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]

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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 22 23 24 25 26 27 28 - A.2 - 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 28 - 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 CV-90 (12/02) CIVIL MINUTES - GENERAL 1 - A.4 - Initials of Deputy Clerk CB Case 2:16-cv-04109-AB-PLA Document 166 Filed 12/29/16 Page 2 of 5 Page ID #:5296 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"). CV-90 (12/02) CIVIL MINUTES - GENERAL 2 - A.5 - Initials of Deputy Clerk CB Case 2:16-cv-04109-AB-PLA Document 166 Filed 12/29/16 Page 3 of 5 Page ID #:5297 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 CV-90 (12/02) CIVIL MINUTES - GENERAL 3 - A.6 - Initials of Deputy Clerk CB Case 2:16-cv-04109-AB-PLA Document 166 Filed 12/29/16 Page 4 of 5 Page ID #:5298 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.) CV-90 (12/02) CIVIL MINUTES - GENERAL 4 - A.7 - Initials of Deputy Clerk CB Case 2:16-cv-04109-AB-PLA Document 166 Filed 12/29/16 Page 5 of 5 Page ID #:5299 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. CV-90 (12/02) CIVIL MINUTES - GENERAL 5 - A.8 - Initials of Deputy Clerk CB 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 26 27 28 - 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. 25 26 27 28 - A.10 - -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 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - A.11 - -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- - A.12 - 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 5 of 13 Page ID #:5223 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- - A.13 - 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 6 of 13 Page ID #:5224 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 - A.14 - 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 7 of 13 Page ID #:5225 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. -4- - A.15 - 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 8 of 13 Page ID #:5226 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 16-CV-04109-AB (PLAX) 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 16-CV-04109-AB (PLAX) 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 - A.18 - -7EX 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 11 of 13 Page ID #:5229 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 16-CV-04109-AB (PLAX) 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 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - A.20 - -9EX 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 13 of 13 Page ID #:5231 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 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 0:: 0 0 0 V) 00 (l_....J ~ ....J LL. "' ...J ~ ,..... ::2 ~~~~ 0::: 1-0l'<t ·o"' <(~<(':":' ::JUJ(.)~ 'Y. ui ~ 13 14 a O:::o::w• 15 <(<(ujo ~0...(!)~ )-Zr-- o:::o::<C,.!., 16 w::Jgs~ :::.:::t-....~~ o :::!. ~ 17 Ol N " 18 <(r5 CD 0 N 1- 19 20 21 22 23 24 25 26 27 28 - A.23 - DECLARATION OF NEAL HARMON £N SUP PORT OF EX PARTE APPLICATION TO TAY Case 2:16-cv-04109-AB-PLA Document 158 Filed 12/21/16 Page 3 of 8 Page ID #:5210 1 I, Neal Harmon, declare as follows: 2 3 4 5 1. counterclaimant Vid.Angel, Inc. I have personal knowledge of the facts set forth herein and if called and sworn as a witness, I could and would testify competently hereto. 6 7 8 9 10 2. 0 0 a..-' LL _JI _Jt- 12 0 ""' 00 r-;- N l,n """\0 1-~(0~ 13 0::: 1-.,:::!:-8"' <(U)<( .. 14 ow ~ n::~fB· 15 ::!<(()~ <(<(u:Jo :;a:CL~~ 0:::~<(~ 16 W::::JUJ<r> ~t-0'0 z_J~ a:l() ;"!; :::!:- 17 0> N 0 N " 18 <x:w 1- 19 20 21 22 23 24 25 comply with the injunction without going out of business completely and without causing unintended problems for our customers. I realized that we faced the following problems, among others. 3. First, unlike ClearPlay (which is able to offer its filtering of Google Play's streaming only to customers who access its eCommerce website online through a desktop browser), Vid.Angel makes 84.3 percent of its sales through app stores such as Roku, Apple, Google Play, and Amazon Fire TV. To avoid risking disruptions to their users' experience during a critical time of the year, the Apple and Roku stores do not permit modifications to their applications during the holiday season. These hard deadlines for publishing new apps, out of necessity, create earlier deadlines for developers to submit builds of app updates for review and approval by the respective app stores. For example, Roku, which has a thorough debug and user-interface testing process before publishing a company's app, will not accept any new app updates after November 15. As of December 12, 2016, this holiday blackout window had already begun for the largest platform through which VidAngel sells content (Roku - over a third of our purchases). Because of its twoday review period, we are now in that holiday window for Apple too, meaning that VidAngel cannot modify its most popular apps until early January. 26 27 When I learned of the issuance ofthe preliminary injunction the night of December 12, 2016, I immediately began to investigate how VidAngel could 11 0:: I am a founder and the Chief Executive Officer of defendant and 4. IfVidAngel were to remove existing titles from its library during the black-out period for modifying apps, the system could not be modified to recognize 28 1 - A.24 - 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 4 of 8 Page ID #:5211 1 titles that were no longer available for sale. Those titles would still appear to be 2 available even though VidAngel had removed them. The only alternative would be 3 for VidAngel to completely turn off in-app purchasing across the board-which 4 would prevent VidAngel from offering content that it is directly licensed to filter 5 and stream or as to which the rights holders have no objection to VidAngel ' s 6 service. As a result, during the app black-out period, we are unable to modify our 7 system to block access to just the plaintiffs' titles without causing major customer 8 confusion about which titles are and are not available for purchase. To immediately 9 shutdown, we would have to block access to all titles. 10 5. VidAngel has entered into licenses to filter and stream certain works 11 a:: 0 12 0 released by entities that are not party to the Directors Guild of America' s collective bargaining agreement. For example, on September 12, 20 16, we signed an 13 exclusive licensing contract with Excel Entertainment to filter and stream The Last 14 Descent commencing December 15, 2016. If we were required to shut down our 15 entire system immediately or disable in-app purchasing across the board because we 16 are currently unable to modify our apps to remove selected titles, we would V) 0 00 (l_...J ';- _ILL N _ji' .... :2 ~--~~ :;0::: t-Cl) .... · o"' <(~~':"":' ::)wu~ a'::£ u) (.1., 0::: a:: w • <(~ujo ::;ECle> £ >-Zr-O:::O::~ N UJ::l(/) :2 :::s:::!z.3 :;<( w "' 17 co u ::!, Cl) N 0 N ~ 18 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 "' '-;- made available for purchase, rolling it back is not an easy process. This is because 5 IX: 0 0 Q......l 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 "' 13 period, removing titles would also prevent customers from being able to use the app ~~~:;-0:: 1-Cl'<t ·oN 14 functionality that currently enables them to sell back and receive monetary credit for O::n::w• 15 titles that they previously purchased. This would create confusion and a massive 16 customer support issue. ....! u.. _J~ ,..._ ~ <(~<!':":' =>LJ.Ju~ a~ ui""" <(c:t:ujo ~(L(!l~ >-Zt- o::n::<t:r!.. UJ::J~~ ~~-...J~ <Crti ccu Cl N 0 N ;; 17 9. Similarly, more than 20,000 discs in our vault are permanently owned :::!:, " 18 1- by VidAngel's customers. Because 56 percent of the discs we sell have content 19 owned or licensed by the plaintiffs, a similar percentage likely applies to the 20 permanently owned discs. To immediately block access to all (or all of plaintiffs') 21 existing titles, would cause a customer-relations nightmare to address the problem of 22 customers who permanently owned discs that they now could not watch, with no 23 explanation. VidAngel will need to communicate options to these customers, such 24 as receiving the physical DVD that they own. 10. 