Disney Enterprises, Inc., et al v. VidAngel, Inc.
Filing
74
Submitted (ECF) Reply Brief for review. Submitted by Appellant VidAngel, Inc.. Date of service: 02/22/2017. [10330044] [16-56843]--[COURT UPDATE: Attached corrected brief. 02/27/2017 by LA] (Stris, Peter) [Entered: 02/22/2017 11:41 PM]
No. 16-56843
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
VIDANGEL, INC.,
Defendant-Appellant,
v.
DISNEY ENTERPRISES, INC.; LUCASFILM LTD. LLC;
TWENTIETH CENTURY FOX FILM CORPORATION; AND
WARNER BROS. ENTERTAINMENT, INC.,
Plaintiffs-Appellees.
On Appeal from the United States District Court
for the Central District of California
Hon. André Birotte Jr.
No. 2:16-cv-04109-AB-PLA
APPELLANT’S REPLY BRIEF
Brendan S. Maher
Daniel L. Geyser
Douglas D. Geyser
STRIS & MAHER LLP
6688 N. Central Expy., Ste. 1650
Dallas, TX 75206
Telephone: (214) 396-6630
Facsimile: (210) 978-5430
February 22, 2017
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: (213) 995-6800
Facsimile: (213) 261-0299
peter.stris@strismaher.com
Counsel for Defendant-Appellant VidAngel, Inc.
(Additional counsel on signature page)
175603.6
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TABLE OF CONTENTS
TABLE OF AUTHORITIES .................................................................................... iii
INTRODUCTION .....................................................................................................1
ARGUMENT .............................................................................................................3
I.
The Studios’ Narrative Is Misleading..............................................................3
A.
B.
II.
VidAngel’s Business Is Fair..................................................................3
The Studios Are Claiming A Filtering Veto .........................................4
The Studios Cannot Show Likely Success On Their Copyright Claims .........5
A.
VidAngel’s Transmissions Are Not Public Performances....................6
1.
2.
B.
III.
VidAngel Does Not Perform ......................................................6
Any Performance By VidAngel Is Private .................................7
The FMA Permits VidAngel’s Intermediate Unfiltered Copies .........11
The Studios Have Not Shown Likely Success On Their DMCA Claim.......14
A.
B.
IV.
The Studios’ § 1201(a) Arguments Are Wrong ..................................14
The Studios’ Expansive Interpretation Would Unnecessarily
Deepen A Circuit Split On An Important Question ............................17
VidAngel Is Likely To Prevail On Its Fair Use Doctrine..............................18
A.
Fair Use Is A Defense To Both Copyright And DMCA Claims.........18
B.
The District Court Clearly Misapplied The Four Fair Use Factors ....20
V.
The Studios Have Not Shown Likely Irreparable Harm ...............................25
VI.
The Balance Of Hardships Requires Reversal ..............................................26
VII. The Injunction Harms The Public Interest ....................................................27
CONCLUSION ........................................................................................................28
i
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CERTIFICATE OF COMPLIANCE .......................................................................29
CERTIFICATE OF SERVICE .................................................................................30
ii
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TABLE OF AUTHORITIES
Cases
321 Studios v. Metro Goldwyn Mayer Studios, Inc.,
307 F. Supp. 2d 1085 (N.D. Cal. Feb. 19, 2004) .................................................16
A&M Records, Inc. v. Napster, Inc.,
239 F.3d 1004 (9th Cir. 2001) .............................................................................23
Am. Broad. Cos., Inc. v. Aereo, Inc.,
134 S. Ct. 2498 (2014) ..................................................................................passim
Brilliance Audio, Inc. v. Haights Cross Commc’ns, Inc.,
474 F.3d 365 (6th Cir. 2007) ...............................................................................10
Campbell v. Acuff-Rose Music,
510 U.S. 569 (1994) .............................................................................................20
Central Point Software, Inc. v. Global Software & Accessories, Inc.,
880 F. Supp. 957 (E.D.N.Y. Mar. 28, 1995)........................................................10
Chamberlain Grp. v. Skylink Techs., Inc.,
381 F.3d 1178 (Fed. Cir. 2004) .....................................................................17, 18
Columbia Pictures Indus., Inc. v. Prof’l Real Estate Inv’rs, Inc.,
866 F.2d 278 (9th Cir. 1989) ...............................................................................10
Elvis Presley Enters., Inc. v. Passport Video,
349 F.3d 622 (9th Cir. 2003) ...............................................................................22
MDY Indus., LLC v. Blizzard Entm’t, Inc.,
629 F.3d 928, 945 (9th Cir. 2010) .....................................................14, 16, 17, 19
Monge v. Maya Magazines, Inc.,
688 F.3d 1164 (9th Cir. 2012) .............................................................................21
Murphy v. Millennium Radio Grp. LLC,
650 F.3d 295 (3d Cir. 2011).................................................................................16
Perfect 10, Inc. v. Giganews, Inc.,
No. 15-55500, 2017 WL 279504 (9th Cir. 2017) .................................................. 7
iii
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Realnetworks, Inc. v. DVD Copy Control Ass’n,
641 F. Supp. 2d 913 (N.D. Cal. Aug. 11, 2009) ..................................................16
Recording Indus. Ass’n of Am. v. Diamond Multimedia Sys., Inc.,
180 F.3d 1072 (9th Cir. 1999) .............................................................................24
Sony Corp. of Am. v. Universal City Studios, Inc.,
464 U.S. 417 (1984) .............................................................................................25
United States v. Berger,
473 F.3d 1080 (9th Cir. 2007) ...............................................................................7
United States v. Pallares-Galan,
359 F.3d 1088 (9th Cir. 2004) ............................................................................... 7
Worldwide Church of God v. Philadelphia Church of God, Inc.,
227 F.3d 1110 (9th Cir. 2000) .............................................................................22
Statutes
Copyright Act of 1976, 17 U.S.C. § 101 et seq. ..................................................2, 10
17 U.S.C. § 106(1) .........................................................................................5, 11, 12
17 U.S.C. § 106(2) ...................................................................................................12
17 U.S.C. § 106(3) ...................................................................................................12
17 U.S.C. § 106(4) .........................................................................................5, 11, 12
17 U.S.C. § 106(5) ...................................................................................................12
17 U.S.C. § 109(a) ...................................................................................................12
