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

Filing 47

Submitted (ECF) excerpts of record. Submitted by Appellant VidAngel, Inc.. Date of service: 02/01/2017. [10298111] [16-56843] (O'Connell, Victor) [Entered: 02/01/2017 10:17 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
EXCERPTS OF RECORD
VOLUME V OF V
(Pages 661-848)
Brendan S. Maher
Daniel L. Geyser
Douglas D. Geyser
STRIS & MAHER LLP
6688 N. Central Expy., Ste. 1650
Dallas, TX 75206
Telephone: [phone]
Facsimile: [phone]
January 11, 2016

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

Counsel for Defendant-Appellant VidAngel, Inc.

TABLE OF CONTENTS
VOLUME I OF V
Pages 1 to 22

ECF Description
144

Page

Order Granting Plaintiffs’ Motion for Preliminary Injunction

ER001

VOLUME II OF V
Pages 23 to 289

ECF Description

Page

175

[In Chambers] Order Granting Plaintiffs’ Ex Parte Application
for an Order to Show Cause Why VidAngel Should Not Be Held
in Contempt

ER023

172

Ninth Circuit Order Denying VidAngel, Inc.’s Emergency Motion
for a Stay Pending Appeal

ER024

167

Declaration of David Quinto

ER026

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

ER029

164

VidAngel, Inc.’s Opposition to Plaintiffs’ Ex Parte Application
for an Order to Show Cause

ER034

164-1

Declaration of Neal Harmon in Support of VidAngel,
Inc.’s Opposition to Plaintiffs’ Ex Parte Application for
an Order to Show Cause

ER050

164-2

Declaration of David Quinto in Support of VidAngel,
Inc.’s Opposition to Plaintiffs’ Ex Parte Application for
an Order to Show Cause

ER060

164-3

Declaration of Jarom McDonald in Support of
VidAngel, Inc.’s Opposition to Plaintiffs’ Ex Parte
Application for an Order to Show Cause

ER070

ECF Description

Page

163

Plaintiffs’ Preliminary Injunction Bond

ER075

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

ER080

149

VidAngel, Inc.’s Notice of Appeal from Order Granting Motion
for Preliminary Injunction; Representation Statement

ER088

145

Court Reporter’s Transcript of Proceedings on Monday,
November 14, 2016

ER094

123

Order Regarding Hearing Date on Plaintiffs’ Motion for
Preliminary Injunction

ER218

110

Supplemental Declaration of Neal Harmon in Opposition to
Motion for Entry of Preliminary Injunction (with Exhibits)

ER220

109

Declaration of William J. Aho in Support of VidAngel, Inc.’s
Opposition to Motion for Entry of Preliminary Injunction

ER283

78

Order Continuing Hearing of Plaintiffs’ Motions for Preliminary
Injunction and to Dismiss VidAngel’s Countercomplaint

ER288

VOLUME III OF V
Pages 290 to 567

ECF Description

Page

77

Amended Answer and First Amended Counterclaims

ER290

69

Declaration of Tim Wildmon in Support of VidAngel’s
Opposition to Motion for Preliminary Injunction

ER350

68

Declaration of Tim Barton in Support of VidAngel’s Opposition
to Motion for Preliminary Injunction

ER354

ECF Description

Page

67

Declaration of Theodore Baehr in Support of VidAngel’s
Opposition to Motion for Preliminary Injunction

ER358

66

Declaration of Rick Green in Support of VidAngel’s Opposition
to Motion for Preliminary Injunction

ER362

65

Declaration of Rebecca Hagelin in Support of VidAngel’s
Opposition to Motion for Preliminary Injunction

ER366

64

Declaration of Patrick Trueman in Support of VidAngel’s
Opposition to Motion for Preliminary Injunction

ER371

63

Declaration of Matt Kibbe in Support of VidAngel’s Opposition
to Motion for Preliminary Injunction

ER375

62

Declaration of L. Brent Bozell III in Support of VidAngel’s
Opposition to Motion for Preliminary Injunction

ER378

61

Declaration of George E. Roller in Support of VidAngel’s
Opposition to Motion for Preliminary Injunction

ER383

60

Declaration of Gary Marx in Support of VidAngel’s Opposition
to Motion for Preliminary Injunction

ER387

59

Declaration of Gary Bauer in Support of VidAngel’s Opposition
to Motion for Preliminary Injunction

ER391

58

Declaration of David Bozell in Support of VidAngel’s
Opposition to Motion for Preliminary Injunction

ER395

57

Declaration of David Barton in Support of VidAngel’s
Opposition to Motion for Preliminary Injunction

ER399

56

Declaration of Connor Boyack in Support of VidAngel’s
Opposition to Motion for Preliminary Injunction

ER403

55

Declaration of Harry R. Jackson Jr. in Support of VidAngel’s
Opposition to Motion for Preliminary Injunction

ER407

54

Declaration of Timothy F. Winter in Support of VidAngel’s
Opposition to Motion for Preliminary Injunction

ER411

ECF Description

Page

53

Declaration of Donna Rice Hughes in Support of VidAngel’s
Opposition to Motion for Preliminary Injunction

ER419

52

Declaration of Bryan and Diane Schwartz in Support of
VidAngel’s Opposition to Motion for Preliminary Injunction

ER428

51

Declaration of Bob Waliszewski in Support of VidAngel’s
Opposition to Motion for Preliminary Injunction

ER433

50

Declaration of Andrea Lafferty in Support of VidAngel’s
Opposition to Motion for Preliminary Injunction

ER436

46

Declaration of David W. Quinto in Support of VidAngel’s
Memorandum of Points and Authorities in Opposition to
Preliminary Injunction Motion

ER441

45

Declaration of Jaime W. Marquart in Support of VidAngel’s
Memorandum of Points and Authorities in Opposition to
Preliminary Injunction Motion

ER451

45-2

[Redacted] Exhibit B to Declaration of Jaime W.
Marquart in Support of VidAngel’s Memorandum of
Points and Authorities in Opposition to Preliminary
Injunction Motion

ER455

45-4

[Redacted] Exhibit D to Declaration of Jaime W.
Marquart in Support of VidAngel’s Memorandum of
Points and Authorities in Opposition to Preliminary
Injunction Motion

ER469

44

[Redacted] Declaration of Sigurd Meldal in Support of
VidAngel’s Memorandum of Points and Authorities in
Opposition to Preliminary Injunction Motion

ER470

44-4

ER514

Exhibit D to Declaration of Sigurd Meldal in Support
of VidAngel’s Memorandum of Points and Authorities
In Opposition to Preliminary Injunction Motion

ECF Description

Page

43

[Redacted] Declaration of Neal Harmon in Support of
VidAngel’s Memorandum of Points and Authorities In
Opposition to Preliminary Injunction Motion

ER520

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

ER545

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

ER547

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

ER551

28

Declaration of Tedd Cittadine in Support of Plaintiffs’ Motion
for Preliminary Injunction

ER554

VOLUME IV OF V
Pages 568 to 660

ECF Description

Page

27

[Redacted] Plaintiffs’ Notice of Motion and Motion for
Preliminary Injunction; Memorandum of Points and Authorities
in Support Thereof

ER568

1

Complaint for Copyright Infringement and Violation of Digital
Millennium Copyright Act

ER613

[1/11/2017] Docket Sheet

ER633

VOLUME V OF V
(FILED UNDER SEAL)
Pages 661 to 848

ECF Description

Page

80-1 Declaration of Neal Harmon in Support of VidAngel’s
Memorandum of Points and Authorities In Opposition to
Preliminary Injunction Motion

ER661

80-2 Declaration of Sigurd Meldal in Support of VidAngel’s
Memorandum of Points and Authorities in Opposition to
Preliminary Injunction Motion

ER686

80-3 Exhibit B to Declaration of Jaime W. Marquart in Support of
VidAngel’s Memorandum of Points and Authorities in Opposition
to Preliminary Injunction Motion

ER709

80-4 Exhibit D to Declaration of Jaime W. Marquart in Support of
VidAngel’s Memorandum of Points and Authorities in Opposition
to Preliminary Injunction Motion

ER723

33

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

ER804

BAKER MARQUART LLP

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

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

21

CENTRAL DISTRICT OF CALIFORNIA

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

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ER661

Plaintiffs,
vs.

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

DECLARATION OF NEAL HARMON

1

VIDANGEL, INC.,

POINTS AND AUTHORITIES IN
OPPOSITION TO PRELIMINARY
INJUNCTION MOTION

Defendant.

2
3
4

VIDANGEL, INC.,
Counterclaimant,

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vs.

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7
8
9

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

10

BAKER MARQUART LLP

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

11
12
13
14
15
16
17
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I, Neal Harmon, declare:
1.

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

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

2.

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

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

ER662

1

DECLARATION OF NEAL HARMON

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

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9
10

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

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3.

CleanFlicks was a business that produced edited versions of films to

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

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

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

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

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

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

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

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

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

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

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

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

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

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Telephone: [phone]
Facsimile: [phone]

BAKER MARQUART LLP

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

11

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

4.

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

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

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ER663

2

DECLARATION OF NEAL HARMON

1

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

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families like mine found objectionable.

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5.

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

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

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

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

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

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

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

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

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browser.

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6.

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

permitted automatic skipping and muting of movies and television shows purchased

Telephone: [phone]
Facsimile: [phone]

BAKER MARQUART LLP

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

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

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

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

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

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

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

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

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

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

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

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

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7.

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

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

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

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

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ER664

3

DECLARATION OF NEAL HARMON

1

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

2

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

3

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

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

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

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

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filtering tool that would work on HD content streams.

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The Development That Led Us to Found VidAngel

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8.

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

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

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

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

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

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

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

18

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

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such a tool.

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9.

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

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

Telephone: [phone]
Facsimile: [phone]

BAKER MARQUART LLP

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

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

10

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

21

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

22

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

23

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

24

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

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

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

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

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ER665

4

DECLARATION OF NEAL HARMON

1

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

2

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

3

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

4

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

5
6

10.

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

7

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

8

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

9

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

12

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

13

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

14

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

15

never worked.

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

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

Telephone: [phone]
Facsimile: [phone]

BAKER MARQUART LLP

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

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

10

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ER666

5

DECLARATION OF NEAL HARMON

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2
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4
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Telephone: [phone]
Facsimile: (424) 652-785

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

Telephone: [phone]
Facsimile: [phone]

BAKER MARQUART LLP

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

11

11.

We discovered that Google removed the technology from their SDK

16

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

17

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

18

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

19

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

20

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

21

filtering.

12.

22

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

23

YouTube that VidAngel’s YouTube Player API programming violated the

24

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

25

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

26

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

27

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

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ER667

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DECLARATION OF NEAL HARMON

1

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

2

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

3

with Sony, which confirmed this belief.

4

13.

That the technology enabling filtering had been quietly removed gave

5

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

6

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

7

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

8

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

9

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

12

prevail in court under the FMA.

13

15

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

14

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

BAKER MARQUART LLP

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

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

10

14.

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

16

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

17

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

18

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

19

15.

While VidAngel was working with counsel to develop a filtering

20

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

21

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

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

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

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

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partnership did not materialize because Google’s distribution contracts required

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

27

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

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ER668

7

DECLARATION OF NEAL HARMON

1

VidAngel.

2

16.

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

3

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

4

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

5

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

6
7

17.

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

11

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

12

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

13

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

14

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

15

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

16

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

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

18

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

19

desktops computers and no major distributor of digital content limited their

20

distribution in this way.

21

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

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

Telephone: [phone]
Facsimile: [phone]

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

10

BAKER MARQUART LLP

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

9

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

8

18.

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

22

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

23

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

24

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

25

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

26

service to the owners of movies under the FMA.

27

19.

I am familiar with some of the litigation involving filtering technology

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ER669

8

DECLARATION OF NEAL HARMON

1

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

2

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

3

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

4

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

5

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

6

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

7

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

8

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

9

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

12

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

13

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

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

14

Telephone: [phone]
Facsimile: [phone]

BAKER MARQUART LLP

Today, VidAngel follows the FMA and transmits filtered content to users’ homes

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

10

Under the current service, customers buy an authorized DVD or Blu-

15

ray disc from VidAngel (which buys it at retail after the studios release it) and then

16

choose various filters provided by VidAngel to apply to the movie. VidAngel then

17

streams the filtered movie to the user’s home. VidAngel allows users to sell back

18

their disc to VidAngel if they choose not to own the movie permanently.

19

21.

In early 2015, VidAngel began privately testing the new service with

20

customers. Over the course of a few months, the service improved substantially and

21

we were able to expand it to the Google Play app store and Chromecast.

22

VidAngel Announces Its New Service to the Studios

23

22.

By July of 2015, VidAngel felt confident enough in its service to seek

24

feedback from the major movie studios. To that end, with the help of counsel,

25

VidAngel sent a letter on July 23, 2015, to the major studios and television networks

26

(including all plaintiffs herein) explaining its service and technology. A true and

27

correct copy of that July 23, 2015 letter as sent to Disney is attached as Exhibit B.

28

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9

DECLARATION OF NEAL HARMON

1

VidAngel’s letter explained that VidAngel operates under the FMA’s filtering

2

exemption, and works as follows: (1) VidAngel “purchases the DVD or Blu-ray disc

3

for the customer and stores it in a physical vault;” (2) it “streams” the contents of the

4

disc to the customer in a filtered format chosen by the customer; and (3) it then “re-

5

purchase[s] the disc at a discount from the sale price. . .based on the length of time

6

the customer has owned the disc.” VidAngel explained that it had grown from 43 to

7

4848 users in just under six months (a 10,000% growth rate) and now wished to buy

8

directly from the studios “to scale its business.” The letter invited the studios to

9

access the service and concluded:

10

If you have any questions concerning VidAngel’s technology or
business model, please feel free to ask. If you disagree with
VidAngel’s belief that its technology fully complies with the Copyright
Act or otherwise does not adequately protect the rights of copyright
owners, please let us know. VidAngel wants to take the concerns of
content owners into consideration and address them to the extent it can.

12
13

Unbeknownst to VidAngel at the time, Disney almost immediately accessed its

15

service. Attached as Exhibit C is true and correct copy of a printout from a

16

VidAngel user account showing that, on August 6, 2015, a Disney employee signed

17

up for a VidAngel account using a non-descript Gmail account and provided

18

payment information for a Director of Antipiracy Operations at Disney. Even

19

though they were obviously investigating VidAngel, Plaintiffs did not respond to

20

VidAngel’s letter, so it sent a second letter on August 21, 2015. A true and correct

21

copy of the August 21, 2015 letter is attached as Exhibit D. VidAngel had over 750

22

titles available for the new filtering service when it sent its letters to Disney. Prior

23

to filing suit on June 9, 2016, none of the plaintiffs, nor any of the dozen other

24

entities to which VidAngel wrote, ever expressed to VidAngel that they believed its

25

services infringed their copyrights and none ever sent a cease and desist letter to

26

VidAngel.

27

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

14

Telephone: [phone]
Facsimile: [phone]

BAKER MARQUART LLP

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

11

23.

I understand that two of the plaintiffs confirmed receipt of VidAngel’s

28

ER671

10

DECLARATION OF NEAL HARMON

1

letters and called or emailed VidAngel’s counsel. Warner Bros. Entertainment

2

Inc.’s parent, Time Warner, Inc., emailed VidAngel in October. VidAngel promptly

3

returned the email and even scheduled a call to answer his questions. Time Warner

4

later cancelled the call and never rescheduled it. Fox called VidAngel’s counsel in

5

September 2015 and left a message, but in my understanding did not return phone

6

calls placed to it in September and October by VidAngel’s counsel. Thereafter,

7

VidAngel heard nothing from Plaintiffs, through counsel or otherwise, until this

8

lawsuit was filed.
VidAngel Wanted the Studios’ Feedback for Many Reasons

9
10

24.

The letters were an important part of VidAngel’s strategy of developing

12

with the FMA, as a practical matter we understood that any legal challenge from the

13

studios would have significant financial consequences for VidAngel even if its

14

technology were ultimately vindicated by the Courts. It was important to assess the

15

studios’ attitude toward VidAngel’s new streaming system early on, to provide

16

VidAngel’s investors (and potential investors) with accurate information about the

17

studios’ position with respect to VidAngel’s technology. For that reason, the letters

18

requested feedback from the studios and invited them to examine VidAngel’s

19

technology and ask any questions they might have about it. Because the letters

20

invited a response from the studios and clearly described VidAngel’s technology,

21

VidAngel assumed that, to the extent the studios had a problem with VidAngel’s

22

technology, they would inform VidAngel if any of them disagreed that VidAngel’s

23

service complied with the FMA. Further, as VidAngel’s model involved purchasing

24

DVDs from the studios and was serving a market of customers that would never

25

watch un-filtered studio content, VidAngel was creating new revenue for the

26

studios. VidAngel believed then (and continues to believe) that there are very good

27

business reasons for the studios to support VidAngel’s model. Since VidAngel’s

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

new technology. Although VidAngel believed its new filtering system complied

Telephone: [phone]
Facsimile: [phone]

BAKER MARQUART LLP

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

11

28

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11

DECLARATION OF NEAL HARMON

1

service contributes to the studios’ bottom line, it was another reason to view the

2

studios’ silence in response to VidAngel’s letters as tacit approval of its service.

3

Had any studio expressed a complaint to VidAngel in response to the letters,

4

VidAngel would have discussed and considered any proposal to resolve it. In

5

particular, VidAngel could have adapted its technology in some way or, to the

6

extent the studios expressed an opinion that VidAngel’s technology was infringing,

7

VidAngel could have filed a declaratory relief suit concerning its technology.

8
9
10

25.

studios after sending two very direct letters, VidAngel opened its services to the
public in August 2015.

11

26.

The version of the system that was publicly launched in August 2015

solved the problems of the 2014 design: it simplified the user-interface, required

13

users to register only once with VidAngel, allowed users to watch HD content on

14

their favorite mobile devices and set-top boxes, and improved the filters so that they

15

were more seamless. By bringing VidAngel’s technology up to and beyond industry

16

standards and offering the features users expect of any content streaming service,

17

VidAngel found a large market for filtered movie and television content. As a

18

result, its customer base began to shoot up almost immediately.

19

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

12

Telephone: [phone]
Facsimile: [phone]

BAKER MARQUART LLP

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

Having received no feedback or objections to our technology from the

27.

In fact, today, VidAngel’s apps are rated higher by users than the

20

leading studio distribution platforms. For example, the VidAngel rating on Google

21

Play is 4.8 stars whereas Netflix is 4.4 stars, Hulu is 4.1 stars, and Disney Movies

22

Anywhere is 3.9 stars. For all ratings on the Apple App Store, VidAngel has 5 stars,

23

Netflix has 3.5 stars, Hulu has 2 stars, and Disney Movies Anywhere has 3.5 stars.

24

On Roku, VidAngel has 4.5 stars, Netflix has 3 stars, Hulu has 3.5 stars and Disney

25

Movies Anywhere has 3.5 stars.

26
27

28.