25 The app blackout period exacerbates these customer relations and 26 support issues. That is because until the apps can be updated (including to reflect 27 direct messaging to customers), there is no practical way to notify our customers of 28 3 - A.26 - 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 6 of 8 Page ID #:5213 1 what we are doing or to let them know that VidAngel will give them credit for 2 selling their discs back to VidAngel. Although we have our customer's e-mail 3 addresses, e-mail messages we send to our customers are typically opened only 4 about 20 percent of the time. As a consequence, many of our apps customers would 5 likely not understand why our system would neither permit them to sell their discs 6 back nor give them credit for doing so, or to stream content they previously 7 purchased and permanently own. We are trying to ensure that customers know 8 which movies they have purchased, even if they cannot watch them, and that they 9 have the opportunity to sell those movies back. To avoid creating enormous 10 11 _J U.. I __Jt- 0 11. The company is ill equipped to handle the influx of customer service on 00 '-;- N on ,.....\0 ~--~~::;0:: f-Ol N -o .... <(~<t;i ::>LJ.Ju"' 0 ~ u)"" O::c::w• <(<{ujO :a: 0.. without having movies simply disappear from the apps without notice. 12 0:: 0 0 a.._J consumer ill will, we need time to make our apps ready to explain what is happening (9 §;5 >-Zt- o::c::<t'"" 13 requests if it is not afforded that opportunity. In the wake of the preliminary 14 injunction ruling alone, VidAngel's support tickets doubled from approximately 15 3,500 to 7000 per week. IfVidAngel were forced to shut down without messaging 16 within the apps to directly explain the situation for its approximately 200,000 17 customers, its team of 14 people would be unable to address the influx even if they 18 devoted their holidays entirely to damage control. w:J~~ ~f-_J~ <x:ifi CD u Ol N 0 N ~ ::!.OJ f- 12. 19 Regardless of the app blackout period, it will take time for VidAngel to 20 develop updated apps to address the issues that result from the preliminary 21 injunction order. Because each of the apps is developed to use the interfaces native 22 to a given platform, there are some functions that must be hard-coded in, such as 23 how to handle errors, and how to disseminate app notifications. To appropriately 24 implement drastic changes of the kind necessitated by the preliminary injunction, 25 such as removing all or a significant number of titles from the site, or removing the 26 ability to purchase a significant number of movies, work of this nature will be 27 required. All changes have to be thoroughly vetted and tested before VidAngel can 28 4 - A.27 - 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 7 of 8 Page ID #:5214 1 submit them to the app stores; otherwise, the app review process will reject them 2 and/or we run the risk of publishing bugs. In addition, VidAngel has to ensure that 3 any changes do not break older versions of the apps, which customers may continue 4 to run. 13. 5 To avoid the foregoing problems, we estimate that we will require until 6 January 5, 2017, to modify our Apple app based on our previous experience with its 7 app store and its resumption date for modifying apps, and until January 25,2017, for 8 the Roku apps because it does not permit modifications to be submitted until 9 January and then requires two weeks for expedited review. Allowing VidAngel that 10 11 0:: 0 0 preliminary injunction order is granted in the interim. 12 0 "' r;- 14. VidAngel today learned that its payment processing company has 00 0....--' _J LL I _J 1-- time would allow at least some of these issues to be mitigated if no stay of the N r-.... <r> \0 ~--~~~ 0::: -o <'~ <(tfjO>:!- 13 indicated that, absent a stay, it might sever relations with VidAngel as early as next 14 week. :J<C<(~ ow<-:~ c:::~Kl· <(<(ujo 15 :::2:0..(!)~ >-Z<- c:::o::<e.,.:. 16 15. On December 20,2016, plaintiffs complained (through the Supplemental Declaration of Kelly Klaus) that VidAngel had just added two new UJ=:lgj~ ~~--_.~ <Ctii (QU 0'> C'\1 0 C'\1 1- 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 mrrtewttertr::rmrn nwr r ;;wv·"' 'WfrY rr: ; WTr"netrr 't 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 a: § Q.... Neal Harmon 12 ~ ~ 13 j.: ... :g ~--~~~ O::!;iS~ ~US5~ 14 0~ ui ... O::a::w• 15 <(~~~ ~>-~ .... 16 ffi~g~ !lo::z-'~ ~)j s N ~ 17 ~ 18 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 0:: 0 0 c..-' 0 "' r- The Order resolved multiple 00 c-:, "' -:~tor--..~ .....J"" E"'""" 0:::: ....,o ~ E-o~ <:t: Dkt. 144. ;::J-<<t:~ O'tJ.Ju"" ::.:: ' et::o:::f:2• <t;<t:-'o 15 refrain from discouraging technological advances, Am. Broad. Cos. v. Aereo, Inc., >-z~ 16 134 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, ~o..f:5o o::;C::<t:· w:::>"'<-> ::.:::!;;::.3:.2 <t;tJ.J C:0 U "' N 0 N ~ N ::!. o:; E- 25 26 27 1 "Plaintiffs" refers collectively to Disney Enterprises, Inc., LucasFilm Ltd., LLC, Twentieth Century Fox Film Corporation and Warner Bros. Entertainment, Inc. 28 - A.49 - 1 VIDANGEL'S EX PARTE APPLICATION TO STAY PRELIMINARY INJUNCTION Case 2:16-cv-04109-AB-PLA Document 147 Filed 12/14/16 Page 9 of 24 Page ID #:5045 1 or any other medium; copying Plaintiffs' copyrighted works, including but not 2 limited to copying the works onto computers or servers; and streaming, transmitting, 3 or otherwise publicly performing or displaying any of Plaintiffs' copyrighted 4 works." Order at 22. 5 VidAngel requests that the Order be stayed in its entirety because VidAngel 's 6 appeal of the Order presents serious and significant questions of law to be 7 considered by the Ninth Circuit, and VidAngel not only submits that it has strong 8 arguments for appeal and is likely to prevail, but also that the equities and balance of 9 hardships tips sharply in favor of VidAngel and the public. The outcome of this 10 motion is critically important to VidAngel. Although this Court saw the novel legal 11 questions differently, VidAngel developed its business model in good faith after 12 Plaintiffs' opposition to filtering left no viable alternative (not to mention, most of 13 VidAngel's investment in its current model occurred while Plaintiffs unreasonably t/l"' .. 14 15 0:: 2 til' • delayed filing suit). Realistic and meaningful access to filtering by the public, which 0:: Ct...t .....:l 0 0 0 ,_ V) 00 N ...J t.L. V) -J~r--..~ E-;:;"'~ 0:: c::c: 0 .... e-o~ ~~~~ O't.Llut.L. C::C:~t;Jo Congress sought to accomplish through the FMA, also hangs in the balance. ~c....,o ><z~ o::O::~· t.:LJ~~~ ::0::~-l~ c::c: N therein) in the context of modern video streaming applications, as well as consideration of the interplay between DMCA anti-circumvention and antitrust law. Moreover, fair use arguments such as those presented by VidAngel are factintensive and are generally inappropriate for determination at the preliminary injunction stage. Furthermore, absent a stay of the preliminary injunction, VidAngel 25 stands to suffer severe and irreparable harm while families will be deprived of the 26 E- language of the Family Movie Act (and, in particular, the "transmission" language 24 " significant legal questions raised on VidAngel's appeal will include interpreting the 23 N 18 22 ::!. injunction motion, but, rather, to address the elements of a stay request. 21 "' N 17 20 .... 0 The following arguments are not offered to re-argue the preliminary 19 t.Ll CQ U 16 ability to legally filter content viewed at home. The 27 For these equitable reasons, and others as set forth below, VidAngel 28 respectfully asks the Court to stay the preliminary injunction until the Ninth Circuit - A.50 - 2 VIDANGEL'S EX PARTE APPLICATION TO STAY PRELIMINARY INJUNCTION Case 2:16-cv-04109-AB-PLA Document 147 Filed 12/14/16 Page 10 of 24 Page ID #:5046 1 has ruled on appeal, or in the alternative, pending a decision by the United States 2 Court of Appeals for the Ninth Circuit on an emergency motion for stay pending 3 appeal, which VidAngel will file if this Court denies this ex parte application. 4 II. PROCEDURAL BACKGROUND 5 In this action, Plaintiffs have sought to permanently enjoin VidAngel from 6 providing a service for online filtering that gives families the ability to control the 7 content they view at home. In designing its service, VidAngel has sought to operate 8 within the language of the Family Movie Act of 2005 (the "FMA") codified at 17 9 U.S.C. § 11 0(11 ). 