17 U.S.C. § 109(b) ...................................................................................................10
17 U.S.C. § 109(c) ...................................................................................................12
17 U.S.C. § 109(e) ...................................................................................................12
Family Home Movie Act of 2005, 17 U.S.C. § 110(11) ..................................passim
Digital Millennium Copyright Act, 17 U.S.C. § 1201 et seq. ..........................passim
17 U.S.C. § 1201(a) ..........................................................................................passim
iv
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17 U.S.C. § 1201(b) .....................................................................................14, 15, 16
17 U.S.C. § 1201(a)(1)(C) .......................................................................................17
17 U.S.C. § 1201(c) .................................................................................................19
17 U.S.C. § 1201(c)(1) .............................................................................................19
Other Authorities
151 Cong. Rec. S501 (daily ed. Jan. 25, 2005) .......................................................12
Brief for Petitioners, Aereo, 134 S. Ct. 2498 (2014)
(No. 13-461), 2014 WL 768315 ........................................................................7, 8
Brief of the United States as Amicus Curiae Supporting
Petitioners, Aereo, 134 S. Ct. 2498 (2014)
(No. 13-461), 2014 WL 828079 ............................................................................ 8
Derivative Rights, Moral Rights, and Movie Filtering
Technology, Hearing Before the Subcomm. on Courts, the
Internet, and Intellectual Property of the H. Comm. on the
Judiciary, 108th Cong. 93 (2d Sess. 2004) ..........................................................14
Gene Maddaus, ClearPlay Is No Longer Offering Filtered
Movies to Stream, Variety (Feb. 7, 2017) .............................................................. 5
H.R. Rep. No. 108-700 (2004).................................................................................14
H.R. Rep. No. 105-551, pt. 1 (1998) .......................................................................15
S. Rep. No. 105-190 (1998) .....................................................................................16
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INTRODUCTION
VidAngel provides filtered streams of movies to customers who buy (or,
according to the Studios, rent) a specific physical disc.1 That service entails
decrypting, copying, and streaming discs. It is neither unfair nor illegal.
The Studios insist that VidAngel unfairly operates “a $1-a-day alternative to
licensed streaming services, such as iTunes, Hulu, Amazon, and Netflix.” Ans. Br. 3.
True, VidAngel does not license content. But licenses are only one way that
streaming services can legitimately pay for content. Physical disc purchases are
another, and VidAngel pays the Studios millions for their discs. Br. 11-12 (citing
ER292, 674-87).
In many ways, VidAngel resembles Redbox, the successful disc-rental
business. Like Redbox, VidAngel waits for the Studios to sell discs to the public,
spends significant capital lawfully purchasing discs at prices determined by the
Studios, and effectively charges customers $1-$2 per day to watch each movie. That
model is neither good nor evil: it is determined by market forces.
Make no mistake: the Studios detest the $1-$2 per day movie rental business
of Redbox. They hate all legitimate movie-rental businesses, and have long
attempted to litigate and lobby them out of existence. Br. 5. The reason is simple:
1
Because it is legally irrelevant here, VidAngel will accept (for the sake of
argument) the Studios’ incorrect characterization of its business as a rental service.
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they want to make additional profits by requiring any post-sale rental to occur only
with their permission. But the Studios lost that battle long ago.
Having chosen to sell discs on a given date for a given price, the Studios
cannot prevent the subsequent rental of those same physical discs. That is not unfair
to the Studios because they are free to adjust their initial pricing and release dates to
capture as much revenue from the later rental business as possible. Br. 5-6
(describing VHS distribution strategy).
This case arises because VidAngel differs from Redbox and other post-sale
disc rental businesses in one respect: it provides filtered streaming. For technological
reasons, it must process, filter, and stream from one physical copy of each title, rather
than the many identical discs it buys and warehouses. ER486-88. That is necessary
for filtered streaming without the Studios’ consent—and the Studios have never
consented. Br. 8-10 (citing ER711-12).
The Studios’ legal claims rest entirely on a false premise: that the Studios have
the exclusive right to stream content. Every time the Studios deride “unlicensed
streaming,” they implicitly characterize streaming as an exclusive right under the
Copyright Act. It is not. VidAngel has not violated any of the Studios’ actual rights
under the Act. The Studios are not entitled to monopolize the post-disc sale
streaming market any more than they are entitled to monopolize post-sale rentals.
2
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ARGUMENT
I.
The Studios’ Narrative Is Misleading.
The Studios presentation of the record is misleading. It unfairly demonizes
VidAngel, and obscures the relevant legal questions at issue in this appeal.
A.
VidAngel’s Business Is Fair.
VidAngel cares about filtering. VidAngel does not use filtering as some
cynical disguise for an unlicensed streaming service that, by charging only $1-$2 per
day, rips off the Studios and unfairly competes with “legitimate” streaming services.
VidAngel was founded, and has always been run, to enable filtering. ER52325. And millions of Americans desperately want filtering—as evidenced by the
overwhelming support VidAngel has received from communities of faith. ER41140 (dozens of declarations supporting VidAngel); ER241 (SaveFiltering.com
petition, which has received over 125,000 signatures).
The Studios are also wrong to insist that VidAngel’s pricing “unfairly”
undercuts licensed streaming companies. True, VidAngel’s typical per-movie cost
is lower than that of services like iTunes. But that comparison is incomplete.
VidAngel charges exactly what Redbox charges to rent discs. Given that VidAngel
uses a disc-based model (with all its inherent risks and limitations), it unsurprisingly
follows a similar price structure. The fairness of VidAngel’s business (and pricing)
should turn on whether its service is lawful—not on whether it is cheaper than
3
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streaming companies with fundamentally different business models. The Studios’
repeated comparison of VidAngel to Netflix, Hulu, and Amazon is even less fitting.
Those services charge fixed monthly fees of $8-$9 for unlimited streaming access to
entire libraries of movies.2
B.
