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

Filing 39

Filed Appellant VidAngel, Inc. motion to file Reply In Support Of VidAngel’s Emergency Motion Under Circuit Rule 27-3 For A Stay Pending Appeal UNDER SEAL. Deficiencies: None. Served on 01/03/2017. (Court-Entered filing of motion submitted under seal at [21]) [10282944] (WL) [Entered: 01/27/2017 11:32 AM]

No. 16-56843
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
VIDANGEL, INC.,
Defendant-Appellant,
v.
DISNEY ENTERPRISES, INC.; LUCASFILM LTD. LLC;
TWENTIETH CENTURY FOX FILM CORPORATION; AND
WARNER BROS. ENTERTAINMENT, INC.,
Plaintiffs-Appellees.
On Appeal from the United States District Court
for the Central District of California
Hon. André Birotte Jr.
No. 2:16-cv-04109-AB-PLA
REPLY IN SUPPORT OF VIDANGEL, INC.’S EMERGENCY MOTION
UNDER CIRCUIT RULE 27-3 FOR A STAY PENDING APPEAL
Brendan S. Maher
Daniel L. Geyser
Douglas D. Geyser
STRIS & MAHER LLP
6688 N. Central Expy., Suite 1650
Dallas, TX 75206
Telephone: [phone]
Facsimile: [phone]
January 3, 2017

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

Counsel for Defendant-Appellant VidAngel, Inc.
(Additional counsel on signature page)

TABLE OF CONTENTS
TABLE OF AUTHORITIES ..................................................................................... ii
INTRODUCTION .....................................................................................................1
ARGUMENT .............................................................................................................1
I.

VidAngel Is A Legitimate Business That Pays The Studios Millions .............1

II.

The Studios’ Extreme Arguments On The Merits Will Not Prevail ................2

III.

The Balance Of Equities Strongly Favors A Stay ...........................................7
A.

The Studios Will Not Suffer Irreparable Harm .....................................8

B.

VidAngel Will Be Destroyed If A Stay Is Not Granted ........................9

C.

Granting A Stay Is In The Public Interest ...........................................10

CONCLUSION ........................................................................................................11

i

TABLE OF AUTHORITIES
Cases
Lopez v. Heckler,
713 F.2d 1432 (9th Cir. 1983) ................................................................................3
MDY Indus., LLC v. Blizzard Entm’t, Inc.,
629 F.3d 928 (9th Cir. 2010) ..................................................................................8
RIAA v. Diamond Multimedia,
180 F.3d 1072 (9th Cir. 1999) ............................................................................5, 8
Sony Corp. v. Universal City Studios,
464 U.S. 417 (1984) ...............................................................................................5
Statutes
Copyright Act of 1976, 17 U.S.C. § 101 et seq. ............................................... 3, 5, 6
Digital Millennium Copyright Act (DMCA),
17 U.S.C. § 1201 et seq. ................................................................................ 3, 6, 7
17 U.S.C. § 1201(a) ................................................................................................6
17 U.S.C. § 1201(a)(3)(A) ......................................................................................6
Family Home Movie Act of 2005 (FMA),
17 U.S.C. § 110(11) ...................................................................................... passim
Other Authorities
H.R. Rep. No. 108-670, at 7 (2004) ...........................................................................7

ii

INTRODUCTION
The Studios’ strategy in this matter has been to defame VidAngel as a “pirate,”
misapprehend the law, and shamelessly claim they will be irreparably harmed unless
a small Utah start-up is shuttered before this Court can consider the serious questions
of first impression raised on appeal. Their latest opposition follows this playbook.
VidAngel submits this short reply to clarify the following:
• VidAngel’s legitimate business model pays the Studios millions;
• VidAngel’s filtering is protected by the Family Movie Act (“FMA”), and
is also protected fair use;
• VidAngel’s conduct violates neither the Copyright Act nor the provisions
of the DMCA therein; and
• VidAngel should not be destroyed in the interim on the pretense that it
threatens the most powerful media conglomerates in the world.
ARGUMENT
I.

VidAngel Is A Legitimate Business That Pays The Studios Millions.
The Studios smear VidAngel as a “sham” and “pirate” and the families it

serves as cheats who want to watch movies “without the credits.” See, e.g., Opp.
at 2, 12-13. That is offensive nonsense.
VidAngel is like a corner video store but with filtered streaming. It serves
families who do not wish to watch mature content, many of whom are people of
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faith. VidAngel pays the Studios millions for authorized copies of their DVDs, which
it then sells and streams to its customers without the content each customer
individually finds objectionable. Around 96 percent of users choose multiple filters,
and VidAngel does not allow users to filter out only the credits. Mot. at 4-5.
Congress specifically contemplated this business model in enacting the FMA.
And as the Studios well know,
See A.601-602 (Marquart Decl. Ex. B 83:20-84:21). For the millions of
Americans who want to watch filtered movies over the Internet, VidAngel is the only
meaningful option.
II.