By the end of 2015, VidAngel’s monthly disc sales had grown to over

100,000. In January 2016, USA Today published an article about VidAngel’s

28

ER673

12

DECLARATION OF NEAL HARMON

1

services and the ability to stream filtered versions of Star Wars prequels for a net

2

cost (after buy and sellback) of as little as $1. A true and correct copy of this USA

3

Today article is attached as Exhibit E. On January 12, a Disney employee -- using

4

the secret VidAngel account created with payment information from Disney’s

5

Director of Antipiracy Operations -- logged on to VidAngel account and purchased

6

Frozen and a Star Wars prequel. (See Exhibit F hereto.) This same employee

7

purchased and sold back 17 total titles over the next four months.

8

29.

On March 3, 2016, Disney announced that it would release Star Wars:

12

titles available before they become available in other digital markets. This is untrue.

13

In fact, the film was available for digital download purchase four days before

14

VidAngel could buy DVDs. Attached as Exhibit F is a true and correct copy of an

15

article regarding Disney’s announcement. While the film was not made available

16

for shorter-term rentals when VidAngel began to make the filtered film available,

17

this is irrelevant because VidAngel does not rent titles. In any event, Star Wars:

18

The Force Awakens is the only major title released in this way, and it was clearly

19

done so at a time when the plaintiffs were planning litigation against VidAngel.

20

Despite VidAngel’s growing popularity, the imminent release of Star Wars: The

21

Force Awakens, and the fact that Plaintiffs had been discussing VidAngel with one

22

another and outside counsel for over seven months, Plaintiffs did not send VidAngel

23

a cease and desist letter or seek an injunction. Instead, on April 5, Plaintiffs

24

purchased, streamed and sold back the film. (See Exhibit C.)
VidAngel Invested Millions in Reliance Upon the Studios’ Silence

25
26
27

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

have used Star Wars: The Force Awakens to show that VidAngel purportedly makes

Telephone: [phone]
Facsimile: [phone]

“purchase” (but not a shorter rental period) on April 1. I am aware that Plaintiffs

11

BAKER MARQUART LLP

The Force Awakens on DVD on April 5. The film would be available for digital

10

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

9

30.

During the ten and a half months from VidAngel’s first letter to the

filing of Plaintiffs’ suit, VidAngel openly streamed filtered versions of every one of

28

ER674

13

DECLARATION OF NEAL HARMON

4

in funding since it wrote to Plaintiffs in July 2015. Attached as Exhibit G is a true

5

and correct copy of an article from October 2015 announcing that VidAngel had

6

raised $2.5 million in additional funding. VidAngel invested most of that funding to

7

develop its current model prior to Plaintiffs filing suit. Prior to the filing of this

8

lawsuit, VidAngel also had applications approved on every major mobile

9

application store and set-top box (e.g., Roku, Apple App Store, Apple TV, Amazon

10

Fire TV, Android TV and Kindle Fire). Monumental efforts went into each one of

11

these apps. In fact, VidAngel hired scores of tech, support and content employees.

12

VidAngel also hired scores of contractors to support the employees. Also, VidAngel

13

updated all the streaming technology to play more smoothly and built a multi-

14

thousand title content library. After several months passed without objection from

15

the studios, VidAngel concluded that the studios did not object to its service. In

16

response to media inquiries about the legality of its service, I cited VidAngel’s

17

letters and the studios’ lack of objection as a basis for VidAngel believing its service

18

did not infringe. Attached as Exhibit H are news articles containing my quotes

19

about the studios having no objection to VidAngel’s service. Today, over 500,000

20

families have used VidAngel’s filtering service.

21

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

$1.2 million purchasing discs at retail. VidAngel has also spent millions of dollars

Telephone: [phone]
Facsimile: [phone]

time, VidAngel continued to purchase DVDs. In total, VidAngel has spent over

3

BAKER MARQUART LLP

Plaintiffs’ most popular titles as soon as they were available on DVD. During this

2

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

1

31.

In fact, it was not until VidAngel announced its intention to seek

22

significant financing that Disney finally decided to sue. On May 24, 2016, a couple

23

of weeks before the suit, VidAngel informed its better customers (including Disney,

24

which has purchased 17 titles with its secret VidAngel account) of its intent to raise

25

additional funds through Regulation A+ financing. Then, and only then, did Disney

26

finally decide to sue. I believe this litigation was intentionally timed to cut off

27

VidAngel’s access to cash flow at a critical stage in its development and prevent our

28

ER675

14

DECLARATION OF NEAL HARMON

1

modern filtering service from growing.

2

VidAngel Is a Filtering Company

3

32.

Because VidAngel has catered only to people who want to filter the

4

motion pictures they watch in their homes, we did not immediately recognize that

5

others might try to abuse VidAngel’s service or exploit loopholes in our service to

6

watch motion pictures without filtering. At the very early stages of our service, our

7

system allowed one to stream a movie even if no filter was selected. At that time,

8

we trusted that our audience was using our service for filtering.

9

33.

In December 2015, we created a #StopJarJar marketing campaign to

We discovered that the campaign was attracting users who were watching Star Wars

12

without filters. We therefore halted the campaign and began requiring filters to

13

watch movies on VidAngel.
34.

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

14

Telephone: [phone]
Facsimile: [phone]

BAKER MARQUART LLP

coincide with Star Wars 7 movie launch, giving away a free $20 Star Wars movie.

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

10

Later on, we discovered that other customers were setting a single

15

global filter (e.g., Jar Jar Binks) and then watching movies on the Roku that didn’t

16

have any tags for the selected filter, resulting in a few unfiltered streams. As soon as

17

we discovered potential loophole, we altered the system again so that it ensured that

18

a filter was set on each streamed movie. It has upset a few customers, but it has

19

allowed us to stay focused on our original target market of FMA-compliant filtering.

20

35.

When the studios sued us, they complained that the opening and

21

closing credits were another loophole of sorts. Because we had always tried to

22

prevent improper use of VidAngel, we immediately removed the opening and

23

closing credits tags altogether. VidAngel received a few complaints from those who

24

were abusing the system, but it also got complaints from those who used those

25

filters for legitimate purposes. One reason these filters were created was that credits

26

are often more than mere lists of the people who did certain tasks in creating the

27

film. Some movies save the most offensive content for the credits. The titles and

28

ER676

15

DECLARATION OF NEAL HARMON

1

credits feature allowed users to avoid such content. We are now updating our apps

2

to allow our customers to use the opening and closing credits filters provided that

3

they also pick at least one additional filter.

4

36.

All of the above steps to remove potential loopholes and focus

5

VidAngel’s viewing experience on filtering have been a part of our evolution, as we

6

become known to a larger audience of people. VidAngel is committed to ensuring

7

that people come to VidAngel to view filtered versions of motion pictures.

8
9

37.

Despite there being a few times where the system has been abused, our

data shows that 95.93 percent of VidAngel’s purchases came from users who

12

from users who voluntarily chose more than one filter. This indicates that our users

13

are overwhelmingly using VidAngel for filtering, and that the number of users

14

choosing multiple filters is increasing.

15

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

2016, and found that more recently 96.93 percent of VidAngel’s purchases came

Telephone: [phone]
Facsimile: [phone]

BAKER MARQUART LLP

voluntarily chose more than one filter. VidAngel also ran these numbers for July

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

10

38.

The studios claim that VidAngel is threatening the “legitimate

16

streaming market” because VidAngel’s sellback model allows a net cost of $1, but

17

the data prove otherwise. Because almost 96% of VidAngel’s purchasers have

18

selected multiple filters over VidAngel’s entire history, this means the version of the

19

film or television show VidAngel streams to them is of a different character than the

20

version available through other VOD providers like Google Play, Amazon Video,

21

VUDU and iTunes. VidAngel has had a long history of ensuring that it is reaching

22

its target filtering market.

23
24

39.

VidAngel has additional data showing that most of its users would not

have watched the movie they chose to see absent filtering:

25

SURVEY QUESTION: Would you have watched "[title]" without a filter?

26

Out of 180,227 movies watched, 92,225 users said they would not have

27

watched the movie at all without filters (as of 8/26/2016). These answers come from

28

ER677

16

DECLARATION OF NEAL HARMON

1

the account holders (usually parents). The numbers do not fully account for

2

hundreds of comments like these:

3

I would let my 13+ year old children watch without the filter. My younger
kids had to wait until Vidangel provided it.

4
5

My kids love this movie especially at Halloween but I hate it because it
needed to be edited. Thank you for editing it and putting it on your site.

6

The filter was great with younger kids watching (13 yr old in my case)

7

The filter was for the kids.

8

I wouldn't have let me kids watch without the filters.

9

My husband and I love the movie "Apollo 13" but we have never watched it
with our kids (youngest is age 7.) We muted the language that we feel is
inappropriate for our own household and were able to watch it with our
children. They loved it :)

10

12

I would have watched it without a filter with my older kids, but not the
youngers.

13

40.

This means that, while over half of all movies would not have been

watched by the account holders without filters at all, far more users would not have

15

watched the movie with their family without filters. This filtered-only viewership is

16

entirely additive to the studios’ market, and the purchases of those films and shows

17

would not have occurred without VidAngel.

18
19

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

14

Telephone: [phone]
Facsimile: [phone]

BAKER MARQUART LLP

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

11

41.

VidAngel’s Marketing Is About Filtering
VidAngel is constantly testing advertising messages and the studios

20

have cherry picked a few that never even got traction. While the studios say

21

VidAngel has an “unfair advantage” using its net cost with sellback and filters as a

22

marketing hook, what they fail to acknowledge is that VidAngel is not a direct

23

competitor to their distribution partners because those partners do not offer filtering.

24

42.

VidAngel learned in its early market testing that the market for filtered

25

content was far larger if customers did not have to pay an additional fee for filtering.

26

It seemed that customers felt they should be able to watch the movie however they

27

wanted after they had purchased the movie. As a company strategy, VidAngel

28

ER678

17

DECLARATION OF NEAL HARMON

1

wanted to reach broadest filtering audience possible and adjusted its marketing

2

messages accordingly.

3

43.

Historically, those who would like to enjoy filtered content had to pay a

4

premium price for the ability to do so (even purchase expensive hardware and a

5

subscription in addition to the cost of the movie). VidAngel’s messaging helps those

6

who think that filtering is more expensive and more difficult to realize that the

7

opposite is true. An analogy explains why VidAngel’s marketing references other

8

VOD services. People may believe that flying in an airplane is dangerous. Airlines

9

may highlight that the chances of dying in a car are higher than the chances of dying

Plane tickets do not directly compete with car sales, but the comparison is useful to

12

customers.

13

44.

The number of users voluntarily choosing more than one filter (over 96

percent in July) are evidence that the studios have mistakenly concluded that

15

VidAngel’s marketing highlighting net cost gives VidAngel an “unfair advantage,”

16

when the approach is ultimately attracting a filtering audience rather than competing

17

with all the many distributors who do not offer filtering.

18
19

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

14

Telephone: [phone]
Facsimile: [phone]

BAKER MARQUART LLP

in an airplane to dispel that myth and attract people to purchasing plane tickets.

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

10

The Studios Are Being Disingenuous Concerning the Lawsuit

45.

In their Complaint, the studios say they are suing VidAngel because it

20

is allegedly operating an "unlicensed VOD streaming service" even though

21

VidAngel is operating a remote filtering service under the FMA.

22

46.

Plaintiffs claim that "The FMA requires that any copy or performance

23

made pursuant to that statute be otherwise 'authorized'— that is, not violating the

24

copyright owner’s other exclusive rights." Complaint (Dkt No. 1), ¶ 44. Under this

25

position, the authority to filter content in the home resides with the studios, not with

26

the family. This position would essentially repeal the FMA, which does not require

27

any consent from the studios to filtering (consent they would definitely not give).

28

ER679

18

DECLARATION OF NEAL HARMON

1

47.

The ultimate irony is that the studios will not sell a streaming license

2

that permits filtering to anyone, putting companies like VidAngel in a Catch-22

3

position. Indeed, 10 years after the studios were compelled by the FMA to dismiss a

4

lawsuit with ClearPlay, the market has yet to see a studio-licensed streaming

5

product that supports filtering.

6

DVDs and Blu-ray Discs Are the Only “Authorized”
Copies of Plaintiff’s Movies Available for Filtering

7
8
9

48.

Due to the agreement the studios have made with the Directors Guild of

America (“DGA”), major studio agreements with their distributors have language
Google search for “VOD license agreement”):

13
14
15
16
17
18
19

CUTTING, EDITING AND INTERRUPTION. Licensee [Google]
shall not make, or authorize any others to make, any modifications,
deletions, cuts, alterations or additions in or to any Included Program
without the prior written consent of Licensor [Sony]. For the
avoidance of doubt, no panning and scanning, time compression or
similar modifications shall be permitted. Without limiting the
forgoing, Licensee shall not delete the copyright notice or credits from
the main or end title of any Included Program or from any other
materials supplied by Licensor hereunder. No exhibitions of any
Included Program hereunder shall be interrupted for intermission,
commercials or any other similar commercial announcements of any
kind.
Telephone: [phone]
Facsimile: (424) 652-785

12

Telephone: [phone]
Facsimile: [phone]

BAKER MARQUART LLP

similar to the Sony/Google agreement posted on WikiLeaks (which I found doing a

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

10

49.

Discovering this language in the studios’ actual agreements helped me

20

realize that this was the reason Google was forced to remove technical support for

21

filtering HD content on the Chromecast and was forced to seek permission from the

22

studios to enable filtering on Google Play.

23

50.

What’s more, when the studios sign a deal for the rights to a specific

24

title, they seem to be required to include the following language in all of their

25

agreements. For example, in Sony’s agreement for the movies Fury and American

26

Hustle, the following language binds Sony:

27
28

ER680

[Sony] shall have the right...to make any and all changes and

19

DECLARATION OF NEAL HARMON

modifications in the Picture; provided, [Sony] shall comply with any
contractual right of first opportunity to make such changes granted to
Director.

1
2

5
6
7
8
9
10

BAKER MARQUART LLP

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

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

Given this language and the studio interpretation of the FMA, this

language trickles down through all agreements and ultimately hands the authority to
make any changes to the movie back to the director of the movie.
52.

The legislative history of the FMA reflect that the DGA refused to

testify or cooperate with Congress in any way when FMA was being debated in
Congress. The DGA and the studios would not seek a business deal with filtering
companies in 2004. And these are the same organizations who have not filled the
market need for filtering for the last decade, leading a few brothers from Idaho to
ask themselves, “Why isn’t there filtering for streaming?”
53.

If the court were to interpret the law as argued by the studios, then

VidAngel will not be able to operate under the “transmitted” language of the FMA
because the studios will not sell VidAngel a license that permits filtering. In fact,
Telephone: [phone]
Facsimile: (424) 652-785

4

51.

Telephone: [phone]
Facsimile: [phone]

3

they are unable to do so without cooperation from the DGA. And lack of
cooperation from the DGA is the reason the FMA was passed by Congress in the
first place. VidAngel is the only entity that provides a filtering service under the
FMA for those viewing title on modern mobile devices such as smartphones, tablets,
and SmartTVs.
VidAngel Would Love to Purchase a Filtered Streaming License
54.

VidAngel has various business reasons for which it is preferable to

purchase a streaming license that allows for filtering. For example:
a)

Discs will increasingly become less available and may eventually be

phased out of existence.
b)

New customers complain about VidAngel’s buy/sellback model and

ask why they can’t just rent the movies.
c)

A streaming license would allow VidAngel to provide both filtered and

unfiltered versions of movies.

ER681

20

DECLARATION OF NEAL HARMON

1

d)

There is a lot of overhead and waste in managing a vault of physical

3

e)

Acquiring physical discs through retailers is time consuming and

4

difficult.

5

f)

2

discs.

When customer demand exceeds our supply, VidAngel has to send

6

customers out-of-stock notices. VidAngel sent out almost 60,000 unique customers

7

over 250,000 out of stock notices last month alone. This means that VidAngel

8

turned away 250,000 requests for streams that it could have received income for if it

9

had a standard VOD distribution agreement that allows for filtering.

10

When VidAngel purchases more discs than it is ultimately able to sell,

it ends up with hundreds or thousands of discs that it will never sell.

12

55.

VidAngel assumed that it needed to have significant size before the

studios would ever consider a filtered licensing deal. Some contacts in Hollywood

14

told me to wait until we had over 1 million users, preferably over 5 million.

15

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

13

Telephone: [phone]
Facsimile: [phone]

BAKER MARQUART LLP

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

11

g)

56.

In fact, VidAngel started talking with a local distributor in Utah about a

16

licensing deal in May of 2016, before the lawsuit. This distributor has agreed to

17

licensing its latest film to VidAngel because it has not signed an agreement with the

18

DGA and can permit filtering of content.

19
20

57.

After Plaintiffs filed their lawsuit, VidAngel inquired of some of the

plaintiffs whether they were open to a business solution rather than litigation.

21

58.

VidAngel also met with Sony, Lionsgate and Paramount about a

22

licensing deal since those studios had not sued them. VidAngel has reached out to

23

many others. These studios have either said, “this is complicated legally,” or

24

“maybe we can solve the problem with the airline cut,” or “you have to get the DGA

25

to agree first.” Multiple studios said they would get back to me after meeting with

26

their legal teams and never did.

27

59.

Finally, I am aware that my counsel has emailed counsel for Disney

28

ER682

21

DECLARATION OF NEAL HARMON

1

and offered to make certain changes to VidAngel’s model and that Plaintiffs’

2

counsel responded: “my clients absolutely will not engage in any joint licensing

3

discussions.” Counsel for VidAngel then offered to abandon its FMA exemption

4

defense (and with it the requirement that consumers must purchase copies of discs)

5

and instead pay a streaming license fee to stream filtered content, noting that this

6

arrangement would resolve Disney’s DMCA and infringement claims. Disney has

7

not responded to this offer.

8
9

60.

It appears that VidAngel is back to 2005 again, with no business

solution available to VidAngel.

10

New Releases on VidAngel Generate
Revenue Share Similar to Studio Contracts

12

Over its history, much of VidAngel’s revenue comes from the sale and

61.

filtered streaming of popular movies within the first four weeks of their release.

14

Each new release DVD or Blu-ray is purchased by VidAngel and is then sold to its

15

customers (after it is bought back by VidAngel) on average 16 times. The average

16

net revenue for each transaction over VidAngel’s history is $1.20. The average cost

17

for a new release DVD or Blu-ray is $15.01. This means that VidAngel, on average,

18

contributes $15.01 in capital for total revenue of $19.20. In other words, the studios

19

receive approximately 78% of all of the revenue VidAngel receives on a new release

20

title. By comparison, the Google Play and VUDU VOD Distribution Agreements

21

with Sony calls for Sony to receive 70% of the revenue day one, and receive 65%

22

for the four weeks thereafter for all new release rentals.

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

13

Telephone: [phone]
Facsimile: [phone]

BAKER MARQUART LLP

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

11

23

VidAngel Maintains It Has Robust Records of Every Transaction
In Its History Related to Each of Plaintiffs’ Titles

24
25

62.