The Studios Are Claiming A Filtering Veto.
If the Studios are correct, filtered streaming of their works cannot occur
without their permission. Br. 39-40. The Studios are careful not to deny this. Instead,
they point to one allegedly “legitimate” filtered streaming company (ClearPlay on
Google) as contrary evidence. ER123-24. That alternative is illusory.
That the Studios might temporarily permit ClearPlay to operate on Google
hardly establishes they will continue to do so. At any point, the Studios (under
pressure from the Directors Guild of America) may enforce terms of use prohibiting
any filtering software plug-in or application. That is what happened when VidAngel
first attempted a nearly identical approach. Br. 10-11. 3
2
Netflix, Membership Plans, www.netflix.com/getstarted/; Hulu, Pick Your
Plan, www.hulu.com/start; Amazon.com, About the Amazon Prime Membership
Charge, www.amazon.com/gp/help/customer/display.html?nodeId=200966690.
3
The Studios dismiss this as a false allegation unsupported by evidence.
Ans. Br. 6. But VidAngel did introduce evidence that the Google technology
supporting its original service was changed to make filtering impossible specifically
at the Studios’ request. ER528.
4
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The proof is in the pudding. In the 12 years since passage of the FMA, the
Studios admit they have never granted any license to a filtering company. ER71112. And the ClearPlay filtering streaming service touted as a “legitimate” alternative
by the Studios has been disabled for all new movies as of September 2016. Gene
Maddaus, ClearPlay Is No Longer Offering Filtered Movies to Stream, Variety (Feb.
7,
2017),
www.variety.com/2017/biz/news/clearplay-streaming-new-releases-
google-shutdown-1201980650.
Even ClearPlay admits that it cannot currently offer streamed filtering for any
new movie releases. ClearPlay Br. 13. It attributes that fact, not to Studio
intervention, but to unspecified technical difficulties. Id. Those “technical
difficulties” have been unsolved for five months and counting, but ClearPlay
maintains they are “likely not permanent.” Id. How reassuring.
Streamed filtering by ClearPlay is currently unavailable for any new movies;
the Studios could shut down ClearPlay at any time; and no other streaming filtering
company exists in the United States today.
II.
The Studios Cannot Show Likely Success On Their Copyright Claims.
VidAngel infringes no copyrights. The Studios make two counterarguments.
First, they argue that VidAngel violates § 106(4) by publicly performing the filtered
works it streams to each customer for private viewing. Ans. Br. 24-31. Second, they
argue that VidAngel violates § 106(1) by making intermediate, unfiltered copies of
5
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lawfully purchased discs to facilitate filtering. Ans. Br. 23-24. The copies disqualify
VidAngel’s service from FMA immunity, per the Studios, because they are not
“authorized.” Ans. Br. 36-38.
The Studios’ first argument misconstrues the meaning of “public
performance.” VidAngel’s transmissions are neither performances nor public. And
the Studios’ second argument misconstrues the plain meaning of the FMA‘s
requirement that filtering must be “from an authorized copy * * * .” 17 U.S.C.
§ 110(11).
A.
VidAngel’s Transmissions Are Not Public Performances.
1.
VidAngel Does Not Perform.
VidAngel’s transmissions are not “performances” by VidAngel under the Act.
Br. 23 & n.30. The Studios’ three responses are unsatisfactory.
First, the Studios argue that a volitional conduct requirement does not apply
to public performance claims. Ans. Br. 30 n.11. But “a user’s involvement in the
operation of the provider’s equipment and selection of the content transmitted may
well bear on whether the provider performs within the meaning of the Act.” Aereo,
134 S. Ct. at 2507.
Second, the Studios contend that VidAngel is too involved to not be
performing. Ans. Br. 30. But involvement prior to causing transmission is irrelevant.
6
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VidAngel makes choices available, but its customers select which movies to acquire
and instruct VidAngel what to filter. They exercise the volition.
Finally, the Studios say VidAngel has waived this argument. Ans. Br. 30. But
“it is claims that are deemed waived or forfeited, not arguments.” United States v.
Pallares-Galan, 359 F.3d 1088, 1095 (9th Cir. 2004) (emphases added).4 In any
event, only after VidAngel’s opening brief did this Court hold that volitional conduct
is an element of direct infringement, and remains so after Aereo. Perfect 10, Inc. v.
Giganews, Inc., No. 15-55500, 2017 WL 279504, at *4-6 (9th Cir. 2017).
2.
Any Performance By VidAngel Is Private.
The Supreme Court recently addressed the meaning of the phrase “to the
public” in the Transmit Clause. Aereo, 134 S. Ct. at 2500-01. Several major
broadcasters (including two plaintiffs here) had sued Aereo, a “commercial
retransmission service that ‘enable[d] its subscribers to watch broadcast television
programs over the internet for a monthly fee.’” Brief for Petitioners at *7, Aereo,
134 S. Ct. 2498 (2014) (No. 13-461), 2014 WL 768315 (citation omitted).
4
The Studios assert that that VidAngel “waived” two other arguments by, in their
view, failing to articulate the identical points below. Ans. Br. 17, 38. Not so.
VidAngel made those arguments below. And, in any event, pure questions of law,
even if not raised below, may be considered on appeal. See United States v. Berger,
473 F.3d 1080, 1101 n.5 (9th Cir. 2007).
7
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As the Studios correctly informed the Court, Aereo had built its business
“without * * * paying anyone a penny.” Compare id. at *21 (emphasis added) with
ER292 (“VidAngel spends one third of all capital raised to lawfully purchase
thousands of DVD and Blu-ray discs * * * .”) and ER683 (average disc purchase
price paid by VidAngel for each new-release constitutes 78% of all revenues
collected by VidAngel over the life of that disc).
In finding that Aereo’s transmissions were “to the public,” the Supreme Court
emphasized the following:
Neither the record nor Aereo suggest that Aereo’s subscribers
receive performances in their capacities as owners or possessors of
the underlying works. This is relevant because when an entity
performs to a set of people, whether they constitute “the public”
often depends upon their relationship to the underlying
work. * * * [A]n entity that transmits a performance to individuals
in their capacities as owners or possessors does not perform to “the
public.”
