Hilton Hotels, Grendene S.A., and SaeA Trading Co. Ltd., as well as the Academy of Motion Picture Arts and Sciences, the Academy
of Television Arts and Sciences, the Producers Guild of America, and the America’s Cup Organizing Committee. David has expertise in trade
secret, trademark, trade dress, copyright, unfair competition and complex business disputes. He published a treatise that analyzed the application
of tort law to the Internet titled “Law of Internet Disputes,” published by Aspen Law and business and he coauthors a practitioners guide to trade
secret protection and litigation nationally, published by LexisNexis (4th ed. 2016). David graduated with his J.D. from the Harvard Law School in
1982, and received his B.A. from Amherst College in 1977.
Paul Ahlstrom, Director. Paul joined VidAngel as our director in 2014. Paul has served as Managing Director of Alta Ventures Mexico
Fund I, LP since 2010, where his responsibilities include all aspects of investor relations, evaluating a business’s products or services for potential
investment opportunity, creating deal flow, negotiating the terms and conditions in each of the company’s financing, serving as a board member of
portfolio companies, and preparing financial statements and financial analysis. Over his career, Paul has directly participated in more than 125
venture capital investments and previously represented vSpring Capital on the boards of Ancestry.com, which was sold in 2007 to a private equity
firm and went public in 2009 (NASDAQ:ACOM), Senforce, which was sold to Novell (NASDAQ: NOVL), and Altiris (NASDAQ:ATRS), which
went public and was then sold to Symantec. (NASDAQ: SYMC), GlobalSim and Aeroprise. Mr. Ahlstrom has also served as an advisor and board
to many successful venturebacked startups including Rhomobile sold to Motorola, SpaceMonkey, SendMi, Convert.com and Jott. Paul is the
author of popular startup book Nail It Then Scale It, and received his B.A. in Communications from Brigham Young University.
Dalton Wright, Director. Dalton joined VidAngel, Inc. as our director in 2014. Dalton has been a partner at Kickstart Seed Fund, L.P.
since 2013, a seedstage investment fund that develops close relationships with universities, angel groups and entrepreneurs to launch high
growth startups in both Utah and the Mountain West. Dalton serves as a director of numerous other corporate boards. From 2009 to 2012, Dalton
was Senior Associate and Founding Team Member at Alta Mexico Ventures, a seed, venture and growth capital fund targeting high growth
companies in Mexico. Dalton graduated from the Wharton Business School at the University of Pennsylvania with his M.B.A. in 2014, and holds
a B.A. in finance from the University of Utah.
36
- A.251 -
Exhibit A
RJN-43
Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 41 of 79 Page ID
#:4493
Page 40 of 78
253G2
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COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Messrs. Harmon, Ms. Ellis, Mr. Reilly and Mr. Quinto receive compensation for acting in their capacities as our executive officers. We reimburse
Messrs. Ahlstrom and Wright for their expenses incurred in acting in their capacity as a director. See – Remuneration of Executive Officers and
Directors of the Company” below for more detailed information.
Remuneration of Executive Officers and Directors of the Company
Set forth below is a table of remuneration that our executive officers and directors received for our fiscal year ended December 31, 2015.
Name
Neal Harmon
Elizabeth Ellis
Jeffery Harmon
Paul Ahlstrom
Dalton Wright
Capacity in which
Compensation Was
Received
CEO
COO
Director of Marketing
Director
Director
Cash
Compensation
($)
$100,000
$100,000
$100,000
n/a
n/a
Other Compensation
($)
n/a
Indeterminate(1)
n/a
n/a
n/a
Total
Compensation
($)
$100,000
$100,000
$100,000
$n/a
$n/a
(1) On July 17, 2015, Ms. Elizabeth Ellis was granted stock incentive options exercisable for 50,000 shares of VidAngel’s Class A Common
Stock with an option price of $0.50 per share and on August 10, 2016, Ms. Ellis was granted stock incentive options exercisable for 28,000
shares of VidAngel’s Class A Common Stock with an option price of $0.82 per share, both pursuant to the terms and conditions of our Stock
Incentive Plan. These options will vest in substantially equal annual increments over a fouryear period.
Employment Agreements
We have recently entered into an employment agreement with Mr. David Quinto with respect to his position as our General Counsel. Mr.
Quinto’s employment begins on August 1, 2016, has no specified term, and will require him to devote his time and attention during normal
business hours to the business and affairs of the Company and the Company’s affiliates. By entering this agreement with Mr. Quinto, we have
attempted to ensure Mr. Quinto is available to defend VidAngel in the Disney Litigation through the court of appeals and all the way to the
Supreme Court, if necessary.
37
- A.252 -
Exhibit A
RJN-44
Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 42 of 79 Page ID
#:4494
Page 41 of 78
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Mr. Quinto’s employment agreement provides for an initial base salary of $350,000, payable semimonthly, which will thereafter be
subject to potential annual increases based on his performance after review by our Board which must approve any salary increase. Mr. Quinto has
also been granted an option exercisable for 219,792 shares of Class A Common Stock.
If Mr. Quinto’s employment is terminated by us without “cause,” or by him for “good reason,” within 12 months of a “change of control”
(each as defined in the applicable employment agreement), Mr. Quinto will be entitled to receive accelerated vesting of 100% of his option.
If Mr. Quinto’s employment is terminated by us without “cause” or by the executive for “good reason” prior to July 31, 2021, and
provided the Company is conducting business in the United States substantially unimpaired by any injunction, Mr. Quinto will be entitled to
receive severance pay in the form of the continued payment of his base salary, at the rate in effect as of the date of termination and in accordance
with the Company’s customary payroll practices, until July 31, 2021. If the Company’s business operations in the United States are substantially
impaired such that the Company cannot operate profitably, Mr. Quinto will be permitted to draw down on a cash collateral account established by
VidAngel to secure payment of Mr. Quinto’s cash compensation to ensure he can continue his defense of VidAngel in the Disney Litigation. Mr.
Quinto’s right to receive the severance pay will be subject to the delivery of a release of claims in favor of the Company.
Mr. Quinto’s employment agreement also required him to enter into a Proprietary Information, Invention Assignment, NonCompetition
and Arbitration Agreement with the Company.
Stock Incentive Plan
In an effort to further the longterm stability and financial success of the Company by attracting and retaining personnel, including
employees, directors and consultants for the Company, the Company adopted its 2014 Stock Incentive Plan, or our Stock Incentive Plan, in
February 2014. There are 2,534,544 shares of Class A Common Stock in VidAngel authorized for issuance through our Stock Incentive Plan. As
of the date of this Offering Circular, options exercisable for 1,022,811 shares of our Class A Common Stock have been granted under our Stock
Incentive Plan, and of those options granted, options exercisable for 5,000 shares of Class A Common Stock in VidAngel have been exercised.
Through the use of stock incentives, the Stock Incentive Plan will stimulate the efforts of those persons upon whose judgment, interest and efforts
the Company is and will be largely dependent for the successful conduct of its business and will further the identification of those persons’
interests with the interests of the Company’s stockholders.
The Stock Incentive Plan is administered by our Board. The board has the power and sole discretion to grant or award a stock incentive,
or an Award, to any employee of, director of, or consultant to the Company, each a Participant, who, in the sole judgment of our Board, has
contributed, or can be expected to contribute, to the profits or growth of the Company. Our Board also has the power and sole discretion to
determine the size, terms, conditions and nature of each Award to achieve the objectives of the Award and the Stock Incentive Plan. This
includes, without limitation, the Board’ ability to determine: (i) which eligible persons shall receive an Award and the nature of the Award,
(ii) the number of securities to be covered by each Award, (iii) the fair market value of such securities, (iv) the time or times when an Award shall
be granted, (v) whether an award shall become vested over a period of time, according to a performancebased or other vesting schedule or
otherwise, and when it shall be fully vested, (vi) the terms and conditions under which restrictions imposed upon an Award shall lapse,
(vii) whether a change of control exists, (viii) factors relevant to the satisfaction, termination or lapse of restrictions on certain Awards, (ix) when
certain Awards may be exercised, (x) whether to approve a Participant’s election with respect to applicable withholding taxes, (xi) conditions
relating to the length of time before disposition of securities received in connection with an Award is permitted, (xii) notice provisions relating to
the sale of securities acquired under the Stock Incentive Plan, and (xiii) any additional requirements relating to Awards that the Board deems
appropriate.
38
- A.253 -
Exhibit A
RJN-45
Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 43 of 79 Page ID
#:4495
Page 42 of 78
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SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITYHOLDERS
The Company has: 25,000,000 shares of common stock par value $0.001 per share, authorized, of which 21,250,000 shares have been
designated as Class A voting common stock, or the Class A Common Stock, and 3,750,000 have been designated as Class B Common Stock. As
of the date of this Offering Circular, we have 18,008,908 shares of Class A Common Stock issued and outstanding.