VidAngel maintains records of every transaction. Those records

26

include the date purchased, date sold back, amounts paid to purchase and sell back,

27

the specific disc purchased and filters used. VidAngel maintains that data for every

28

ER683

22

DECLARATION OF NEAL HARMON

1

title VidAngel users have ever filtered and streamed.

2

VidAngel Will Suffer Tremendous Hardship If an Injunction Issues

3

63.

In the event that VidAngel is enjoined on October 24, 2016, the

4

following financial damages (immediate, and future) would be incurred in the

5

estimated 18-month timeframe for the trial to occur:

6

a.

VidAngel is

7

currently operating at a

8

Hosting, Credit Card Fees, and Tagging Costs.

, this includes

9
10

b. VidAngel expects to have a user base of
by April 2018 (18 months from the injunction hearing). With a

12

, and a

13

15
16
17
18
19
20
21

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

14

, the
Telephone: [phone]
Facsimile: [phone]

BAKER MARQUART LLP

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

11

If VidAngel were to be enjoined, the total value of the customers
lost would be
c. In Apr 2018, VidAngel's monthly revenue run rate is projected to
be at

per month, or an annual
If VidAngel achieves this goal in the timeframe

projected, the company would be valued at, or above,
All of this potential market value would be lost if
VidAngel is enjoined.

22

VidAngel, formed just three years ago, has only 20 full-time employees. To date,

23

VidAngel has been capitalized with over $3.6 million and has spent over a third of

24

that capital, $1.2 million, purchasing discs.

25
26
27
28

ER684

23

DECLARATION OF NEAL HARMON

64.

VidAngel developed its filter-and-strenm technology J u ~H f:lS ~ons um~r

2

preferences were beginning to move awny from getting physicfl l DVP:i/Ol t.J =
my

3

discs to watch on a home television to having content streamed to Lh ~m to watch on

4

all sorts of devices, which now are only infrequently n televis ion set. Con:wmen~

5

increasingly want to avoid having to obtain discs and want th e freedom

6

content on tablet, laptop, and desktop computers, smart telephones, and other

7

devices, and want to be able to watch content wherever they may be, in private, A»

8

consumer preferences involving digital technologies always do, the preference for

9

streamed content is happening rapidly and the bulk of the transition will likely be

w wai..Ch

10

complete in less than three years. VidAngel is the only company currently

11

streaming filtered content to customers. (The only other content filtering service

12

sells devices that consumers may use at home to filter the content of physical DVD

13

and Blu-ray discs being watched on a television set.) As the sole competitor

0:: . o"
<"' "' ..

14

offering to provide filtered streamed content to modern devices, VidAngel

u..

15

obviously has a significant head start over potential competitors in developing its

16

technology and increasing its know-how. Further, VidAngel owes a large portion of

17

its success to the highly capable and competent employees and independent

18

contractors it has attracted, trained, and retained. Were VidAngel to be enjoined

19

during the pendency of this action, it would lose all the advantages described above.

20

I declare under penalty of perjury under the laws of the United States of

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21

America that the foregoing is true and correct.

22

Executed on September 12, 2016, at Provo, Utah.

23
24
25
26
27
28
24

ER685

DECLARATION OF NEAL I JARMON

BAKER MARQUART LLP

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

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

UNITED STATES DISTRICT COURT

21

CENTRAL DISTRICT OF CALIFORNIA

22

WESTERN DIVISION

23
24
25

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

26
vs.

27
28

VIDANGEL, INC.,

ER686

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

DECLARATION OF SIGURD MELDAL

1

OPPOSITION TO PRELIMINARY
INJUNCTION MOTION

Defendant.

2
3

VIDANGEL, INC.,

4

Counterclaimant,

5
6

vs.

8

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

9

Counterclaim Defendants.

7

10

BAKER MARQUART LLP

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

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

ER687

1

DECLARATION OF SIGURD MELDAL

1

I, Dr. Sigurd Meldal, declare:

2

1.

I submit this declaration in support of defendant and counterclaimant

3

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

4

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

5

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

6

and would testify competently hereto.

7

2.

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

8

professor of computer engineering, software engineering and computer science at

9

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

10

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

11

Stanford University.

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

12

3.

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

13

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

14

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

15

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

16

Professional Honors and Experience

17

4.

I have served on many professional committees and organizations. For

18

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

19

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

20

(The Engineering Accreditation Commission of ABET defines the standards for

21

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

22

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

23

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

24

Computing Machinery (ACM).

25
26
27
28

ER688

2

DECLARATION OF SIGURD MELDAL

1

5.

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

2

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

3

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

4

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

5

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

6

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

7

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

8

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

9

6.

I have previously testified in a number of cases concerning intellectual

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

11

architectures, including in particular smartphones, wireless communication and

12

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

13

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

14

My Curriculum Vitae is attached as Exhibit A.

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

10

15

Documents and Things Reviewed

16

7.

The opinions expressed in this declaration are based on my professional

17

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

18

documents:

19

(i)

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

20

(ii)

The deposition testimony of Todd Cittadine and Neal Harmon;

21

(iii)

Deposition exhibit 15 (a description of VidAngel’s filtering

22

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

23

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

24

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

25

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

26
27
28

ER689

3

DECLARATION OF SIGURD MELDAL

1

(vi)

2

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

3

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

4

Preliminary Injunction;

5

(v)

6

Entertainment Sales Update;

7

(vi)

8

Vudu, iTunes Store, and Youtube;

9

(vii)

10

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

13
14
15
16
17
18
19
20

8.

23
24
25
26
27
28

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

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

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

21
22

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

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

11
12

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

9.

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

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

ER690

4

DECLARATION OF SIGURD MELDAL

1

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

2

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

3

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

4

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

5

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

6

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

7

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

8

10.

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

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

10

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

11

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

12

user’s television.

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

9

13

The Digital Millennium Copyright Act

14

11.

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

15

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

16

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

17

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

18

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

19

to gain access to the work.”

20

12.

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

21

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

22

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

23

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

24

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

25

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

26

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

27

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

28

ER691

5

DECLARATION OF SIGURD MELDAL

1

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

2

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

3

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

4

control systems is incorrect.

5

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

6
7

13.

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

8

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

9

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

10

[make] imperceptible, by or at the direction of a member of a private
household, of limited portions of audio or video content of a motion
picture, during a performance in or transmitted to that household for
private home viewing, from an authorized copy of the motion picture,
or. . .creat[e] or provi[de]. . .a computer program or other technology
that enables such making imperceptible and that is designed and
marketed to be used, at the direction of a member of a private
household, for such making imperceptible, if no fixed copy of the
altered version of the motion picture is created by such computer
program or other technology.

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

12
13
14
15
16

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

17

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

18

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

19

as “filtering.”

20

14.

The plain language of the FMA quoted above expressly authorizes and

21

exempts from copyright infringement two distinct methods for filtering motion

22

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

23

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

24

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

25

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

26

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

27

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

28

ER692

6

DECLARATION OF SIGURD MELDAL

1

FMA expressly authorized future processes for privately transmitting filtered

2

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

3

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

4

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

5

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

6

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

7

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

8

described in more detail below.

9

15.

The FMA also exempts any computer program or other technology that

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

11

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

12

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

13

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

14

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

15

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

16

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

17

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

18

obtained CSS keys through licenses from the DVD Copy Control Association

19

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

20

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

21

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

22

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

23

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

24

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

25

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

26

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

27

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

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

10

28

ER693

7

DECLARATION OF SIGURD MELDAL

1

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

2

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

3

order to work).

4

16.

The FMA expressly does not require that the household or the

5

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

6

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

7

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

8

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

9

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

11

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

12

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

13

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

14

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

15

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

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

10

16

17.

Digitally encoded motion pictures to be distributed commercially are

17

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

18

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

19

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

20

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

21

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

22

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

23

information content.

24

18.

Since the encrypted representation of the content is indistinguishable

25

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

26

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

27

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

28

ER694

8

DECLARATION OF SIGURD MELDAL

1

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

2

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

3

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

4

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

5

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

6

altering the content of the original files.

7

19.

In drafting the FMA, Congress obviously considered known

8

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

9

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

11

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

12

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

13

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

14

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

15

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

16

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

17

has to be decrypted before any filtering can occur.

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10

18
19

20.

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

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

20

21.

Having made the movie content ready for a filtered transmission,

21

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

22

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

23

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

24

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

25

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

26

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

27

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

28

ER695

9

DECLARATION OF SIGURD MELDAL

1

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

2

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

3

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

4

22.

The strategy of creating temporary versions of data such as movie

5

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

6

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

7

respect to streaming media content in particular.

8
9

23.

As is common industry practice for delivering of commercial digital

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

10

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

11

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

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LOS ANGELES, CA 90067
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12

Technological Measures Implemented
by VOD Providers Impede Filtering

13
14

24.

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

15

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

16

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

17

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

18

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

19

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

20

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

21

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

22

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

23

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

24

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

25

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

26

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

27

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

28

ER696

10

DECLARATION OF SIGURD MELDAL

1

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

2

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

3

access, alter or add to that software. Id.

4

25.

I have read the declaration and deposition transcript of Plaintiffs’

5

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

6

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

7

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

8

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

9

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

11

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

12

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

13

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

14

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

15

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

16

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

17

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

18

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

19

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

20

the title expires within a short time.

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10

21

26.

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

22

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

23

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

24

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

25

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

26

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

27

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

28

ER697

11

DECLARATION OF SIGURD MELDAL

1

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

2

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

3

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

4

system. Because these terms of service expressly prohibit modification of

5

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

6

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

7

terms of service.

8

27.

9

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

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

11

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

12

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

13

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

14

create software compatible across multiple devices and applications to filter titles

15

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

16

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

17

Closed systems contain security features that prevent the creation of filtering

18

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

19

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

20

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

21

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

22

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

23

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

24

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

25

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

26

within the provider’s closed system.

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LOS ANGELES, CA 90067
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10

27
28

ER698

12

DECLARATION OF SIGURD MELDAL

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

1
2
3
4
5
6
7
8
9
10
11
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2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
Tel: [phone] ● Fax: [phone]

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

28.

One exception to the closed VOD delivery systems architecture and

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

Paragraph 47 of Plaintiffs’ Complaint alleges that the YouTube API

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

ER699

13

DECLARATION OF SIGURD MELDAL

1

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

2

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

3

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

4

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

5

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

6

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

7

motion picture through YouTube’s Embeddable Player.

8
9

30.

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

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

11

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

12

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

13

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

14

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

15

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

16

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

17

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

18

violates the YouTube API Services Terms of Service.

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

10

19

31.

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

20

compatible with the YouTube Embeddable Player API capable of accurately and

21

seamlessly filtering motion pictures purchased lawfully for viewing on the YouTube

22

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

23

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

24

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

25

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

26

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

27

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

28

ER700

14

DECLARATION OF SIGURD MELDAL

1

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

2

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

3

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

4

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

5

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

6

devices.1

7

32.

Furthermore, these approaches to enabling a filtering functionality for

8

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

9

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

10

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

11

enjoying the filtered content would be significantly jeopardized and diminished.

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

12

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

13
14

33.

VidAngel is an online video filtering service that operates under the

15

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

16

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

17

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

18

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

19
20
21
22
23
24
25
26
27

1

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

28

ER701

15

DECLARATION OF SIGURD MELDAL

1

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

2

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

3

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

4

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

5

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

6

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

7

permitting users in most instances to select many thousands of different

8

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

9

and unique.

10

VidAngel’s Filtering Technology

11

34.

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

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

13

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

14

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

15

Internet using a video content delivery protocol called HTTP Live Streaming2

16

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

17

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

18

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

19

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

20

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

21

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

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

12

22
23

35.

VidAngel’s filtering technology divides each feature film or television

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

24
25
26
27

2

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

28

ER702

16

DECLARATION OF SIGURD MELDAL

1

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

2

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

3

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

4

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

5

36.

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

6

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

7

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

8

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

9

portion unchanged.

10

37.

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

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

12

follows:

13

(i)

VidAngel lawfully purchases DVDs and Blu-ray discs;

14

(ii)

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

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11

15

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

16

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

17

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

18

removing restrictions on DVD or Blu-ray content access;

19

(iii)

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

20

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

21

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

22

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

23

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

24

(iv)

VidAngel uploads the subtitle/caption data files and Matroska files

25

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

26

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

27

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

28

ER703

17

DECLARATION OF SIGURD MELDAL

1

files);

2

(v)

VidAngel destroys the locally cached Matroska file;

3

(vi)

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

4

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

5

a.

The encoding script temporarily copies the PF files from the PCSS

6

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

7

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

8

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

9

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

11

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

12

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

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10

13

b.

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

14

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

15

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

16

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

17

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

18

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

19

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

20

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

21

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

22

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

23

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

24

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

25

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

26

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

27

inventory system;

28

ER704

18

DECLARATION OF SIGURD MELDAL

1

(ix)

VidAngel applies bar codes to the disc packages;

2

(x)

VidAngel sells specific discs to specific customers;

3

(xi)

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

4

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

5

while applying the filters chosen by that customer.

6

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

7

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

8

the segment.

9

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

10
11

38.

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

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

13

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

14

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

15

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

16

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

17

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

18

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

19

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

20

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

21

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

22

intents and purposes, is gone.

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

12

23

39.

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

24

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

25

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

26
27
28

ER705

19

DECLARATION OF SIGURD MELDAL

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

1
2
3

40.

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

4

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

5

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

6

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

7

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

8

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

9

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

10

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

11

contents of the disc.

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

12

41.

As is common practice for Internet content delivery services (and

13

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

14

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

15

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

16

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

17

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

18

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

19

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

20

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

21

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

22

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

23

start, stop viewing of the motion picture.

24

42.

Each VidAngel user experiences an individualized stream based on the

25

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

26

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

27

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

28

ER706

20

DECLARATION OF SIGURD MELDAL

1

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

2

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

3

server.

4

43.

Decrypting and streaming a filtered version of a motion picture

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

6

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

7

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

8

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

9

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

10

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

11

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

12

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

13

without first obtaining the copyright holder’s consent.

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2029 CENTURY PARK EAST, 16TH FLOOR
LOS ANGELES, CA 90067
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5

14

44.

Importantly, VidAngel’s methodology ensures that any decrypted file

15

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

16

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

17

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

18

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

19

45.

Tedd Cittadine declares that the following four harms he claims will

20

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

21

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

22

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

23

online distribution of our content and to our relationships with authorized

24

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

25

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

26

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

27

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

28

ER707

21

DECLARATION OF SIGURD MELDAL

1

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

2

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

3

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

4

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

5

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

6

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

7

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

8

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

9

studios’ control.

10
11

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

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

12

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

13
14

_____________________________________

15

Dr. Sigurd Meldal

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

ER708

22

DECLARATION OF SIGURD MELDAL

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

ER709

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

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

)
)
)
)

)
)
)
)

) Case No. CV16-04109
I

INC .

)
)

I

)
)

___________________________ )
Defendant.

AND RELATED CROSS-ACTION.

)
)

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

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

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

HIGHLY CONFIDENTIAL

ER710

Highly Confidential -Pursuant to Protective Order
of Tedd Cittadine-Rule (30) (b) (6)
Page 83
A.

1

Uh-huh.
MR. KLAUS:

2

And just -- and so just --

3

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

4

using "filtering" in this depos-

5

unless you say otherwise, that's going to mean

6

"making imperceptible limited portions of audio or

7

video content of a motion picture"?

deposition,

8

MR. MARQUART:

Yes.

9

And I specifically mean to include the

10

examples that the witness gave, which would be

11

bleeping -- he mentioned to filter out or make

12

imperceptible audio -- and removing and cutting,

13

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

14
15

Removing, cutting, skipping

video?

16
17

MR. KLAUS:

18

-

MR. MARQUART:

MR. MARQUART:

Yes.

Okay.
Those were examples of

19

filtering that I also mean to include.

20

BY MR. MARQUART:
Q.

21

Have you -- has Fox ever authorized one

22

of its clients to provide filtering of authorized

23

copies of VOD titles?
MR. KLAUS:

24
25

So the -- and just to be

clear, is it a -- speaking at a general level
eLitigation Services, Inc. - [e-mail]

HIGHLY CONFIDENTIAL

ER711

Highly Confidential -Pursuant to Protective Order
of Tedd Cittadine-Rule (30) (b) (6)
Page 84
1

-

without going into any specific agreement, but I

2

think the question is:

3

agreement that specifically authorizes filtering as

4

Mr. Marquart has described it?

Are you aware of an

5

THE DEPONENT:

6

Theoretically, it's possible if we agreed

7

with a client about it.
I

8
9

Let me think about that.

offhand.

10

can't think of a specific agreement

I

don't have the agreements with me.

That comes to mind is something where the

11

client and -- and Fox have mutually decided to

12

authorize it.

13

BY MR. MARQUART:

14

Q.

Okay.

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

15

here today, remember any instance in which it has

16

been done?

17

A.

Has been agreed upon.

I can't -- I can't

18

think of a specific example.

19

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

20

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

21

circumstance.

Q.

22
23

possible."

24
25

Okay.

And said,

Again, I don't know

"Theoretically, it's

Just clarify that for me.
What do you mean?

A.

So if -- if Fox and the client were to

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

HIGHLY CONFIDENTIAL

ER712

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

A.

-- more specifically.

2

Q.

Let's talk about those.

3

A.

Okay.

4

Q.

What's digital sell-through?

5

A.

Digital sell-through is a right that we

6

grant our clients to offer consumers the ability to

7

access content for a very long period of time,

8

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

9

to a number of authorized devices.

Q.

10
~

Okay.

And the second category you

11

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

12

word?

13

A.

Video-on-demand, or --

14

Q.

Yes.

15

A.

16

rental"

17

Q.

Okay.

18

A.

-- in more of a generic sense.

19

Q.

Okay.

20

A.

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

you can refer to it as "digital

What does that entail?

21

a consumer can download and watch a piece of

22

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

23

Q.

Okay.

24

A.

More prevalent in the -- the film

25

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

- [e-mail]

HIGHLY CONFIDENTIAL

ER713

Highly Confidential -Pursuant to Protective Order
of Tedd Cittadine-Rule (30) (b) (6)
Page 97
Q.

1

2

Does your business have anything to do

with physical disc sales?

3

MR. KLAUS:

4

MR. MARQUART:

Sorry.

5

MR. KLAUS:

what he's involved in

6

or

7

"Your business" meaning

BY MR. MARQUART:
Q.

8

9

Does the business that you're involved in

have anything to do with physical disc sales?

10

A.

A very

11

Q.

Are you where familiar with the

12

very minor aspect of it does.

technology called "ultraviolet"?

13

A.

I

14

Q.

What is that technology?

15

A.

Ultraviolet is a -- is a consortium of

am.

16

companies -- technology companies, content

17

providers, as well as retailers or our -- our

18

clients, that are working together to create better

19

utility for digital content.