Aereo, 134 S. Ct. at 2510. The relevant distinction is simple: transmission to those
who have lawfully acquired the right to view a work is private.
Both the United States and the Studios endorsed this distinction. Brief of the
United States as Amicus Curiae Supporting Petitioners at *32, Aereo, 134 S. Ct.
2498 (2014) (No. 13-461), 2014 WL 828079; Brief for Petitioners at *46, Aereo,
8
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134 S. Ct. 2498 (2014) (No. 13-461), 2014 WL 768315. It is fatal to the Studios’
position here.5
Unlike Aereo, VidAngel streams to customers who have lawfully acquired the
right to possess, and therefore to view, copyrighted works. The Studios admit:
1.
VidAngel pays the Studios millions to buy thousands of discs, numbers
each one, and stores them in a warehouse. Br. 11-12 (citing ER292;
ER674-87).
2.
Any time a VidAngel customer wishes to watch a movie, he pays for a
unique, numbered disc. Br. 12 (citing ER489).
3.
Any time a VidAngel customer wishes to watch a stream of a disc he
owns, he must select the filters he wants to be applied to the stream. Br.
12 (citing ER532-33).
4.
No two customers can own (and thus stream) the same numbered disc
at the same time. If there is no unique disc available, neither existing
nor prospective customers can view a filtered stream of that title. Br. 12
(citing ER489, ER541).
The conclusion is inescapable. Every VidAngel customer has obtained the legal right
to view a movie by buying or renting a unique, physical disc. Choosing to have
VidAngel filter and stream it does not make the performance public.
5
Unable to escape the opinion, its own brief, and the government’s brief in Aereo,
the Studios instead assert that “[w]ell-established precedent supports the court’s
conclusion that VidAngel violates the Transmit Clause.” Ans. Br. 25. They proceed
to cite only an inapposite Third Circuit case that predates Aereo by 30 years, and
two wrongly decided pre-Aereo district court cases. Id.
9
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The Studios respond by disparaging VidAngel’s “buy-sellback” model as a
“sham.” Ans. Br. 27-29. But whether VidAngel’s customers own or rent the discs is
irrelevant. Renters lawfully possess. The Supreme Court was clear in Aereo that one
who transmits a performance of a work “to individuals in their capacities as owners
or possessors does not perform to ‘the public.’” 134 S. Ct. at 2510 (emphasis added).
Nor is VidAngel a sham. VidAngel’s inventory of discs is limited; only
customers who pay for a specific, physical disc can watch, ER541; and at any time,
VidAngel’s streaming is constrained by the number of unique discs for which it has
paid the Studios, ER541. VidAngel’s customers have a right to watch the content on
a specific, numbered disc. That distinguishes them from the public.6
Finally, when Congress amended the Transmit Clause in 1976, it added a
compulsory license provision to ensure that all broadcast retransmitters, no matter
how small, would be able to participate. See Aereo, 134 S. Ct. at 2506. That
6
The Studio’s two “cf.” citations, see Ans. Br. 29, merely illustrate that their
“buyback scheme” argument is baseless. Those cases both arose under 17 U.S.C.
§ 109(b), a section added to the Copyright Act in 1984 (for phono-records) and 1990
(for computer software) specifically. As its legislative history confirms, § 109(b)
imposes special sell/buyback prohibitions for phono-records and computer software
that do not apply to other kinds of works. Brilliance Audio, Inc. v. Haights Cross
Commc’ns, Inc., 474 F.3d 365, 372-73 (6th Cir. 2007) (phono-records); Central
Point Software, Inc. v. Global Software & Accessories, Inc., 880 F. Supp. 957, 96364 (E.D.N.Y. Mar. 28, 1995), as amended Apr. 21, 1995 (computer software).
§ 109(b) is the exception that proves the rule as to the Studios’ works: post-sale
rental does not render a performance public. See Columbia Pictures Indus., Inc. v.
Prof’l Real Estate Inv’rs, Inc., 866 F.2d 278, 281 (9th Cir. 1989).
10
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compulsory license provision protects against the same de facto veto rights the
Studios seek to impose on filtered streaming. In Aereo, the Supreme Court made
clear that new fact situations not involving broadcast retransmissions would need to
be examined closely in light of the Act’s purposes. Id. at 2707. This is such a case.
B.
The FMA Permits VidAngel’s Intermediate Unfiltered Copies.
VidAngel’s filtering technology makes intermediate copies of lawfully
purchased discs. Br. 11; ER487-88, ER508-10. The FMA expressly immunizes those
copies from liability under § 106(1). 7 The Studios’ three arguments otherwise are
mistaken.
First, the Studios argue that the FMA, even if its conditions are met, does not
immunize any violation of § 106(1) (and, for that matter, § 106(4)). Ans. Br. 35-36.
In the words of the Studios: “If Congress intended to exempt the performance itself
from copyright obligations (or the making of copies in connection with the
performance), it would have said so expressly.” Ans. Br. 36.
Congress did say so expressly. The FMA provides that “Notwithstanding the
provisions of section 106, the following are not infringements of copyright * * * .”
7
For similar reasons, the FMA also expressly immunizes VidAngel’s
transmissions from liability under § 106(4). And the definition of a public
transmission in the FMA is either coterminous or narrower than that of the Transmit
Clause. The Studios offer no reason why VidAngel would not meet the FMA’s
private transmission definition.
11
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17 U.S.C. §110(11) (emphasis added). Of course, both § 106(1) and § 106(4) are
“provisions of section 106.”
Like generals fighting the last war, the Studios read the FMA to immunize
only “fast-forwarding” filtering (which the Studios had argued, pre-FMA, would
infringe upon their derivative work rights under § 106(2)). But that cramped
interpretation cannot be squared with the FMA’s plain text. If Congress intended the
Studios’ meaning, it would have written: “Notwithstanding the provisions of
section 106(2), the following are not infringements of copyright * * * .” And it
knew how to restrict exemptions to § 106 in such a manner.8
Second, the Studios argue that “VidAngel falls outside the FMA,” because it
does not “make or stream ‘from an authorized copy’ of any of Plaintiffs’ works.”