10 On August 22, 2016, Plaintiffs moved for a preliminary injunction (Dkt. 27) 11 and VidAngel opposed that motion. (Dkt. 42.) On September 16, 2016, VidAngel 12 filed counterclaims against Plaintiffs and various Doe counter-defendants for 13 antitrust violations, intentional interference with prospective economic advantage .o"<~" 14 and unfair competition. (Dkt. 77.) Plaintiffs filed a motion to dismiss VidAngel's O'tl.lut.L. o::~ti· <t::<t;lo 15 counterclaims (Dkt. 103) which is scheduled for hearing in this Court on December >z~ 16 19,2016. a: 0 0 0 V) 00 0.... ....J .....:J"'" :c r~ V) 'D ~E-r--..-. E-~\0~ 0:: f-0~ <"' 0' .. ;::::,<<~ ::EQ..<.:>O o::C::<• w='tnc::! :;.::f-.3-.o o::x::ta ~ Q:l U N 0' N 0 N :::!- ~ 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 11 0:: c.. 0 0 ...l .....:l "- 0 on r- N on O'wu"" ~ Vl~ 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. 00 " "" ......Jtor-...E- ....- 0 '<!" "";"!i Q::; E-O~ <r: "' "' .. ::J<>:<>:~ 0::. A. • 0:: "' <r:<>:-'o ~o..t;jo >oz~ Q::;O::<>:' w~Vl~ ::.:::~.3~ <r;w Ct:lu "' "' N ::'!;, 0 N '<~" " 18 These familiar equitable factors cannot be reduced to a "set of rigid rules" but 19 rather necessitate "individualized judgments in each case." Hilton, 481 U.S. at 777. 20 For instance, the district court, having already ruled against the movant on the 21 underlying legal questions, need not be convinced that the movant has "an absolute 22 certainty of success" on appeal. If serious legal questions exist on the appeal, the 23 Court may grant a stay even if it "believes [its] ruling was correct." Davila v. Cty of 24 San Joaquin, 2008 WL 4426669, at *2 (E.D. Cal. Sept. 26, 2008). 25 questions are substantial, difficult and doubtful, as to make them a fair ground for 26 litigation and thus for more deliberative investigation." Silvester v. Harris, No. 11- 27 cv-2137, 2014 WL 6611592, *7 (E.D. Cal. Nov. 20, 2014) (quoting Gilder v. PGA 28 E- Tour, Inc., 936 F.2d 417,422 (9th Cir. 1991)). Finally, should the Court have any - A.52 - 4 "Serious VIDANGEL'S EX PARTE APPLICATION TO STAY PRELIMINARY INJUNCTION Case 2:16-cv-04109-AB-PLA Document 147 Filed 12/14/16 Page 12 of 24 Page ID #:5048 1 doubt regarding whether to stay a preliminary injunction, the Court may also stay 2 enforcement of the injunction only long enough for the Ninth Circuit to rule on a 3 motion to stay. 4 WL4536894, at *2 (N.D. Cal. Sept. 30, 2011). B. 5 See County of Sonoma v. Fed. Housing Fin. Agency, 2011 VidAngel's Appeal Raises Novel Legal Questions That Create a 6 Substantial Likelihood that the Grant of a Preliminary Injunction 7 in This Case Will Be Reversed. 8 A movant for a stay of a preliminary injunction pending appeal need only 9 demonstrate that serious legal questions are raised and that the balance of hardships 10 tips sharply in its favor. Lopez v. Heckler, 713 F.2d at 1435; In re Pac. Gas and 11 Elec. Co., 2002 WL 32071634, at *2 (N.D. Cal. Nov. 14, 2002) ("in an alternative 12 formulation of the same standard, serious legal questions and a balance of hardships N <n 13 were the stay denied"). Here, both things are true. t-~"'~ IX E-O~ • o '<~" 14 0 0:: <n 0 0 00 r-- c..-' ~t.r. ~~r--..~ -<: (/) C1' •• 1. This Court's Interpretation of the Family Movie Act Presents ;::J;;.'j;)~ 0'::,:: • t.r. O::cx::t3• -<:<-'o ~o..t:5o >z~ C1' N 0 N 18 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 N ::!- 17 21 ::.:::!2:.3"' C::::"-1 ;; The case raises important questions concerning the construction of the FMA. 20 ~::JVl~ 16 19 c:::O::<' IX) U 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 E-~"';'!i c::: . 0""" e-o~ 14 authorized by the FMA pursuant to the doctrine of inclusio unius est exclusio O't>Ju.._ 0:: ~ ~-- • 15 alterius. 0:: 0 0 o...-' ......... 0 V) 00 r- r:, V) -:l~r--..~ <t::"'"' .. ;:::,<:<:~ <r:<:~o ~0.."'0 >z~ 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 tJJ~tn~ 16 19 c::;O::<:· contends that such a reading of the FMA renders the first and most important :::.:::!;;;.3\D <r: t>J c:Q ~ U N "' N ::!- 0 N ~ 24 25 26 27 3 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 V) 0 00 3 ;:;; "' 13 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 O'wu"cG ~ ~-- • <t:<:-'o 15 remember that statutes always have some purpose or object to accomplish.'' Cabell c:::~~~ 16 v. Markham, 148 F.2d 737, 739 (2d Cir. 1945). See also Stone v. INS, 514 U.S. 386, 17 397 (1995) ("When Congress acts to amend a statute, we presume it intends its 18 amendment to have real and substantial effect.") The FMA "does not require that 19 filtering be done with the permission of the content creator or owner, but rather 20 creates an exemption from copyright and trademark liability for filtering." H.R. 21 REP. No. 108-670, at 3 (2004). This Court's reading effectively requires a filtering 22 service to receive the same permissions it would have needed from the studios 23 before the FMA's enactment, particularly in the VOD market (where all 24 transmissions are encrypted and prevent access to the work for filtering purposes). 25 Thus, VidAngel's appeal raises a serious question concerning the statutory 26 interpretation of the FMA such that the FMA's language can be given effect. 0.. ....::l "" V) ...:JI-r--..,_ " .c:::. . <t: ~\0;; - 0 '<!" E-O~ C/) Cl' .• ~<:<:~ ~0..~0 t.LI;::,~~ ~~s~ -::t:w CCI Cl' u N 0 N '<~" "" ~ 03 E- 27 28 - A.55 - 7 VIDANGEL'S EX PARTE APPLICATION TO STAY PRELIMINARY INJUNCTION Case 2:16-cv-04109-AB-PLA Document 147 Filed 12/14/16 Page 15 of 24 Page ID #:5051 1 2. VidAngel's Appeal Raises Serious Questions Concerning the 2 3 Additionally, this Court dismissed as dicta language from that decision stating that 8 future cases may require the court to consider the interplay between the anti- 9 circumvention right and antitrust law. While this Court ultimately concluded that 10 MDY Indus. is inapplicable to this case, VidAngel respectfully contends that as to 11 the need to consider the interplay with antitrust law, the reasoning in MDY Indus. is 12 sound and applies equally here. 00 In MDY Indus., LLC v. Blizzard Entm 't, Inc., 629 F.3d 928, 948 (9th Cir. 14 2010), the Ninth Circuit interpreted the DMCA to hold that Section 1201(a) created 15 a new anti-circumvention right distinct from copyright infringement. In doing so, 16 the MDY court split from contrasting Federal Circuit precedent that required Section 17 1201(a) "plaintiffs to demonstrate that the circumventing technology infringes or 18 facilitates infringement of the plaintiffs copyright (an "infringement nexus requirement")." !d. (citing Chamberlain Group, Inc. v. Skylink Techs., Inc., 381 20 F.3d 1178, 1203 (Fed. Cir. 2004)). 4 In making its decision, the MDY court did not 21 have to consider the interplay between the enforcement of the DMCA and antitrust 22 ....J"" 13 19 N on -Jtor--..~ f-..-."';:!; Q:; E-O~ . 0 "'" <t:VJ<J' .. ~ ...J not the type of defendant contemplated by the court in MDY Indus." (Dkt. 144 at 8.) 7 on r- parties here are not engaged in "trafficking in circumvention technology, and thus is 6 0 Inc., 629 F.3d 928, 951 (9th Cir. 2010) from the instant case on the ground that the 5 0 0 In the Order, this Court distinguished MDY Indus., LLC v. Blizzard Entm 't, 4 0:: Interplay between the DMCA and Antitrust Law. law because "there [was] no clear issue of anti-competitive behavior in this case ;::l--=<~ O't>Ju.,.. ~ . O::c::l2• <t:<rjo ~c..."'o >-- z ~ Q:;O::<· t.:J~~c:! ::.:::E-_,-.o <t:ti'i Q:l U 0' N 0 N ~ N ::!;:; E- 23 24 25 26 27 4 The Chamberlain court "feared that copyright owners could use an access control right to .Prohibit exclusively fair uses of their material even absent feared foul use ... [andj that§ 120l(a) would allow companies to leverage their sales into aftermarket mono~oliesbin a potential violation of antitrust law and the doctrine of copyright misuse. ' M Y Inaus., 629 F .3d at 949 (emphasis added). VidAngel submits that on this point, Chamberlain was correct and MDY Indus. reached the wrong conclusion. 