20

It involves the interoperability of

21

rights from one retailer to another, meaning you

22

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

23

Amazon user, that piece of content would be

24

available in your Amazon ecosystem as well as your

25

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

HIGHLY CONFIDENTIAL

ER714

Highly Confidential -Pursuant to Protective Order
of Tedd Cittadine-Rule (30) (b) (6)
Page 98
1

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

2

and utility that a customer can get.

3

So whether they buy from Apple or Amazon

4

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

5

a certain amount -- or baseline of utility with

6

that movie.
Q.

7

Okay.

And how does that -- how does that

8

technology relate to the actual purchase -- the

9

retail purchase of physical discs?
MR. KLAUS:

10

11

Object to the form of the

question.
THE DEPONENT:

12

I would say that it

13

doesn't specifically relate to the purchase of

14

physical discs.

15

A number of studios, including Fox, have

16

attached what we call an eCopy or eCopy rights to a

17

physical disc

18

BY MR. MARQUART:

19

Q.

Yeah.

20

A.

-- where we have voluntarily granted with

21

some our digital retailers the right for the

22

consumer that buys a physical disc to get a digital

23

or electronic copy of that movie.

24
25

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

HIGHLY CONFIDENTIAL

ER715

Highly Confidential -Pursuant to Protective Order
of Tedd Cittadine-Rule (30) (b) (6)
Page 99
1

would be a retailer that Fox has authorized to

2

offer that.

Q.

3

4

that's

offered for free?
MR. KLAUS:

5

6

And -- and when that's offered,

Object to the form of the

question.
THE DEPONENT:

7

8

for no additional cost --

9

That is currently offered

BY MR. MARQUART:

10

Q.

11

A.

12

Q.

No additional cost

13

A.

or the Blu-ray.

14

Q.

other than the cost of the DVD or

15

Okay.
to the DVD

Blu-ray?

16

A.

That's correct.

17

Q.

Okay.

And are

does that cover all of

18

Fox's new-release titles for major theatrical

19

motion pictures?
A.

20

21

most,

I believe that -- that covers most --

if not all.

22

Q.

Okay.

23

A.

A very large percent.

24

Q.

And what about Fox's television

25

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

HIGHLY CONFIDENTIAL

ER716

Highly Confidential -Pursuant to Protective Order
of Tedd Cittadine-Rule (30) (b) (6)
Page 100
A.

1

A much more limited selection of tel-

2

television programs would be available for an

3

electronic copy.

4

that -- very, very small number would be

5

ultraviolet enabled.
Q.

6

7

Okay.

And a much smaller percentage of

So -- and is ultraviolet becoming

more or less popular,
A.

8

9

in your estimation?

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

10

I can only tell you that,

11

ultraviolet has not changed, you know, noticeably

12

in the last,

13

in my opinion,

I would say, two years.

We have the same number of retailers that

14

have participated in ultraviolet.

And our -- our

15

strategy -- as well from like our

as well as

16

what I can tell from our competitors

17

materially changed of putting eCopies on discs,

18

some of which are ultraviolet enabled.
Q.

19

Okay.

has not

Does -- does Fox allow a member of

20

the public who has purchased a digital copy, to

21

filter content of that copy to themselves for

22

private horne viewing?
MR. KLAUS:

23

24

Object to the form of the

question.

25

THE DEPONENT:

Who has purchased the --

eLitigation Services, Inc. - [e-mail]

HIGHLY CONFIDENTIAL

ER717

Highly Confidential -Pursuant to Protective Order
of Tedd Cittadine-Rule (30) (b) (6)
Page 101
1

how was the purchase made in this case?

2

BY MR. MARQUART:
Q.

3

4

Let us use the example of an ultraviolet

purchase.

5

A.

Okay.

6

Q.

An individual has bought a disc at an

7

authorized retailer.

8

A.

Okay.

9

Q.

That purchase allows them,

10

for free,

to

access a digital copy.

11

A.

Yes.

12

Q.

Does Fox allow that user to view their

13

digital copy in a filtered format to their

14

specifications?
MR. KLAUS:

15

16

Object to the form of the

question.

17

If you know, you can answer the question.

18

THE DEPONENT:

19

To my knowledge, it does not allow them

Yes.

20

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

21

purchased physically and then redeem the digital

22

copy of that.

23

BY MR. MARQUART:
Q.

24

25

Does -- to your knowledge, does any other

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

HIGHLY CONFIDENTIAL

ER718

Highly Confidential -Pursuant to Protective Order
of Tedd Cittadine-Rule (30) (b) (6)
Page 102
1

MR. KLAUS:

If you know.

2

THE DEPONENT:

Not -- not to my

3

.......

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

4

sure .

5

BY MR. MARQUART:
Q.

6

for

And I know the answer to this.

7

But, to your knowledge, does Fox allow

8

any third party to assist that user in filtering

9

out content from their streamed copy?
MR. KLAUS:

10

Object to the form of the

11

question, outside the scope, calls for a legal

12

conclusion.

13

If you know of any third-party agreements

14

that specifically authorize that, you can say "Yes"

15

or "No."
THE DEPONENT:

16
17

BY MR. MARQUART:
Q.

18
19

No.

Okay.

Based on your counsel's

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

20
21

authorize the filtering of that digital copy before

22

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

23

Object to the form of the

24

question, calls for a legal conclusion.

It's

25

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

HIGHLY CONFIDENTIAL

ER719

Highly Confidential -Pursuant to Protective Order
of Tedd Cittadine-Rule (30) (b) (6)
Page 227
1

If it were illegal,

2

to that behavior, yes.

3

I would object to --

BY MR. MARQUART:
Q.

4

5

The -- the second example you mentioned

on Harm Number 2

6

A.

Uh-huh.

7

Q.

-- control of revenue and license

8

agreements was -- the second specific example you

9

gave, was that existing VOD users might complain to

10

you.

11

Do you recall that?

A.

12

13

Existing VOD users being existing VOD

clients?

14

Q.

Yeah.

Sorry.

15

A.

Yeah.

16

Q.

Let me specify that.

17

A.

Yeah.

18

Q.

So your existing VOD clients might come

19

to you and complain about the unauthorized

20

distributors' activities and say that it's harming

21

their business?

22

A.

Yes, they do complain.

23

Q.

Do you have any evidence of actual

24

complaints to you or to anyone at Fox about

25

VidAngel?
eLitigation Services,

Inc.

- els®els-team.com

HIGHLY CONFIDENTIAL

ER720

Highly Confidential -Pursuant to Protective Order
of Tedd Cittadine-Rule (30) (b) (6)
Page 228
1

A.

Again, I have not received specific

2

complaints about VidAngel, or rarely receive

3

specific complaints about individual pirate or

4

illegal or unauthorized service from clients.

5

rarely.

6

Very

But very frequently, we receive

7

push-back.

Whether we're trying to negotiate

8

economic terms or counter-protection terms or

9

consumer-use cases that unauthorized or pirate

10

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

11

the rules do not apply to them.

12

I get frequent push-back about that from

13

a -- from a generic sense about unauthorized

14

services, not specific to a single or -- or

15

multiple authorized services.
Q.

16

Okay.

But so no one -- no one

17

specifically mentioned VidAngel in that context in

18

any of your negotiations; correct?

......... 19

A.

That's correct.

20

Q.

And you don't normally receive specific

21

complaints?

22

A.

23

They're normally generic?

Regarding specific unauthorized services,

that's --

24

Q.

25

A.

If you -that's correct.

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

HIGHLY CONFIDENTIAL

ER721

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

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

HIGHLY CONFIDENTIAL

ER722

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

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

UNITED STATES DISTRICT COURT

10

CENTRAL DISTRICT OF CALIFORNIA

11

WESTERN DIVISION

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

15
16
17

vs.
VIDANGEL, INC.,

18
19
20
21
22
23
24
25

Defendant and CounterClaimant.

Case No. 16-cv-04109-AB (PLAx)
UNREDACTED VERSION OF
DOCUMENT PROPOSED TO BE
FILED UNDER SEAL
PLAINTIFFS’ NOTICE OF
MOTION AND MOTION FOR
PRELIMINARY INJUNCTION;
MEMORANDUM OF POINTS AND
AUTHORITIES IN SUPPORT
THEREOF
Judge: Hon. André Birotte Jr.
Date: October 24, 2016
Time: 10:00 a.m.
Crtrm.: 4
Filed concurrently herewith:
(1) Declaration of Tedd Cittadine
(2) Declaration of Rose Leda Ehler
(3) Declaration of Kelly M. Klaus
(4) Declaration of Robert Schumann
(5) [Proposed] Order
(6) Application to File Under Seal
Trial Date:

None Set

26
27
28

ER804

NOTICE OF MOTION AND MOTION FOR PRELIMINARY INJUNCTION
16-CV-04109-AB (PLAX)

1 TO ALL PARTIES AND THEIR ATTORNEYS OF RECORD:
2

PLEASE TAKE NOTICE that on October 24, 2016, at 10:00 a.m., before the

3 Honorable André Birotte Jr., in Courtroom 4 of the United States District Court for
4 the Central District of California, located at 312 North Spring Street, Los Angeles,
5 California 90012, Plaintiffs Disney Enterprises, Inc., Lucasfilm Ltd. LLC, Twentieth
6 Century Fox Film Corporation, and Warner Bros. Entertainment Inc. (collectively,
7 “Plaintiffs”) will and hereby do move for a Preliminary Injunction restraining
8 Defendant VidAngel, Inc. (“VidAngel”) and all of its officers, agents, servants,
9 employees, and attorneys, and those persons in active concert or participation or
10 privity with any of them, from: [1] violating Plaintiffs’ rights pursuant to § 1201(a) of
11 the Digital Millennium Copyright Act (“DMCA”), 17 U.S.C. § 1201(a), by
12 circumventing technological measures that effectively control access to Plaintiffs’
13 copyrighted works on DVDs and Blu-ray discs; and [2] infringing by any means,
14 directly or indirectly, Plaintiffs’ exclusive rights under § 106 of the Copyright Act,
15 id. § 106, including by reproducing or publicly performing Plaintiffs’ copyrighted
16 works.
17

This Motion is made on the following grounds as explained in the

18 accompanying Memorandum of Points and Authorities and supporting papers:
19

1.

Plaintiffs are likely to succeed on the merits because the record

20 evidence clearly shows that VidAngel: (a) uses “ripping” software to circumvent
21 technological protection measures on DVDs and Blu-ray discs that effectively
22 control access to Plaintiffs’ copyrighted motion pictures and television shows on
23 those discs, thereby violating § 1201(a); (b) copies the resulting unprotected digital
24 files containing Plaintiffs’ works to a computer system, thereby infringing Plaintiffs’
25 exclusive rights to reproduce their works under § 106(1); and (c) transmits
26 performances from the unauthorized copies that VidAngel makes to the public,
27 thereby infringing Plaintiffs’ exclusive rights to perform their works publicly under
28 § 106(4).

ER805

NOTICE OF MOTION FOR PRELIMINARY INJUNCTION
16-CV-04109-AB (PLAX)

1

2.

VidAngel’s defenses to violating Plaintiffs’ rights are meritless.

2

3.

Absent a preliminary injunction, Plaintiffs will suffer irreparable harm,

3 including with respect to their ability to exercise their exclusive rights, their
4 relationships and goodwill with authorized licensees, and the development of the
5 market for on-demand streaming. The balance of equities tips decidedly in
6 Plaintiffs’ favor, and an injunction is in the public interest.
7

This Motion is based upon this Notice of Motion and Motion; the attached

8 Memorandum of Points and Authorities; the Declarations of Tedd Cittadine
9 (“Cittadine Decl.”), Rose Leda Ehler (“Ehler Decl.”), Kelly M. Klaus (“Klaus
10 Decl.”) and Robert Schumann (“Schumann Decl.”) and Exhibits thereto; all
11 documents on file in this action; and such further or additional evidence or
12 argument as may be presented before or at the time of the hearing on this Motion.
13
14 DATED: August 22, 2016

MUNGER, TOLLES & OLSON LLP

15
16
17
18
19

By:

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

20
21
22
23
24
25
26
27
28

ER806

-2NOTICE OF MOTION FOR PRELIMINARY INJUNCTION
16-CV-04109-AB (PLAX)

TABLE OF CONTENTS

1

Page

2
3
4

INTRODUCTION ....................................................................................................... 1
FACTUAL BACKGROUND...................................................................................... 4

5
6

A.

Plaintiffs And Their Copyrighted Works................................................ 4

B.

VidAngel Builds Its Business By Exploiting Plaintiffs’ Rights ............. 5

7

1.

10

C.

11

How VidAngel Works .................................................................. 7

3.

9

VidAngel’s Decision To Create An Unlicensed Service ............. 5

2.

8

VidAngel’s Escalating Marketing And Recent Growth ............... 9

VidAngel’s Letters To Plaintiffs And Other Studios, And This
Lawsuit .................................................................................................. 10

12 ARGUMENT ............................................................................................................. 11
13 I.
14

PLAINTIFFS ARE LIKELY TO SUCCEED ON THE MERITS OF
THEIR CLAIMS ............................................................................................. 11
A.

15

Plaintiffs Will Succeed On Their DMCA Claim .................................. 11
1.

VidAngel Circumvents The Technological Protection
Measures That Control Access To Plaintiffs’ Works On
Discs............................................................................................ 12

2.

VidAngel Has No Defense To Its Violation Of § 1201(a) ......... 13

16
17
18

a.

The DMCA Makes No Exception For Businesses
That Want To Circumvent To Provide Filters ................. 13

20

b.

The FMA Does Not Authorize Circumvention................ 14

21

c.

There Is No Fair Use Exemption To § 1201(a)
Liability ............................................................................ 15

19

22
23

B.

Plaintiffs Will Succeed On Their Copyright Infringement Claims ...... 16
1.

Plaintiffs Own Or Control Valid Copyrights In The Works
That VidAngel Exploits .............................................................. 16

2.

26

VidAngel Violates Plaintiffs’ Exclusive Rights To
Reproduce And Publicly Perform Their Copyrighted
Works .......................................................................................... 16

27

a.

24
25

28

ER807

VidAngel Violates Plaintiffs’ Exclusive Right To
Reproduce Their Works By Making Copies .................... 17
-iPLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION
16-CV-04109-AB (PLAX)

TABLE OF CONTENTS
(continued)

1
2
b.

3
4

Page

VidAngel Violates Plaintiffs’ Exclusive Right To
Publicly Perform Their Copyrighted Works .................... 17
i.

VidAngel Publicly Performs Plaintiffs’
Works ..................................................................... 17

ii.

VidAngel’s “Buy-Sellback” Scheme Does
Not Transform VidAngel’s Public
Performances Into Private Ones............................. 18

5
6
7
3.

8

None of VidAngel’s Defenses Excuse Its Infringement ............ 21
a.

The FMA Does Not Excuse VidAngel’s
Infringement ..................................................................... 21

b.

11

VidAngel’s Affirmative Defense Of Fair Use Does
Not Excuse Its Infringement ............................................ 22

12

i.

VidAngel’s Wholesale Copying And Publicly
Performing Plaintiffs’ Works Are
Commercial And Non-Transformative .................. 23

ii.

Plaintiffs’ Copyrighted Works Are Highly
Creative .................................................................. 24

iii.

VidAngel Copies The Entirety Of Plaintiffs’
Works And Publicly Performs Substantially
The Entirety Of Them ............................................ 24

iv.

VidAngel’s Service Undermines Existing
And Potential Markets For Plaintiffs’ Works ........ 25

9
10

13
14
15
16
17
18
c.

19
20

II.

The First Sale Doctrine Does Not Authorize
VidAngel’s Copying or Streaming................................... 26

21

PLAINTIFFS WILL SUFFER IRREPARABLE HARM ABSENT AN
INJUNCTION ................................................................................................. 27

22

A.

VidAngel’s Unauthorized Service Causes Immediate And
Irreparable Harms ................................................................................. 27

B.

Plaintiffs’ Motion Is Timely, And VidAngel’s Assertions of
“Delay” Do Not Negate Irreparable Harm ........................................... 30

23
24
25 III.
26
27

THE BALANCE OF HARDSHIPS TIPS DECISIVELY FOR
PLAINTIFFS ................................................................................................... 31

IV.

A PRELIMINARY INJUNCTION IS IN THE PUBLIC INTEREST ........... 32

V.