Ans. Br. 36. Again, the Studios are wrong. This requirement was included to prevent
filtering from bootleg copies, not to prevent filtering from lawfully purchased discs.
See 151 Cong. Rec. S501 (daily ed. Jan. 25, 2005) (“The making imperceptible must
be ‘from an authorized copy of a motion picture.’ Thus, skipping and muting from
an unauthorized or ‘bootleg’ copy of a motion picture would not be exempt.”).
VidAngel creates every filtered stream from a lawfully purchased disc. As
such, VidAngel’s technology “make[s] imperceptible” from an authorized copy.
8
See, e.g., § 109(a) (“Notwithstanding the provisions of section 106(3) * * * .”);
§ 109(c) (same for § 106(5)); § 109(e) (same for §§ 106(4) and 106(5)).
12
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That is the common sense meaning of “from.” The word “enable” further clarifies
that legitimate intermediate steps are not disqualifying. Indeed, the FMA prohibits
the making of a “fixed copy of the altered version of the motion picture.” 17 U.S.C.
§ 110(11). If Congress meant what the Studios say, it would have prohibited the
making of “any copy of the motion picture.”
The Studios’ reading of the FMA also undermines its purpose. Br. 21-23.
Tellingly, the Studios offer no conceivable reason why Congress would authorize
filtering only so long as it could be accomplished without intermediate copying. As
legislators who voted to pass the FMA have expressly told this Court: “In 2005,
Congress clearly contemplated that a decryption/filtering/streaming method, like
VidAngel’s, could be developed in the future and would be lawful under the FMA
and the DMCA.” U.S. Reps. Br. 17.
Finally, the Studios argue that VidAngel’s reading of the FMA would lead to
absurd results. Ans. Br. 38-39. Not so. The private performance requirement
prevents anyone from buying only one disc and streaming unlimited copies of it to
the public writ large. And if other companies wanted to adopt the cumbersome
business model that VidAngel adopted in light of the Studios’ refusal to deal, they
could do so without violating the Studios’ public performance rights. But they could
13
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not create intermediate copies to stream within the FMA safe harbor unless they
were also to filter in compliance with the FMA. 9
III.
The Studios Have Not Shown Likely Success On Their DMCA Claim.
The Studios are also wrong about the DMCA. Finding otherwise would force
this Circuit to deepen unnecessarily a controversial split with the Federal Circuit.
A.
The Studios’ § 1201(a) Arguments Are Wrong.
When a copyright holder conditions an authorization to circumvent a
technological protection measure (“TPM”) on use, i.e., one can decrypt to view but
not decrypt to copy, the TPM is a use control under the DMCA. That matters because
the DMCA does not prohibit the circumvention of use controls. Br. 33-35. 10
9
The Studios worry that VidAngel’s view of the FMA would allow companies
to filter out meaningless snippets. Ans. Br. 2-3, 38-39. Congress was aware of that
possibility, and accepted it as a cost of enacting a statute consistent with the First
Amendment. See generally Derivative Rights, Moral Rights, and Movie Filtering
Technology, Hearing Before the Subcomm. on Courts, the Internet, and Intellectual
Property of the H. Comm. on the Judiciary, 108th Cong. 93 (2d Sess. 2004). Indeed,
several legislators pointed out that the FMA would allow pornographic companies
to use filtering to their advantage. H.R. Rep. No. 108-700, at 116-17 (2004) (“In
conclusion, section 12 * * * would lead to socially undesirable editing and actually
permit the distribution of technology that makes pornography even more
pornographic.”). Congress acted anyway—because it adjudged the possibility of
abuse outweighed by the certainty of legitimate filtering.
10
§ 1201(a) involves technological protection measures intended to prevent
access. The policy justification is that viewing a disc without permission does not
violate § 106. MDY Indus., LLC v. Blizzard Entm’t, Inc., 629 F.3d 928, 945 (9th Cir.
2010) (“Blizzard”). In contrast, § 1201(b) governs technological protection
measures designed to protect the use rights of the copyright owner, i.e., its rights
14
182634.2
The Studios disparage VidAngel’s access/use control distinction as
“convoluted” and a “false dichotomy.” Ans. Br. 16, 20. But the dichotomy is in the
statute itself. Br. 33-35. And the Studios’ response, Ans. Br. 18-20, begs the relevant
question. Obviously VidAngel had “authority” to decrypt discs it purchased using
approved methods, such as playback in a DVD player, that permit viewing but not
copying. Lacking authority to decrypt using an unapproved method, i.e., a method
that permits copying, only matters if the “TPM” is treated as an access control. But
where decryption is authorized, conditional access controls should be treated as use
controls—for which circumvention absent authority does not trigger liability.
The legislative history makes this perfectly clear:
[Section 1201](a)(1) does not apply to the subsequent actions of a
person once he or she has obtained authorized access to a copy of a
work protected under Title 17, even if such actions involve
circumvention of additional forms of technological protection
measures. In a fact situation where the access is authorized, the
traditional defenses to copyright infringement, including fair use,
would be fully applicable. So, an individual would not be able to
circumvent in order to gain unauthorized access to a work, but would
be able to do so in order to make fair use of a work which he or she has
acquired lawfully.
H.R. Rep. No. 105-551, pt. 1 at 18 (1998).
under § 106. Id. at 944-45. There is no need for a strict anti-circumvention rule as to
§ 1201(b), because, absent trafficking, § 106 does the relevant work. Id. at 945.
15
182634.2
Precisely that happened here. VidAngel had “authorized access” to the work,
i.e., the right to decrypt and view discs via playback. VidAngel was therefore
permitted to “circumvent additional forms of technological protection measures” as
long as the subsequent use did not violate § 106. Id.; see also S. Rep. No. 105-190
at 29 (1998) (confirming that § 1201(a) applies only to “initial access to a
copyrighted work”) (emphasis added).