Capitalization
As of the date of this Offering Circular, Harmon Ventures, LLC, or Harmon Ventures, owned indirectly by our CEO, Mr. Harmon, and
his two brothers, Jeffrey Harmon and Daniel Harmon, owns 8,938,520 shares of our common stock. Alta Ventures Mexico Fund I, LLC, or Alta
Ventures Mexico Fund I, owns 3,160,318 shares of our common stock. Osborne Companies, LC, or Osborne Companies, owns 2,222,733 shares
of common stock. Various unaffiliated investors own the remaining shares of common stock.
The following table sets forth those executive officers, directors and other security holders holding 10% or a greater percentage of any
class of shares, as of the date of this Offering Circular.
Amount and Nature of
Name and Address of Beneficial Amount and Nature of
Title of Class
Beneficial Ownership
Percent of Class
Owner
Beneficial Ownership
Acquirable
Harmon Ventures, LLC
Class A Common Stock
1154 Holly
8,938,520 shares
N/A
49.63%
Cir Provo, UT 84604
Alta Ventures Mexico
Fund I, LLC
3315 Mayflower Avenue, Suite #1
Class A Common Stock
3,160,318 shares
N/A
17.55%
Lehi, U
T 84043
Osborne Companies, LC
Options exercisable for 66,000
Class A Common Stock
4290 North Vintage Circle
2,222,733 shares
12.33%
shares of Class A Common Stock
Provo, UT 84604
Upon closing of the Minimum Offering, Harmon Ventures will own approximately 46.41% of our total outstanding shares of capital
stock, Alta Ventures Mexico Fund I will own approximately 16.41% of our total outstanding shares of capital stock, and Osborne Companies, LC
will own approximately 11.54% of our total outstanding shares of capital stock. Upon closing of the Maximum Offering, Harmon Ventures will
own 41.08% of our total outstanding shares of capital stock, Alta Ventures Mexico Fund I will own 14.52% of our total outstanding shares of
capital stock, and Osborne Companies, LC will own 10.22% of our total outstanding shares of capital stock. See “COMPENSATION OF
DIRECTORS AND EXECUTIVE OFFICERS – Stock Incentive Plan” above.
Our Board may, from time to time, also cause shares of capital stock to be issued to directors, officers, employees or consultants of our
Company or its affiliates as equity incentive compensation under our Stock Incentive Plan, which shares will have all benefits, rights and
preferences as our Board may designate as applicable to such shares.
39
- A.254 -
Exhibit A
RJN-46
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INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS AND OTHER CONFLICTS OF
INTEREST
Affiliated Transactions
Promotion and Marketing Services Agreement with Harmon Brothers LLC.
VidAngel entered a “Promotion and Marketing Services Agreement” or the HB Marketing Agreement, with Harmon Brothers LLC, or
HB. HB is owned by Neal Harmon, Jeffrey Harmon, and Daniel Harmon. HB is in the business of providing internetbased and multimedia
promotion and marketing services, including the design, implementation and execution of promotional and webbased advertising campaigns.
HB’s services to the Company are divided into two categories: creative and production services and optimization and distribution services. For
creative and production services, HB invoices the Company at cost according to each employee or consultant’s personal hourly, billable rate.
VidAngel also pays all of HB’s expenses incurred in producing promotional and webbased advertising, including without limitation, props, food
and catering onset, facility rentals, travel, equipment rentals, and other costs of production. For optimization and distribution services, VidAngel
pays HB a percentagebased fee for the management of thirdparty adspend (Adwords, Facebook, etc.) which drives traffic to the content
produced, coproduced or otherwise created by HB, for VidAngel. The percentagebased management fee continues for the life of the content. In
exchange for the promotion and advertising services from HB, including thirdparty adspend billed at cost, VidAngel paid $0 to HB in 2014,
$344,739 to HB in 2015, and $2,166,989 to HB through June 30, 2016.
Employment Agreement with our General Counsel, David Quinto
We have recently entered into an employment agreement with Mr. David Quinto with respect to his position as our General Counsel. Mr.
Quinto’s employment began on August 1, 2016, has a five year term, and will require him to devote his time and attention during normal business
hours to the business and affairs of the Company and the Company’s affiliates.
Mr. Quinto’s employment agreement provides for an initial base salary of $350,000, payable semimonthly, which will thereafter be
subject to potential annual increases based on his performance after review by our Board which must approve any salary increase.
Investor Rights and Voting Agreement
The Company entered into an Investor Rights and Voting Agreement, or Investor Agreement, dated February 27, 2014 with certain of
VidAngel’s investors, including Alta Ventures Mexico Fund I, the manager of which is Paul Ahlstrom, one of our directors. The Investor
Agreement requires us to provide certain information and inspection rights, provides for confidentiality, and requires the parties to this agreement
to vote their respective shares of common stock in a manner which maintain the number of directors on our Board at no more than five and to
elect as a director an individual designated by Alta Ventures Mexico Fund I for so long as it owns at least 1,000,000 shares of our common stock.
The Company is permitted to enter into transactions with, including making loans to and loan guarantees on behalf of, our directors,
executive officers and their affiliates; so long as the person or persons approving the transaction on behalf of the Company acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best interest of the Company. We do not have any outstanding loans or loan
guarantees with any related party, and, as of the date of this Offering Circular, we do not have any intentions to enter into any such transactions.
40
- A.255 -
Exhibit A
RJN-47
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SECURITIES BEING OFFERED
General
The Company is offering a minimum of 1,666,667 and a maximum of 3,750,000 of our Class B Common Stock at a price of $3.00 per
share ($5,000,000 and $11,250,000, respectively). The minimum subscription is fifty (50) Offered Shares ($150); however, we can waive the
minimum subscription on a case to case basis in our sole discretion. The Offered Shares are common equity and are not entitled to any
preferences regarding distributions. See “–Distributions.”
This offering will terminate on the Termination Date, provided that if we have received and accepted subscriptions for the Maximum
Offering on or before the Termination Date, then this offering will terminate when all Offered Shares have been sold, whichever occurs first. If, at
the Initial Closing, we have sold less than the Maximum Offering, we will hold Additional Closings, up to the Maximum Offering, through the
Termination Date. Purchases of Shares in excess of $5,000 must be transmitted by investors directly by either wire transfer or electronic funds
transfer via ACH to the escrow account maintained by Issuer Direct. Purchases of Shares in the amount of $5,000 or less may be submitted
through an investor's VidAngel customer account in accordance with the billing information for such investor at www.vidangel.com, and will not
be held in a noninterest bearing escrow account by Issuer Direct, but will be held in a separate noninterest bearing account held by VidAngel.
Upon each closing, the proceeds collected for such closing will be disbursed to the Company and the Offered Shares for such closing will be
issued to investors. If a closing does not occur for any reason, the proceeds for such closing will be promptly returned to investors, generally
without interest (within one business day) and without deduction.
The Company and stockholders are governed by our Certificate and Bylaws. See “– Description of Certificate of Incorporation and
Bylaws” below for a detailed summary of terms of our Certificate and Bylaws. Our Certificate and Bylaws are filed as an exhibit to the Offering
Statement of which this Offering Circular is a part. The Company has: 25,000,000 shares of common stock, par value $0.001, authorized, of
which 21,250,000 shares have been designated as Class A Common Stock, and 3,750,000 have been designated as Class B Common Stock. Our
Board has the right to create, authorize and issue new shares in the Company, including new classes, provided that it may not authorize or issue
shares senior to the rights and preferences of our common stock without the consent of the common stockholders holding a majority of the
outstanding shares of each class of common stock.
Registrar, Paying Agent and Transfer Agent for our Offered Shares
Duties
Issuer Direct Corporation will serve as the registrar and transfer agent for our Offered Shares. We will pay all fees charged by the
transfer agent for transfers of our Offered Shares except for special charges for services requested by a Class B Common Stockholder.
There will be no charge to our Class B Common Stockholders for disbursements of our cash dividends, if any, although we do not
anticipate issuing dividends for the foreseeable future. We will indemnify the transfer agent, its agents and each of their respective stockholders,
directors, officers and employees against all claims and losses that may arise out of acts performed or omitted for its activities in that capacity,
except for any liability due to any gross negligence or intentional misconduct of the indemnified person or entity.
Resignation or Removal
The transfer agent may resign, by notice to us, or be removed by us. The resignation or removal of the transfer agent will become
effective upon our appointment of a successor transfer agent and registrar and its acceptance of the appointment. If no successor has been
appointed and has accepted the appointment within 30 days after notice of the resignation or removal, our Board, or a designee of our Board, may
act as the transfer agent and registrar until a successor is appointed.
Dividends
No dividends to investors in our Offered Shares are assured, nor are any returns on, or of, an investor’s investment
guaranteed. Dividends are subject to our ability to generate positive cash flow from operations. All dividends are further subject to the
discretion of our Board. It is possible that we may have cash available for dividends, however, we anticipate retaining all of our earnings
for the future operation of the Company and do not anticipate making any cash distributions in the foreseeable future.