The Studios’ Extreme Arguments On The Merits Will Not Prevail.
When one party will be destroyed by a preliminary injunction, the relevant

inquiry is whether the merits dispute raises “serious legal questions.” Lopez v.
Heckler, 713 F.2d 1432, 1433-36 (9th Cir. 1983). Here, the Studios advance
extraordinary interpretations of the Copyright Act, the DMCA, the FMA, and the
fair use doctrine. This appeal raises multiple issues of first impression regarding
these serious legal questions. That alone warrants a stay.
The Studios’ arguments conflict with the FMA. The Studios’ interpretation
of the Copyright Act and DMCA conflict with the FMA and would render it
meaningless. VidAngel does precisely what the FMA permits: it filters content from
legitimate physical DVDs and streams it over the Internet to individual consumers.
2

See 17 U.S.C. § 110(11) (permitting filtering “transmitted to that household for
private home viewing * * * from an authorized copy”) (emphasis added). The
Studios’ arguments against this practice all impermissibly ignore the text of this
statute or render it a nullity.
The FMA was passed to allow filtering (including filtering over the Internet)
without permission of the Studios—permission they have never granted. As the
Studios have it, online filtering—whether by VidAngel or others—is subject to their
veto. They can invoke either (1) their contractual rights to prevent licensed
streaming, or (2) the DMCA to prevent unlicensed streaming, even from authorized
copies. See Mot. at 3-4. But that is not the law, nor should it be. It would render the
FMA a dead letter. It is also inconsistent with the Copyright Act. Infra 4-6.
VidAngel has a serious fair use defense. The Studios concede that fair use
has long been both a common law and statutory defense to copyright claims, but
incorrectly deny that filtering is transformative and assert that it has an adverse effect
on the demand for their products. Opp. at 13-15.
The district court found that the majority of VidAngel customers would not
purchase or view unfiltered titles. A.204 (Order). VidAngel’s fair use thus broadens
the Studios’ market rather than shrinks it. And the Studios make millions on
VidAngel’s DVD purchases too.
The Studios’ other contention is equally meritless. Omissions can obviously
3

transform a work: Romeo and Juliet without the final act, or the Bible without the
resurrection of Jesus, are fundamentally different works. Congress passed the FMA
precisely to allow Americans to transform movies into content suitable for their
families. And the Studios have consistently opposed filtering on the grounds that it
transforms works by replacing the director’s vision and message.
Like the time-shifting held to be fair use in Sony Corporation of America v.
Universal City Studios, 464 U.S. 417 (1984), this Court has already held that spaceshifting is a “paradigmatic” example of fair use. RIAA v. Diamond Multimedia, 180
F.3d 1072, 1079 (9th Cir. 1999). VidAngel offers a space-shifting service that is far
more transformative than even the “paradigmatic” fair use in RIAA. Moreover,
VidAngel’s transformative service enriches the Studios while making their content
available to new markets. Its use is eminently fair, and at a minimum, should not be
destroyed without a hearing on the merits of this appeal.
The Studios are wrong on the merits of their copyright claims. Even leaving
aside fair use, the Studios are unlikely to prevail on the merits of their Copyright Act
claims.
Their argument that VidAngel violates the Act by conducting a “public
performance” when it streams filtered movies because VidAngel does not stream
from an authorized copy and ownership is a “sham,” Opp. at 11-13, is wrong on all
counts. First, VidAngel does not conduct a public performance by transmitting
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filtered movies directly to their owners at their specific request; moreover, this is
exactly what the FMA allows. See 17 U.S.C. § 110(11) (expressly permitting
filtering done “at the direction of a member of a private household * * * during a
performance [that is] transmitted to that household for private home
viewing * * * from an authorized copy”). Second, VidAngel streams from an
authorized copy of a legitimate DVD that it validly purchased. The Studios conceded
below that it is irrelevant that VidAngel streams from a master copy. A.94-95 (Oral
Arg. Tr. at 29:19-30:6). Finally, not only did the Studios not credibly argue below
that VidAngel was a “sham,” but that assertion is also meritless. VidAngel’s sellback
model—like Redbox’s and Blockbuster’s—is not a “gimmick” but rather
legitimately ensures there is a DVD for every customer; moreover, it is the only
lawful way for DVD owners to watch streamed filtered content.
The Studios alternately argue that VidAngel violates the Act because it creates
intermediate copies to enable filtering. Opp. at 10-11. They cite no support for that
proposition because there is none. The opposite is true: Congress carefully crafted
the FMA to ensure that it would not depend on how any given technology works,
including whether doing so entails making intermediate copies. The FMA thus
expressly and broadly authorizes the use of “other technology” to enable filtering as
long as one begins with an authorized copy and creates no fixed copy of the filtered