MINIMAL SECURITY SHOULD BE REQUIRED...................................... 33

28

ER808

-iiPLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION
16-CV-04109-AB (PLAX)

1

TABLE OF CONTENTS
(continued)

2

Page

3 CONCLUSION.......................................................................................................... 33
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

ER809

-iiiPLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION
16-CV-04109-AB (PLAX)

1

TABLE OF AUTHORITIES
Page(s)

2
3 FEDERAL CASES

4 321 Studios v. Metro Goldwyn Mayer Studios, Inc.,
307 F. Supp. 2d 1085 (N.D. Cal. 2004)................................................................ 12
5
6 A & M Records, Inc. v. A.L.W., Ltd.,
855 F.2d 368 (7th Cir. 1988) ................................................................................ 20
7
8 A&M Records, Inc. v. Napster, Inc.,
239 F.3d 1004 (9th Cir. 2001) .............................................................................. 16
9
American Broadcasting Companies, Inc. v. Aereo, Inc.,
10
134 S. Ct. 2498 (2014)...................................................................... 3, 7, 17, 18, 19
11
Apple Inc. v. Psystar Corp.,
12
673 F. Supp. 2d 943 (N.D. Cal. 2009).................................................................. 32
13
Arc of Cal. v. Douglas,
14
757 F.3d 975 (9th Cir. 2014) .......................................................................... 30, 31
15 Arista Records LLC v. Myxer, Inc.,
No. CV 08-03935 GAF, 2011 WL 11660773 (C.D. Cal. 2011) .......................... 25
16
17 Authors Guild. v. Google, Inc.,
804 F.3d 202 (2d Cir. 2015) ................................................................................. 24
18
19 Cadence Design Sys., Inc. v. Avant! Corp.,
125 F.3d 824 (9th Cir. 1997) ................................................................................ 31
20
21 Campbell v. Acuff-Rose Music, Inc.,
510 U.S. 569 (1994) ................................................................................. 23, 24, 25
22
Capitol Records, LLC v. ReDigi Inc.,
23
934 F. Supp. 2d 640 (S.D.N.Y. 2013) .................................................................. 26
24
Central Point Software, Inc. v. Global Software & Accessories, Inc.,
25
880 F. Supp. 957 (E.D.N.Y. 1995) ....................................................................... 20
26 Clean Flicks of Colo. v. LLC v. Soderbergh,
433 F. Supp. 2d 1236 (D. Colo. 2006) ................................................................. 24
27
28

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1
2

TABLE OF AUTHORITIES
(continued)

Page(s)

3 Columbia Pictures Industries, Inc. v. Redd Horne, Inc.,
749 F.2d 154 (3d Cir. 1984) ..................................................................... 17, 18, 19
4
5 Dish Network, L.L.C. v. Vicxon Corp.,
No. 12-CV-9-L WVG, 2013 WL 3894905 (S.D. Cal. July 26, 2013) ................. 15
6
Dr. Seuss Enters., L.P. v. Penguin Books, USA, Inc.,
7
109 F.3d 1394 (9th Cir. 1997) .............................................................................. 25
8
Eldred v. Ashcroft,
9
537 U.S. 186 (2002) ............................................................................................. 32
10
Elvis Presley Enters., Inc. v. Passport Video,
11
349 F.3d 622 (9th Cir. 2003) .................................................................... 23, 24, 25
12 Harper & Row Publishers, Inc. v. Nation Enters.,
471 U.S. 539 (1985) ............................................................................................. 23
13
14 Hooks v. Kitsap Tenant Support Servs., Inc.,
816 F.3d 550 (9th Cir. 2016) ................................................................................ 14
15
16 Kelly v. Primco Mgmt., Inc.,
No. CV-14-07263 BRO, 2015 WL 10990368 (C.D. Cal. Jan. 12,
17
2015) ..................................................................................................................... 32
18
L.A. News Serv. v. Tullo,
19
973 F.2d 791 (9th Cir. 1992) ................................................................................ 25
20 Leadsinger, Inc. v. BMG Music Publ’g,
512 F.3d 522 (9th Cir. 2008) .......................................................................... 23, 25
21
22 Lotus Dev. Corp. v. Paperback Software Int’l,
740 F. Supp. 37 (D. Mass. 1990).......................................................................... 30
23
24 Lydo Enters., Inc. v. City of Las Vegas,
745 F.2d 1211 (9th Cir. 1984) .............................................................................. 30
25
26 MAI Sys. Corp. v. Peak Computer, Inc.,
991 F.2d 511 (9th Cir. 1993) .......................................................................... 17, 22
27
MDY Indus., LLC v. Blizzard Entm’t, Inc.,
28
629 F.3d 928 (9th Cir. 2010) ...................................................................... 2, 12, 14
-v-

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1
2

TABLE OF AUTHORITIES
(continued)

Page(s)

3 Monge v. Maya Magazines, Inc.,
688 F.3d 1164 (9th Cir. 2012) ......................................................................... 23,24
4
5 On Command Video Corporation v. Columbia Pictures Industries,
777 F. Supp. 787 (N.D. Cal. 1991)................................................................. 18, 19
6
Peker v. Masters Collection,
7
96 F. Supp. 2d 216 (E.D.N.Y. 2000) .................................................................... 26
8
Perfect 10, Inc. v. Amazon.com, Inc.,
9
508 F.3d 1146 (9th Cir. 2007) .............................................................................. 22
10
Petrella v. Metro-Goldwyn-Mayer, Inc.,
11
134 S. Ct. 1962 (2014)................................................................................ 4, 30, 31
12 Realnetworks, Inc. v. DVD Copy Control Ass’n,
641 F. Supp. 2d 913 (N.D. Cal. 2009)............................................................ 12, 32
13
14 Red Baron-Franklin Park, Inc. v. Taito Corp.,
883 F.2d 275 (4th Cir. 1989) ................................................................................ 26
15
16 Salinger v. Colting,
607 F.3d 68 (2d Cir. 2010) ................................................................................... 27
17
18 Ticketmaster L.L.C. v. RMG Techs., Inc.,
507 F. Supp. 2d 1096 (C.D. Cal. 2007) ................................................................ 28
19
Triad Sys. Corp. v. Se. Express Co.,
20
64 F.3d 1330 (9th Cir. 1995) ................................................................................ 31
21
TRW Inc. v. Andrews,
22
534 U.S. 19 (2001) ............................................................................................... 13
23 UMG Recordings, Inc. v. Escape Media Grp., Inc.,
No. 11 CIV. 8407, 2014 WL 5089743 (S.D.N.Y. Sept. 29, 2014) ...................... 17
24
25 United Fabrics Int’l, Inc. v. C&J Wear, Inc.,
630 F.3d 1255, 1257 (9th Cir. 2011) .................................................................. 16
26
27 United States v. Crippen,
No. CR 09-703 PSG, 2010 WL 7198205 (C.D. Cal. Nov. 23, 2010) ............ 15, 16
28
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1
2

TABLE OF AUTHORITIES
(continued)

Page(s)

3 Universal City Studios, Inc. v. Reimerdes,
111 F. Supp. 2d 294 (S.D.N.Y. 2000) ............................................................ 12, 16
4
5 Warner Bros. Entertainment Inc. v. WTV Systems, Inc.,
824 F. Supp. 2d 1003 (C.D. Cal. 2011) ........................................ 18, 19, 27, 29, 33
6
Winter v. Natural Res. Def. Council, Inc.,
7
555 U.S. 7 (2008) ................................................................................................. 11
8
Worldwide Church of God v. Philadelphia Church of God, Inc.,
9
227 F.3d 1110 (9th Cir. 2000) .............................................................................. 24
10
WPIX, Inc. v. ivi, Inc.,
11
691 F.3d 275 (2d Cir. 2012) ................................................................................. 28
12 FEDERAL STATUTES
13
17 U.S.C. § 101................................................................................................ 3, 17, 22
14
17 U.S.C. § 106............................................................................................. 14, passim
15
17 U.S.C. § 106(1) ................................................................................................. 1, 17
16
17 17 U.S.C. § 106(3) ..................................................................................................... 26
18 17 U.S.C. § 106(4) ............................................................................................. 1, 3, 17
19 17 U.S.C. § 107.................................................................................................... 15, 22
20
17 U.S.C. § 109(a) ..................................................................................................... 26
21
17 U.S.C. § 110.............................................................................................. 14, 15, 21
22
23 17 U.S.C. § 110(11) ........................................................................................ 2, passim
24 17 U.S.C. § 117(c) ..................................................................................................... 31
25 17 U.S.C. § 410(c) ..................................................................................................... 16
26 17 U.S.C. § 1201.................................................................................................. 14, 15
27
17 U.S.C. § 1201(a) ........................................................................................ 1, passim
28
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1

TABLE OF AUTHORITIES
(continued)

2

Page(s)

3 17 U.S.C. § 1201(c) ................................................................................................... 15
4 17 U.S.C. § 1201(d)-(j) .............................................................................................. 13
5
FEDERAL REGULATIONS
6
37 CFR pt. 201.40 ...................................................................................................... 13
7
LEGISLATIVE MATERIALS
8
9 151 Cong. Rec. S501-S502 (daily ed. Jan. 25, 2005)...................................... 2, 15, 22
10 H.R. 4586, Serial No. 94 (June 17, 2004) ................................................................. 15
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

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1

MEMORANDUM OF POINTS AND AUTHORITIES

2

INTRODUCTION
Defendant VidAngel operates an online on-demand video streaming service

3

4 that blatantly violates Plaintiffs’ rights under the DMCA and the Copyright Act:


5

VidAngel starts by circumventing the technological protection

6

measures on DVDs and Blu-ray discs (collectively, “Discs”) that

7

control access to the digital media files of Plaintiffs’ copyrighted

8

movies and television shows—or, as VidAngel’s employees say, they

9

“rip[]” the movies—a violation of § 1201(a) of the DMCA. Schumann
Decl. ¶¶ 7, 35-38, 43, Ex. C at 23; Dkt. 11(Counter-Complaint) ¶ 61.

10


11

VidAngel then copies to computer servers the copyrighted works that

12

VidAngel has ripped—a violation of Plaintiffs’ exclusive rights to

13

reproduce their works under § 106(1) of the Copyright Act. Schumann

14

Decl. ¶¶ 37, 40-42, Ex. C at 23-25; Ehler Decl. Ex. EE at Tr. 58:1-4.1


15

VidAngel then streams performances of those copyrighted works over

16

and over again to numerous VidAngel customers, i.e., “to the public”—

17

a violation of Plaintiffs’ exclusive rights to publicly perform their

18

works under § 106(4). Schumann Decl. ¶¶ 7-8, Ex. C at 23-25; Ehler

19

Decl. Ex. EE at Tr. 90:18-22.
Legitimate on-demand streaming services—e.g., iTunes, Amazon and Google

20

21 Play—run their businesses without illegally circumventing and with authorization to
22 copy and stream Plaintiffs’ works. These legitimate services negotiate and pay for
23 the rights they use. VidAngel does not, and it thereby acquires an unjust
24 competitive advantage that VidAngel touts in its advertising. Id. Ex. A (examples).
25
1

All transcript references are to the 30(b)(6) deposition of VidAngel’s CEO, Neal
Harmon on August 11, 2016, excerpts at Ehler Decl., Ex. EE. The “Tr.” references
27 are to the page and line of the original deposition transcript rather than the page as
28 consecutively numbered in the Exhibits.
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1 VidAngel’s illegal conduct threatens imminent, irreparable harm by depriving
2 Plaintiffs of their rights to control their content, interfering with relationships with
3 licensees, and undercutting the growth of the legitimate on-demand streaming
4 market. Even VidAngel’s followers recognize VidAngel causes harm. Id. Ex. C (“I
5 could watch Star Wars 7 on VidAngel (only filtering one small thing) for $1 before
6 any other video streaming service had it available. If you guys are allowed to rip,
7 stream, and resell DVDs, the other streaming services will want to do it too – it’s
8 only fair.”).
9
10

VidAngel tries to defend its service with three meritless arguments.
First, VidAngel argues that Congress sanctioned all of its unlawful conduct

11 under the Family Movie Act of 2005 (“FMA”), 17 U.S.C. § 110(11), because
12 VidAngel allows its users to select content “filters” that skip or mute content from
13 streamed movies. The claims at issue have nothing to do with the filtering aspects
14 of VidAngel’s service, and the FMA provides VidAngel no shelter on this motion.
15 The FMA says that one does not infringe copyright by making motion picture
16 content “imperceptible” (or providing software that does the same) in the context of
17 private home viewing. Id. The FMA does not say that a business that filters thereby
18 has a total exemption from the DMCA or from having to license the right to copy
19 and publicly stream movies. On the contrary, the FMA makes clear that the relevant
20 filtering must be done from an “authorized copy,” which VidAngel does not make
21 and from which it does not stream. Id.; see 151 Cong. Rec. S501-S502 (daily ed.
22 Jan. 25, 2005) (Sen. Hatch) (“[A]n infringing transmission of a performance to a
23 household, [is] not rendered non-infringing by section 110(11) by virtue of the fact
24 that limited portions [of the performance] are made imperceptible.”). Filtering does
25 not make an underlying unlicensed service legal. And the FMA provides no defense
26 to circumventing, which is “distinct from infring[ing].” MDY Indus., LLC v.
27 Blizzard Entm’t, Inc., 629 F.3d 928, 946, 950 (9th Cir. 2010).
28

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1

Second, VidAngel claims it does not violate the public performance right

2 because it makes only “private” performances to users who “purchase” Discs from
3 VidAngel. That is wrong. When it streams movies over the Internet, VidAngel is
4 “transmitting” performances to users. Transmissions infringe § 106(4) where, as
5 here, the defendant makes them “to the public, by means of any device or process,
6 whether the members of the public capable of receiving the performance or display
7 receive it in the same place or in separate places and at the same time or at different
8 times.” 17 U.S.C. § 101 (defining “[t]o perform . . . a work ‘publicly’”). A long
9 line of precedent construing this provision (the “Transmit Clause”)—including in
10 the Supreme Court’s recent decision in American Broadcasting Companies, Inc. v.
11 Aereo, Inc., 134 S. Ct. 2498 (2014)—makes it clear that VidAngel’s online, on12 demand transmissions are public performances. They do not become “private”
13 performances just because VidAngel purports to “sell” its users the Discs (which
14 VidAngel then immediately offers to buy back for a net access price of $1 a day).
15 VidAngel’s “buy-sellback” scheme is an artifice—what its CEO called a “creative
16 way” to compete while trying to be “buttoned up legally.” Ehler Decl. Ex. DD at
17 366. This sleight of hand does not cure VidAngel’s infringement. What matters is
18 whether VidAngel is transmitting performances to the public, not the label that
19 VidAngel uses to describe its transactions. Aereo, 134 S. Ct. at 2509 (“[W]hen
20 Aereo streams the same television program to multiple subscribers, it ‘transmit[s]
21 . . . a performance’ to all of them”). VidAngel publicly performs without a license.
22

Third, VidAngel argues that Plaintiffs forfeited the right to a preliminary

23 injunction because they did not immediately sue VidAngel when its outside litigator
24 (and recently appointed General Counsel) sent letters describing parts of the service
25 to Plaintiffs and other motion picture studios in July 2015. Dkt. 11, Ex. A. At that
26 point, as noted in those letters, VidAngel had fewer than 5,000 users and described
27 its service as being in a “limited beta.” Id. The letters did not say when VidAngel
28 would launch publicly, and Plaintiffs could not have known whether the service
-3-

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1 would survive, let alone thrive. As the Supreme Court has recognized, “[e]ven if an
2 infringement is harmful, the harm may be too small to justify the cost of litigation.”
3 Petrella v. Metro-Goldwyn-Mayer, Inc., 134 S. Ct. 1962, 1976 (2014). Copyright
4 owners do not have to immediately sue anyone who infringes, or forever lose the
5 right to seek a preliminary injunction; such a requirement would lead to unnecessary
6 litigation and burdens on the courts. VidAngel started to advertise more
7 aggressively earlier this year and gained traction in the press and online blogs; it
8 now has more than [100,000] active monthly users (and more than [400,000] total)
9 and continues to grow. Ehler Decl. Ex. D; id. Ex. AA at 317. Plaintiffs were
10 justified in suing when they did, and they satisfy all the requirements for injunctive
11 relief.
12

FACTUAL BACKGROUND

13

A.

Plaintiffs And Their Copyrighted Works

14

Plaintiffs, directly or through affiliates, invest substantial resources and effort

15 to produce and distribute some of the most popular and critically acclaimed movies
16 and television programs in the world. Their works include, among many others,
17 Frozen (2013) (Disney), Star Wars: The Force Awakens (2015) (Lucasfilm), Avatar
18 (2009) (Fox), and Harry Potter and the Sorcerer’s Stone (2001) (Warner Bros.).
19

Copyright protection is critical to Plaintiffs’ ability to obtain a return on their

20 substantial investments in these and other works and to underwrite the production of
21 new creative content, often at great financial risk. Cittadine Decl. ¶ 8. A studio will
22 spend tens or even hundreds of millions of dollars producing, distributing and
23 marketing a major motion picture. Id. ¶ 7. Third parties that wish to exercise
24 Plaintiffs’ rights to exploit their works must negotiate to obtain those rights. Id.
25 ¶ 14.
26

Plaintiffs employ different strategies to make their content available to meet

27 consumer demand, but each Plaintiff tries to tailor the value and price for each
28 offering—or “distribution channel”—to the willingness of customers (and licensees)
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1 to pay for those offerings. Id. ¶ 9. Plaintiffs distribute and license their content for
2 home entertainment across a number of channels. These include, among others:
3 (1) physical Discs; (2) digital download through services like iTunes, VUDU or
4 Amazon Video; (3) on-demand streaming for short-term viewing on a per5 transaction fee (e.g., iTunes Store or Google Play Store); or (4) subscription on6 demand streaming (e.g., Netflix or Hulu). Id.
7

Plaintiffs’ strategic process of releasing their content across different

8 distribution channels and to different licensees over time is called “windowing.” Id.
9 ¶ 15. A Plaintiff may decide to release specific titles only through certain channels
10 for a prescribed period, e.g., releasing titles for purchase on Discs or digital
11 download before releasing them to on-demand streaming. Id. ¶¶ 15, 33. Plaintiffs
12 often negotiate higher licensing fees in exchange for granting a licensee the
13 exclusive right to perform a movie or television show during a particular time
14 period. Id. ¶ 15. The online and digital channels have become increasingly
15 important revenue sources. Id. ¶ 10.
16

Especially in this digital age, to exercise their exclusive rights under

17 copyright, Plaintiffs must protect their content from piracy and unauthorized use.
18 Technological protection measures that control access (here, “access controls”) are
19 one way in which Plaintiffs ensure that copies of their content stored on Discs
20 cannot be easily copied and disseminated digitally. Schumann Decl. ¶¶ 20, 27. The
21 access controls that encrypt the digital files on Discs can lawfully be unencrypted
22 for playback or copying only by authorized devices. Id. ¶¶ 20-34.
23
24
25

B.

VidAngel Builds Its Business By Exploiting Plaintiffs’ Rights
1.

VidAngel’s Decision To Create An Unlicensed Service

In the fall of 2013, VidAngel first launched a standalone filtering service

26 through a web browser plug-in. Ehler Decl. Ex. EE at Tr. 135:12-136:7. This
27 technology permitted a user to apply filters to content streamed from YouTube (and
28 if a full-length movie, obtained legitimately through Google Play). Id.
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1

In the fall of 2014, VidAngel decided to “pivot” its business to its current

2 service, which does not simply provide filtering but offers unauthorized streaming
3 for a daily fee. Id. Ex. V at 217; Id. Ex. EE at Tr. 136:8-12. VidAngel knew from
4 surveying users who stopped using its prior service that [47% of them “didn’t want
5 to pay for rentals on YouTube/Google Play.”] Id. Ex. V at 227. It also had
6 information that only 1% of Americans would actually pay to watch filtered
7 versions of movies if you charged them to use a filter. Id. Ex. E at 61. VidAngel
8 decided that, rather than provide filters to run on streams from licensed services, it
9 would rip and copy Discs and charge users for streaming. When investors
10 questioned whether the company was getting into a [declining business (movies on
11 Discs)], Mr. Harmon, the CEO, assured them that [“VidAngel is NOT a disc service.
12 VidAngel is a streaming service.”] Id. Ex. W at 234 (emphasis added).2
From the outset of its “pivot,” VidAngel knew it would need licenses to run a

13

14 streaming business. VidAngel, however, decided on a strategy of asking for
15 forgiveness, not permission. As Mr. Harmon put it in a fall 2014 email to an
16 investor: [“[i]n the future we plan to negotiate licenses for content directly from
17 Hollywood (as Netflix) did. . . . We need disc[s] right[] [now] on the streaming
18 platform (which is growing at over 20 percent annually), not an upward trend in disc
19 sales.”] Id.; see also id. Ex. DD at 366 (Feb. 2015: Mr. Harmon saying VidAngel
20 would “have to be a lot bigger” to “get licensing from Hollywood. . . . Until then,
21 we sell DVDs and Blu-Rays to you, vault them in our warehouse, and stream you a
22 filtered movie. The buyback system was the most creative way we could come up
23 with in order to offer you the value of a Redbox while staying buttoned up
24 legally.”); id. Ex. X at 257 (Sept. 2015: Mr. Harmon saying VidAngel
25
2

At deposition, Mr. Harmon claimed this email was discussing a model for users to
“trade or share” their own Discs. Ehler Decl. Ex. EE at Tr. 146:8-148:6. But the
27 statement that VidAngel would be a [“streaming service,” “NOT a disc service,”]
28 was true regardless of the source of Discs. Id. Ex. W at 234.
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1
2
3
4

2.