41
- A.256 -
Exhibit A
RJN-48
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Our Board, in its sole discretion, may determine from time to time to declare and pay dividends out of any funds legally available
therefore. The Company has never declared or paid cash dividends on its capital stock. The Company currently intends to retain any future
earnings to finance the growth and development of its business and therefore does not anticipate paying any cash dividends for the foreseeable
future.
Liquidating Preferences
Upon the dissolution and liquidation of the Company, no stockholder will receive a preference in the distribution of liquidation proceeds.
Liquidating distributions will be shared pari passu among our common stock.
Basis for Dividends
The Company’s ability, and our Board’ decisions, to issue dividends to our stockholders will be based upon the operating results of the
Company. Our Board has discretion over whether to declare and pay dividends to our stockholders, however, we do not anticipate issuing any
dividends for the foreseeable future.
Description of Certificate of Incorporation and Bylaws
The Company is governed by our certificate of incorporation, or our Certificate, and our bylaws, or our Bylaws. The following summary
describes material provisions of our Certificate and our Bylaws, but it is not a complete description of our Certificate, our Bylaws or any
combination of the two. A copy of our Certificate and our Bylaws are filed as exhibits to the Offering Statement of which this Offering Circular is
a part.
Board of Directors
Subject to our stockholders’ rights to consent to certain transactions as provided under the Delaware General Corporate Law, or DGCL,
the business and affairs of the Company are controlled by, and all powers are exercised by, our board of directors, or our Board. Our Board is
required to consist of not less than three (3) nor more than five (5) directors, the exact number to be set from time to time by the Board. Our Board
is comprised of Paul Ahlstrom, Neal Harmon and Dalton Wright. Our Board is elected each year at the annual meeting of stockholders, to hold
office until the next annual meeting and until their successors are elected and qualified. Any newly created directorships resulting from an
increase in the authorized number of directors and any vacancies occurring in our Board may be filled by the affirmative vote of the remaining
directors. A director may resign at any time, and the stockholders may remove a director at any time, with or without cause, by the affirmative
vote of a majority of stockholders voting in such decision.
The DGCL provides that stockholders of a Delaware corporation are not entitled to the right to cumulate votes in the election of directors
unless its certificate of incorporation provides otherwise. Our Certificate does not provide for cumulative voting.
Our Board may designate one or more committees. Such committees must consist of one or more directors. Any such committee, to the
extent permitted by applicable law, will have and may exercise all the powers and authority of the Board in the management of the business and
affairs of the Company.
Officers
The Board has the authority to select the officers of the Company. The officers consist of a Chairman of the Board, a Chief Executive
Officer, or CEO, a Secretary and a Treasurer. In addition, the Board may elect one or more Vice Chairmen, President, Chief Financial Officer and
Vice Presidents, and such other offices as the Board may determine. Two or more of the aforementioned offices may be held by the same person.
Our officers are: (i) Neal Harmon, CEO; (ii) Jeffrey Harmon, Chief Marketing Officer; (iii) Elizabeth Ellis, Chief Operating Officer, or COO; (iv)
Patrick Reilly, Director of Finance and Secretary; and (v) David Quinto, General Counsel.
42
- A.257 -
Exhibit A
RJN-49
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At the first meeting of the Board following the annual meeting of stockholders, the Board appoints the officers, however, the Board may
also empower the CEO to appoint subordinate officers and agents for us. Each officer so elected holds office until such officer’s successor is
elected and qualified or until the officer’s earlier resignation or removal. Each officer is required to perform such duties as are provided in the
Bylaws or as the Board may from time to time determine. Subject to the rights, if any, of an officer under any employment agreement, any officer
may be removed, with our without cause, by the affirmative vote of a majority of the Board. An officer may resign at any time on giving notice to
the Board. Our CEO is in charge of the general affairs of the Company, subject to the oversight of the Board. In case any officer is absent, or for
any other reason the Board may deem sufficient, the CEO or the Board may delegate the powers and duties of such officer to any other officer or
to any director.
Fiduciary Duties and Indemnification
The Company shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or investigative, or Proceeding (other than an action by or in the right
of the Company), by reason of the fact that he is or was a director, officer, employee or agent of the Company, or is or was serving at the request
of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against all
liability and loss suffered and expenses reasonably incurred by such person in connection with any such Proceeding. The Company shall be
required to indemnify a person in connection with a Proceeding initiated by such person only if the Proceeding was authorized by the Board.
Company Stock
The Company may issue up to 25,000,000 shares of capital stock, of which 25,000,000 shares will be common stock, par value $0.001
per share of which 21,250,000 shares have been designated as Class A Common Stock, and 3,750,000 have been designated as Class B Common
Stock.
Stockholder Rights
Voting
Class B Common Stockholders will not be entitled to vote other than as required by law. Only holders of Class A Common Stock are
entitled to one vote for each share of Class A Common Stock held of record on all matters on which the holders of shares of Class A Common
Stock are entitled to vote.
Meetings
The annual meeting of the stockholders shall be held at such date, time and place, if any, as shall be determined by the Board and stated
in the notice of the meeting. Special meetings of the stockholders shall be called pursuant to resolution approved by the Board, chairperson of our
Board, the Chief Executive Officer or President (in the absence of a Chief Executive Officer) or by Class A Common Stockholders holding shares
of Class A Common Stock in the aggregate entitled to cast votes not less than ten (10%) percent of the votes at that meeting. The only business
which may be conducted at a special meeting shall be the matter or matters set forth in the notice of such meeting.
Dividends and Liquidations
Upon any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, a Liquidation Event, the assets and
funds of the Corporation available for distribution to its stockholders, if any, shall be distributed common stockholders, pro rata, then outstanding.
43
- A.258 -
Exhibit A
RJN-50
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Amendment
Class A Common Stockholders may amend, alter or repeal our Certificate and our Bylaws.
Description of our Stockholders Agreement
Our Class B Common Stock is governed by our Stockholders Agreement. The following summary describes material provisions of our
Stockholders Agreement, but it is not a complete description of our Stockholders Agreement. A copy of our Stockholders Agreement is filed as an
exhibit to the Offering Statement of which this Offering Circular is a part.
Transfer restrictions.
Investors in our Class B Common Stock will be subject to the restrictions on transfer set forth in our Stockholders Agreement. Under the
terms of our Stockholders Agreement, transfer of shares of our Class B Common Stock will be subject to a right of first refusal exercisable first
by the Company, second, by our Class A Common Stockholders, and, third, by our remaining Class B Common Stockholders pursuant to the
Stockholders Agreement. Prior to any transfer or proposed transfer of shares, the transferring shareholder, or the Seller, is required to give written
notice to us and to the remaining stockholders of such proposed transfer. The certificates for our Class B Common Stock will be legended to
reflect these restrictions.
Restrictions Imposed by the USA PATRIOT Act and Related Acts
In accordance with the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism
Act of 2001, or the USA PATRIOT Act, the securities offered hereby may not be offered, sold, transferred or delivered, directly or indirectly, to
any “unacceptable investor,” which means anyone who is:
a “designated national,” “specially designated national,” “specially designated terrorist,” “specially designated global terrorist,” “foreign
● terrorist organization,” or “blocked person” within the definitions set forth in the Foreign Assets Control Regulations of the United
States, or U.S., Treasury Department;
acting on behalf of, or an entity owned or controlled by, any government against whom the U.S. maintains economic sanctions or
●
embargoes under the Regulations of the U.S. Treasury Department;
within the scope of Executive Order 13224 — Blocking Property and Prohibiting Transactions with Persons who Commit, Threaten to
●
Commit, or Support Terrorism, effective September 24, 2001;
a person or entity subject to additional restrictions imposed by any of the following statutes or regulations and executive orders issued
thereunder: the Trading with the Enemy Act, the National Emergencies Act, the Antiterrorism and Effective Death Penalty Act of 1996,
the International Emergency Economic Powers Act, the United Nations Participation Act, the International Security and Development
● Cooperation Act, the Nuclear Proliferation Prevention Act of 1994, the Foreign Narcotics Kingpin Designation Act, the Iran and Libya
Sanctions Act of 1996, the Cuban Democracy Act, the Cuban Liberty and Democratic Solidarity Act and the Foreign Operations, Export
Financing and Related Programs Appropriations Act or any other law of similar import as to any nonU.S. country, as each such act or
law has been or may be amended, adjusted, modified or reviewed from time to time; or
designated or blocked, associated or involved in terrorism, or subject to restrictions under laws, regulations, or executive orders as may
●
apply in the future similar to those set forth above.
44
- A.259 -
Exhibit A
RJN-51
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ERISA CONSIDERATIONS
An investment in us by an employee benefit plan is subject to additional considerations because the investments of these plans are
subject to the fiduciary responsibility and prohibited transaction provisions of ERISA and restrictions imposed by Section 4975 of the Code. For
these purposes the term “employee benefit plan” includes, but is not limited to, qualified pension, profitsharing and stock bonus plans, Keogh
plans, simplified employee pension plans and tax deferred annuities or IRAs established or maintained by an employer or employee organization.