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version. 1 VidAngel does precisely that.
The Studios are wrong on the merits of their DMCA claim. Similar flaws
doom the Studios’ claim that VidAngel violates the DMCA portions of the Act.
First, VidAngel does not decrypt “without authorization” in violation of
17 U.S.C. § 1201(a) because, like any other lawful purchaser, VidAngel and its
customers are entitled to—and indeed, must—decrypt the DVD for viewing.
Moreover, the Studios are not empowered to “withhold authorization,” 17 U.S.C.
§ 1201(a)(3)(A), because VidAngel’s access is both necessary and incidental to its
filtering technology and is independently a fair use. Cf. Lenz v. Universal Music
Corp., 815 F.3d 1145, 1151-53 (9th Cir. 2016) (fair use “authorized” and must be
considered under DMCA take-down provision). And in passing the FMA, Congress
expressly allowed the application of such technology to an authorized copy without
the Studios’ consent. H.R. Rep. No. 108-670, at 7 (2004).
Second, the Studios’ argument again proves too much. If the Studios were
right, then encrypting a DVD would prevent filtering, fair use, or anything else—
even those things expressly permitted by law—without their consent. The FMA was

1

The Studios’ assertion that this argument is new is belied by the record. See,
e.g., A.681 (VidAngel arguing 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.”); A.682 (arguing that the FMA
does not require further authorization apart from starting with authorized rather than
bootlegged copies); A.684 (arguing that intermediate copies permissible).
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passed to enable the transmission of filtered content over the Studios’ objections. It
makes no sense to interpret the legislation to mean that streaming filtering services
require Studio permission.2 It also conflicts with copyright law, which seeks to
promote societally beneficial uses of creative works. The idea that the DMCA
granted creators through the back door unbridled authority to control digital works
runs counter to the entire history of copyright law and to its constitutional mandate. 3
III.

The Balance Of Equities Strongly Favors A Stay.
The balance of equities and the relative hardships here are stark, and strongly

favor issuance of a stay. The Studios offered no evidence of irreparable harm during
the short months it will take for a decision on the merits. Conversely, the injunction
has forced VidAngel to shut down. Nor is VidAngel the only victim. Millions of
Americans who want to see filtered movies now cannot do so.

2

The legislative history cited by the Studios is not to the contrary. It reflects only
that pirates—those who steal DVDs or other programs without permission (e.g.,
bootleg copies or theft via torrent sites)—are not immunized. There is no such claim
here because VidAngel purchases legitimate DVDs. And in any event, Congress
passes, and the president signs, statutory text, not statements in the Congressional
Record. RIAA v. Diamond Multimedia, 180 F.3d 1072, 1076-77 (9th Cir. 1999).
3

That is, in part, why this Court has expressly left open the question of whether
fair use constitutes a DMCA defense, and has also held that antitrust violations as
alleged here may constitute a valid DMCA defense. MDY Indus., LLC v. Blizzard
Entm’t, Inc., 629 F.3d 928, 950-51(9th Cir. 2010). These two questions are serious
and squarely presented by this case, and their presence again strongly supports
issuance of a stay.
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A.

The Studios Will Not Suffer Irreparable Harm.

The idea that a tiny Utah start-up could threaten the behemoth Studios with
significant harm in the months it will take to resolve this appeal is fantastical. The
only evidence of alleged irreparable harm during this period consists of a generic
declaration by a Studio employee, Tedd Cittadine, that copyrights are valuable and
that the Studios have much to fear from pirates. Consider:
Assertion by Tedd Cittadine
Plaintiffs’ copyrights “are critical to
providing Plaintiffs the opportunity to earn
a return on their substantial investments.”
S.A.0941-0942 (Cittadine Decl. ¶¶ 7-8).

Related Evidence in Record
No evidence that VidAngel’s conduct
has resulted in any reduction in the
Studios’ “return” on their movies, let
alone one that justifies shutting down
VidAngel.
VidAngel’s existence interferes with
No evidence that VidAngel
Plaintiffs’ exercise of their exclusive rights “interference” actually led to fewer
and frustrates Plaintiffs’ ability to
people watching the Studios’
negotiate for similar rights in the future.
(unfiltered) movies, or that even a
S.A.0945, S.A.0951 (Cittadine Decl.
single counterparty used VidAngel as a
¶¶ 17, 36).
way to drive a harder licensing bargain
with the Studios.
As a Fox employee, Cittadine does not
No competent evidence introduced by
have personal knowledge of how
Disney or Lucasfilm regarding alleged
VidAngel allegedly affected Disney or
harm VidAngel was causing them.
Lucasfilm. S.A.0941 (Cittadine Decl. ¶ 5).
Nothing the Studios have said about this alleged harm is specific to VidAngel
or supported by the detail that would exist if the Studios actually faced it; instead,

8

the Studios parrot generic concerns in declarations ghostwritten by their lawyers. 4
On the record the Studios created, it is not even clear that the Studios have been
damaged at all, let alone subjected to irreparable injury.
B.