According to the Studios, this Court held that “if a copyright owner puts in
place an effective measure that both (1) controls access and (2) protects against
copyright infringement, a defendant who traffics in a device that circumvents the
measure could be liable under both 1201(a) and (b).” Blizzard, 629 F.3d at 946
(emphasis added). But that does not help the Studios, because section 1201(b)
provides that the prohibited act in connection with use-control circumvention is
trafficking. If one creates a program that circumvents both access and use controls
and then distributes it, one is liable under both sections. In fact, Blizzard supports
VidAngel because it suggests the converse: absent trafficking, circumventing a use
control does not run afoul of § 1201(a).11
11
Both Realnetworks, Inc. v. DVD Copy Control Ass’n, 641 F. Supp. 2d 913, 917
(N.D. Cal. Aug. 11, 2009), and 321 Studios v. Metro Goldwyn Mayer Studios, Inc.,
307 F. Supp. 2d 1085, 1094 (N.D. Cal. Feb. 19, 2004), involved the trafficking of
circumvention software. Distinguishing between access-controls and use-controls
was unnecessary, because trafficking is illegal in either instance. Those decisions
therefore lack persuasive value. As for the passing remark from Murphy v.
Millennium Radio Grp. LLC, 650 F.3d 295 (3d Cir. 2011), that dictum disregards the
16
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Lastly, the Studios claim that VidAngel’s interpretation would render the
Librarian’s exemption authority superfluous. Ans. Br. 22-23. Not so. The Library is
empowered to protect those without authorized access who should nonetheless be
allowed to engage in fair use: students, academics, and artists. 17 U.S.C.
§§ 1201(a)(1)(C)-(D); see also infra 19 (rulemaking preferable to litigation).
B.
The Studios’ Expansive Interpretation Would Unnecessarily
Deepen A Circuit Split On An Important Question.
How this Court should view “mixed” access/use controls under the DMCA is
an issue of first impression. Treating mixed measures as what they really are—use
controls—would avoid granting the Studios absolute power to prevent noninfringing uses, which Congress did not intend and which is constitutionally suspect.
EFF Br. 8-12. It also avoids unnecessarily deepening a controversial split with the
Federal Circuit:
In 2010, this Court expressly split with the Federal Circuit on whether
§ 1201(a) requires a nexus to infringing conduct. This Court ruled that it does not.
Blizzard, 629 F.3d at 952. In Chamberlain Group v. Skylink Technologies, Inc., the
Federal Circuit had ruled that it does. 381 F.3d 1178, 1204 (Fed. Cir. 2004). The
statutory structure, legislative history of the DMCA, and natural implications of this
Court’s decisions.
17
182634.2
Federal Circuit was profoundly concerned about the societal consequences of
imposing liability absent infringement. Chamberlain, 381 F.3d at 1200.12
While this Court parted with the Federal Circuit on “pure” access controls, the
Federal Circuit’s reasoning applies with even more force here, where an access
control is being deployed to control use. Treating a conditional access control like a
pure access control would unnecessarily deepen the divide. In essence, the Studios
are asking this Court to become the first and only circuit to apply a strict § 1201(a)
regime to “mixed” access and use controls. It should decline.
IV.
VidAngel Is Likely To Prevail On Its Fair Use Defense.
In the alternative, VidAngel engages in fair use. The district court erred in
concluding otherwise.
A.
Fair Use Is A Defense To Both Copyright And DMCA Claims.
The Studios deny that fair use is a defense to DMCA claims. Ans. Br. 39-42.
Yet § 1201(c)(1) expressly authorizes a fair use defense to claims made “under this
title,” which includes the DMCA. Br. 45-46. Every academic commentator,
including Jane Ginsburg, agrees that the text of § 1201(c) applies fair use to DMCA
claims. Br. 46. The Studios offer no response.
12
Chamberlain was the only relevant Circuit authority on this point when the
FMA was passed. That is why it is not surprising that Congress saw no need to add
an express DMCA exemption in the FMA.
18
182634.2
The Studios also misrepresent the relevant case law. They cite district court
cases but fail to mention this Court expressly left open this precise issue. Blizzard,
629 F.3d at 958. The Studios then assert that the Second Circuit has held that DMCA
claims are not subject to a fair use defense, Ans. Br. 39-40, but this is what that court
actually said:
We need not explore the extent to which fair use might have
constitutional protection * * * because whatever validity a
constitutional claim might have as to an application of the DMCA that
impairs fair use of copyrighted materials, such matters are far beyond
the scope of this lawsuit * * * [T]he Appellants do not claim to be
making fair use of any copyrighted materials, and nothing in the
injunction prohibits them from making such fair use.
Universal City Studios v. Corley, 273 F.3d 429, 458-59 (2d Cir. 2001). Nor do the
Studios refute that eliminating fair use would offend both the Copyright Clause and
First Amendment. Br. 46-47.
The Studios finally say that a fair use defense is unnecessary because the
Librarian of Congress may grant categorical exemptions triennially. Ans. Br. 40-41.
Statutes often have express safe harbors precisely to make clear the propriety of
certain acts. That Congress included an avenue to protect legitimate fair uses
amenable to rulemaking through a process other than protracted litigation against
billion-dollar corporations merely underscores that the DMCA is subject to fair use.
Fair use—perhaps the most decorated, longstanding, and important doctrine
in copyright law—is a common law creation notwithstanding the original Act’s
19
182634.2
express prohibitions. That Congress would strike it sub silentio is unlikely at best.
Such a sea change would and should require explicit congressional instruction.
B.
The District Court Clearly Misapplied The Four Fair Use Factors.
Determining whether a use is fair entails considering each unique case and
balancing four guiding factors. The parties agree that the central factors here are (1)
the nature of the use and (2) its market effects. See also Campbell v. Acuff-Rose
Music, 510 U.S. 569, 570 (1994). Both favor VidAngel.
As for the nature of the use, the district court held that omissions categorically
cannot be transformative. Ans. Br. 43-44. That holding, critical to the district court’s
findings and defended by the Studios here, was clear error.
Omissions can unquestionably be transformative. This was a key premise of
the Directors Guild of America and the Studios in opposing the FMA. Br. 9 n.23.
The reason they so fiercely oppose filtering is because omissions transform works
in ways they find artistically unacceptable.
