The US Court of Appeals for the Ninth Circuit affirmed a preliminary injunction against an online video streaming service, finding that the movie studio plaintiffs were likely to succeed on the merits for violations under the Digital Millennium Copyright Act (DMCA) and the Copyright Act. Disney Enterprises, Inc., et al. v. VidAngel, Inc., Case No. 16-56843 (9th Cir., Aug. 24, 2017) (Hurwitz, J).

VidAngel is a film and television filtering service that essentially cracks encryption on discs, makes full unauthorized copies of the copyrighted materials from those decrypted discs, edits objectionable content from the shows, stores copies on its servers and streams the shows to its customers. VidAngel was shut down by a preliminary injunction issued by the district court, which found that VidAngel likely violated the DMCA by circumventing the encryption on DVD and Blu-ray discs, and the Copyright Act by copying movies onto its servers and streaming the movies to consumers. VidAngel appealed.

VidAngel argued two issues of first impression on appeal. First, it claimed that its copying was protected under the Family Movie Act of 2005. Second, it argued that the DMCA’s anti-circumvention provisions do not cover the studios’ technical protection measures, commonly known as TPMs. To control access to their movies, the studios use encryption-based protection, Content Scramble System and Advanced Access Content System.

The Family Movie Act was designed to allow consumers to skip objectionable audio and video content in videos without committing copyright infringement. The Act authorizes a member of a household to make limited portions of audio or video content of a motion picture imperceptible during performances in, or transmissions to, that household. To support the development of filtering functionality, the Act also allows for the creation and distribution of any filtering technology. However, that technology is restricted to use by a member of a private household, and no fixed copy of the movie may be created.

VidAngel failed to convince the Ninth Circuit that because it started with a lawful copy of the movie (i.e., the disc it purchased), any subsequent stream was “from” that authorized copy. The Court found no support for VidAngel’s interpretation of the Act and noted that VidAngel’s interpretation would allow for unlawful decryption and copying prior to filtering, a result that would negatively affect the integrity of intellectual property rights, creating a giant loophole in copyright law.

The Ninth Circuit also made quick work of VidAngel’s argument that it was authorized to decrypt the discs under the language of the Act. The Court explained that the studios allow lawful purchasers permission only to view their discs with a DVD or Blu-ray player licensed to decrypt, not to access the work itself. 

Finally, VidAngel argued (for the first time on appeal) that because the studios only object to decryption for the purpose of copying (i.e., a “use” of the videos), but permit those who buy the discs to decrypt them in order to view the videos (i.e., an “access”), the encryption controls should be treated as “use” governed by § 1201(b) of the DMCA. The Ninth Circuit found no support in the statute for this argument, noting that when a defendant decrypts the protection measures and also reproduces that work, it is liable both for circumvention in violation of the DMCA and copyright infringement.

The Ninth Circuit also affirmed the district court’s finding that VidAngel was not likely to succeed on its fair use defense, because, among other things, the defendant’s service was an effective substitute for the studio’s unfiltered works. After balancing the equities in favor of the studios, the Court found that the district court did not abuse its discretion in finding that a preliminary injunction was in the public interest.