Disney Enterprises, Inc. v. Vidangel, Inc.
45 Media L. Rep. (BNA) 2241, 869 F.3d 848, 123 U.S.P.Q. 2d (BNA) 1753 (2017)
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Rule of Law:
The Family Movie Act of 2005 (FMA) does not exempt a service from copyright infringement liability if it circumvents technological protection measures to create an unauthorized digital copy of a film and then streams a filtered version from that unauthorized copy. The FMA's protection applies only to filtering performances made 'from an authorized copy,' not a process that begins with one but relies on an intermediate, unauthorized reproduction.
Facts:
- Disney Enterprises, LucasFilm Limited, Twentieth Century Fox Film Corporation, and Warner Brothers Entertainment ('the Studios') produce and distribute copyrighted films.
- The Studios use Technological Protection Measures ('TPMs') like Content Scramble System (CSS) on their DVDs and Blu-ray discs to control access and prevent unauthorized copying.
- VidAngel, Inc. purchased authorized physical DVDs and Blu-ray discs of the Studios' films.
- Using software called AnyDVD HD, VidAngel circumvented the TPMs on the discs to decrypt and 'rip' a digital master copy of each film onto its computer servers.
- Customers would 'purchase' a specific physical disc from VidAngel for $20, but VidAngel would retain possession of the disc.
- VidAngel then streamed a filtered version of the film to the customer from its unauthorized digital master copy, not from the physical disc the customer 'owned'.
- After viewing, nearly all customers would 'sell back' the disc to VidAngel for a credit, effectively paying a $1 or $2 per-night streaming fee.
- VidAngel marketed and streamed new releases, such as 'Star Wars: The Force Awakens', at a time when they were only available for purchase on disc or digital download, competing with the Studios' exclusive distribution windows.
Procedural Posture:
- The Studios sued VidAngel, Inc. in the U.S. District Court for the Central District of California, alleging copyright infringement and violations of the Digital Millennium Copyright Act (DMCA).
- VidAngel raised the Family Movie Act and fair use as affirmative defenses.
- The Studios moved for a preliminary injunction to halt VidAngel's service pending the outcome of the litigation.
- The district court granted the preliminary injunction, finding that the Studios had demonstrated a likelihood of success on the merits.
- VidAngel (appellant) appealed the district court's grant of the preliminary injunction to the U.S. Court of Appeals for the Ninth Circuit, with the Studios as appellees.
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Issue:
Does the Family Movie Act of 2005, which permits filtering of 'limited portions' of a movie 'from an authorized copy,' shield a streaming service from copyright infringement liability when that service decrypts a physical disc, creates a new digital master copy, and then streams the filtered content from that unauthorized master copy?
Opinions:
Majority - Hurwitz, Circuit Judge
No. The Family Movie Act (FMA) does not protect VidAngel's service because the streaming of the filtered movie does not come 'from an authorized copy' as required by the statute. The court reasoned that the plain language of the FMA requires the performance itself to originate from an authorized copy, such as a physical DVD being played. VidAngel's process, which involves creating an unauthorized intermediate master copy and streaming from it, falls outside this narrow exemption. The court further held that VidAngel's circumvention of the Studios' TPMs is a separate violation of the Digital Millennium Copyright Act (DMCA), as the authority to view a purchased disc does not grant the authority to decrypt it for the purpose of making a copy. Finally, the court rejected VidAngel's fair use defense, finding its use was commercial, not transformative, and harmed the potential market for the Studios' works by supplanting authorized streaming and rental services.
Analysis:
This decision significantly clarifies the narrow scope of the Family Movie Act (FMA), establishing that it cannot be used as a shield for business models that rely on creating unauthorized reproductions of copyrighted works. The ruling reinforces that the FMA protects filtering technologies applied during the playback of an authorized copy, not services that engage in format-shifting and unauthorized distribution. Furthermore, the opinion strengthens the DMCA's anti-circumvention provisions by affirming that the right to access a work (by buying a DVD) is distinct from the right to circumvent its technological protections to make a copy. The case serves as a strong precedent against 'disruptive' technology services that infringe on core copyright protections under the guise of providing a secondary feature like content filtering.
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