20
182634.2
Consider these two versions of Sir John Chardin, a painting displayed in the
National Portrait Gallery:
Omissions can entirely transform the emotional and social content of a work.13
The omissions VidAngel facilitates transform works into content that families
are willing and able to watch together. Indeed, it is undisputed that the omission of
“mature” content is the only reason most VidAngel customers are even willing to
watch the Studios’ movies. ER15. The Studios ignore this. The Court should not.
13
That does not mean they always do. But the “minor cropping” of photographs
in Monge v. Maya Magazines, Inc., 688 F.3d 1164 (9th Cir. 2012), is not comparable
to removing content that people find contrary to their fundamental values. The
Studios’ remaining cases are even less relevant. See Elvis Presley Enterprises, Inc.
v. Passport Video, 349 F.3d 622, 629 (9th Cir. 2003) (long Elvis clips used without
transformation); Worldwide Church of God v. Philadelphia Church of God, Inc., 227
F.3d 1110 (9th Cir. 2000) (“verbatim” copying).
21
182634.2
Ultimately, the Studios wrongly ask this Court to deny that people’s values
matter when consuming entertainment. VidAngel’s filtering service provides
personalized transformations of works so that people can view them without
religious, moral, or parenting discomfort. The district court’s conclusion that
filtering, i.e., omission, can never be transformative was mistaken. VidAngel’s
service is highly transformative. This factor weighs strongly in favor of fair use.
The court below compounded that error by making another equally serious
one. It improperly evaluated the market effects evidence before it. Based on the
undisputed evidence—which the district court expressly credited—VidAngel
enhances the economic value of the Studios’ works.
The district court concluded that 51% of VidAngel’s audience would not
watch the Studios’ movies without filtering. ER15. For those customers, VidAngel
indisputably expands both the Studios’ revenues and market.14 That the other 49%
might watch unfiltered works does not diminish this. Some unspecified percentage
of them would not watch the Studios’ movies with their children. ER537. For that
subset, VidAngel again increased the Studios’ audience.
14
That customers pay VidAngel rather than the Studios directly does not
undermine this conclusion. First, VidAngel buys more copies of the Studios’ discs
than otherwise would have been sold. Second, VidAngel introduces a new
population to the Studios’ works.
22
182634.2
Even assuming, arguendo, that the entire 49% would otherwise have watched
an unfiltered version and was attracted to VidAngel not only because they preferred
(but did not require) filtering, but also due to its pricing, the district court erred in
finding market harm to the Studios. People who are price-motivated rather than
(exclusively) filtering-motivated could have watched the same movie by paying $1
per day to Redbox. There is no substantial reason to believe the alleged negative
effects outweigh the unquestionably positive effect of the majority of VidAngel
customers who never would have watched the Studios’ movies at all.
The Studios respond only by repeatedly citing A&M Records, Inc. v. Napster,
Inc., 239 F.3d 1004 (9th Cir. 2001), which they (correctly) note was not fair use.
Ans. Br. 46-49. But Napster bought one CD and simultaneously streamed it to tens
of thousands of customers. That would have an adverse market effect. If Redbox (or
VidAngel) bought only one disc, copied it, and then put all those copies for rent in a
red box (or streamed them), Napster would be a good analogy. But that is not this
case.
VidAngel, like Redbox, instead buys a disc for each one-at-a-time customer.
The profits that the Studios obtain from these two businesses are materially
indistinguishable. Unlike VidAngel, Napster (like other pirate sites) never ran out of
stock. Napster did not put millions into the Studios’ coffers by buying their discs, let
alone copies that customers would not pay to watch without its service.
23
182634.2
The Studios argue that VidAngel is Napster-like because after it buys
numerous copies, it stores most discs in a vault and streams from only one of them.
That objection is misplaced. The market effects on the Studios arise from the money
made when VidAngel buys their discs. As long as VidAngel buys one unique disc
per customer, which it does, the Studios get paid. VidAngel is not Napster.
Taking a disc one owns or has rented—i.e., for which the Studios have already
been paid—and streaming it to a particular screen for private home viewing is spaceshifting. This Court (and every academic commentator) has accurately described
space-shifting as “paradigmatic fair use.” All the Studios say in response is that this
Court’s express statement to that effect in Recording Industry Association of
America v. Diamond Multimedia Systems, Inc., 180 F.3d 1072 (9th Cir. 1999), was
technically dictum. Even so, it was entirely true.
On both the transformative nature of the work (which the court below valued
at zero, ER13-14) and on the market effects (which the court below misunderstood,
ER14-15), the court committed clear error. And because fair use is an equitable rule
of reason that requires a balancing among various factors, this Court should reverse.
See Sony Corporation of America v. Universal City Studios, Inc., 464 U.S. 417
(1984) (protecting time-shifting using the then-new VCR).
24
182634.2
V.
The Studios Have Not Shown Likely Irreparable Harm.
VidAngel argued that the Studios showed no harm, let alone irreparable harm.
Br. 48-52. In response, the Studios point to the deposition of Tedd Cittadine, who
noted that partners like exclusivity and are concerned about pirates. Ans. Br. 51-52.
General concerns are not harm. No less favorable deal terms were struck. No
potential partners walked. That a small company offering filtered streams after discs
are already available to buy and rent somehow moved the needle in the Studios’
negotiations with Netflix or HBO is specious. No Studio partner ever mentioned
VidAngel in negotiations, let alone actually drove a harder bargain. Br. 51.
Indeed, the absence of such evidence further suggests that “traditional”
streaming services know full well that “filtered” streams appeal largely to an
audience they disregard. Nor was there any indication in the record that, to the extent
the Studios’ unfounded speculations of harm translated into any actual lost revenue,
VidAngel would be unable to pay damages. Br. 52. Nothing about the supposed
harm was concrete, imminent, or not remediable by damages.
The Studios’ delay in acting is further evidence that their cries of irreparable
harm are insincere. One does not wait eleven months to address irreparable harm.
Br. 52-53. Nor, if a harm is truly irreparable, will months of evidence-gathering fail
to unearth even a single particularized reference to the specific harm (or estimated
amount thereof) a plaintiff is supposedly suffering. Br. 51.