28 - A.56 - 8 VIDANGEL'S EX PARTE APPLICATION TO STAY PRELIMINARY INJUNCTION Case 2:16-cv-04109-AB-PLA Document 147 Filed 12/14/16 Page 16 of 24 Page ID #:5052 1 because Blizzard does not seek to put a direct competitor who offers a competing 2 role-playing game out of business and the parties have not argued the issue." !d. at 3 951. However, the court noted that future cases may require the court to consider 4 the interplay between the anti-circumvention right and antitrust law. !d. 5 reasoning applies equally to the anti-competitive enforcement of Section 6 1201(a)(l)(A)'s access control at issue here. (See Dkt. 77.) This is particularly true 7 in light of the facts alleged in VidAngel's antitrust answer and counter-complaint 8 involving Plaintiffs' anti competitive conduct with respect to legitimate filtering 9 services. That Plaintiffs have taken away any legitimate alternatives to VidAngel's 10 11 c:: 0 or, 0 0 right. These adverse, anticompetitive effects are exactly what the Ninth Circuit in 12 MDY Indus. intended future courts to address. 00 t- 16 challenges 17 unconstitutional prior restraint and speech licensing regime. 18 VidAngel 's appeal raises many of the same significant legal issues as the EFF suit. In interpreting the FMA, the Ninth Circuit may correctly be guided by the canon of constitutional avoidance, and conclude that the FMA authorizes VidAngel's transmission of filtered content. See, e.g., Gallardo v. Lynch, 818 F.3d 808, 817 (9th Cir. 2016) (describing the canon as follows: "where an otherwise acceptable construction of a statute would raise serious constitutional problems, the Court will construe the statute to avoid such problems unless such construction is plainly 25 contrary to the intent of Congress.") (citations and internal quotation marks 26 t.L1::>~~ prov1s1on, 17 U.S.C. § 1201(a)(l)(A), at issue here. (Dkt. 48-1.) 24 <t:q;-'o :Eo..E3o >o:z:~ t:r:C::q;o 15 23 . O:::o::t2• the District of Columbia challenging the constitutionality of the precise DMCA 22 :=Jq;q;~ O'~u..,... 14 21 "' ""' <-;::""';% 0:: r-· g ::!<t: Vl 0' .. Additionally, the Electronic Frontier Foundation ("EFF") recently filed suit in 20 or, .....J'""r--~ 13 19 M ~ ...J .....J "" ~ current model then complain that the current model violates the anti-circumvention omitted). Section 1201 as being unconstitutionally overbroad That suit and an ::.::~3'0 <t:~ c:Q U ~ N 0' ::!- 0 v f- N N (Dkt. 48-1.) 27 28 - A.57 - 9 VIDANGEL'S EX PARTE APPLICATION TO STAY PRELIMINARY INJUNCTION Case 2:16-cv-04109-AB-PLA Document 147 Filed 12/14/16 Page 17 of 24 Page ID #:5053 3. 1 2 The Fair Use Defense Raises Novel Issues of Law Justifying Reversal. 3 As Judge Pierre Nelson Leval observed, customary biases in favor of 4 injunctive remedies in conventional cases of copyright infringement have no proper 5 application to a matter in which a fair use defense has been alleged. Toward a Fair 6 Use Standard, 103 Harv. L. Rev. 1105 (March 1990). This is particularly true 7 when, as here, a fact-intensive analysis into the trans formative nature of the alleged 8 fair use is required. 9 filtering service is inherently transformative, in that it turns a film that would not 10 otherwise be welcome in a particular household into a family-friendly production 11 that every member of the family can enjoy. 12 Plaintiffs' works for transformative purposes as VidAngel's system does not allow 13 users to view unfiltered content. VidAngel's data show that the overwhelming E-~"";:!; Q::; e-o~ • 0..,. <t: V) 0' .. 14 majority of its users (96%) apply multiple filters, indicating that VidAngel users 0' .... Q::; ~ l:(j • <t:<-'o 15 derive genuine transformative value from the filtering service, and are not simply ~ 16 using it as a pretense for viewing inexpensive content. And the Ninth Circuit may 17 agree with VidAngel that, contrary to this Court's Order, removal-for example by 18 filtering out obscenity-can be highly transformative. 5 19 VidAngel does not make fixed copies of filtered works and it purchases thousands 20 of discs to resell to unique customers, its service does not negatively affect the 21 market for Plaintiffs' works (and, in fact, increases the market for Plaintiffs' 22 works). 6 Thus, VidAngel's appeal raises very significant fair use issues and these 0:: 0 0 0 00 .-- ~;;3;)~ ~c..~o Q::;O::<' ~~~~ ::.::~...J~ <t:~ CQ U 0' N 0 N VidAngel users may only access >n o... ...J "' ....::~"" >n .....J<-r-...-. " "" >- z As noted in VidAngel's opposition briefing, VidAngel's ..,. N ~ 0 E- In addition, because 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 Cl::O::<C' 16 not be great"); Hanginout, Inc. v. Google, Inc., 54 F. Supp. 3d 1109, 1132-33 (S.D. ~~s~ <t:t.t:> "'¢ cou "' 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). 0:: ~ -:I 0 g t.t. 0 V) 00 ~ V) ~;:r--..~ E-~"';'!i • 0 "'¢ Cl:: r,-o~ <t: "' "' .. ::J<C<C~ O't.t:>ut.t. ~ ~ t2.. • <t:«:-'o ::E""~o > z ~ t.r.J:;:lV'l~ "' N :::!:- 0 " N f- 24 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 IX: E-~""""" E-- g ~ 14 the preliminary injunction motion, Order at 4, Plaintiffs are half of the major studios O:::o::;~· 15 in this country. The magnitude of the loss of the ability for VidAngel to conduct its t:J.J;:o"'N >z~ ~:~::O::<· 16 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. 0:: o... 0 0 ....J .....:1"'"' 0 .,., 00 r- N .,., :<: "" .....:l'""r-~ <: Vl " ' •. ::J<<t;i O't.tlu"'::.:: <:<-'o ;:?;:c..f3o :::.::~.32 <: t.tl ~ N "' N ::!.. N 0 0 E- 23 D. 24 ~ 64.) In fact, the entire Plaintiffs Will Not Suffer Substantial Harm from A Stay Pending Appeal. 25 Plaintiffs are four of the world's largest movie studios. A stay of the 26 preliminary injunction that allows VidAngel to continue to offer families the ability 27 to filter streamed film and television content will not significantly impact Plaintiffs' 28 business in a negative manner. Additionally, Plaintiffs' goodwill with its licensees - A.60 - 12 VIDANGEL'S EX PARTE APPLICATION TO STAY PRELIMINARY INJUNCTION Case 2:16-cv-04109-AB-PLA Document 147 Filed 12/14/16 Page 20 of 24 Page ID #:5056 1 will be largely unaffected pending the outcome on appeal considering this Court's 2 3 because they hope effectively to preclude VidAngel from pursuing its case at all, or 6 to severely handicap what is already a battle of David versus several Goliaths. 7 Having waited more than a year to seek an injunction, Plaintiffs cannot truly claim 8 to suffer irreparable harm if this Court permits a stay while the Ninth Circuit 9 evaluates the significant questions at issue. Uncontroverted evidence on the record 10 shows that the harms Plaintiffs' claimed they were suffering in July 2015 when they 11 0 or, at 18. Of course Plaintiffs have an interest in opposing VidAngel's requested stay, 5 0 0 quantified harm to goodwill, acknowledging only that it is hard to quantify. Order 4 a:: ruling in Plaintiffs' favor in the Order. The Order did not find any specific or first learned of VidAngel are the same harms that they are allegedly experiencing 12 now. Any marginal impact will certainly pale in comparison to the damage of 13 denying a stay to VidAngel and to the public. 00 .... o...-' N ....J'"" or, :c "' -JI-r--..- E-::;"';::!i ~ .o..,. ~o~ 14 Still further, there are important issues concerning whether Plaintiffs have o::~~.f· 15 demonstrated that it is suffering any cognizable irreparable injury whatsoever, 16 especially given that all of the harms from which Plaintiffs could actually be 17 suffering as a result of VidAngel's service are equally posed by the ClearPlay 18 streaming model that the Court has identified as a lawful implementation of the 19 FMA. 7 And the Ninth Circuit may agree with VidAngel that Plaintiffs cannot 20 properly establish irreparable harm by extrapolating from their experience with 21 unabashed pirates to conclude that a service operating openly and attempting to 22 operate lawfully will cause similar harms. <t:UJa-- .. ;:::J<t:<:l;J Cl"'uc... <t:<:-'o :;Eo.~o >-z~ ~a::<:' t.LI~~~ :::.:di <C"-' CQ U 0' N 0 N ...1 ~ ..,. N ::!- ;; ~ 23 24 25 26 27 7 As for the unquantified and speculative alleged harm to Plaintiffs' negotiation position and relationships with autborized distributors due to VidAngel's operation without a license agreement, Order at 17-18, Plaintiffs' claims are disingenuous because Vidf\ngel has repeatedly s.ought to pay Plaintiffs for a license and tts DVD purchases satisfy the payment reqmrement. 