How VidAngel Works

For every movie or TV show it streams, VidAngel first rips a digital copy of

5 the content from a single Disc. Id. Ex. EE at Tr. 127:6-131:7; Schumann Decl. ¶¶
6 37-39, 42, Exs. C at 23, D. Using RedFox AnyDVD HD software—popularly
7 known as a “ripping” tool—VidAngel circumvents the technological protections—
8 CSS, AACS, BD+—that Plaintiffs use to control access to their content. Ehler Decl.
9 Ex. S. VidAngel previously used the same software sold by the same developers
10 and staff of SlySoft, a ripping software company whose owner was found guilty of
11 distributing illegal circumvention tools. Id. Exs. F, EE at Tr. 68:9-69:16.
12

After circumventing the access controls, VidAngel copies the underlying

13 digital files (i.e., the movie or television show) onto its computers and then saves
14 additional copies on leased third-party servers. Schumann Decl. ¶ 40-42. VidAngel
15 uses the ripped digital copies stored on those servers to stream content. Id.; Ehler
16 Decl. Ex. EE at Tr. 90:18-22.
17

VidAngel charges customers for its on-demand streaming through a sham

18 “buy-sellback” scheme. VidAngel adopted this scheme as part of the “pivot,”
19 believing that it provided a loophole from public performance liability in light of
20 dicta in the Aereo decision. Id. Ex. V at 217. As discussed at pp. 18-21, infra,
21 VidAngel’s reliance on “buy-sellback” does not change its liability. The facts
22 showing “buy-sellback” to be a fiction, however, speak volumes about VidAngel’s
23 credibility in defending its service.
24

“Buy-sellback” works like this: Users pay an upfront fee of $20, purportedly

25 to “purchase” a physical Disc. Id. Ex. P at 181, 198 (“like a ‘security deposit’”).
26 VidAngel then associates the user with an individual Disc that VidAngel has bar27 coded and stored at its facility (the so-called “vault copy”). Id. Ex. EE at Tr. 51:528 20; 184:22-185:9. The user does not control or possess the vault copy; VidAngel
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1 does. Id. at 124:21-25. VidAngel claims that, upon request, it will transfer
2 possession of the vault copy to the user. Id. at 228:21-229:1. To date, however,
3 VidAngel has received only [eight] requests from users to receive the physical Disc
4 and has returned only [four] Discs—out of more than [1.5 million] purported “sales”
5 thus far in 2016 alone. Id. at 229:2-12; 189:21-190:8.3
Furthermore, VidAngel does not actually stream from the vault copy—the

6

7 copy that VidAngel claims the customer “owns.” Id. at 127:6-20. Rather, VidAngel
8 circumvents the access controls on a Disc, copies the content and then streams from
9 the ripped copy that resides on VidAngel’s leased server. Id. at 130:20-131:17.
10 VidAngel then encourages the user to “sell back” the Disc at a “buyback” price that
11 goes down by $1 or $2 for each 24-hour period. Id. Ex. G at 93-94 (VidAngel
12 promotional clips on YouTube).4 The net effect is that the user pays $1 or $2 a day
13 for on-demand access to stream the movie or television show—daily prices which
14 VidAngel prominently features in its advertising. Id. Ex. G.
VidAngel constantly encourages users to treat the service as an online rental

15

16 service, which they can do by simply clicking to “sellback” the movie for credit.
17 Among other things, VidAngel provides: (1) an icon in the corner of the viewing
18 screen, allowing the user to initiate sellback during the stream; (2) a sellback
19 “popup” box at the end of the movie; (3) a link to sellback in the user dashboard;
20
21
22
23
24
25

3

Other inconsistencies expose the fiction that VidAngel is performing the contents
of a Disc the user “owns.” For example, the [four] users who actually requested and
received physical Discs can still stream the same content via VidAngel—proving
the stream comes from a different copy. Id. at 235:6-21. And, users who want to
watch a television show “purchase” access only to a single episode. Id. Ex. H.
Discs of Plaintiffs’ television shows contain entire seasons. If a user actually
“owned” the Disc, the user could watch the full season.
4

“How VidAngel $1 Movie Works in 15 Seconds” is available on YouTube at
https://www.youtube.com/watch?v=map6EIP41bY (last visited Aug. 21, 2016).
27 “How $1 Movies Work on VidAngel Sellback” is available at
28 https://www.youtube.com/watch?v=wvcF4x1d0xo (last visited Aug. 21, 2016).
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1 (4) an email reminder about the sellback option after 24 hours; and (5) until this
2 lawsuit, an “auto-sellback” default setting, whereby users would automatically set
3 their devices to sellback, and thus be assured the equivalent of a rental transaction.
4 Id. Ex. BB at 336-37.
5
6

3.

VidAngel’s Escalating Marketing And Recent Growth

VidAngel’s strategy has involved rapidly growing its user base. In July 2015,

7 VidAngel had fewer than 4,848 users, but ambitious growth plans. Dkt. 11, Ex. A at
8 3. A November 2015 investor presentation projected that for 2016, VidAngel would
9 reach
10 customers and
11

in revenue; for 2017,

customers and

in revenue; and for 2018,

customers and

in revenue—with projected profit margins of

. Ehler

12 Decl. Ex. Y at 283.
13

To achieve these ends, VidAngel this year embarked on an aggressive

14 marketing campaign, explicitly contrasting its $1-a-day (or $2 for HD) price
15 (because it foregoes license fees) with the more typical $4.99 or $5.99 daily fee
16 charged by licensed services; VidAngel also boasts of its ability to offer movies not
17 available on other services. Ehler Decl. Exs. A, B. VidAngel’s users have
18 responded to VidAngel’s marketing cues:
19
20

One more thing I love about VidAngel is that I can easily
download NEW movies cheaper than anywhere else! I
probably won’t edit this one for our family, but I’m so
happy I can still just rent it for $2 a night!

21
22 Id. Ex. I at 98; see also id. at 101 (“We bought Star Wars and sold it back for a total
23 of $1 when it was like $5 to rent on Amazon. So even if you don’t need content
24 cleaned, it’s a great video service.”).
25

This spring, VidAngel began adding more of Plaintiffs’ works to its service,

26 with a particular focus on marketing movies as soon as they were released on Disc.
27 On April 5, 2016, VidAngel offered Star Wars: The Force Awakens. Id. Ex. J.
28 April 5 was the same day that The Force Awakens was released for purchase on
-9-

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16-CV-04109-AB (PLAX)

1 Disc and digital download, but was not yet available to the on-demand streaming
2 market. Cittadine Decl. ¶ 16. VidAngel also released Disney’s Zootopia, Warner
3 Bros.’s Batman v. Superman: Dawn of Justice and Keanu, and Fox’s DeadPool and
4 The Revenant, among others, within a week of their release on Disc and, for some of
5 these titles, before they were released on any other on-demand streaming service.
6 Ehler Decl. Ex. N.
7

By June 2016, when Plaintiffs filed suit, VidAngel had grown to nearly

8 [500,000] monthly transactions across well over [100,000] monthly active users. Id.
9 Ex. AA at 315, 317. VidAngel had also streamed over [1.5 million] movies in the
10 first half of 2016. Id. Ex. EE at Tr. 189:21-190:8. VidAngel continues to
11 aggressively market its service using Plaintiffs’ copyrighted content.
12

C.

VidAngel’s Letters To Plaintiffs And Other Studios, And This
Lawsuit

13
14

Late last summer, VidAngel’s then-outside counsel, David Quinto, sent letters

15 to Plaintiffs or their corporate parents, ostensibly expressing interest in purchasing
16 more Discs directly from each company. Dkt. 11, Ex. A. Mr. Quinto sent the letters
17 to General Counsels, not to people in business development. He purported to
18 describe VidAngel’s nascent service, which he said was in “limited beta” testing.
19 Id. at 3. Mr. Quinto said nothing about VidAngel circumventing the access-control
20 measures on Discs. He said nothing about VidAngel marketing its service for $1-a21 day on-demand streaming through its “buy-sellback” scheme or offering Plaintiffs’
22 content before that content was available to authorized licensees.
23

Plaintiffs started investigating their potential legal claims against VidAngel

24 almost immediately after receiving Mr. Quinto’s letter. Cittadine Decl. ¶ 35.
25 Starting earlier this year, VidAngel launched a much broader advertising offensive
26 and started to gain traction in the press and on blogs, and its service started to grow
27 to significant user numbers. On June 9, 2016, Plaintiffs filed this suit.
28

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1

In response, VidAngel modified certain aspects of its service. Before being

2 sued, VidAngel allowed users to filter for either the opening or closing credits as the
3 single required filter, meaning users could stream essentially the entire movie
4 without filters (users could even set this as the default filter).5 Ehler Decl. Ex. EE at
5 Tr. 247:24-248:21. To the chagrin of its users, VidAngel suspended this option in
6 response to this litigation, although users still must only select one filter to use the
7 service.6 Id. at 246:10-247:22.
8

ARGUMENT

9

Plaintiffs satisfy all the requirements for a preliminary injunction: They

10 likely will succeed on the merits and suffer irreparable harm absent preliminary
11 relief; the balance of equities tip in their favor, and an injunction is in the public
12 interest. Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 20 (2008).
13 I.
14

PLAINTIFFS ARE LIKELY TO SUCCEED ON THE MERITS OF
THEIR CLAIMS
A.

Plaintiffs Will Succeed On Their DMCA Claim

15
To prevail on their circumvention claim, Plaintiffs must prove that VidAngel

16

17 “circumvent[s] a technological measure that effectively controls access to a work
18 protected” by copyright. 17 U.S.C. § 1201(a)(1)(A). A violation of the DMCA is
19 “independent of traditional copyright infringement,” and no “nexus” to copyright
20
21
5

22
23
24
25
26
27
28

This was a popular option particularly for Disney works. When VidAngel offered
this option, customers watched [23.61%] of streams of Up, [22.36%] of streams of
Finding Nemo, [20.91%] of streams of Monsters, Inc., [20.46%] of streams of WallE and [20.36%] of streams of Big Hero 6 essentially unfiltered by selecting only the
credits filter. Ehler Decl. Ex. CC. For Warner Bros.’s An Innocent Man, customers
viewed [44.90%] of streams using only this filter. Id.
6
Users were upset that they would have to filter actual movie content (rather than
the credits) to cheaply stream movies: “@VidAngel and you took away censoring
the end credits which was an easy choice if I didn’t really want to censor anything.”
Ehler Decl. Ex. FF; id Ex. K (examples); see also id. Ex. O.

ER825

-11PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION
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1 infringement is required. See MDY Indus., 629 F.3d at 946, 949, 952 (expressly
2 declining to adopt a “infringement nexus requirement”) (emphasis added).
1.

3

VidAngel Circumvents The Technological Protection
Measures That Control Access To Plaintiffs’ Works On Discs

4
5

A technological measure effectively controls access to a copyrighted work if,

6 “in the ordinary course of its operation, [it] requires the application of information,
7 or a process or a treatment, with the authority of the copyright owner, to gain access
8 to the work.” 17 U.S.C. § 1201(a). Plaintiffs use CSS, AACS and BD+ to prevent
9 unauthorized access to their content on Discs. Schumann Decl. ¶¶ 20, 27. All three
10 qualify as DMCA access controls. See id. ¶¶ 20-34; Realnetworks, Inc. v. DVD
11 Copy Control Ass’n, 641 F. Supp. 2d 913, 932 (N.D. Cal. 2009) (“CSS . . .
12 effectively controls access to . . . copyrighted DVD content”); 321 Studios v. Metro
13 Goldwyn Mayer Studios, Inc., 307 F. Supp. 2d 1085, 1095 (N.D. Cal. 2004);
14 Universal City Studios, Inc. v. Reimerdes, 111 F. Supp. 2d 294, 317-18 (S.D.N.Y.
15 2000).
16

VidAngel circumvents these access controls. To circumvent is “to

17 descramble a scrambled work, to decrypt an encrypted work, or otherwise to avoid,
18 bypass, remove, deactivate, or impair a technological measure, without the authority
19 of the copyright owner.” 17 U.S.C. § 1201(a)(3)(A). VidAngel admits that it “uses
20 a commercially available software program to automatically allow read-access for
21 the purpose of mounting the DVD [and Blu-ray] files for uploading onto a
22 computer, in the process removing restrictions on DVD [and Blu-ray] encryption.”
23 Dkt. 11 ¶ 50(ii) (emphasis added); see Ehler Decl. Ex. S (invoice for AnyDvd HD);
24 Schumann Decl. ¶¶ 35-39. In short, VidAngel circumvents technological measures
25 that control access, and is liable under § 1201(a).
26
27
28

ER826

-12PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION
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2.

1

VidAngel Has No Defense To Its Violation Of § 1201(a)
a.

2

The DMCA Makes No Exception For Businesses That
Want To Circumvent To Provide Filters

3
VidAngel argues that its circumvention is lawful because “the making of a

4

5 decrypted copy [is] the necessary first step in making a lawfully purchased DVD
6 capable of being filtered.” See Dkt. 11 (Counter-Complaint) ¶¶ 61-62. That is not
7 true as a factual matter and is irrelevant as a legal matter. As VidAngel admits,
8 other services provide software that allows consumers to apply filters to Discs they
9 have purchased. See id. ¶ 34 (describing ClearPlay’s DVD-filtering service). What
10 VidAngel means is that circumventing is a “necessary first step” for the type of
11 business VidAngel wants to run—one that provides unauthorized on-demand access
12 to content streamed from copies ripped from Discs. Circumvention makes it easier
13 and cheaper for VidAngel to run its business, but that does not make the
14 circumvention lawful.
VidAngel’s circumvention does not fit into any enumerated exception to the

15

16 anti-circumvention right or any additional exception promulgated by the Librarian
17 of Congress.7 17 U.S.C. § 1201(d)-(j). Where, as here, “Congress explicitly
18 enumerates certain exceptions to a general prohibition, additional exceptions are not
19 to be implied, in the absence of evidence of a contrary legislative intent.” TRW Inc.
20 v. Andrews, 534 U.S. 19, 28 (2001) (quotations omitted).
21
22
23
24
25

7

The DMCA calls for the Librarian of Congress to engage in triennial rulemaking to
26 determine if certain noninfringing uses of a copyrighted work are entitled to an
exception. 17 U.S.C. § 1201(a)(1)(B)-(C). The exceptions the Librarian has
27 promulgated are at 37 CFR Part 201.40, and none applies to VidAngel. Indeed, the
28 Librarian has never even been asked to consider such an exception for filtering.
-13-

ER827

PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION
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b.

1
2

The FMA Does Not Authorize Circumvention

VidAngel argues that the FMA shows Congress’s intent to exempt VidAngel

3 from § 1201(a) liability. The FMA’s text and legislative history show the opposite
4 is true.
5

The FMA addresses a narrowly specified type of activity (the making

6 imperceptible of certain audio and video), which, if it falls within the FMA is “not
7 an infringement[] of copyright.” 17 U.S.C. § 110(11). Section 1201, however,
8 provides a separate cause of action that is not a claim of infringement. As the Ninth
9 Circuit explained—in the course of declining to adopt the requirement of a “nexus”
10 between a DMCA violation and infringement—the DMCA “create[d] a new
11 anticircumvention right in § 1201(a) distinct from infringement.” See MDY Indus.,
12 629 F.3d at 950 (emphasis added). “Infringement” is the violation of one of
13 copyright’s exclusive rights, which are found in § 106. It is not the same as
14 circumvention. The FMA further states that nothing in that exception to
15 infringement (§ 110(11)) “shall be construed to imply further rights under section
16 106 of this title, or to have any effect on defenses or limitations on rights granted
17 under any other section of this title or under any other paragraph of this section.” 17
18 U.S.C. § 110 (final sentence) (emphasis added). Section 1201(a) embodies rights
19 and defenses relating to circumvention and not infringement. The FMA by its plain
20 language provides VidAngel no defense.
21

Because “the statutory language is unambiguous and the statutory scheme is

22 coherent and consistent,” there is no need to examine legislative history. Hooks v.
23 Kitsap Tenant Support Servs., Inc., 816 F.3d 550, 562 (9th Cir. 2016). But the
24 legislative history confirms that the FMA does not excuse circumvention. The
25 section-by-section analysis by the FMA’s Senate sponsor states that the FMA “does
26 not provide any exemption from the anti-circumvention provisions of section 1201,”
27 and that it:
28

ER828

-14PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION
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would not be a defense to a claim of violation of section
1201 that the circumvention is for the purpose of engaging
in the conduct covered by this new exemption in section
110(11) [the FMA], just as it is not a defense under section
1201 that the circumvention is for the purpose of engaging
in any other non-infringing conduct.

1
2
3
4

5 151 Cong. Rec. S502 (daily ed. Jan. 25, 2005); see id. (“Any suggestion that support
6 for the exercise of viewer choice . . . requires violation of either the copyright in the
7 work or of the copy protection schemes that provide protection for such work should
8 be rejected.”).8 The FMA provides VidAngel no defense to its § 1201(a) violations.
c.

9

There Is No Fair Use Exemption To § 1201(a) Liability

The fair use defense under § 107 does not apply to § 1201(a) violations. See,

10

11 e.g., Dish Network, L.L.C. v. Vicxon Corp., No. 12-CV-9-L WVG, 2013 WL
12 3894905, at *6 (S.D. Cal. July 26, 2013) (“[P]otential lawful or fair use is not a
13 defense to § 1201(a) when its requirements are established.”); United States v.
14 Crippen, No. CR 09-703 PSG, 2010 WL 7198205, at *2 (C.D. Cal. Nov. 23, 2010)
15 (“A reading of § 1201(c) that adds the fair use arrow to a defendant’s § 1201(a)
16 quiver contradicts the plain meaning of the statute and must be rejected.”).
17
8

18
19
20
21
22
23
24
25
26
27
28

When Congress first considered the FMA, in 2004, Representative Goodlatte
expressed concern that it might interfere with copyright owners’ rights under
§ 1201. Hearing on H.R. 4586, Serial No. 94 (June 17, 2004) at 84. He asked about
including an explicit provision to make clear that the FMA has no effect on § 1201.
Id. In a letter, the Register of Copyrights stated that such an explicit provision was
unnecessary because “[t]he anticircumvention provisions of section 1201 apply even
in cases where circumvention is carried out in order to engage in an act that is not an
act of infringement under the copyright statute.” Id. at 89. The Register advised
against including a specific statement confirming the inapplicability of the FMA to
§ 1201 claims, noting such a provision could create needless confusion regarding
the other exemptions from infringement in § 110 (where the FMA is codified) and
elsewhere in the Copyright Act: “To include in this new exemption a reference to
section 1201 when none of the other exemptions in section 110 or elsewhere in the
Copyright Act make such reference will imply that those existing exemptions also
apply to liability under the anticircumvention provisions, when it should be clear
that they do not.” Id.

