Streaming under the DMCADisney Enter., Inc. et al.

v. VidAngel, Inc.

Presented by John Carpenter

© 2017 Workman Nydegger

• Disney Enterprise, Inc.– American Diversified multinational mass media and entertainment

conglomerate– 2nd largest media company in revenue

• LucasFilm, LLC.– Purchased in 2012 at $4.06 billion– Responsible for half the top 10 grossing films in history

• Twentieth Century Fox Film Corporation– One half of 21st Century Fox Corp, almost $29 billion in annual revenue

• Warner Bros. Entertainment, Inc.– Really dark superhero films.

Introduction – Disney et al.

• Founded in Provo, UT in 2013; now headquartered in Palo Alta, CA.

• December 2016: initiated Regulation A+ securities offering to raise legal funds– Targeted $5 million: raised $6.25

in 28 hours1

– $10 Million raised in 5 days.1

• Offers DVDs and Blu-ray discs for sale on the website, with instant streaming options available with filtering of the video content.

Introduction – VidAngel, Inc.

1 “VidAngel Boasts the Fastest Reg A+ Raise So Far”. https://www.equities.com/news/vidangel-boasts-the-fastest-reg-a-raise-so-far

Introduction – VidAngel, Inc.

Source: https://www.vidangel.com/news/category/legal/

Facts

• Movie Studios commonly distribute films in a process called windowing.– Timing and price varied depending on

distribution method and content.• Physical disc (Blu-ray)• Digital download (Ultraviolet, iTunes)• “Pay per view” on-demand streaming (Amazon)• Subscription on-demand streaming (Netflix)

Facts

Source: Order Granting Plaintiffs’ Motion for Preliminary Injunction. https://www.documentcloud.org/documents/3237153-VidAngel-Order.html

• VidAngel offered discs of over 2,500 movie titles for purchase.

• VidAngel charges a flat $20 price for all discs.– VidAngel holds the disc until the buyer requests shipment

or pickup, while providing remote access to a filtered version of the content.

• The buyer can sell the disc back to VidAngel for a discount price based on the format and duration of ownership.– For example:

• buy-back price = $20 – ($2/day) for a Blu-ray disc

Facts

Source: Order Granting Plaintiffs’ Motion for Preliminary Injunction. https://www.documentcloud.org/documents/3237153-VidAngel-Order.html

• VidAngel decrypts the retail disc.• The decrypted data (both audio and video) is broken into

thousands of fragments that are tagged with various properties.

• The tagged data is stored on VidAngel servers, awaiting compilation by VidAngel software on-demand from the buyer.– The tagged data is not viewable without the VidAngel

software.• After compilation, the data is viewable as a remotely

accessible streamed multimedia file.

Defenses

Source: Order Granting Plaintiffs’ Motion for Preliminary Injunction. https://www.documentcloud.org/documents/3237153-VidAngel-Order.html

• 1) The decryption does not violate 17 U.S.C. §1201(a) of the Digital Millennium Copyright Act (DMCA).

• 2) The creation of the tagged data does not constitute reproduction of a copy under 17 U.S.C. §106.

• 3) Providing a buyer access to the recompiled file does not constitute a public performance under17 U.S.C. §106.

• 4) Fair Use under 17 U.S.C. §107.

#1 Decryption – VidAngel Argument

Source: https://www.law.cornell.edu/uscode/text/17/1201

– DMCA does not apply.– The DMCA forbids unauthorized decryption.– The Family Movie Act of 2005 allows filtering

and creates an exception to the Copyright Act for decryption in order to filter.

– 17 U.S.C §1201(a)(1) states:• “No person shall circumvent a technological measure

that effectively controls access to a work protected under this title.”

– 17 U.S.C §1201(a)(2) states:• “No person shall manufacture, import, offer to the public,

provide, or otherwise traffic in any technology, product, service, device, component, or part thereof, that . . . is primarily designed or produced for the purpose of circumventing a technological measure that effectively controls access to a work protected under this title.”

Decryption - Response

– DMCA does apply.– The DMCA forbids unauthorized decryption.– 17 U.S.C §1201(a)(3) states:

• “to ‘circumvent a technological measure’ means to descramble a scrambled work, to decrypt an encrypted work, or otherwise to avoid, bypass, remove, deactivate, or impair a technological measure, without the authority of the copyright owner.”

Source: https://www.law.cornell.edu/uscode/text/17/1201

Family Movie Act

17 U.S.C. § 110(11):“the making 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 the creation or provision of 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.”