Among other things, consideration should be given to:
● whether the investment is prudent under Section 404(a)(1)(B) of ERISA;
● whether in making the investment, that plan will satisfy the diversification requirements of Section 404(a)(1)(C) of ERISA; and
whether the investment will result in recognition of unrelated business taxable income by the plan and, if so, the potential aftertax
●
investment returns.
The person with investment discretion with respect to the assets of an employee benefit plan, often called a fiduciary, should determine
whether an investment in us is authorized by the appropriate governing instrument and is a proper investment for the plan.
Section 406 of ERISA and Section 4975 of the Code prohibit employee benefit plans from engaging in specified transactions involving
“plan assets” with parties that are “parties in interest” under ERISA or “disqualified persons” under the Code with respect to the plan.
In addition to considering whether the purchase of Offered Shares is a prohibited transaction, a fiduciary of an employee benefit plan
should consider whether the plan will, by investing in us, be deemed to own an undivided interest in our assets, with the result that our operations
would be subject to the regulatory restrictions of ERISA, including its prohibited transaction rules, as well as the prohibited transaction rules of
the Code.
The Department of Labor regulations provide guidance with respect to whether the assets of an entity in which employee benefit plans
acquire equity interests would be deemed “plan assets” under some circumstances. Under these regulations, an entity’s assets would not be
considered to be “plan assets” if, among other things:
(1) the equity interests acquired by employee benefit plans are publicly offered securities i.e., the equity interests are widely held by
100 or more investors independent of the issuer and each other, freely transferable and registered under some provisions of the federal securities
laws;
(2) the entity is an “operating company”—i.e., it is primarily engaged in the production or sale of a product or service other than the
investment of capital either directly or through a majorityowned subsidiary or subsidiaries; or
(3) there is no significant investment by benefit plan investors, which is defined to mean that less than 25% of the value of each class of
equity interest is held by the employee benefit plans referred to above.
We do not intend to limit investment by benefit plan investors in us because we anticipate that we will qualify as an “operating
company”. If the Department of Labor were to take the position that we are not an operating company and we had significant investment by
benefit plans, then we may become subject to the regulatory restrictions of ERISA which would likely have a material adverse effect on our
business and the value of our common stock.
Plan fiduciaries contemplating a purchase of Offered Shares should consult with their own counsel regarding the consequences under
ERISA and the Code in light of the serious penalties imposed on persons who engage in prohibited transactions or other violations.
45
- A.260 -
Exhibit A
RJN-52
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ACCEPTANCE OF SUBSCRIPTIONS ON BEHALF OF PLANS IS IN NO RESPECT A REPRESENTATION BY OUR
BOARD OR ANY OTHER PARTY RELATED TO US THAT THIS INVESTMENT MEETS THE RELEVANT LEGAL
REQUIREMENTS WITH RESPECT TO INVESTMENTS BY ANY PARTICULAR PLAN OR THAT THIS INVESTMENT IS
APPROPRIATE FOR ANY PARTICULAR PLAN. THE PERSON WITH INVESTMENT DISCRETION SHOULD CONSULT WITH
HIS OR HER ATTORNEY AND FINANCIAL ADVISERS AS TO THE PROPRIETY OF AN INVESTMENT IN US IN LIGHT OF
THE CIRCUMSTANCES OF THE PARTICULAR PLAN.
46
- A.261 -
Exhibit A
RJN-53
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#:4503
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REPORTS
We will furnish the following reports, statements, and tax information to each stockholder:
Reporting Requirements under Tier II of Regulation A. Following this Tier II, Regulation A offering, we will be required to comply
with certain ongoing disclosure requirements under Rule 257 of Regulation A. We will be required to file: an annual report with the SEC on
Form 1K; a semiannual report with the SEC on Form 1SA; current reports with the SEC on Form 1U; and a notice under cover of Form 1
Z. The necessity to file current reports will be triggered by certain corporate events, similar to the ongoing reporting obligation faced by issuers
under the Exchange Act, however the requirement to file a Form 1U is expected to be triggered by significantly fewer corporate events than that
of the Form 8K. Parts I & II of Form 1Z will be filed by us if and when we decide to and are no longer obligated to file and provide annual
reports pursuant to the requirements of Regulation A.
Annual Reports. As soon as practicable, but in no event later than one hundred twenty (120) days after the close of our fiscal year,
ending December 31, our Board will cause to be mailed or made available, by any reasonable means, to each Stockholder as of a date selected by
the Board, an annual report containing financial statements of the Company for such fiscal year, presented in accordance with GAAP, including a
balance sheet and statements of operations, company equity and cash flows, with such statements having been audited by an accountant selected
by the Board. The Board shall be deemed to have made a report available to each stockholder as required if it has either (i) filed such report with
the SEC via its Electronic Data Gathering, Analysis and Retrieval, or EDGAR, system and such report is publicly available on such system or (ii)
made such report available on any website maintained by the Company and available for viewing by the stockholders.
Tax Information. On or before June 30th of the year immediately following our fiscal year, which is currently January 1st through
December 31st, we will send to each stockholder such tax information as shall be reasonably required for federal and state income tax reporting
purposes.
Stock Certificates. We do not anticipate issuing stock certificates representing Offered Shares purchased in this offering to the Class B
Common Stockholders. However, we are permitted to issue stock certificates and may do so at the request of our transfer agent. The number of
Offered Shares held by each Class B Common Stockholder, will be maintained by us or our transfer agent in the Company register.
INDEPENDENT AUDITORS
The balance sheet of VidAngel as of the fiscal years ended December 31, 2015 and 2014, and the statements of operations, stockholders’
equity and cash flows of VidAngel for each of the two years ended December 31, 2015 and 2014, have been included in this Offering Circular and
have been audited by Tanner LLC, independent auditors, as stated in their report appearing herin.
47
- A.262 -
Exhibit A
RJN-54
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#:4504
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Index to Financial Statements
VidAngel, Inc. Interim Financial Statements For the Six Months Ended June 30, 2016 and 2015
Balance Sheets as of June 30, 2016 and December 31, 2015 (Unaudited)
Statements of Operations For the Six Months Ended June 30, 2016 and 2015 (Unaudited)
Statements of Stockholders’ Equity (Deficit) For the Six Months Ended June 30, 2016 And the Year Ended December 31,
2015 (Unaudited)
Statements of Cash Flows For the Six Months Ended June 30, 2016 and 2015 (Unaudited)
Notes to Financial Statements For the Six Months Ended June 30, 2016 (Unaudited)
VidAngel, Inc.
Financial Statements as of December 31, 2015 and 2014 for the Years Then Ended
Balance Sheets as of December 31, 2015 and December 31, 2014
Statements of Operations For Years Ended December 31, 2015 and December 31, 2014
Statements of Stockholders Equity For the Years Ended December 31, 2015 and December 31, 2014
Statements of Cash Flows For the Years Ended December 31, 2015 and December 31, 2014
Notes to Financial Statements, December 31, 2015 and December 31, 2014
- A.263 -
Exhibit A
RJN-55
F2
F3
F4
F5
F6
F13
F14
F15
F16
F17
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VIDANGEL, INC.
Interim Financial Statements
As of And For the Six Months Ended June 30, 2016 and 2015
Notice to Reader
Our auditors have not reviewed the unaudited interim financial statements for the six months ended June 30, 2016 and 2015. These
financial statements and the notes thereto have been prepared by the Company’s management in accordance with accounting principles
generally accepted in the United States of America using management’s best judgments, consistent with prior periods, and should be read
in conjunction with the audited financial statements for the years ended December 31, 2015 and 2014.
- A.264 -
Exhibit A
RJN-56
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VIDANGEL, INC.
Balance Sheets
As of June 30, 2016 and December 31, 2015 (Unaudited)
Assets
Current assets:
Cash and cash equivalents
Accounts receivable
Prepaid expenses and other
Total current assets
Movie inventory
Property and equipment, net
Total assets
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Accounts payable
Accrued expenses
Deferred revenue
Total current liabilities
Commitments and contingencies
Stockholders' equity (deficit):
Common stock, $0.001 par value, 25,000,000 shares
authorized; 18,008,908 and 18,003,908 shares issued
and outstanding, respectively
Additional paidin capital
Accumulated deficit
Total stockholders' equity (deficit)
Total liabilities and stockholders' equity (deficit)
June 30,
2016
December 31,
2015
$
$
1,480,525
689
299,083
1,780,297
886,253
34,510
2,701,060
$
$
$
222,494
35,789
3,248,449
3,506,732
$
$
18,009
3,510,568
(4,334,249)
(805,672)
2,701,060 $
1,910,880
11,868
34,517
1,957,265
206,887
2,780
2,166,932
86,530
669,341
755,871
18,004
3,508,073
(2,115,016)
1,411,061
2,166,932
See accompanying notes to financial statements.
F2
- A.265 -
Exhibit A
RJN-57
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VIDANGEL, INC.