ER829

-15PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION
16-CV-04109-AB (PLAX)

1

“[T]he decision not to make fair use a defense to a claim under Section

2 1201(a) was quite deliberate.” Reimerdes, 111 F. Supp. 2d at 322. Congress was
3 well aware “that technological controls on access to copyrighted works might erode
4 fair uses by preventing access even for uses that would be deemed ‘fair,’” and
5 “struck a balance among the competing interests.” Id. (citing Commerce Com. Rep.
6 25-26). Reading a fair use defense into § 1201(a) would upset that balance and be
7 contrary to the statute. Crippen, 2010 WL 7198205, at *5 (§ 1201(a) is a
8 “rebalancing of interests that attempts to deal with special problems created by the
9 so-called digital revolution”; “[t]hat balancing [is] done by the DMCA, not by
10 adding fair use to the circumvention equation”) (citation omitted).
11

B.

Plaintiffs Will Succeed On Their Copyright Infringement Claims

12

Plaintiffs easily establish prima facie infringement claims because they

13 (1) “show ownership” and (2) demonstrate a violation of “at least one exclusive
14 right” (sections 1 and 2, infra). A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004,
15 1013 (9th Cir. 2001). VidAngel’s claimed defenses are meritless (section 3, infra).
1.

16

Plaintiffs Own Or Control Valid Copyrights In The Works
That VidAngel Exploits

17
18

Certificates of registration issued by the Copyright Office for the copyrighted

19 works identified in the Complaint are included with this filing. Klaus Decl. Exs. A20 RR. The certificates create a presumption of copyright validity and ownership. 17
21 U.S.C. § 410(c); United Fabrics Int’l, Inc. v. C&J Wear, Inc., 630 F.3d 1255, 1257
22 (9th Cir. 2011). It is undisputed that VidAngel currently offers all the works listed
23 in Exhibit A to the complaint and, unless enjoined, will continue to offer these
24 works and other future releases. Ehler Decl. Ex. EE at Tr. 27:19-29:14; 30:3-20;
25 31:6-37:4.
26

2.

VidAngel Violates Plaintiffs’ Exclusive Rights To Reproduce
And Publicly Perform Their Copyrighted Works

27
28

ER830

VidAngel infringes at least two distinct § 106 rights, each of which is
-16PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION
16-CV-04109-AB (PLAX)

1 sufficient to render VidAngel liable.
2

a.

VidAngel Violates Plaintiffs’ Exclusive Right To
Reproduce Their Works By Making Copies

3
4

Plaintiffs have the exclusive right “to reproduce” their works “in copies.” 17

5 U.S.C. § 106(1). VidAngel admits to making copies of Plaintiffs’ works onto
6 computer system and third-party servers, thereby violating the reproduction right.
7 Ehler Decl. Ex. EE at Tr. 58:1-4. This is infringement. MAI Sys. Corp. v. Peak
8 Computer, Inc., 991 F.2d 511, 518 (9th Cir. 1993) (transferring digital work “from a
9 permanent storage device to a computer’s RAM [or storage]” infringes the
10 reproduction right); see UMG Recordings, Inc. v. Escape Media Grp., Inc., No. 11
11 CIV. 8407, 2014 WL 5089743, at *20 (S.D.N.Y. Sept. 29, 2014) (“uploaded copies”
12 of works violate reproduction right).
13
14

b.

VidAngel Violates Plaintiffs’ Exclusive Right To
Publicly Perform Their Copyrighted Works
i.

VidAngel Publicly Performs Plaintiffs’ Works

15
16

Plaintiffs have the exclusive right “to perform the copyrighted work

17 publicly.” 17 U.S.C. § 106(4). VidAngel violates that right under the Transmit
18 Clause. VidAngel “transmits” “performances” “of the work[s].” 17 U.S.C. § 101
19 (definition of public performance and “to transmit”); Aereo, 134 S. Ct. at 2508
20 (Internet streams trigger the Transmit Clause). And VidAngel streams “to the
21 public,” i.e., VidAngel’s thousands of users. Under the Transmit Clause, the fact
22 that VidAngel’s users receive those performances “in separate places” and “at
23 different times” does not change the fact that VidAngel is performing “to the
24 public.” 17 U.S.C. § 101; Aereo, 134 S. Ct. at 2510.
25

VidAngel’s public performance liability follows from Transmit Clause

26 precedent. Columbia Pictures Industries, Inc. v. Redd Horne, Inc., 749 F.2d 154 (3d
27 Cir. 1984), held that a remote video rental service—wherein patrons selected videos
28 from a store, which transmitted performances from the videos to private in-store
-17-

ER831

PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION
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1 booths—violated the public performance right. The court held that the store
2 “show[ed] each copy [of a movie] repeatedly to different members of the public,”
3 and that the service was “essentially the same as a movie theatre, with the additional
4 feature of privacy.” Id. at 159.
5

On Command Video Corporation v. Columbia Pictures Industries, 777 F.

6 Supp. 787 (N.D. Cal. 1991), held that a hotel’s “electronic rental” system—in which
7 the hotel rented movies to guests and transmitted performances from the main office
8 to individual hotel rooms—infringed the public performance right. The court held
9 that the “relationship between the transmitter of the performance, On Command,
10 and the audience, hotel guests,” was “a commercial, ‘public’ one regardless of
11 where the viewing takes place.” Id. at 788.
12

Warner Bros. Entertainment Inc. v. WTV Systems, Inc., 824 F. Supp. 2d 1003

13 (C.D. Cal. 2011) (“Zediva”), held that the Zediva service—which streamed
14 performances from DVDs and DVD players purportedly assigned to specific
15 users—violated the public performance right. Id. at 1006-07, 1010.
16

And Aereo held that Internet streaming of content captured from over-the-air

17 broadcast signals by thousands of separate antennae—each of which, Aereo
18 claimed, was assigned separately to individual subscribers—infringed. The Court
19 squarely rejected Aereo’s claim that its technical design (using an individual
20 antenna to make a separate transmission path to each user) made the performances
21 private. Aereo, 134 S. Ct. at 2508-09 (noting subscribers would not “care much”
22 about the service’s technical design).
23

Like its predecessors, VidAngel “transmits” (by streaming) performances “to

24 the public” (its users). VidAngel’s liability is clear.

26

VidAngel’s “Buy-Sellback” Scheme Does Not
Transform VidAngel’s Public Performances Into
Private Ones

27

VidAngel argues that it makes private, not public, performances because it

25

ii.

28 transmits streams of movies that users purportedly “buy” from VidAngel. VidAngel
-18-

ER832

PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION
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1 claims support for this argument in dicta from Aereo, stating that a different analysis
2 might apply where users “receive performances in their capacities as owners or
3 possessors of the underlying works.” Aereo, 134 S. Ct. at 2510. This argument
4 fails.
5

First, the Court’s description of the ownership/possessory relationship that

6 might be relevant is plainly inapplicable to VidAngel. The Court said that the
7 difference between a valet returning cars to their owners and a dealership selling
8 new cars provided a potential analogy to the private/public distinction: “we would
9 not say that the [valet] provides cars ‘to the public’ . . . [w]e would say that a car
10 dealership . . . provide[s] cars to the public, for it sells cars to individuals who lack a
11 pre-existing relationship to the cars.” Id. The Court said Aereo was more like a car
12 dealership because it “transmits to large numbers of paying subscribers who lack
13 any prior relationship to the works.” Id. The same is true of VidAngel, whose users
14 have no “prior relationship” with the works they watch, but instead receive access
15 by paying VidAngel a fee.
16

Second, as Aereo and the other cases discussed above make clear, courts must

17 look at the reality of what the defendant is doing rather than the stratagem it
18 employs to characterize its performances as private. The Court rejected Aereo’s
19 claim that associating each user with an antenna made its streams private
20 performances. The Court explained that this gimmickry did not “render Aereo’s
21 commercial objective any different from that of cable companies,” and did not
22 “significantly alter the viewing experience.” Id. at 2508. It is unfathomable that the
23 courts in Redd Horne, On Command, and Zediva would have deemed the
24 performances private if the defendants had said they were “selling” videos to
25 customers and “buying them back” after each performance.
26

The courts’ focus on substance rather than labels is fatal to VidAngel’s

27 “private performance” argument. VidAngel streams the same copyrighted works to
28 multiple users (“the public”) in a manner that is fundamentally the same as other on-19-

ER833

PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION
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1 demand services. VidAngel’s own internal documents make it clear that
2 [“VidAngel is NOT a disc service. VidAngel is a streaming service.”] Ehler Decl.
3 Ex. W at 234 (emphasis added). VidAngel’s labeling the transaction a “sale” does
4 not affect the user’s viewing experience. Given that only [eight] users have ever
5 requested a copy of the Disc they purportedly “bought”—out of [millions] of
6 purported “sales”—it is obvious that VidAngel’s users do not treat the service as
7 selling them Discs. Id. Ex. EE at Tr. 189:21-190:8, 229:2-12; see also id. Ex. I at
8 120 (“VidAngel – An Honest Review”9). VidAngel’s business model depends on
9 consumers treating the “buy-sellback” option just like an on-demand streaming
10 rental service, and it encourages this behavior at every turn by repeatedly reminding
11 users to “sellback,” sending email reminders, and even offering “auto-sellback.” Id.
12 at Ex. BB at 336-37. VidAngel’s labeling of the transaction cannot disguise what is
13 really taking place.10
Third, even if VidAngel were right (which it is not) that the Court should look

14

15 at how VidAngel characterizes its service (at least in its legal papers as opposed to
16 its marketing materials), that would not help VidAngel. VidAngel streams
17 performances to paying subscribers from a master copy stored on a server (not a
18 Disc temporarily assigned to the user) in the same way licensed services do—except
19 VidAngel’s master copy is unauthorized and VidAngel has no license to stream.
20
21
22

9

“VidAngel – An Honest Review” is available on YouTube at
23 https://www.youtube.com/watch?v=KG7xgmDHF40 (last visited Aug. 21, 2016).
10
In analogous contexts, courts have recognized “rentals” couched as “sales”
24
through a sell-buyback structure as gimmicks and held that it is the substance that
25 matters. A & M Records, Inc. v. A.L.W., Ltd., 855 F.2d 368, 370 (7th Cir. 1988)
26 (rejecting buyback scheme under Record Rental Amendment of 1984); Central
Point Software, Inc. v. Global Software & Accessories, Inc., 880 F. Supp. 957, 964
27 (E.D.N.Y. 1995) (rejecting buyback scheme under Computer Software Rental
28 Amendments Act of 1990).

ER834

-20PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION
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1 Schumann Decl. ¶¶ 7, 42. In sum, VidAngel’s attempt to characterize its
2 performances as private fails.
3
4
5

3.

None of VidAngel’s Defenses Excuse Its Infringement
a.

The FMA Does Not Excuse VidAngel’s Infringement

The statutory text and Congress’s clear intent establish that the FMA is

6 narrow and does not exempt VidAngel’s infringement of Plaintiffs’ rights.
7

First, as a textual matter, the FMA exempts only (1) “the making

8 imperceptible” and (2) “the creation or provision of a computer program or other
9 technology that enables such making imperceptible.” 17 U.S.C. § 110(11). Every
10 other word in the FMA narrows the circumstances in which these two exemptions to
11 § 106 apply. The savings clause, moreover, clarifies the FMA shall not be
12 “construed to imply further rights under” § 106. Id. § 110 (final sentence).
13

VidAngel argues that a business that offers filtering software has statutory

14 authorization to publicly perform Plaintiffs’ works because the FMA permits
15 filtering “during a performance . . . transmitted to that household for private home
16 viewing.” Dkt. 11 (Counter-Complaint) ¶ 65 (quoting 17 U.S.C. § 110(11)
17 (omissions in original)). The plain text of the FMA defies this reading. VidAngel’s
18 reading ignores the requirement that the performance be from an “authorized copy.”
19 17 U.S.C. § 110(11). If Congress wanted to grant filtering businesses a total
20 exemption from copyright infringement—a radical notion with no historical
21 support—it would have said that directly. The fact that the transmission must come
22 from an “authorized copy” of the copyrighted work makes clear that Congress did
23 not provide a blanket exemption to the reproduction or public performance right. Id.
24 VidAngel’s answer to this is that it purchases authorized copies of Plaintiffs’ movies
25 on Discs. But VidAngel does not stream from those Discs (and even if it did, it
26 would still be publicly performing them without the necessary license, as discussed
27 above). VidAngel does not stream from an “authorized copy;” it streams from a
28

ER835

-21PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION
16-CV-04109-AB (PLAX)

1 ripped digital copy that it obtained by violating § 1201(a) and then by violating
2 Plaintiffs’ reproduction right.11 Schumann Decl. ¶¶ 35-42.
The FMA was “targeted narrowly and specifically” at the act of filtering and

3

4 did not impact other rights and obligations under the Copyright Act. The statute
5 was not intended to be a blanket license for every business that engaged in
6 filtering.12
b.

7

VidAngel’s Affirmative Defense Of Fair Use Does Not
Excuse Its Infringement

8
VidAngel must show it likely will succeed on its defense that copying and

9

10 publicly performing Plaintiffs’ works are fair uses. Perfect 10, Inc. v. Amazon.com,
11 Inc., 508 F.3d 1146, 1158 (9th Cir. 2007). VidAngel cannot meet its burden. All
12 four factors that § 107 directs the Court to consider weigh against VidAngel.
13
14

11

Even if VidAngel’s reading were correct—which it is not—VidAngel could not
15 rely on the statute because it
. Schumann Decl. Ex. C at 25; Ehler Decl. Ex. EE at Tr.
16 95:22-96:14. The FMA only applies “if no fixed copy of the altered version of the
17 motion picture is created by such computer program or other technology.” 17
U.S.C. § 110(11). VidAngel’s documents make clear that it
18
19 Schumann Decl. Ex. C at 25. A copy is fixed if it is “sufficiently permanent or
stable to permit it to be perceived, reproduced, or otherwise communicated for a
20 period of more than transitory duration.” MAI Sys. Corp., 991 F.2d at 518 (citing 17
21 U.S.C. § 101). VidAngel’s server copy segments are fixed because they are stored
for more than a transitory duration. Id. (software loaded to a computer’s RAM is
22 fixed, even if for the sole purpose of viewing the system and running an error log).
23 12 Senator Hatch, a sponsor of the bill, explained that the FMA “would not exempt
24 from liability an otherwise infringing performance, or a transmission of a
performance, during which limited portions of audio or video content of the motion
25 picture are made imperceptible” and infringing performances “are not rendered non26 infringing by section 110(11) by virtue of the fact that limited portions of audio or
video content of the motion picture being performed are made imperceptible during
27 such performance or transmission.” 151 Cong. Rec. S501 (daily ed. Jan. 25, 2005)
28 (Sen. Hatch) (emphasis added).

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i.

1
2
3

VidAngel’s Wholesale Copying And Publicly
Performing Plaintiffs’ Works Are Commercial And
Non-Transformative

The first factor asks whether VidAngel’s use is commercial and

4 transformative. Leadsinger, Inc. v. BMG Music Publ’g, 512 F.3d 522, 530 (9th Cir.
5 2008).
6

VidAngel’s use of Plaintiffs’ works obviously is commercial: VidAngel

7 copies and publicly performs Plaintiffs’ works to profit in its business. Harper &
8 Row Publishers, Inc. v. Nation Enters., 471 U.S. 539, 562 (1985). VidAngel’s
9 commercial use weighs against fair use because VidAngel “stands to profit from
10 exploitation of the copyrighted material without paying the customary price.”
11 Leadsinger, 512 F.3d at 530 (quotations omitted).
12

VidAngel’s commercial use is not transformative. A transformative use adds

13 “something new, with a further purpose or different character, altering the first
14 [work] with new expression, meaning or message.” Campbell v. Acuff-Rose Music,
15 Inc., 510 U.S. 569, 579 (1994). VidAngel’s wholesale copying of Plaintiffs’ works
16 “in their entirety” to its computer system adds nothing new to those works and is not
17 transformative. Worldwide Church of God v. Philadelphia Church of God, Inc., 227
18 F.3d 1110, 1117 (9th Cir. 2000).
19

VidAngel’s public performance of those works—in which VidAngel makes

20 the entire copied work available to users and allows them to selectively filter out
21 small portions of Plaintiffs’ works— also is not transformative. Removing portions
22 of the works obviously does not add anything new to them. VidAngel instead is
23 “simply rebroadcast[ing] for entertainment purposes [works] that Plaintiffs
24 rightfully own”—which is not transformative. Elvis Presley Enters., Inc. v.
25 Passport Video, 349 F.3d 622, 628-29 (9th Cir. 2003), overruled on other grounds
26 as recognized in Seltzer v. Green Day, Inc., 725 F.3d 1170 (9th Cir. 2013); see
27 Monge v. Maya Magazines, Inc., 688 F.3d 1164, 1174 (9th Cir. 2012) (“neither
28 minor cropping nor the inclusion of headlines or captions transformed the
-23-

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1 copyrighted [photographs]”); Worldwide Church of God, 227 F.3d at 1117 (“where
2 the use is for the same intrinsic purpose as the copyright holder’s, such use seriously
3 weakens a claimed fair use”) (alterations and internal quotation marks omitted); cf.
4 Authors Guild. v. Google, Inc., 804 F.3d 202, 225 (2d Cir. 2015) (while Google
5 Books’ display of “snippets” of text was held to be transformative, court expressly
6 stated that “[i]f Plaintiffs’ claim were based on Google’s converting their books into
7 a digitized form and making that digitized version accessible to the public, their
8 claim would be strong”).
9

The court in Clean Flicks of Colo. v. LLC v. Soderbergh, 433 F. Supp. 2d

10 1236 (D. Colo. 2006), considered and rejected the same fair use defense that
11 VidAngel makes. The defendants there mechanically edited movies to remove
12 content and therefore had no FMA defense. The court held that the defendants also
13 had no fair use defense. The court emphasized that the defendants (1) added
14 nothing to the movies, (2) only removed small amounts of content, and (3) did so for
15 commercial gain. Id. at 1241. All of those findings apply to VidAngel.
ii.

16
17

Plaintiffs’ Copyrighted Works Are Highly Creative

Plaintiffs’ works are highly creative, and “the nature of the copyrighted work”

18 favors Plaintiffs. Campbell, 510 U.S. at 586; Elvis Presley Enters., 349 F.3d at 629
19 (motion pictures “are creative in nature and thus fit squarely within the core of
20 copyright protection”).
21
22
23

iii.

VidAngel Copies The Entirety Of Plaintiffs’ Works
And Publicly Performs Substantially The Entirety
Of Them

VidAngel copies Plaintiffs’ works in their entirety. Ehler Decl. Ex. EE at Tr.

