"In the absence of the Family Movie Act, you've got these works that are encrypted and you use what appears to be illegal software ... to decrypt them," said one judge of VidAngel's service.
"I think this one’s a lot easier," whispered 9th Circuit judge Carlos T. Bea to his colleague Andrew D. Hurwitz, comparing the unlicensed family-friendly streaming dispute between Disney and VidAngel to previous items on their calendar while the attorneys were setting up for their oral arguments on Thursday.
It's unclear whether those in the room could hear, but the statement was plainly audible in a live stream on the court's website. "I do, too," responded Hurwitz with a laugh.
The dispute itself is no laughing matter, however, and has potentially wide-ranging implications for the entertainment industry in regard to fair use. It centers on whether VidAngel's service that allows users to set filters and stream content infringes upon copyrights held by Hollywood studios in those films. Disney, 20th Century Fox and Warner Bros. argue the service threatens the legitimate streaming market, while VidAngel paints the lawsuit as part of a war on family-friendly content.
The panel, comprised of Bea, Hurwitz and district judge Leslie E. Kobayashi, is currently reviewing whether the district court erred in issuing an injunction that paused VidAngel's service. "The statute clearly requires that a performance or transmission of filtered content must come from an 'authorized copy' of the motion picture," wrote U.S. District judge Andre Birotte in that decision. "The digital content that VidAngel streams to its customers is not from an authorized copy."
The appellate arguments were the last on the panel's Thursday calendar — and the apparent perception that two of the three judges consider this a straightforward case bodes well for the studios.
During the oral arguments, VidAngel attorney Peter Stris told the panel that the case boils down to two key questions: "Does the Family Movie Act authorize VidAngel's copying and streaming and, if so ... should the DMCA be interpreted to gut not only the Family Movie Act but also other well-recognized exemptions to copyright infringement?"
DVDs and Blu-rays contain technological measures that prevent unauthorized copying, and the Digital Millennium Copyright Act lays out specific situations in which circumventing those measures would be legal. Those exemptions are re-evaluated every three years. In 2015, for example, the exemption that allowed documentary filmmakers to lawfully access DVD content pursuant to fair use was expanded to include Blu-rays for the first time.
The Family Entertainment and Copyright Act of 2005, meanwhile, creates a different exemption. It allows "the making imperceptible ... limited portions of audio or video content of a motion picture ... from an authorized copy of the motion picture."
So, as Birotte noted, whether VidAngel's service filters from authorized or unauthorized copies is key here.
"In the absence of the Family Movie Act, you've got these works that are encrypted and you use what appears to be illegal software ... to decrypt them," said Hurwitz. "Isn't that exactly what the DMCA is about?"
Stris said "absolutely not" and argued that, by buying the discs, VidAngel was given permission to access the content and therefore the family movie exemption applies. "You don't pay $20 for a disc unless you're going to have the right to watch it," he said, adding that, in order to watch it, your DVD player has to bypass the access controls. He argues that, after buying a disc, he should be allowed to rip it and filter it without worry of legal consequences. "It's very dangerous if our interpretation is rejected ... I don't think Mr. Verrilli will be able to explain how, under their interpretation of the Family Movie Act, anyone can ever filter through streaming without the studio's permission."
Hurwitz seemed skeptical. "The central issue for me is ... you’re not transmitting from the one that you actually bought from them," he said. "You're transmitting from a copy that you've ripped. ... Why is that 'from an authorized copy' language not fatal to your claim?"
VidAngel's interpretation of the statute is that you can make a fixed copy of the original work if it enables filtering, and Stris argued that "Congress didn't care about the technology and whether it made an intermediate copy as long as it met the other conditions in the provision."
Donald Verrilli, attorney for the studios, argued that Birotte issued the injunction because he saw the service for what it is. "It's an unlicensed on-demand streaming service that lacks any legal justification and is totally unfair to us and to licensed streaming services," Verrilli said. "The only way you gain access lawfully under the DMCA is by using the means that the copyright owner has authorized for gaining access."
Verrilli argued the 9th Circuit has already "unambiguously" held in MDY v. Blizzard that consumers can't circumvent access control measures to view a DVD on a competing platform just because they purchased it.
"You cannot invoke the Family Movie Act to excuse conduct that would be a violation of the DMCA on the ground that you're violating the DMCA so that you can do what the Family Movie Act would otherwise authorize," said Verrilli, paraphrasing Sen. Orrin Hatch, who sponsored the bill. "What they're essentially saying is 'if we filter, we can stream without a license.'"
Further, Verrilli argued that the studios aren't inherently against filtering, only illegal filtering. "I think it speaks volumes that the filtering company out there that’s trying to do this in a way that's consistent with the copyright laws and DMCA, ClearPlay, has filed an amicus brief on our side," he said. "I think that tells you all you need to know about whether we're trying to kill off filtering or not."