28 - A.61 - 13 VIDANGEL'S EX PARTE APPLICATION TO STAY PRELIMINARY INJUNCTION Case 2:16-cv-04109-AB-PLA Document 147 Filed 12/14/16 Page 21 of 24 Page ID #:5057 1 E. 2 This Court found that "a preliminary injunction is in the public interest'' 3 partially because "the evidence in the record shows that another filtering service, 4 ClearPlay, offers filtering to Google Play users who access authorized streams from 5 Google Play's licensed service" and that "an injunction in this case would not 6 prevent VidAngel or any other company from providing a filtering service similar to 7 ClearPlay's, and thus wouldn't negatively impact the public interest in watching 8 filtered content in private." Order at 20. However, VidAngel initially attempted to 9 employ a similar service to the one ClearPlay now uses and it received notice from The Public Interest Is Served by A Stay. at~~ 10 11 0:: o.. 0 0 0 16 and Exhibit A; Supplemental Harmon Declaration dated 10/17/2016 ("Supp. 12 Harmon Decl.") 13 its service without any consent or license from the studios and without paying the 14 studios anything. (Supp. Harmon Decl. at 15 VidAngel has concluded, they will be free to invoke their terms of service at any 16 time to force Google to shut down ClearPlay's service. (ld.) at~ 8- 6.) Notwithstanding Plaintiffs' suggestion, ClearPlay provides 00 or. ,_ N ...J or. ....J'""' '" "' -"ltor---f-.-<'~>;:!; 0::: YouTube that filtering violated YouTube's terms of service. (Harmon Decl. ,0"'" E-O~ <t: "' "' .. ;:J<r.:<r.:~ CI'""Ut.t.. ::.::: - CX::o:::~· <t:<r.:-'o ~o..t:;jo >-z?2 o:::O::<r.:· "'"::>"'"' :::.:::~.3:2 <t:'-" ~ "' N ::!.. 0 <i CQ U N N 17 ~ 6.) After Plaintiffs' litigation with In addition, ClearPlay's service is technically inferior. (Supp. Harmon Decl. ~~ 18 at 19 by GooglePlay customers. (Supp. Harmon Decl. 20 working and even ClearPlay admits that its video player is choppy. (Id. at ~~ 11-12, 21 Exhibit B.) It is also very difficult to use. The ClearPlay browser works only on a 22 Mac or PC computer using a Chrome browser, and only can only be displayed on 23 the TV when the computer is attached to the TV via HDMI cable or by using the 24 "tab-cast" feature of the Chromecast. 25 ("Meldal Decl.") 26 result, it is incompatible with most devices and platforms that the public primarily 27 E- uses to watch movies and television shows. (Supp. Harmon Decl. 28 - A.62 - 3-11.) The ClearPlay browser relies solely on YouTube and can only be used at~ at~ 4.) Its filters frequently stop (Meldal Declaration dated 9/12/2016 16 and Exhibit D; Supp. Harmon Decl. at~~ 10-11.) As a at~~ 8-9.) Thus, ClearPlay's service does not provide a legal filtering alternative 14 VIDANGEL'S EX PARTE APPLICATION TO STAY PRELIMINARY INJUNCTION Case 2:16-cv-04109-AB-PLA Document 147 Filed 12/14/16 Page 22 of 24 Page ID #:5058 1 because it operates in violation of the YouTube (and Google Play) terms of at~~ 28-20 and Exhibit D; Supp. Harmon Decl. at ~6.) Nor 2 service. (Meldal Decl. 3 does a technically legal but threadbare filtering option serve the important public 4 interest Congress intended to protect in passing the FMA. That public interest in 5 protecting every person's right to watch filtered content in private will be greatly 6 served by a stay pending appeal. 7 Furthermore, in opposition to the preliminary injunction motion, VidAngel 8 submitted several declarations from family group leaders, religious figures and 9 public servants (including a former Congresswoman), extolling the virtues of 10 VidAngel's filtering service. These constituents have come to rely on VidAngel's 11 user-friendly, universally-available filtering service to view popular content in the 12 customized manner envisioned by the Family Movie Act. N 13 injunction pending appeal serves that vital public interest. E-;:;-.o;; .o '<!" E-O~ 14 IV. o.. 0 0:: 0 0 r- ....J .....:! ""' V) '-0 -J "' r--.._ ... 0::: <X: t/) Suspension of the V) 00 "' CONCLUSION •• ;::J<l::<l:;t;j ctt.l.luLl. 15 For the foregoing reasons, VidAngel respectfully requests that the Court stay 16 its December 12, 2016 order granting plaintiffs' motion for preliminary injunction 17 pending appeal, or alternatively, pending a decision by the United States Court of 18 Appeals for the Ninth Circuit on an emergency motion for stay pending appeal, 19 o:::~t3· <t:<l::iiJo ::Ea."o >-z~ o::;O::<l::o ~~~~ which VidAngel will file if this Court denies this ex parte application. ~E-_,-.o <X:~ o:l u "' N 0 N 't "' :-:::, v E- 20 21 22 23 24 25 26 27 28 - A.63 - 15 VIDANGEL'S EX PARTE APPLICATION TO STAY PRELIMINARY INJUNCTION Case 2:16-cv-04109-AB-PLA Document 147 Filed 12/14/16 Page 23 of 24 Page ID #:5059 1 BAKER MARQUART LLP DATED: December 14,2016 /s/ Jaime W. Marquart Jaime W. Marquart Scott M. Malzahn 2 3 4 Attorneys for Defendant and Counterclaimant VidAngel, Inc. 5 6 7 8 9 CERTIFICATE OF SERVICE 10 11 o... 0 via the Court's CM/ECF system per Local Rule 5-4.7.2 on December 14, 2016. 00 V) r- N ...J ....:! "" V) ~~['-..~ E-;:;"'~ 0:: have consented to electronic service are being served with a copy of this document 12 0:: 0 0 The undersigned hereby certifies that counsel of record who are deemed to - 0 .... r,-o~ <t: "' a-- .. 13 14 ::JCO::<>:!;! o>tl.lu"- cx:~ti· <t;<>:o;lo ::Eo..,_.,o >zi?2 o:;:O::<>:o w~t/j~ ::.::!;::.3~ <t: tl.l .... o::l u a-- "' ::!- N 0 N /s/ Jaime W. Marquart Jaime W. Marquart 15 16 17 ij ... 18 19 20 21 22 23 24 25 26 27 28 - A.64 - 16 VIDANGEL'S EX PARTE APPLICATION TO STAY PRELIMINARY INJUNCTION Case 2:16-cv-04109-AB-PLA Document 147 Filed 12/14/16 Page 24 of 24 Page ID #:5060 1 2 APPENDIX A 3 4 Plaintiffs' counsel and their contact information are: 5 6 7 8 9 10 11 a:: "' r-- 00 N ~ ....:~ ....:l 0: tx. ....:l .... 12 0 0 0 "' '0 ,_~-o;:!; c::: E-O~ -0 ~ <t:<llO'·· ;::J-<«:~ - O''"'utx. ~ 13 r--.._ O::::a:~· <t:-<-'o :EQ..~O >oz~ 14 15 c:::O::-<• 16 ::.::~.3-o ..:X: '"' ~ Q:l U N 17 t.t:l~tnf;:! "' N 0 N ::t '0) E- 18 19 20 21 22 23 24 25 26 27 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.68 - 4 1 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.69 - 5 1 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.70 - 6 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.71 - 7 1 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? CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.72 - 8 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.73 - 9 1 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.74 - 10 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.75 - 11 1 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.76 - 12 1 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.77 - 13 1 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. CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.78 - 14 1 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. CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.79 - 15 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.80 - 16 1 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.81 - 17 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.82 - 18 1 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.83 - 19 1 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.84 - 20 1 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. CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.85 - 21 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.86 - 22 1 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.87 - 23 (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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.88 - 24 1 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. CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.89 - 25 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.90 - 26 1 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.91 - 27 1 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. CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.92 - 28 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.93 - 29 1 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.94 - 30 1 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.95 - 31 1 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. CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.96 - 32 1 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.97 - 33 1 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. CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.98 - 34 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.99 - 35 1 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.100 - 36 1 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.101 - 37 1 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, CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.102 - 38 1 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. CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.103 - 39 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.104 - 40 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.105 - 41 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.106 - 42 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.107 - 43 1 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.108 - 44 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.109 - 45 1 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.110 - 46 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.111 - 47 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.112 - 48 1 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, CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.113 - 49 1 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.114 - 50 1 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.115 - 51 1 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.116 - 52 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. CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.117 - 53 1 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.118 - 54 1 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. CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.119 - 55 1 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.120 - 56 1 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.121 - 57 1 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.122 - 58 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.123 - 59 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, CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.124 - 60 1 $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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.125 - 61 1 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, CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.126 - 62 1 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.127 - 63 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. CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.128 - 64 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.129 - 65 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.130 - 66 1 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.131 - 67 1 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.132 - 68 1 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.133 - 69 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.134 - 70 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.135 - 71 1 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.136 - 72 1 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.137 - 73 1 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.138 - 74 1 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.139 - 75 1 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.140 - 76 1 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. CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.141 - 77 1 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.142 - 78 1 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.143 - 79 1 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.144 - 80 1 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.145 - 81 1 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.146 - 82 1 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.147 - 83 1 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.148 - 84 1 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. CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.149 - 85 1 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.150 - 86 1 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.151 - 87 1 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.152 - 88 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.153 - 89 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.154 - 90 1 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.155 - 91 1 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.156 - 92 1 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.157 - 93 1 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, CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.158 - 94 1 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.159 - 95 1 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.160 - 96 1 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.161 - 97 MR. KLAUS: 1 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.162 - 98 1 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.163 - 99 1 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" CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.164 - 100 1 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 -- CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.165 - 101 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 CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.166 - 102 1 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. CHIA MEI JUI, CSR 3287, CCRR, FCRR UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA - A.167 - 103 1 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-- 5 6 7 8 9 10 11 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.168 - 104 1 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 12 13 14 /S/ CHIA MEI JUI _______ 15 Chia Mei Jui, CSR No. 3287 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.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 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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 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 11 12 13 DISNEY ENTERPRISES, INC.; LUCASFILM LTD. LLC; TWENTIETH CENTURY FOX FILM CORPORATION and WARNER BROS. ENTERTAINMENT, INC., Plaintiff, 14 15 16 Case No. 2:16-cv-04109 – AB (PLAx) ORDER GRANTING PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION v. VIDANGEL, INC., Defendant. 17 18 19 20 21 22 23 24 25 26 27 28 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 - 1. Case 2:16-cv-04109-AB-PLA Document 144 Filed 12/12/16 Page 2 of 22 Page ID #:4892 1 2 3 4 5 6 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. 7 8 I. a. Factual and Procedural Background 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 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.) 26 27 28 - A.191 - 2. Case 2:16-cv-04109-AB-PLA Document 144 Filed 12/12/16 Page 3 of 22 Page ID #:4893 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 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.) 16 17 18 19 20 21 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.) 22 23 24 25 26 27 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 28 - A.192 - 3. Case 2:16-cv-04109-AB-PLA Document 144 Filed 12/12/16 Page 4 of 22 Page ID #:4894 1 2 3 4 5 6 7 8 9 10 11 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.) 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 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 - A.193 - 4. Case 2:16-cv-04109-AB-PLA Document 144 Filed 12/12/16 Page 5 of 22 Page ID #:4895 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 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 19 20 21 22 23 24 25 26 27 28 1 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. - A.194 - 5. Case 2:16-cv-04109-AB-PLA Document 144 Filed 12/12/16 Page 6 of 22 Page ID #:4896 1 III. 2 a. Plaintiffs Have Demonstrated A Likelihood of Success on the Merits. 3 i. Plaintiffs’ DMCA Claim 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 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 2 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.) - A.195 - 6. Case 2:16-cv-04109-AB-PLA Document 144 Filed 12/12/16 Page 7 of 22 Page ID #:4897 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 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: 20 “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 21 22 23 24 25 26 27 28 3 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. - A.196 - 7. Case 2:16-cv-04109-AB-PLA Document 144 Filed 12/12/16 Page 8 of 22 Page ID #:4898 1 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” 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 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. 24 4 25 26 27 28 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.") 5 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. - A.197 - 8. Case 2:16-cv-04109-AB-PLA Document 144 Filed 12/12/16 Page 9 of 22 Page ID #:4899 1 2 3 4 5 6 7 8 9 10 11 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. 