24 112:19-113:2. This weighs strongly against fair use. See Monge, 688 F.3d at 1180
25 (no fair use where defendant copied photographs in their entirety). VidAngel’s
26 public performances omit some portions of each work. See Ehler Decl. Ex. Q
27 (removing “nudity/graphic violence/f-bomb . . . took out 14min” from Deadpool).
28 But VidAngel always performs the “heart” of the works, and this factor weighs
-24-

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1 against VidAngel. See Campbell, 510 U.S. at 586; Elvis Presley Enters., 349 F.3d
2 at 630; L.A. News Serv. v. Tullo, 973 F.2d 791, 798 (9th Cir. 1992).
3

iv.

VidAngel’s Service Undermines Existing And
Potential Markets For Plaintiffs’ Works

4
5

The fourth factor considers current market harm and ‘“whether unrestricted

6 and widespread conduct of the sort engaged in by the defendant . . . would result in a
7 substantially adverse impact on the potential market’ for the original.” Campbell,
8 510 U.S. at 590 (citations omitted). Where, as here, the defendant uses the works
9 “for commercial gain, the likelihood of market harm may be presumed.”
10 Leadsinger, 512 F.3d at 531-32 (quotations omitted); see Campbell, 510 U.S. at 591
11 (presumption of market harm “makes common sense” in cases involving “copying
12 of the original in its entirety for commercial purposes”) (quotation marks and
13 alterations omitted). To rebut this presumption, VidAngel must “bring forward
14 favorable evidence about relevant markets.” Arista Records LLC v. Myxer, Inc., No.
15 CV 08-03935 GAF, 2011 WL 11660773, at *43 (C.D. Cal. 2011) (quoting Dr. Seuss
16 Enters., L.P. v. Penguin Books, USA, Inc., 109 F.3d 1394, 1403 (9th Cir. 1997)).
17 This VidAngel cannot do.
18

VidAngel plainly undermines existing and developing markets for Plaintiffs’

19 works. VidAngel’s own marketing materials and strategy compare it to legitimate
20 on-demand streaming services such as iTunes, Google Play, Amazon Video, and
21 Netflix. Ehler Decl. Exs. A, B. Further, as explained by the Senior Vice President,
22 Digital Distribution at Fox, VidAngel undercuts the market for Plaintiffs’ works in a
23 number of ways. Cittadine Decl. ¶¶ 16-22; 26-34. For example when VidAngel
24 released Star Wars: The Force Awakens on the same day it was released to Disc and
25 for digital download, VidAngel was “competing directly with these other exclusive
26 viewing options and preempting legitimate on-demand streaming services” which
27 did not yet have rights to stream that title. Id. ¶ 16. Likewise, “[b]y offering
28 consumers on-demand streaming at a lower price —which VidAngel can offer only
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1 because it misappropriates Fox’s content—VidAngel threatens the business of all of
2 [Fox’s licensees] who have negotiated legal, authorized licenses [with Fox and other
3 Plaintiffs] for those rights.” Id. ¶ 20. Many VidAngel customers are using the
4 service because of its price as compared to authorized services—a differential that
5 exists only because VidAngel does not pay for the rights it exploits. Ehler Decl. Ex.
6 I (examples).
7

In sum, fair use is not a defense to VidAngel’s blatant infringement.
c.

8

The First Sale Doctrine Does Not Authorize VidAngel’s
Copying or Streaming

9
VidAngel claims that Plaintiffs’ attempt to enforce their reproduction and

10

11 public performance rights violates the first sale doctrine, see 17 U.S.C. § 109(a),13
12 because VidAngel buys Discs and resells them via its “buy-sellback” model. Dkt.
13 11 (Counter-Complaint) ¶¶ 53-59. Even if VidAngel were actually selling Discs
14 (which it is not), the argument would be a red herring. The first sale doctrine
15 applies only to Plaintiffs’ right of distribution, which is not at issue here. See Red
16 Baron-Franklin Park, Inc. v. Taito Corp., 883 F.2d 275, 280-81 (4th Cir. 1989)
17 (“the first sale doctrine has no application to the rights of the owner of a copyright
18 guaranteed by § 106, except the right of distribution”); Capitol Records, LLC v.
19 ReDigi Inc., 934 F. Supp. 2d 640, 655 (S.D.N.Y. 2013) (“[T]he first sale defense
20 does not apply to ReDigi’s infringement of those [reproduction] rights.”); Peker v.
21 Masters Collection, 96 F. Supp. 2d 216,221 (E.D.N.Y. 2000) (“no defense that
22 [defendant] used a lawfully acquired object to achieve its unlawful goal of
23 copying”).
24
25
13

“Notwithstanding the provisions of section 106(3), the owner of a particular copy
. . . lawfully made under this title, or any person authorized by such owner, is
27 entitled, without the authority of the copyright owner, to sell or otherwise dispose of
28 the possession of that copy . . . .” 17 U.S.C. § 109(a) (emphasis added).
-2626

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16-CV-04109-AB (PLAX)

1 II.

PLAINTIFFS WILL SUFFER IRREPARABLE HARM ABSENT AN
INJUNCTION

2
3

A court may find that a copyright owner’s harm is likely “irreparable” for

4 many reasons, including that a particular loss is “difficult to replace,” “difficult to
5 measure,” or of a kind “that one should not be expected to suffer.” Salinger v.
6 Colting, 607 F.3d 68, 81 (2d Cir. 2010). VidAngel’s illegal conduct puts Plaintiffs
7 at risk of suffering imminent, irreparable harms; VidAngel’s “delay” defense does
8 not change this fact.
9

A.

VidAngel’s Unauthorized Service Causes Immediate And
Irreparable Harms

10
11

First, VidAngel interferes with Plaintiffs’ basic right to control how, when

12 and through which channels consumers can view their copyrighted works. “As the
13 copyright holders, Plaintiffs have the exclusive right to decide when, where, to
14 whom, and for how much they will authorize transmission of their Copyrighted
15 Works to the public.” Zediva, 824 F. Supp. 2d at 1012 (citation omitted). Where
16 defendants operate an “infringing service without the normal licensing restrictions
17 imposed by Plaintiffs, [it] interfere[s] with Plaintiffs’ ability to control the use and
18 transmission of their Copyrighted works, thereby, causing irreparable injury.” Id. at
19 1012 (citation omitted). Plaintiffs’ exclusive rights under copyright are critical to
20 providing Plaintiffs the opportunity to earn a return on their substantial
21 investments—often tens of millions of dollars for a major motion picture—in
22 creating content. Cittadine Decl. ¶¶ 7-8. This harm is ongoing and worsening as
23 VidAngel continues to add Plaintiffs’ works and grow its user base. Id. ¶ 34.
24

Plaintiffs exercise their rights through agreements with authorized

25 distributors. Some licenses grant the licensee an exclusive time window for
26 performing a title. Id. ¶ 15. The price for such a license is based, in part, on the
27 promise and scope of exclusivity. Id. VidAngel operates without any license and
28 performs Plaintiffs’ works during negotiated exclusivity periods. As of this filing,
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1 VidAngel offers (at least) two of Plaintiffs’ works—The Martian and Brooklyn—
2 during periods these works are exclusive to an authorized licensee, HBO. Id. ¶ 30.
3 As noted, VidAngel offered Star Wars: The Force Awakens when no service had
4 rights to distribute it for on-demand streaming. Id. ¶ 16; Ehler Decl. Ex. J.
5 VidAngel flaunts its interference with exclusive windows as a competitive
6 advantage over authorized services by expressly promoting titles that are available
7 on VidAngel but “NOT on Netflix.” Ehler Decl. Ex. A at 13-15, 23-38. VidAngel
8 thus interferes with Plaintiffs’ exercise of their exclusive rights and frustrates
9 Plaintiffs’ ability to negotiate for similar rights in the future. Cittadine Decl. ¶¶ 17,
10 36.
11

Second, VidAngel threatens harm to Plaintiffs’ relationships and goodwill

12 with authorized distributors by undermining their ability to provide licensed
13 offerings. See Ticketmaster L.L.C. v. RMG Techs., Inc., 507 F. Supp. 2d 1096, 1115
14 (C.D. Cal. 2007) (irreparable harm includes “damage to goodwill”). VidAngel
15 poses a threat to the businesses of Plaintiffs’ legitimate licensees and, in turn, to
16 Plaintiffs’ relationships with them and the goodwill Plaintiffs have worked to create.
17 Cittadine Decl. ¶¶ 18-22. VidAngel’s users often compare the service to Plaintiffs’
18 licensees, commenting that they prefer VidAngel because it provides inexpensive
19 access to Plaintiffs’ copyrighted works. See Ehler Decl. Ex. I (examples).
20 Licensees complain to Plaintiffs that their business suffers from competition with
21 unlicensed services that offer low-cost or free content because they do not obtain
22 licenses. Cittadine Decl. ¶ 19. VidAngel’s unrestrained conduct thus threatens the
23 legitimate online distribution market. Id. ¶¶ 19, 22; see WPIX, Inc. v. ivi, Inc., 691
24 F.3d 275, 286 (2d Cir. 2012) (holding that unrestrained unauthorized Internet
25 retransmissions of broadcast programming “would encourage” other services to
26 follow suit, diminish plaintiffs’ negotiating position, adversely affect “quantity and
27 quality of efforts put into creating” new works, and “drastically change the industry,
28 to plaintiffs’ detriment”).

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-28PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION
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1

Third, VidAngel threatens harm to Plaintiffs’ ability to secure and protect

2 their content in the online environment. Online distribution carries with it a
3 heightened risk of piracy because the Internet facilitates the ability to exploit
4 copyrighted content on a mass scale. Cittadine Decl. ¶ 24. Plaintiffs require
5 licensees to employ specified security measures to prevent piracy. Id.¶ 25. Because
6 VidAngel streams Plaintiffs’ works without negotiating a license, Plaintiffs are
7 deprived of their right to impose those terms on VidAngel. Id. VidAngel
8 jeopardizes Plaintiffs’ content and harms Plaintiffs’ relationships with licensees who
9 are required to abide by security requirements to which VidAngel is not bound. Id.
10

Fourth, VidAngel threatens harm to the overall development of the on-

11 demand streaming market by the provision of inferior user-viewing experiences.
12 See Zediva, 842 F. Supp. 2d at 1014 (Zediva “threatens the development of a
13 successful and lawful video on demand market by offering a sub-optimal customer
14 experience and, thus, tarnishing customers’ perception of video on demand as an
15 attractive option for viewing Plaintiffs’ Copyrighted Works.”). Plaintiffs require
16 their licensees to have quality controls, which maintain predictable standards and
17 allow customers to view Plaintiffs’ movies under consistently positive conditions.
18 Cittadine Decl. ¶ 27. VidAngel threatens these efforts and provides an inferior user19 viewing experience that tarnishes Plaintiffs’ brands because it is not bound to
20 comply with Plaintiffs’ quality controls. Id. This possibility is not merely
21 theoretical: VidAngel’s social media pages contain customer complaints about the
22 service’s poor streaming quality. Ehler Decl. L (attaching numerous examples).
23

VidAngel also threatens the lawful market by confusing consumers that

24 VidAngel is engaged in lawful conduct. See Zediva, 824 F. Supp. 2d at 1013
25 (finding that the Zediva service threatened “to create incorrect but lasting
26 impressions with consumers about what constitute[d] lawful video on demand
27 exploitation” of copyrighted works). VidAngel publicly justifies its unlicensed
28

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-29PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION
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1 activities as “legal” under the FMA. Ehler Decl. Ex. M. But VidAngel’s service is
2 not legal, and it creates incorrect expectations about the value of Plaintiffs’ content.
3

B.

Plaintiffs’ Motion Is Timely, And VidAngel’s Assertions of
“Delay” Do Not Negate Irreparable Harm

4
5

VidAngel has asserted that Plaintiffs face no irreparable harm because they

6 did not sue as soon as they learned of VidAngel when they received Mr. Quinto’s
7 letters in July 2015. Plaintiffs are not required to act immediately to sue, or to seek
8 to enjoin, every potential infringer. See Petrella, 134 S. Ct. at 1976 (“Even if an
9 infringement is harmful, the harm may be too small to justify the cost of
10 litigation.”). A rule that required a copyright holder to pursue every possible
11 threat—no matter how nascent—would generate a rash of litigation and motion
12 practice, which would not serve the Courts, the parties, or the public interest. See
13 Lotus Dev. Corp. v. Paperback Software Int’l, 740 F. Supp. 37, 82 (D. Mass. 1990)
14 (“Prudent business judgment, Rule 11, and basic common sense required [the
15 plaintiff] first to ascertain that the threat to its intellectual property interest was
16 serious, and that its legal position was sound, before filing suit.”) (internal
17 quotations omitted). Courts are “loath to withhold relief” solely on the ground that a
18 party delayed seeking an injunction. Arc of Cal. v. Douglas, 757 F.3d 975, 990 (9th
19 Cir. 2014) (citing Lydo Enters., Inc. v. City of Las Vegas, 745 F.2d 1211, 1214 (9th
20 Cir. 1984)).
21

Plaintiffs filed this suit when VidAngel’s conduct was sufficiently egregious

22 to require litigation and when it was apparent VidAngel would continue operating.
23 See Arc of Cal., 757 F.3d at 991 (“The significance of such a prudent delay in
24 determining irreparable harm may become so small as to disappear.”). To require
25 Plaintiffs to “sue soon, or forever hold [their] peace” would force Plaintiffs to mount
26 a federal case to stop services that might never get off the ground—which is often
27 the case. Petrella, 134 S. Ct. at 1976 (describing “seemingly innocuous
28 infringements”). Plaintiffs filed suit after they had conducted their investigation and
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1 analysis, and when it was clear that litigation was necessary to stop VidAngel’s
2 illegal conduct.
3

Moreover, each new title that VidAngel offers gives rise to a new

4 infringement claim and inflicts new immediate, irreparable harm.14 Id. at 1969
5 (“[e]ach wrong gives rise to a discrete ‘claim’ that ‘accrue[s]’ at the time the wrong
6 occurs”). VidAngel has added more and more of Plaintiffs’ titles in recent months
7 and promises to continue to do so, especially with Plaintiffs’ most popular releases.
8 Ehler Decl. Exs. N (examples of titles recently added); EE at Tr. 32:9-37:4, R
9 (VidAngel offers new movies that reach more than [$10 million] in domestic sales).
The harm that VidAngel causes is not over and done with, but continuing and

10

11 growing. The time a party takes initially in seeking judicial protection “is not
12 particularly probative in the context of ongoing, worsening injuries.” Arc of Cal.,
13 757 F.3d at 990-91 (citations omitted). VidAngel’s growth, increased marketing
14 and more brazen conduct have increased the immediacy and magnitude of the harm
15 to Plaintiffs, further justifying injunctive relief. See id.
16 III.

THE BALANCE OF HARDSHIPS TIPS DECISIVELY FOR
PLAINTIFFS

17
The threat of harm to Plaintiffs, as demonstrated above, is substantial. In

18

19 contrast, VidAngel “cannot complain of the harm that will befall it when properly
20 forced to desist from its infringing activities.” Triad Sys. Corp. v. Se. Express Co.,
21 64 F.3d 1330, 1338 (9th Cir. 1995), superseded on other grounds by 17 U.S.C.
22 § 117(c); see Cadence Design Sys., Inc. v. Avant! Corp., 125 F.3d 824, 830 (9th Cir.
23 1997) (“Where the only hardship that the defendant will suffer is lost profits from an
24
25

14

For example, on July 20, 2016, VidAngel made Batman v. Superman: Dawn of
26 Justice (Ultimate Edition) available, when that title was not yet available to
legitimate on-demand streaming services. See Ehler Decl. Ex. N at 155. On August
27 4, VidAngel offered Keanu, when that title was not yet available to legitimate on28 demand services. See id. at 157.
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1 activity which has been shown likely to be infringing, such an argument in defense
2 merits little equitable consideration”) (quotations and citations omitted); Apple Inc.
3 v. Psystar Corp., 673 F. Supp. 2d 943, 950 (N.D. Cal. 2009) (“Since [small start-up
4 defendant] does not (and cannot) claim any legitimate hardships as a result of being
5 enjoined from committing unlawful activities, and Apple would suffer irreparable
6 and immeasurable harms if an injunction were not issued, this factor weighs
7 strongly in favor of Apple’s motion.”).
8

VidAngel does not suffer a legitimate hardship if it is enjoined because the

9 very core of its business involves circumvention and infringement. The fact that
10 VidAngel’s litigation counsel sent letters to a number of general counsel makes
11 clear that VidAngel knew from the outset it was on thin ice. Nonetheless, VidAngel
12 proceeded at its peril.
13 IV.

A PRELIMINARY INJUNCTION IS IN THE PUBLIC INTEREST

14

Upholding copyright protection is in the public interest. See Eldred v.

15 Ashcroft, 537 U.S. 186, 212 n.18 (2002) (“[t]he economic philosophy behind the
16 [Copyright] [C]lause . . . is the conviction that encouragement of individual effort by
17 personal gain is the best way to advance public welfare through the talents of
18 authors and inventors”) (citation omitted); Kelly v. Primco Mgmt., Inc., No. CV-1419 07263 BRO, 2015 WL 10990368 at *16 (C.D. Cal. Jan. 12, 2015) (“[I]t is virtually
20 axiomatic that the public interest can only be served by upholding copyright
21 protections . . . .”); Realnetworks, Inc., 641 F. Supp. 2d at 943 (“By making it a
22 DMCA violation to distribute products that enable consumers to override copyright
23 owner preferences against unauthorized copying, Congress determined that the
24 public interest is best served by outlawing such products.”).
25

VidAngel’s circumvention violations and infringements undermine

26 Congress’s purposes in the DMCA and Copyright Act. Congress believed that
27 content owners must have exclusive rights, as set forth in § 106, and also the ability
28 to safeguard access to their works, in order to be able to earn returns on their (often
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1 substantial) investments. VidAngel’s violation of Plaintiffs’ rights flouts Congress’s
2 goals and harms Plaintiffs. An injunction serves the public interest in upholding the
3 law.
4 V.

MINIMAL SECURITY SHOULD BE REQUIRED

5

The required security need not be substantial. See Zediva, 824 F. Supp. 2d at

6 1015 (requiring $50,000 bond). Any hardship VidAngel faces results from its
7 voluntary decision to build a business around violating Plaintiffs’ rights. Plaintiffs
8 respectfully submit that security in the amount of $50,000 is appropriate.
9

CONCLUSION

10

The Court should grant Plaintiffs’ motion for a preliminary injunction.

11
12
13

DATED: August 22, 2016

MUNGER, TOLLES & OLSON LLP

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By:

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

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-33PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION
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1
2

CERTIFICATE OF SERVICE
I hereby certify that on August 22, 2016, I authorized the electronic filing of

3 the foregoing with the Clerk of the Court using the CM/ECF system, which will
4 send e-mail notification of such filing to all registered parties. I certify under
5 penalty of perjury under the laws of the United States of America that the foregoing
6 is true and correct.
7
8 DATED: August 22, 2016

MUNGER, TOLLES & OLSON LLP

9
10
11

By:

/s/ Kelly M. Klaus
Kelly M. Klaus

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