Statements of Operations
Revenues, net
Operating expenses:
Cost of revenues
Selling and marketing
General and administrative
Research and development
Total operating expenses
Operating loss
Other income (expense):
Interest income
Interest expense
Other expense, net
Total other expense, net
Loss before income taxes
Provision for income taxes
Net loss
$
June 30 ,
2016
2,405,430 $
815,284
2,836,930
629,120
353,904
4,635,238
(2,229,808)
$
10,602
(27)
10,575
(2,219,233)
(2,219,233) $
June 30,
2015
64,291
51,544
50,689
125,086
40,777
268,096
(203,805)
(8,508)
(8,508)
(212,313)
(212,313)
See accompanying notes to financial statements.
F3
- A.266 -
Exhibit A
RJN-58
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VIDANGEL, INC.
Statements of Stockholders’ Equity (Deficit)
For the Six Months Ended June 30, 2016 and the Year Ended December 31, 2015 (Unaudited)
Balance as of January 1, 2015
Convertible notes payable and related
accrued interest converted to
common stock
Issuance of common stock, net of
issuance costs of $5,000
Stockbased compensation expense
Contingent beneficial conversion feature
Net loss
Balance as of December 31, 2015
Exercise of stock options
Net loss
Balance as of June 30, 2016
$
$
Members'
Interest
Common Stock
Shares
13,411,257
3,526,896
1,065,755
18,003,908
5,000
18,008,908
$
$
Amount
Total
Additional
Stockholders'
Paidin
Equity
Accumulated
Capital
Deficit
(Deficit)
13,411
3,527
1,066
18,004
5
18,009
$ 584,766
1,915,933
993,934
12,098
1,342
3,508,073
2,495
$ 3,510,568
$ (733,000) $ (134,823)
1,919,460
995,000
12,098
1,342
(1,382,016) (1,382,016)
(2,115,016) 1,411,061
2,500
(2,219,233) (2,219,233)
$(4,334,249) $ (805,672)
See accompanying notes to financial statements.
F4
- A.267 -
Exhibit A
RJN-59
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VIDANGEL, INC.
Statements of Cash Flows
For the Six Months Ended June 30, 2016 and 2015 (Unaudited)
Cash flows from operating activities:
Net loss
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization
Decrease (increase) in:
Accounts receivable
Prepaid expenses and other assets
Movie inventory
Increase (decrease) in:
Accounts payable and accrued expenses
Deferred revenue
Net cash used in operating activities
Cash flows from investing activities:
Purchase of property and equipment
Cash flows from financing activities:
Proceeds from convertible notes payable
Exercise of stock options
Net cash provided by financing activities
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of period
Supplemental disclosure of cash flow information:
Cash paid for interest
$
$
$
June 30,
2016
June 30,
2015
(2,219,233) $
5,795
11,179
(264,566)
(679,366)
171,753
2,579,108
(395,330)
(37,525)
2,500
2,500
(430,355)
1,910,880
1,480,525 $
27 $
(212,313)
1,047
7,131
(31,736)
(25,091)
92,474
(168,488)
335,417
335,417
166,928
172,216
339,145
See accompanying notes to financial statements.
F5
- A.268 -
Exhibit A
RJN-60
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VIDANGEL, INC.
Notes to Financial Statements
For the Six Months Ended June 30, 2016 (Unaudited)
The interim financial information presented should be read in conjunction with the entity’s latest annual audited financial statements.
1. Basis of Presentation
2. Description of
Organization
and Summary
of Significant
Accounting
Policies
The accompanying financial statements have been prepared by the Company, without audit, and reflect all
adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim
periods presented. The financial statements have been prepared in accordance with accounting principles generally
accepted in the United States of America (GAAP) for interim financial reporting. Certain information and footnote
disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or
omitted pursuant to such rules and regulations. It is the opinion of management that the financial statements reflect
all adjustments which are necessary for a fair presentation of the financial position, results of operations and cash
flows for the interim periods presented. The results of operations for the six months ended June 30, 2016 are not
necessarily indicative of the results expected for the entire fiscal year.
Organization
VidAngel, Inc. (the Company) was incorporated on November 13, 2013 as a Utah limited liability Company. On
February 7, 2014, the Company converted to a Delaware corporation. The Company resells BluRay and DVD
discs to its customers. The Company includes access to proprietary content filtering technology as part of the
transaction. With the purchase of the disc, and access to the technology, the customer then has the ability to stream
a customized version of the disc to their location for viewing on many of today’s most popular devices. After they
are finished with a disc, the customer has the option to sell the disc back to the Company at a reduced price. The
sellback price varies depending on the type (BluRay or DVD) of the disc, and the number of days the customer
owned the disc.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions that affect reported amounts and
disclosures. Accordingly, actual results could differ from those estimates. Key management estimates include the
estimated life of the customer’s ownership of a disc, valuation allowances for net deferred income tax assets, and
valuation of stockbased compensation.
F6
- A.269 -
Exhibit A
RJN-61
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VIDANGEL, INC.
Notes to Financial Statements
Continued
For the Six Months Ended June 30, 2016 (Unaudited)
2. Description of
Organization
and Summary
of Significant
Accounting
Policies Continued
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities to the Company of three months or
less to be cash equivalents. As of June 30, 2016 these cash equivalents consisted of money market accounts.
Movie Inventory
Movie inventory includes DVD and BluRay discs purchased by the Company for resell, not in excess of realizable
value. Movie inventory is recorded at the lower of cost or market, with cost being determined on a first in, first out
method. The Company periodically reviews inventories for excess supply, obsolescence, and valuations above
estimated realizable amounts, and provides a reserve to cover these items. Management determined that no
allowance for obsolete inventory was necessary as of June 30, 2016.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and
amortization are calculated using the straightline method over the estimated economic useful lives of the assets or
over the related lease terms (if shorter) as follows:
Office and computer equipment
3 years
Leasehold improvements
1 year
Expenditures that materially increase values or capacities or extend useful lives of property and equipment are
capitalized. Routine maintenance, repairs, and renewal costs are expensed as incurred. Upon sale or other
retirement of depreciable property, the cost and accumulated depreciation and amortization are removed from the
related accounts and any gain or loss is reflected in the statement of operations.
Impairment of LongLived Assets
The Company reviews its property and equipment, and other longlived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of the assets may be impaired. If it is determined that
the estimated undiscounted future cash flows are not sufficient to recover the carrying value of the asset, an
impairment loss is recognized in the statements of operations for the difference between the carrying value and the
fair value of the asset. Management does not consider any of the Company’s assets to be impaired as of June 30,
2016.
F7
- A.270 -
Exhibit A
RJN-62
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VIDANGEL, INC.
Notes to Financial Statements
Continued
For the Six Months Ended June 30, 2016 (Unaudited)
2. Description of
Organization
and Summary
of Significant
Accounting
Policies
Continued
Revenue Recognition
The Company resells BluRay and DVD discs to its customers for a fixed price of $20. Upon purchase of the disc,
the customer agrees to have the Company retain physical custody of the purchased disc until such a time that the
customer either requests to have the disc shipped to them directly, or the customer decides to sell the disc back to
the Company at an agreed upon price, which reduces $1 per day for DVD discs, and $2 per day for BluRay
discs. During the time that the customer owns the disc, the Company gives the customer access to a patented video
streaming technology that permits the customer to direct their individual viewing experience by allowing them to
remove certain audio or video segments that contain material that may be considered objectionable by a member of
the private household. Access to this technology is available during the entire period of which the customer owns
the disc purchased from the Company, and is extinguished upon the customer selling the disc back to the Company.
Revenue is recognized when all of the following criteria have been met: (1) persuasive evidence of an arrangement
exists, (2) services have been rendered, (3) the Company’s price to the buyer is fixed or determinable, and (4)
collectability is reasonably assured.
The Company separates its revenue transactions into two pools based on length of time of disc ownership – short
term and longterm ownership of discs.
Transactions that have a shortterm ownership of a disc exhibit a very short ownership time period, usually on
average selling the disc back to the Company within 5 hours. For these transactions, the Company recognizes
revenue on a daily basis, in an amount equal to the daily reduction in the sellback price from the customer to the
Company ($1 or $2 per day), and ceasing upon the customer’s sellback of the disc. Approximately 99.5% of the
Company’s transactions are shortterm.
Transactions that have a longterm ownership exhibit a longer period of time of ownership – in excess of 20 days.
A majority of the customers entering longterm transactions appear to be building a library of movie titles, and may
own the associated discs indefinitely. The Company estimates the expected period of the longterm transactions,
and recognizes revenue based on a subscription model, or ratably over the expected term. Cash received from
customers prior to recognition of revenue is recorded as deferred revenue.
Advertising
Advertising costs are expensed as incurred. Advertising expenses totaled $2,353,396 for the six months ended June
30, 2016.
F8
- A.271 -
Exhibit A
RJN-63
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VIDANGEL, INC.
Notes to Financial Statements
Continued
For the Six Months Ended June 30, 2016 (Unaudited)
3. Commitments
and
Contingencies
Litigation
The Company is involved in legal proceedings from time to time arising in the normal course of business. The
Company has received, and may in the future continue to receive, claims from third parties. Management, after
consultation with legal counsel, believes that the outcome of these proceedings may have a material impact on the
Company’s financial position, results of operations, or liquidity.
