VidAngel New Streaming Business Model Seen Raising New Copyright Questions

VidAngel is trying to buy time with its Chapter 11 bankruptcy to reorganize around its new, streaming-centric business model (see 1710190046), but there's no consensus among copyright experts on whether that new business model will fare better in court because it's not clear how the streaming model operates. VidAngel General Counsel David Quinto told us the streaming service does result in some technical violations of exclusive rights, but it doesn't cause any actual harm to copyright owners and ultimately benefits consumers. "The fair use argument is very, very strong," he said.

Copyright statutory language didn't contemplate such services, said Rebecca Tushnet, Harvard University professor of First Amendment law. Meanwhile, the 2005 Family Movie Act expressed preference for people being able to edit movies for family-friendly viewing, but the law is "technology specific," Tushnet said. That raises the issue for a court of how much sway that law should have over what VidAngel is doing, even if it's not completely covered by FMA, she said.

In its Chapter 11 filing last week, VidAngel said its docket 2:17-cv-00989 complaint (in Pacer) filed last month in U.S. District Court in Salt Lake City against a variety of content companies seeking a declaratory ruling about the legality of its streaming service is in early stages. None of the content companies have responded. Chapter 11 gives the firm space "to promote and protect" its new streaming technology and to seek legal determination that its streaming system "is fully legal" and not subject to the preliminary injunction, CEO Neal Harmon said in a statement. He said the company has "millions in the bank to fight this all the way.” The bankruptcy filing creates a stay of the preliminary injunction upheld by the 9th U.S. Circuit Court of Appeals in August (see 1708240017), but the stay is only temporary, copyright lawyer Leonard French said.

VidAngel's problems when its business involved streaming video ripped from DVDs is that those copies were unauthorized, and if the company now isn't making copies, it solved that problem, said Santa Clara University School of Law High Tech Law Institute Director Eric Goldman. But if VidAngel again makes and manipulates a copy for its streaming service without authorization, "everything falls apart again," he said. With the 9th Circuit in August upholding content companies'-sought injunction against VidAngel, the companies undoubtedly will use that to suggest Utah court should be skeptical of the company, given its history of copyright infringement, Goldman said.

VidAngel's streaming model has it making a copy of content at eight different bit rates, tagging each for instances of potentially offensive content, so when a consumer orders a stream of that content from a licensed provider like Netflix, the stream is transmitted to VidAngel, while the company simultaneously transmits the previously recorded stream to the consumer with filters applied en route, Quinto said. Those copies are technically copyright violations, but most VidAngel viewers wouldn't watch the content sans filtering, so it creates no financial injury to studios, he said: The filtering is transformative, changing the content's character "from unwatchable to watchable." The Copyright Alliance didn't comment.

Quinto said the VidAngel process is the second-best option for consumers -- the best being studios licensing their content to the firm because then it could match the quality of unfiltered content, such as by being able to offer filtered subtitles. He said the copying method is more precise than trying to filter a livestream, which inevitably results in stops and starts and less-accurate filtering.

The streaming business model "isn't as outlandish and egregious" as Aereo's practices struck down in a 2014 Supreme Court decision, said St. Thomas University intellectual property law professor Ira Nathenson. Copyright law allows making of a copy, tagging objectionable content in that copy and then throwing the copy away, Nathenson said.

The new VidAngel business model "sounds good until you understand what they've really done," said Thompson Coburn intellectual property lawyer Jim Burger, who represents rival filtering service ClearPlay. With VidAngel apparently making a copy of a streaming service's content and then streaming that filtered copy to you, the problem is VidAngel doesn't have authorization to make those copies, he said, saying the company is unlikely to get the declaratory ruling it seeks.

If VidAngel was real-time filtering a streaming service's content, that could be a fair use defense, Burger said. Added Harvard's Tushnet, VidAngel making copies of content isn't automatically a copyright violation, since intermediate copies necessary to make a fair use have been protected.

Filtering livestreams would put the case "in a very different legal posture" than the DVD model, said University of Richmond School of Law intellectual property professor James Gibson. He said one issue the Utah court will have to decide is whether VidAngel streams are public performances, with one digital copy of content being streamed to many different viewers likely falling squarely into that camp. Gibson said VidAngel streams are public performances, so the court will have to determine whether they have a defense under FMA. He said it was surprising that during the 9th Circuit case, there wasn't much focus on whether the unauthorized copy VidAngel had on its servers was fair use because it was an intermediate step toward a permissible goal.