12 1. VidAngel Violates Plaintiffs’ Exclusive Right To Reproduce Their Works By Making Copies 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 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.) - A.198 - 9. Case 2:16-cv-04109-AB-PLA Document 144 Filed 12/12/16 Page 10 of 22 Page ID #:4900 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 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. 17 2. VidAngel Violates Plaintiffs’ Exclusive Right To Publicly Perform Their Copyrighted Works 18 19 20 21 22 23 24 25 26 27 28 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 - A.199 - 10. Case 2:16-cv-04109-AB-PLA Document 144 Filed 12/12/16 Page 11 of 22 Page ID #:4901 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 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. 28 - A.200 - 11. Case 2:16-cv-04109-AB-PLA Document 144 Filed 12/12/16 Page 12 of 22 Page ID #:4902 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 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. 28 - A.201 - 12. Case 2:16-cv-04109-AB-PLA Document 144 Filed 12/12/16 Page 13 of 22 Page ID #:4903 1 2 3 4 5 6 7 8 9 10 11 12 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; 13 (2) the nature of the copyrighted work; 14 15 (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and 16 17 (4) the effect of the use upon the potential market for or value of the copyrighted work. 18 1. Purpose and Character of the Use. 19 20 21 22 23 24 25 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)). 26 27 28 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, - A.202 - 13. Case 2:16-cv-04109-AB-PLA Document 144 Filed 12/12/16 Page 14 of 22 Page ID #:4904 1 2 3 4 5 6 7 8 9 10 11 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. 12 2. Nature of the Copyrighted Work 13 14 15 16 17 18 19 20 21 “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. 22 3. Amount and Substantiality of the Portion Used in Relation to the Copyrighted Work as a Whole 23 24 25 26 27 28 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 - A.203 - 14. Case 2:16-cv-04109-AB-PLA Document 144 Filed 12/12/16 Page 15 of 22 Page ID #:4905 1 2 3 4 5 6 7 8 9 10 11 12 13 "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 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 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 - A.204 - 15. Case 2:16-cv-04109-AB-PLA Document 144 Filed 12/12/16 Page 16 of 22 Page ID #:4906 1 2 3 4 5 6 7 8 9 10 11 12 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. 13 b. Plaintiffs Have Demonstrated A Likelihood of Imminent Irreparable Injury. 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 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 - A.205 - 16. Case 2:16-cv-04109-AB-PLA Document 144 Filed 12/12/16 Page 17 of 22 Page ID #:4907 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 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.) 26 27 28 6 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.) - A.206 - 17. Case 2:16-cv-04109-AB-PLA Document 144 Filed 12/12/16 Page 18 of 22 Page ID #:4908 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 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). - A.207 - 18. Case 2:16-cv-04109-AB-PLA Document 144 Filed 12/12/16 Page 19 of 22 Page ID #:4909 1 2 3 4 5 6 7 8 9 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. 10 11 12 13 14 15 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.” 16 17 18 19 20 21 22 23 24 25 26 27 28 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. - A.208 - 19. Case 2:16-cv-04109-AB-PLA Document 144 Filed 12/12/16 Page 20 of 22 Page ID #:4910 1 2 3 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 4 5 6 7 8 9 10 11 12 13 14 15 16 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. 17 18 d. A Preliminary Injunction is in the Public Interest 19 20 27 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. 28 On the other hand, "it is virtually axiomatic that the public interest can only be 21 22 23 24 25 26 - A.209 - 20. Case 2:16-cv-04109-AB-PLA Document 144 Filed 12/12/16 Page 21 of 22 Page ID #:4911 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 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. Case 2:16-cv-04109-AB-PLA Document 144 Filed 12/12/16 Page 22 of 22 Page ID #:4912 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 - 22. Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 1 of 79 Page ID #:4453 EXHIBIT A - A.212 - Exhibit A RJN-4 Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 2 of 79 Page ID #:4454 253G2 vai_253g2.htm Page 1 of 78 10/19/2016 3:14pm EDT   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 RJN-5 Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 3 of 79 Page ID #:4455 Page 2 of 78 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT       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 Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 4 of 79 Page ID #:4456 Page 3 of 78 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT     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 Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 5 of 79 Page ID #:4457 Page 4 of 78 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT      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 Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 6 of 79 Page ID #:4458 Page 5 of 78 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT     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 Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 7 of 79 Page ID #:4459 Page 6 of 78 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT     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 Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 8 of 79 Page ID #:4460 Page 7 of 78 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT     ●  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 Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 9 of 79 Page ID #:4461 Page 8 of 78 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT   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 Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 10 of 79 Page ID #:4462 Page 9 of 78 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT     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 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT     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 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT     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 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT     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 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT     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 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT     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 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT     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 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT     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 vai_253g2.htm 10/19/2016 3:14pm EDT     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 vai_253g2.htm 10/19/2016 3:14pm EDT     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 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT     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 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT     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 vai_253g2.htm 10/19/2016 3:14pm EDT     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 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT     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 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT     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 vai_253g2.htm 10/19/2016 3:14pm EDT       ● 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 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT      (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 Page 26 of 78 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT     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 Page 27 of 78 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT     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 Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 29 of 79 Page ID #:4481 Page 28 of 78 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT     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 Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 30 of 79 Page ID #:4482 Page 29 of 78 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT      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 Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 31 of 79 Page ID #:4483 Page 30 of 78 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT     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 Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 32 of 79 Page ID #:4484 Page 31 of 78 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT     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 Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 33 of 79 Page ID #:4485 Page 32 of 78 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT            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 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT     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 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT      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 Page 35 of 78 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT     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 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT     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 vai_253g2.htm 10/19/2016 3:14pm EDT       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 vai_253g2.htm 10/19/2016 3:14pm EDT     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 vai_253g2.htm 10/19/2016 3:14pm EDT     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 vai_253g2.htm 10/19/2016 3:14pm EDT      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 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT     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 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT      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 Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 44 of 79 Page ID #:4496 Page 43 of 78 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT      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 Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 45 of 79 Page ID #:4497 Page 44 of 78 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT     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 Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 46 of 79 Page ID #:4498 Page 45 of 78 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT       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 Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 47 of 79 Page ID #:4499 Page 46 of 78 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT     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 Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 48 of 79 Page ID #:4500 Page 47 of 78 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT     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 Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 49 of 79 Page ID #:4501 Page 48 of 78 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT     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 Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 50 of 79 Page ID #:4502 Page 49 of 78 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT     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 Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 51 of 79 Page ID #:4503 Page 50 of 78 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT     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 Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 52 of 79 Page ID #:4504 Page 51 of 78 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT     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 Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 53 of 79 Page ID #:4505 Page 52 of 78 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT         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 Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 54 of 79 Page ID #:4506 Page 53 of 78 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT     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 Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 55 of 79 Page ID #:4507 Page 54 of 78 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT     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 Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 56 of 79 Page ID #:4508 Page 55 of 78 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT   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 Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 57 of 79 Page ID #:4509 Page 56 of 78 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT     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 Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 58 of 79 Page ID #:4510 Page 57 of 78 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT   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 Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 59 of 79 Page ID #:4511 Page 58 of 78 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT     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 Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 60 of 79 Page ID #:4512 Page 59 of 78 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT     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 Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 61 of 79 Page ID #:4513 Page 60 of 78 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT     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 Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 62 of 79 Page ID #:4514 Page 61 of 78 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT     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 Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 63 of 79 Page ID #:4515 Page 62 of 78 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT           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 Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 64 of 79 Page ID #:4516 Page 63 of 78 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT     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 Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 65 of 79 Page ID #:4517 Page 64 of 78 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT     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 Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 66 of 79 Page ID #:4518 Page 65 of 78 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT       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 Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 67 of 79 Page ID #:4519 Page 66 of 78 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT     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 Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 68 of 79 Page ID #:4520 Page 67 of 78 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT     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 Case 2:16-cv-04109-AB-PLA Document 117-2 Filed 10/27/16 Page 69 of 79 Page ID #:4521 Page 68 of 78 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT       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 Page 69 of 78 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT   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 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT     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 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT     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 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT       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 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT     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 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT     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 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT     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 vai_253g2.htm 10/19/2016 3:14pm EDT     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 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT     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 253G2 vai_253g2.htm 10/19/2016 3:14pm EDT         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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