Current and future litigation may be necessary to defend the Company and its customers by determining the
scope, enforceability, and validity of these claims. The results of any current or future complex litigation matters
cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact because
of defense and settlement costs, distraction of management resources, and other factors. Additionally, these
matters may change in the future as the litigation and factual discovery unfolds. Legal fees are expensed as
incurred. Insurance recoveries associated with legal costs incurred are recorded when they are deemed probable
of recovery.
The Company assesses whether there is a reasonable possibility that a loss, or additional losses beyond those
already accrued, may be incurred (“Material Loss”). If there is a reasonable possibility that a Material Loss may
be incurred, the Company discloses an estimate or range of the amount of loss, either individually or in the
aggregate, or discloses that an estimate of loss cannot be made. If a Material Loss occurs due to an unfavorable
outcome in any legal matter, this may have an adverse effect on the financial position, results of operations, and
liquidity of the Company. The Company records a provision for each liability when determined to probable, and
the amount of the loss may be reasonably estimated. These provisions are reviewed annually and adjusted as
additional information becomes available.
The Company is involved in various litigation matters and believes that any reasonably possible adverse outcome
of these matters could potentially be material, either individually or in the aggregate, to the Company’s financial
position, results of operations and liquidity. As of the date of the independent auditors’ report management has
determined an adverse outcome is not yet probable or estimable, and has not accrued any estimated losses related
to these matters. Expectations may change in the future as the litigation and events related thereto unfold. For the
six months ended June 30, 2016 the Company incurred $99,950 in legal and litigation costs, which are included in
general and administrative expenses in the accompanying statements of operations.
F9
- A.272 -
Exhibit A
RJN-64
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VIDANGEL, INC.
Notes to Financial Statements
Continued
For the Six Months Ended June 30, 2016 (Unaudited)
4. Related Party
Transactions
5. Subsequent
Events
The Company has a marketing services contract with an entity owned by one of the Company’s stockholders. For
the six months ended June 30, 2016, the Company incurred expenses of $2,166,989, to the related party for
marketing services.
Litigation
As described more fully in Note 3, the Company is subject to claims and litigation that arise in the normal course of
business. Management reviews those claims and believes none of them meet the standard for accrual or
disclosure. In August 2016, a motion for preliminary injunction was filed in District Court in attempt to stop the
operations of the Company while the litigation is resolved. The initial complaint was filed in June 2016, and was
brought against the Company for infringing on exclusive rights under the Copyright Act and for violating the
Digital Millennium Copyright Act. The Company believes its legal position has merit, and is vigorously defending
the matter. The potential loss associated with the lawsuit is not estimable and the probability of the loss is
unknown.
Employment Agreement
On July 21, 2016, the Company hired an attorney as inhouse general counsel. The associated employment
agreement includes certain common stock option modifications, severance terms in certain circumstances, and the
establishment of a cash collateral account.
- A.273 -
Exhibit A
RJN-65
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VIDANGEL, INC.
Financial Statements as of December 31, 2015 and 2014
and For the Years Then Ended
Together with Independent Auditors’ Report
- A.274 -
Exhibit A
RJN-66
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INDEPENDENT AUDITORS’ REPORT
To the Board of Directors and Management of
VidAngel, Inc.
We have audited the accompanying financial statements of VidAngel, Inc. (the Company), which comprise the balance sheets as of December 31,
2015 and 2014, the related statements of operations, stockholders’ equity, and cash flows for the years then ended, and the related notes to
financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles
generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the
preparation and fair presentation of financial statements that are free from material misstatement, whether due to error or fraud.
Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing
standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures
selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due
to error or fraud. In making those risk assessments, the auditors consider internal control relevant to the entity’s preparation and fair presentation
of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as
evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of VidAngel, Inc. as of
December 31, 2015 and 2014, and the results of its operations and its cash flows for the years then ended, in accordance with accounting
principles generally accepted in the United States of America.
/s/ Tanner LLC
Salt Lake City, Utah
July 29, 2016
- A.275 -
Exhibit A
RJN-67
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VIDANGEL, INC.
Balance Sheets
As of December 31,
Assets
Current assets:
Cash and cash equivalents
Accounts receivable
Prepaid expenses and other
Total current assets
Movie inventory
Property and equipment, net
Total assets
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Accounts payable
Accrued expenses
Deferred revenue
Convertible notes payable
Total current liabilities
Commitments and contingencies
Stockholders' equity (deficit):
Common stock, $0.001 par value, 25,000,000 and
15,000,000 shares authorized, respectively; 18,003,908 and
13,411,257 shares issued and outstanding, respectively
Additional paidin capital
Accumulated deficit
Total stockholders' equity (deficit)
Total liabilities and stockholders' equity (deficit)
$
$
$
$
See accompanying notes to financial statements.
1,910,880 $
11,868
34,517
1,957,265
206,887
2,780
2,166,932 $
$
86,530
669,341
755,871
18,004
3,508,073
(2,115,016)
1,411,061
2,166,932 $
2014
172,216
20,013
192,229
6,234
4,015
202,478
65,522
4,301
395
267,083
337,301
13,411
584,766
(733,000)
(134,823)
202,478
F13
- A.276 -
2015
Exhibit A
RJN-68
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VIDANGEL, INC.
Statements of Operations
Years Ended December 31,
Revenues, net
Operating expenses:
Cost of revenues
Selling and marketing
General and administrative
Research and development
Total operating expenses
Operating loss
Other income (expense):
Interest expense
Other expense, net
Total other expense, net
Loss before income taxes
Provision for income taxes
Net loss
$
$
2015
415,517 $
256,831
699,773
468,396
310,754
1,735,754
(1,320,237)
(52,435)
(9,344)
(61,779)
(1,382,016)
(1,382,016) $
2014
19,265
93,232
210,167
452,407
35,990
791,796
(772,531)
(2,047)
(3,238)
(5,285)
(777,816)
(100)
(777,916)
See accompanying notes to financial statements.
F14
- A.277 -
Exhibit A
RJN-69
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VIDANGEL, INC.
Statements of Stockholders’ Equity
For the Years Ended December 31, 2015 and 2014
Balance as of January 1, 2014
Net loss
Conversion from LLC to CCorp
Issuance of common stock, net of
issuance costs of $3,000
Issuance of common stock for
services
Stock based compensation
expense
Balance as of December 31, 2014
Convertible notes payable and related
accrued interest converted to
common stock
Issuance of common stock, net of
issuance costs of $5,000
Stock based compensation
expense
Contingent beneficial conversion
feature
Net loss
Balance as of December 31, 2015
Members'
Interest
$
26,343
(44,916)
18,573
$
Common Stock
Shares
10,000,000
3,411,257
Amount
$
10,000
3,311
13,411,257
3,526,896
1,065,755
18,003,908
$
Total
Stockholders'
Additional
Paidin
Accumulated
Equity
Capital
Deficit
(Deficit)
$
$
$
26,343
(733,000)
(777,916)
(28,573)
593,689
597,000
100
13,411
3,527
1,066
18,004
$
17,900
18,000
(733,000)
1,750
(134,823)
1,919,460
995,000
12,098
12,098
(1,382,016)
(2,115,016) $
1,342
(1,382,016)
1,411,061
1,750
584,766
1,915,933
993,934
1,342
3,508,073
$
See accompanying notes to financial statements.
F15
- A.278 -
Exhibit A
RJN-70
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VIDANGEL, INC.
Statements of Cash Flows
For the Years Ended December 31,
Cash flows from operating activities:
Net loss
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization
Contingent beneficial conversion feature
Issuance of common stock for services
Stockbased compensation expense
Loss on sale of assets
Decrease (increase) in:
Accounts receivable
Prepaid expenses and other assets
Movie inventory
Increase (decrease) in:
Accounts payable and accrued expenses
Deferred revenue
Net cash used in operating activities
Cash flows from investing activities:
Purchase of property and equipment
Cash flows from financing activities:
Proceeds from issuance of common stock, net
Proceeds from convertible notes payable
Net cash provided by financing activities
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Supplemental disclosure of cash flow information:
Cash paid for interest
Cash paid for income taxes
Supplemental disclosure of noncash investing and
financing information:
Convertible notes payable and related accrued interest
converted to common stock
Conversion of LLC to CCorp
$
$
$
$
2015
(1,382,016) $
2,879
1,342
12,098
1,555
(11,868)
(14,504)
(200,653)
71,167
668,946
(851,054)
(3,199)
995,000
1,597,917
2,592,917
1,738,664
172,216
1,910,880 $
$
1,919,460 $
2014
(777,916)
2,095
18,000
1,750
(18,773)
(6,234)
49,721
395
(730,962)
597,000
267,083
864,083
133,121
39,095
172,216
28,573
See accompanying notes to financial statements.
F16
- A.279 -
Exhibit A
RJN-71
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VIDANGEL, INC.