Source: https://www.law.cornell.edu/uscode/text/17/110

Space-shifting

– VidAngel’s argument: Decryption does not amount to “circumvention” because VidAngel is only decrypting DVDs to allow the viewing of the DVD on a different format (i.e., streaming platform).

– 321 Studios v. MGM Studios, Inc., 307 F. Supp. 2d 1085 (N.D. Cal. 2004)• The court held that “the purchase of a DVD does not give the purchaser the

authority of the copyright holder to decrypt [Content Scrambling System].”

– Universal City Studios v. Corley, 273 F.3d 429 (2d Cir. 2001)• Defendants made a similar argument "that an individual who buys a DVD has the

'authority of the copyright owner' to view the DVD, and therefore is exempted from the DMCA pursuant to subsection 1201(a)(3)(A) when the buyer circumvents an encryption technology in order to view the DVD on a competing platform.”

• BUT Section 1201(a)(3)(A) only exempts from liability those “who would 'decrypt' an encrypted DVD with the authority of a copyright owner, not those who would 'view' a DVD with the authority of a copyright owner."

Source: Order Granting Plaintiffs’ Motion for Preliminary Injunction. https://www.documentcloud.org/documents/3237153-VidAngel-Order.html

Space-shifting

– The Librarian of Congress is required to review the exceptions to the DMCA every three years.

– The 2015 review considered and declined an exemption to allow circumvention of access controls on lawfully acquired audiovisual works for the purpose of noncommercial space- or format-shifting.1

– Does the Family Movie Act allow an exemption?– Orrin Hatch: “the FMA “does not provide any exemption from

the anti-circumvention provisions of section 1201 of title 17.”• “It 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).”2

Source: 1Exemption to Prohibition on Circumvention of Copyright Protection Systems for Access Control Technologies, 80 Fed. Reg. 65944 (Oct. 28, 2015).

2 150 Cong. Rec. S.11852-01 at S11853 (Statement of Senator Hatch) (RJN Ex. G at 269)

#2 Reproduction of a Copy

– VidAngel argued that the tagged data fragments do not constitute illegally reproducing a copy.

– Only an “intermediate copy” is made, and the intermediate copy is unviewable by a user.

– 17 U.S.C. § 101 provides that “in order to constitute a "copy" for purposes of the Copyright Act, the allegedly infringing work must be fixed in some tangible form, "from which the work can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device." (emphasis added).

Source: https://www.law.cornell.edu/uscode/text/17/101

#3 Public Performance of a Copy

– 17 U.S.C. § 101– To perform or display a work “publicly” means—(2) to transmit or otherwise communicate a performance or display of the work to . . . the public, by means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times.

Source: https://www.law.cornell.edu/uscode/text/17/101

#3 Public Performance of a Copy

– Warner Bros. Entertainment Inc. v. WTV Systems, Inc., 824 F. Supp. 2d 1003 (C.D. Cal. 2011).• a service which streamed the contents of DVDs from DVD players

purportedly assigned to individual users also violated the public performance right.

– On Command Video Corporation v. Columbia Pictures Industries, 777 F. Supp. 787 (N.D. Cal 1991).• “electronic rental” system infringed the public performance right.• The court held that the “relationship between the transmitter of the

performance . . . and the audience,” was “a commercial, ‘public’ one regardless of where the viewing takes place.”

#3 Public Performance of a Copy

– Am. Broad. Cos. V. Aereo, Inc., 134 S. Ct. 2498 (2014)• held that internet streaming of copyrighted material captured from over-the-

air broadcast signals by thousands of separate antennae, each of which was purportedly assigned separately to individual subscribers, infringed the public performance right.

– Individual authorized sources of copyrighted material are held to infringed the public performance but

– the Supreme Court declared that a transmission of a copyrighted program is not made to “the public” when it is made “to those who act as owners or possessors of the relevant product.”

– The Court has “not considered whether the public performance right is infringed when the user of a service pays primarily for something other than the transmission of copyrighted works.”

#3 Public Performance of a Copy

– to those who act as owners or possessors of the relevant product.”

– Judge Birotte states that the buyers of the DVD own the DVD, even though the DVD is held by VidAngel.

– However, the tagged data streamed to the user is distinct from the DVD

– Therefore, the buyer of the DVD is not receiving a product or service to which the buyer acts as owner or possessor.

#4 Fair Use

– (1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;

– (2) the nature of the copyrighted work;

– (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and

– (4) the effect of the use upon the potential market for or value of the copyrighted work.

Source: https://www.law.cornell.edu/uscode/text/17/107