VidAngel Will Be Destroyed If A Stay Is Not Granted.

To comply with the Order, VidAngel was forced to shut down its servers. A.3
(Quinto Decl. ¶ 2). VidAngel now has no incoming revenue. The Studios’ response
that VidAngel took an overly dramatic step, Opp. at 18-19, is baseless.
Most of VidAngel’s DVDs are from the Studios. VidAngel initially hoped to
make only the Studios’ titles unavailable, leaving it crippled but still online.5 But
despite working feverishly, VidAngel was unable to do so. A.3 (Quinto Decl. ¶ 2).
The only way to comply was to shut down its movie-servers completely.
The Studios insist that VidAngel might have kept streaming. Opp. at 18-19.
They would have this Court believe that (1) they know more about VidAngel’s
configuration than it does, and that (2) VidAngel chose to shut down its business
unnecessarily. That is insane. And contrary to the Studios’ insinuations, VidAngel’s

4

As for the Studios’ concerns over “windows,” they almost never sell DVDs
during their desired exclusive streaming window, so there is no way for VidAngel
to meaningfully interfere.
5

To be clear, even that best-case scenario would have been a catastrophe. With
the most popular titles unavailable, customers would have left in droves. So even if
VidAngel could have done what the Studios speculate, the harm in the interim would
still be staggering and irreparable.
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public vows to survive do not mean it has suffered no damage; they mean only that
VidAngel has faith that someday justice will be served.
C.

Granting A Stay Is In The Public Interest.

Finally, there is a substantial public interest in a stay. The public has a
legitimate interest in filtered movies, an interest reaffirmed by the FMA. The Studios
argue that ClearPlay meets that need. But the Studios admit that ClearPlay (1) works
only via Google Play; (2) requires a separate desktop computer; (3) doesn’t work on
tablets or smartphones (which is what consumers now use to watch movies); and (4)
doesn’t work on high-definition or Blu-ray content (which is what consumers now
watch). The Studios also concede that they or Google Play can shut ClearPlay down
at any time because ClearPlay has no license from the Studios and its streaming
service violates Google’s terms of service. Mot. at 20; A.579 & n.2.
If ClearPlay worked, VidAngel would not exist. But ClearPlay does not work.
That is why VidAngel has hundreds of thousands of customers, families who do not
or cannot use ClearPlay, and who will be left in the dark absent a stay. A.27 (Harmon
Ex Parte Decl. ¶ 11). Indeed, 84.3 percent of VidAngel’s sales are through apps—a
modern media platform that ClearPlay does not support. A.24 (id. ¶ 3).
Families should be able to watch filtered content during the short time it will
take for this Court to resolve the significant issues raised by this appeal. A stay
should be granted to effectuate this public interest.
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CONCLUSION
For the foregoing reasons, VidAngel’s emergency motion should be granted.
Dated: January 3, 2017

Respectfully submitted,

Brendan S. Maher
[e-mail]
Daniel L. Geyser
[e-mail]
Douglas D. Geyser
[e-mail]
STRIS & MAHER LLP
6688 N. Central Expressway, Suite 1650
Dallas, TX 75206
Tel: [phone]
Fax: [phone]
David W. Quinto
[e-mail]
VIDANGEL, INC.
3007 Franklin Canyon Drive
Beverly Hills, CA 90210
Tel: [phone]
Fax: [phone]

s/ Peter K. Stris
Peter K. Stris
[e-mail]
Elizabeth Rogers Brannen
[e-mail]
Dana Berkowitz
[e-mail]
Victor O’Connell
[e-mail]
STRIS & MAHER LLP
725 South Figueroa Street, Suite 1830
Los Angeles, CA 90017
Tel: [phone]
Fax: [phone]
Ryan Geoffrey Baker
[e-mail]
Jaime Wayne Marquart
[e-mail]
Scott M. Malzahn
[e-mail]
BAKER MARQUART LLP
2029 Century Park East, 16th Floor
Los Angeles, CA 90067
Tel: [phone]
Fax: [phone]

Shaun P. Martin
[e-mail]
UNIVERSITY OF SAN DIEGO
SCHOOL OF LAW
5998 Alcala Park
San Diego, CA 92110
Tel: [phone]
Fax: [phone]

Counsel for Defendant-Appellant
VidAngel, Inc.

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