Notes to Financial Statements
December 31, 2015 and 2014
1. Description of
Organization
and Summary
of Significant
Accounting
Policies
Organization
VidAngel, Inc. (the Company) was incorporated on November 13, 2013 as a Utah limited liability Company. On
February 7, 2014, the Company converted to a Delaware corporation. The Company resells BluRay and DVD
discs to its customers. The Company includes access to proprietary content filtering technology as part of the
transaction. With the purchase of the disc, and access to the technology, the customer then has the ability to stream
a customized version of the disc to their location for viewing on many of today’s most popular devices. After they
are finished with a disc, the customer has the option to sell the disc back to the Company at a reduced price. The
sellback price varies depending on the type (BluRay or DVD) of the disc, and the number of days the customer
owned the disc.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions that affect reported amounts and
disclosures. Accordingly, actual results could differ from those estimates. Key management estimates include the
estimated life of the customer’s ownership of a disc, valuation allowances for net deferred income tax assets, and
valuation of stockbased compensation.
Concentrations of Credit Risk
The Company maintains its cash and cash equivalents in bank deposit accounts which, at times, exceed federally
insured limits. At December 31, 2015 and 2014, the Company had approximately $1,660,000 and $19,000 of cash
and cash equivalents that exceeded federally insured limits. To date, the Company has not experienced a loss or
lack of access to its invested cash and cash equivalents; however, no assurance can be provided that access to the
Company’s invested cash and cash equivalents will not be impacted by adverse conditions in the financial markets.
Major vendors are defined as those vendors having expenditures made by the Company which exceed 10% of the
Company’s total cost of revenues. Concentrations of vendors were as follows for the year ended December 31,
2015:
Vendor A 69%
Vendor B 18%
There were no vendor concentrations for the year ended December 31, 2014.
F17
- A.280 -
Exhibit A
RJN-72
Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 70 of 79 Page ID
#:4522
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VIDANGEL, INC.
Notes to Financial Statements
Continued
December 31, 2015 and 2014
1. Description of
Organization
and Summary
of Significant
Accounting
Policies
Continued
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities to the Company of three months or
less to be cash equivalents. As of December 31, 2015 and 2014, these cash equivalents consisted of money market
accounts.
Movie Inventory
Movie inventory includes DVD and BluRay discs purchased by the Company for resell, not in excess of realizable
value. Movie inventory is recorded at the lower of cost or market, with cost being determined on a first in, first out
method. The Company periodically reviews inventories for excess supply, obsolescence, and valuations above
estimated realizable amounts, and provides a reserve to cover these items. Management determined that no
allowance for obsolete inventory was necessary as of December 31, 2015 and 2014.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and
amortization are calculated using the straightline method over the estimated economic useful lives of the assets or
over the related lease terms (if shorter) as follows:
Office and computer equipment 3 years
Leasehold improvements 1 year
Expenditures that materially increase values or capacities or extend useful lives of property and equipment are
capitalized. Routine maintenance, repairs, and renewal costs are expensed as incurred. Upon sale or other
retirement of depreciable property, the cost and accumulated depreciation and amortization are removed from the
related accounts and any gain or loss is reflected in the statement of operations.
Impairment of LongLived Assets
The Company reviews its property and equipment, and other longlived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of the assets may be impaired. If it is determined that
the estimated undiscounted future cash flows are not sufficient to recover the carrying value of the asset, an
impairment loss is recognized in the statements of operations for the difference between the carrying value and the
fair value of the asset. Management does not consider any of the Company’s assets to be impaired as of December
31, 2015 and 2014.
F18
- A.281 -
Exhibit A
RJN-73
Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 71 of 79 Page ID
#:4523
Page 70 of 78
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VIDANGEL, INC.
Notes to Financial Statements
Continued
December 31, 2015 and 2014
1. Description of
Organization
and Summary
of Significant
Accounting
Policies
Continued
Revenue Recognition
The Company resells BluRay and DVD discs to its customers for a fixed price of $20. Upon purchase of the disc,
the customer agrees to have the Company retain physical custody of the purchased disc until such a time that the
customer either requests to have the disc shipped to them directly, or the customer decides to sell the disc back to
the Company at an agreed upon price, which reduces $1 per day for DVD discs, and $2 per day for BluRay
discs. During the time that the customer owns the disc, the Company gives the customer access to a patented video
streaming technology that permits the customer to direct their individual viewing experience by allowing them to
remove certain audio or video segments that contain material that may be considered objectionable by a member of
the private household. Access to this technology is available during the entire period of which the customer owns
the disc purchased from the Company, and is extinguished upon the customer selling the disc back to the Company.
Revenue is recognized when all of the following criteria have been met: (1) persuasive evidence of an arrangement
exists, (2) services have been rendered, (3) the Company’s price to the buyer is fixed or determinable, and (4)
collectability is reasonably assured.
The Company separates its revenue transactions into two pools based on length of time of disc ownership – short
term and longterm ownership of discs.
Transactions that have a shortterm ownership of a disc exhibit a very short ownership time period, usually on
average selling the disc back to the Company within 5 hours. For these transactions, the Company recognizes
revenue on a daily basis, in an amount equal to the daily reduction in the sellback price from the customer to the
Company ($1 or $2 per day), and ceasing upon the customer’s sellback of the disc. Approximately 99.65% of the
Company’s transactions are shortterm.
Transactions that have a longterm ownership exhibit a longer period of time of ownership – in excess of 20 days.
A majority of the customers entering longterm transactions appear to be building a library of movie titles, and may
own the associated discs indefinitely. The Company estimates the expected period of the longterm transactions,
and recognizes revenue based on a subscription model, or ratably over the expected term.
Cash received from customers prior to recognition of revenue is recorded as deferred revenue.
F19
- A.282 -
Exhibit A
RJN-74
Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 72 of 79 Page ID
#:4524
Page 71 of 78
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VIDANGEL, INC.
Notes to Financial Statements
Continued
December 31, 2015 and 2014
1. Description of
Organization
and Summary
of Significant
Accounting
Policies
Continued
StockBased Compensation
Stockbased payments made to employees, including grants of employee stock options, are measured using a fair
valuebased method. The related expense is recorded in the statements of operations over the period of service.
Advertising
Advertising costs are expensed as incurred. Advertising expenses totaled $430,084 and $67,044 for the years
ended December 31, 2015 and 2014, respectively.
Income Taxes
Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of
taxes currently due plus deferred taxes related primarily to differences between the tax bases of assets and
liabilities. The deferred taxes represent the future tax return consequences of those differences, which will either be
taxable or deductible when the assets and liabilities are recovered or settled. Deferred income tax assets are
reviewed periodically for recoverability, and valuation allowances are provided when it is more likely than not that
some or all of the deferred income tax assets may not be realized.
The Company believes that it has appropriate support for the income tax positions taken and to be taken on its tax
returns and that its accruals for tax liabilities are adequate for all open tax years based on an assessment of many
factors including experience and interpretations of tax laws applied to the facts of each matter. The Company files
income tax returns in the U.S. federal jurisdiction and certain state jurisdictions. With few exceptions, the
Company is subject to U.S. federal and state and local income tax examinations by tax authorities for years ending
December 2015, 2014, and 2013.
Subsequent Events
Management has evaluated events and transactions for potential recognition or disclosure through July 29, 2016,
which is the day the financial statements were available to be issued.
F20
- A.283 -
Exhibit A
RJN-75
Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 73 of 79 Page ID
#:4525
Page 72 of 78
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VIDANGEL, INC.
Notes to Financial Statements
Continued
December 31, 2015 and 2014
2. Property and
Equipment
Property and equipment consisted of the following as of December 31:
Computer equipment
Leasehold improvements
Less accumulated depreciation and amortization
2015 2014
$
4,730 $
6,285
3,199
7,929
6,285
(5,149)
(2,270)
$
2,780 $
4,015
3. Convertible
Notes
Payables
4. Commitments
and
Contingencies
Depreciation and amortization expense on property and equipment for the years ended December 31, 2015 and
2014 was $2,879 and $2,095, respectively.
Convertible notes payable were due various investors with an annual interest rate equal to 7%, and a maturity date
of November 7, 2015. The notes were secured by substantially all of the assets of the Company. The notes were
converted into shares of common stock during 2015. Certain notes raised in June 2015 were converted into
shares of common stock pursuant to a contingent beneficial conversion feature, totaling $1,342. The balance of
the convertible notes payable as of December 31, 2015 and 2014 was $0 and $267,083, respectively.
Litigation
The Company is involved in legal proceedings from time to time arising in the normal course of business. The
Company has received, and may in the future continue to receive, claims from third parties. Management, after
consultation with legal counsel, believes that the outcome of these proceedings may have a material impact on the
Company’s financial position, results of operations, or liquidity.
Current and future litigation may be necessary to defend the Company and its customers by determining the
scope, enforceability, and validity of these claims. The results of any current or future complex litigation matters
cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact because
of defense and settlement costs, distraction of management resources, and other factors. Additionally, these
matters may change in the future as the litigation and factual discovery unfolds. Legal fees are expensed as
incurred. Insurance recoveries associated with legal costs incurred are recorded when they are deemed probable
of recovery.
