Court Rules that Vidangel is a Devil for Now

Digital Movie Theater

by: Carolyn Herman, Esq.

The U.S. District Court for the Central District of California has granted plaintiffs’ motion for a preliminary injunction prohibiting the defendant from conducting business as usual pending the outcome of a lawsuit filed earlier this year. Disney Enterprises, Lucas Films, 20th Century Fox, and Warner Bros. Entertainment had filed suit against Vidangel, Inc. alleging copyright infringement and violation of the DMCA by allowing users to circumvent plaintiffs’ encryption of their respective videos and to filter content without consent of the owner. According to the complaint, Vidangel is a Utah based Video on Demand service (VOD) which empowers users to filter content which is permitted under the Family Movie Act of 2005 (the “Act”). Defendant purchases DVDs or Blu-Rays (“Video”), uploads copies of the Video to its website, and, on a user’s request, streams the Video for the “purchase” price of $20.00. (A particular copy is designated for the user and the user may only play it one time and on one device.) After a Video is streamed, users may set filters presumably to delete nudity or offensive material. Users then have the option of selling back the Video to the defendant for $19.00 (less an additional $1.00 for each day the Video is kept).

Defendant both answered the complaint denying any infringement and counter-sued alleging antitrust violations. Defendant argued that decrypting the Video is a necessary step in allowing viewers’ movies to be filtered, that the Act does not require consent in order to filter, and that it was in the public interest to allow users to filter content. In its countersuit, the defendant claimed that the studios were interfering with its attempt to partner with streaming content providers to filter movies and that the studios have sought to expand their copyright monopoly by depriving consumers of the right to buy and sell copyrighted works (first sale doctrine). Defendant concluded that the studios were simply upset because they wanted to be the only ones who may authorize Video for streaming and filtering, which they currently do with other companies pursuant to lucrative licensing agreements.

In granting plaintiffs’ motion, the Court essentially found that too many important copyright interests were at stake and that there are other authorized streaming services available to the public which allow for filtering.  Defendant has said it will appeal. Another hearing, this time on plaintiffs’ Motion to dismiss defendant’s antitrust counterclaim, is scheduled for later this month.  Stay tuned. See, Disney Enterprises, Inc. et al. v. VidAngel, Inc., Case 2:16-cv-04109 (C.D.CA)

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