25
182634.2
VI.
The Balance Of Hardships Requires Reversal.
In stark contrast, the harm to VidAngel and its customers was devastating.
VidAngel shut down its streaming business. Br. 53-54 (citing ER28, 56-57).
The Studios say harm to infringers does not count. Ans. Br. 55-56. But as
VidAngel pointed out, that cannot be, because likelihood of success and
consideration of hardship are separate prongs in the analysis. That means hardship
to the defendant necessarily matters even if the plaintiff is likely to succeed—and it
matters even more in close cases. Br. 54-56. Any other approach would tolerate the
destruction of a defendant’s business before final judgment. That is the opposite of
how an equitable doctrine should function.
The Studios also say VidAngel’s “cries of harm are disingenuous,” Ans. Br.
56, because VidAngel could have modified its technology to permit only the
streaming of movies other than Plaintiffs’ works, but instead chose not to. Id. at 57.
This suggestion—that VidAngel stopped streaming unnecessarily—ignores
the record. First, the Studios’ movies comprise 56% of its titles. Even if the
injunction prevented streaming only of that large share, VidAngel was significantly
harmed as a matter of both math and customer psychology. ER84. Second, in the
abrupt time permitted for compliance, VidAngel originally hoped it could, and
desperately tried to, come up with a technological solution that would affect only the
Studios’ titles, but it failed. ER28. In fact, VidAngel incurred the wrath of the district
26
182634.2
court for complying too slowly with its order and was not permitted adequate time
to explore a technological solution. ER23. And, contrary to the Studios’ implication,
Ans. Br. 57, nothing about VidAngel’s defiant public conduct or insistence that it
would fight the Studios to the end suggests that VidAngel was not seriously harmed.
Under that reasoning, Pearl Harbor was not a serious blow.
VII. The Injunction Harms The Public Interest.
Although the public interest in filtering is strong and Congressionally
sanctioned, Br. 56-57, the injunction robbed the public of any viable means to filter.
VidAngel is shut down; ClearPlay no longer functions for new releases; and the
Studios have scared everyone else away.
According to the Studios, the relevant public interest is in “upholding
copyright protections.” Ans. Br. 58. The Studios have confused themselves with the
public. The actual public has no interest in seeing America’s only commercially and
technologically viable filtering company destroyed through an unnecessary
preliminary injunction. The legal questions in this case are as complex and novel as
they are important. If the Studios prevail, they will be entitled to damages. If
VidAngel prevails, they will not. In either case, there will be a final judgment that
“upholds copyright protections.”
27
182634.2
CONCLUSION
For the foregoing reasons, the injunction should be dissolved.
Dated: February 22, 2017
Respectfully submitted,
Brendan S. Maher
brendan.maher@strismaher.com
Daniel L. Geyser
daniel.geyser@strismaher.com
Douglas D. Geyser
douglas.geyser@strismaher.com
STRIS & MAHER LLP
6688 N. Central Expressway, Suite 1650
Dallas, TX 75206
Tel: (214) 396-6630
Fax: (210) 978-5430
David W. Quinto
dquinto@vidangel.com
VIDANGEL, INC.
3007 Franklin Canyon Drive
Beverly Hills, CA 90210
Tel: (213) 604-1777
Fax: (213) 604-1777
Ryan Geoffrey Baker
rbaker@bakermarquart.com
Jaime Wayne Marquart
jmarquart@bakermarquart.com
Scott M. Malzahn
smalzahn@bakermarquart.com
BAKER MARQUART LLP
2029 Century Park East, 16th Floor
Los Angeles, CA 90067
Tel: (424) 652-7800
Fax: (424) 652-7850
Shaun P. Martin
smartin@sandiego.edu
UNIVERSITY OF SAN DIEGO
SCHOOL OF LAW
5998 Alcala Park
San Diego, CA 92110
Tel: (619) 260-2347
Fax: (619) 260-7933
Counsel for Defendant-Appellant
VidAngel, Inc.
28
182634.2
s/ Peter K. Stris
Peter K. Stris
peter.stris@strismaher.com
Elizabeth Rogers Brannen
elizabeth.brannen@strismaher.com
Dana Berkowitz
dana.berkowitz@strismaher.com
Victor O’Connell
victor.oconnell@strismaher.com
STRIS & MAHER LLP
725 South Figueroa Street, Suite 1830
Los Angeles, CA 90017
Tel: (213) 995-6800
Fax: (213) 261-0299
CERTIFICATE OF COMPLIANCE
Undersigned counsel certifies that this brief complies with the type-volume
limitation of Federal Rule of Appellate Procedure 32(a)(7)(B) and Circuit Court Rule
32-1 because it contains 6,296 words, excluding the parts of the brief exempted by
the Federal Rule of Appellate Procedure 32(a)(7)(B)(iii).
Undersigned counsel certifies that this brief complies with the typeface
requirements of Federal Rule of Appellate Procedure 32(a)(5) and the type-style
requirements of Federal Rule of Appellate Procedure 32(a)(6) because this brief has
been prepared in a proportionately spaced 14-point Times New Roman typeface
using Microsoft Word 2013.
Dated: February 22, 2017
s/ Peter K. Stris
Peter K. Stris
29
182634.2
CERTIFICATE OF SERVICE
I hereby certify that, on February 22, 2017, I electronically filed the foregoing
with the Clerk of the Court for the United States Court of Appeals for the Ninth
Circuit by using the appellate CM/ECF system. Participants in the case who are
registered CM/ECF users will be served by the appellate CM/ECF system.
I further certify that some of the participants in the case are not registered
CM/ECF users. Upon acceptance by the Clerk of the Court of the electronically filed
document, one copy of the foregoing will be served, via U.S. Mail, postage prepaid
on:
Brian T. Grace
BAKER MARQUART LLP
2029 Century Park East, 16th Floor
Los Angeles, CA 90067
Tel: (424) 652-7800
Fax: (424) 652-7850
bgrace@bakermarquart.com
Dated: February 22, 2017
s/ Peter K. Stris
Peter K. Stris
30
182634.2
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