A U.S. District Court has granted a preliminary injunction (thereafter confirmed by the 9th Circuit Court of Appeal) against VidAngel, a movie filtering and streaming service. The Judge, while granting the injunction in favour of a slew of Hollywood movie studios, found that the services of VidAngel infringe the copyright held by these studios over the movies streamed by VidAngel to the viewers. This decision not only strengthens the monopoly enjoyed by Hollywood’s studios over the digital content in movies but also raises the larger question as to what rights are transferred when one purchases a digital disc containing movies.
VidAngel- What and How?
VidAngel is a direct to home movie streaming service that offers its customers the option of streaming filtered movies directly into their devices for a sum of 20$ with the option of sellback. Under the sellback option, for every night that the customers choose to retain the movie with them, they lose 1$ for a normal print and 2$ for an HD print. Thus, if you manage to return the movie within a night, you effectively pay only 1$ for watching the movie.
As to the filtering of content, VidAngel gives its customers the option of choosing from a long list of filters (for e.g. – violence, nudity, profanity etc.) that can be applied to the movie before it is streamed. While there is no upper limit to how many filters can be applied, customers are obliged to apply at least one filter. I will explain in a bit as to why at least one filter is being insisted upon.
VidAngel’s business model has been built on the exemption introduced by the Family Movie Act, 2005. As per this Act, any action or technology that “makes imperceptible”, “limited portions of audio or video content of a motion picture […] by or at the direction of a member of a private household” for “private home viewing” is exempt from copyright infringement. Other conditions to be fulfilled under the legislation are that a) the copy to which filtering is done should be an “authorized copy” and b) no “fixed copy” should be made in the course of such alteration.
VidAngel tries to fit in their business model within the ambit of this exception by first physically buying the DVDs/ CDs of movies from retailers, uploading them on their inventory management system, decrypting them and then offering the same to the customers for sale through their websites. Once the customer “buys” a movie, he is expected to apply at least one filter, as already mentioned above. Once a customer buys the movie, that particular copy will no longer be available for other customers, till it is sold back. VidAngel then streams the digital content of the disc to the viewer’s device. Although technically VidAngel is selling the DVD to the customers,(and the customers have even the option of asking VidAngel to send the physical copy of the DVD to them), it is the streaming service, which in effect the customers avail of rather than the DVDs themselves.
As is obvious, by buying a DVD from the retailer and thereafter “selling” it to the customer, VidAngel tries to ensure that they could take recourse to the first sale doctrine and also claim that the streaming was done on behalf of the owner of the disc, i.e., the customer. It also helps them fulfill the first of the Family Movie Act conditions, of the copy being an authorised one. By obliging the customer to apply a filter, another one of the conditions under the Act’s exemption- applying a filter at the direction of a member of a private household- is also fulfilled. Another reason why at least one filter is being asked to be applied, as it appears from VidAngel’s submissions in the case, is to argue “transformation”.
While it appears that VidAngel has done a good job at prima facie fulfilling the conditions under the Act, the Judge clearly did not seem convinced that the services of VidAngel are legal. We will now look into how the Judge dealt with each of the arguments raised by the parties.
- Circumvention of technological measures
Plaintiff’s primary argument was that the Defendant violated the Digital Millennium Copyright Act, 1998 (“DMCA”) by decrypting the DVDs/ discs. Defendant’s response that the re-formatting/space-shifting carried out on behalf of the owners of the physical discs was legal did not pass muster with the Court. Not only did the Judge observe that VidAngel failed to cite any authorities for their position but he also specifically found that such a defence can hold ground only if done with the authority of the copyright holder.
- Exemption provided under the Family Movie Act
VidAngel attempted to build its case primarily around the exemption provided under the Family Movie Act, which they claimed gave blanket immunity to services such as theirs. As already explained above, this enactment gives immunity to an act or technology that help filter limited portions of a motion picture. Here again, the Judge noted that the legislative history of the Act shows that it was not intended to be an exception to the prohibition contained in the DMCA. Furthermore, the Judge was of the opinion that the digital content that they streamed was not from an authorised copy as it was obtained through the circumvention of a technological measure.
- Creation of “copies”
Defendant further attempted to establish that they were not liable for copyright infringement as there was no creation of a “copy” and only an “intermediate copy” was created during the course of their services. Such intermediate copies, according the Defendant were not copies capable of being viewed unless re-assembled by them, and thus did not fall foul of DMCA. Here again, the Judge made a purposive interpretation by noting that although “VidAngel’s fragmented copies may not be able to be perceived directly by consumers, however they are able to be perceived with the aid of VidAngel’s software.”
- Exclusive right of the Plaintiff to communicate to public
Another one of their rights, which the Plaintiff claimed had been violated, was the exclusive right to communicate the work to the public. To this argument, VidAngel again relied on the Family Movie Act as well as the decision in Am.Broad. Cos.v. Aereo to contend that when transmission is made to the owners of the product (DVDs in this case), such a transmission cannot be held to be “communication to the public”.
It raises the question of whether a person buying a physical DVD in fact owns the digital content in it as well. This is a crucial debate, which we have discussed on this blog in the past in the context of e-book lending (see here). If so, as per the first-sale doctrine, the person owning it should have the right to exploit it. But, here again, the Judge ruled that the owners merely owned the physical discs and did not have rights over the digital content.
- Fair use
VidAngel’s fair use defence was also rejected on the ground that its services did not add anything to the Plaintiff’s character and by simply omitting what the viewers found objectionable, they were not imparting a transformative character to the works.
Court also weighed the other arguments raised by VidAngel before arriving at the conclusion that a preliminary injunction would in fact further public interest rather than defeat it. As things stand now, a Circuit Court too has rejected VidAngel’s prayer for vacating the order of injunction. VidAngel’s failure to take down the infringing content has also meant that the District Judge has found it to be in contempt of his order forcing VidAngel to shut down its services, at least temporarily.
Although VidAngel waged its battle mainly on the plank of exception provided under Family Movie Act, dig a little deeper and one can easily discern that this has everything to do with the applicability of first sale doctrine in the digital sphere and the larger question of who owns the rights over the digital content. Although VidAngel tried to portray its service as a re-sale of the physical discs, at no point was the Judge inclined to accept this stance. The decision has further made it clear that it will be hard to import the doctrine of first sale to the digital world and it will be quite a while before the customers can lay claim to the digital content they have “bought”.
Image from here