F21
- A.284 -
Exhibit A
RJN-76
Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 74 of 79 Page ID
#:4526
Page 73 of 78
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VIDANGEL, INC.
Notes to Financial Statements
Continued
December 31, 2015 and 2014
4. Commitments
and
Contingencies
Continued
5. Stock Options
Litigation continued
The Company assesses whether there is a reasonable possibility that a loss, or additional losses beyond those
already accrued, may be incurred (“Material Loss”). If there is a reasonable possibility that a Material Loss may
be incurred, the Company discloses an estimate or range of the amount of loss, either individually or in the
aggregate, or discloses that an estimate of loss cannot be made. If a Material Loss occurs due to an unfavorable
outcome in any legal matter, this may have an adverse effect on the financial position, results of operations, and
liquidity of the Company. The Company records a provision for each liability when determined to probable, and
the amount of the loss may be reasonably estimated. These provisions are reviewed annually and adjusted as
additional information becomes available.
The Company is involved in various litigation matters and believes that any reasonably possible adverse outcome
of these matters could potentially be material, either individually or in the aggregate, to the Company’s financial
position, results of operations and liquidity. As of the date of the independent auditors’ report management has
determined an adverse outcome is not yet probable or estimable, and has not accrued any estimated losses related
to these matters. Expectations may change in the future as the litigation and events related thereto unfold. During
2015 and 2014 the Company incurred $38,906 and $262,394, respectively, in legal and litigation costs, which are
included in general and administrative expenses in the accompanying statements of operations. Also see Note 8.
Operating Leases
The Company leases office facilities under a monthtomonth operating lease. Rental expense under operating
leases was $9,545 and $5,000 for the years ended December 31, 2015 and 2014, respectively.
Stock Options
The Company’s 2014 Stock Incentive Plan (the Plan), originally approved on February 27, 2014, provides for the
grant of incentive stock options, nonqualified options, stock appreciation rights, and shares of restricted
stock. Under the terms of the Plan, there are 1,034,544 shares of common stock available for grant to employees,
officers, directors and consultants. The Board of Directors determines the terms of each grant. Generally, the
options have a vesting period of 4 years with 1/48th vesting on each monthly anniversary of the vesting reference
date over the fouryear period, thereafter, and have a contractual life of ten (10) years. Certain stock options have
provisions to accelerate vesting upon the occurrence of certain events. There are 299,733 and 915,233 shares
available for grant under the Plan as of December 31, 2015 and 2014, respectively.
F22
- A.285 -
Exhibit A
RJN-77
Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 75 of 79 Page ID
#:4527
Page 74 of 78
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VIDANGEL, INC.
Notes to Financial Statements
Continued
December 31, 2015 and 2014
5. Stock Options
Continued
Stockbased compensation expense for the years ended December 31, 2015 and 2014 was $12,098 and $1,750,
respectively. As of December 31, 2015 and 2014, the Company had $94,556 and $106,654, respectively, of
unrecognized stockbased compensation costs related to nonvested awards that will be recognized over a
weightedaverage period of 4 years.
The following sets forth the outstanding common stock options and related activity for the years ended December
31, 2015 and 2014:
Weighted
Average
Number Exercise
of
Price Per
Options
Share
$
188,813
0.186
(69,502)
0.186
119,311
0.190
625,500
0.500
(10,000)
0.186
734,811
0.450
Outstanding as of January 1, 2014
Granted
Exercised
Forfeited
Outstanding as of December 31, 2014
Granted
Exercised
Forfeited
Outstanding as of December 31, 2015
The following summarizes information about stock options outstanding as of December 31, 2015 and 2014:
2015
Number of
Options
Outstanding
99,311
10,000
625,500
734,811
Weighted
Average
Remaining
Contractual
Life (Years)
8.39
8.85
9.45
$
Weighted
Average
Exercise
Price
0.18
0.30
0.50
Number
of Options
Exercisable
69,690
3,900
60,790
134,380
Weighted
Average Exercise
Price
$
0.18
0.30
0.50
F23
- A.286 -
Exhibit A
RJN-78
Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 76 of 79 Page ID
#:4528
Page 75 of 78
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VIDANGEL, INC.
Notes to Financial Statements
Continued
December 31, 2015 and 2014
5. Stock Options
Continued
2014
Number of
Options
Outstanding
109,311
10,000
119,311
Weighted
Average
Remaining
Contractual
Life (Years)
9.38
9.85
$
Weighted
Average
Exercise
Price
0.18
0.30
Number
of Options
Exercisable
63,062
500
63,562
Weighted
Average Exercise
Price
$
0.18
0.30
The fair value of each stockbased award granted was estimated on the date of grant using the BlackScholes
optionpricing model with the following assumptions:
Riskfree interest rate
Expected stock price volatility
Expected dividend yield
Expected life of options
2015
1.31 – 1.69%
50%
0%
5 years
2014
1.49 – 1.68%
50%
0%
5 years
6. Related Party
Transactions
As of December 31, 2015 and 2014, the aggregate intrinsic value of options outstanding was $268,919 and $0,
respectively. As of December 31, 2015 and 2014, the aggregate intrinsic value of options outstanding and
exercisable was $52,644 and $0, respectively.
Expected option lives and volatilities were based on historical data of the Company and comparable companies in
the industry. The risk free interest rate was calculated using similar rates published by the Federal Reserve. The
Company has no plans to declare any future dividends.
The Company has a marketing services contract with an entity owned by one of the Company’s
stockholders. During 2015 and 2014, the Company incurred expenses of $375,870 and $0, respectively, to the
related party for marketing services.
F24
- A.287 -
Exhibit A
RJN-79
Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 77 of 79 Page ID
#:4529
Page 76 of 78
253G2
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VIDANGEL, INC.
Notes to Financial Statements
Continued
December 31, 2015 and 2014
7. Income Taxes
The provision (benefit) for income taxes differs from the amount computed at federal statutory rates as follows:
Federal income tax at statutory rates
State income tax at statutory rates
Change in valuation allowance
Other
$
$
2015
(469,919) $
(45,064)
512,083
2,900
– $
2014
(264,457)
(25,526)
288,557
1,526
100
Significant components of the Company’s net deferred income tax assets (liabilities) are as follows as of December
31:
Current:
Accruals and reserves
Valuation allowance
Longterm:
Net operating loss carryforwards
Depreciation and amortization
Valuation allowance
$
$
$
$
2015
264,401 $
(264,401)
– $
542,350 $
374
(542,724)
– $
2014
19,410
(19,410)
–
276,004
(372)
(275,632)
–
As of December 31, 2015, the Company has net operating loss (NOL) carryforwards available to offset future
taxable income, if any, of approximately $1,454,000, which will begin to expire in 2034.
The utilization of the NOL carryforwards is subject to annual limitations under Section 382 of the Internal Revenue
Code. Section 382 imposes limitations on a corporation’s ability to utilize its NOL carryforwards if it experiences
an “ownership change.” In general terms, an ownership change results from transactions increasing the ownership
of certain stockholders in the stock of a corporation by more than 50% over a threeyear period.
The Company has concluded that there are no significant uncertain tax positions requiring disclosure, and there are
no material amounts of unrecognized tax benefits.
F25
- A.288 -
Exhibit A
RJN-80
Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 78 of 79 Page ID
#:4530
Page 77 of 78
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VIDANGEL, INC.
Notes to Financial Statements
Continued
December 31, 2015 and 2014
8. Subsequent Events
Litigation
As described more fully in Note 4, the Company is subject to claims and litigation that arise in the normal course of
business. Management reviews those claims and believes none of them meet the standard for accrual or
disclosure. In June 2016, a complaint was brought against the Company for infringing on exclusive rights under
the Copyright Act and for violating the Digital Millennium Copyright Act. The Company believes its legal
position has merit, and is vigorously defending the matter. The potential loss associated with the lawsuit is not
estimable and the probability of the loss is unknown.
Stock Repurchase Agreement
On January 21, 2016, the Company entered into a stock repurchase agreement with one of the shareholders. The
agreement was for the shareholder to sell to the Company and the Company agreed to purchase from the
shareholder 397,350 shares of the Company’s common stock for $325,000.
Employment Agreement
On July 21, 2016, the Company hired an attorney as inhouse general counsel. The associated employment
agreement includes certain common stock option modifications, severance terms in certain circumstances, and the
establishment of a cash collateral account.
F26
- A.289 -
Exhibit A
RJN-81
Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 79 of 79 Page ID
#:4531
Page 78 of 78
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VidAngel, Inc.
$11,250,000 Maximum Offering Amount (3,750,000 Shares of Class B Nonvoting Common Stock)
$5,000,000 Minimum Offering Amount (1,666,667 shares of Class B Nonvoting Common Stock)
Offering Circular
October 19, 2016
- A.290 -
Exhibit A
RJN-82
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