Yesterday, the Hollywood film industry was handed a key legal victory as the Ninth Circuit Court of Appeals rejected VidAngel’s appeal of a preliminary district court injunction which bars the company from filtering and streaming film content that is sourced from DVDs.

VidAngel, which markets its service to families, built its business by purchasing DVDs, which are then decrypted and edited for foul language, nudity, violence and other objectionable content before films are streamed online to subscribers. Although VidAngel contends that its service complies with tenets of the 2005 Family Movie Act (FMA), which exempts from copyright liability technologies designed to create censored versions of DVDs, Warner Brothers, Disney and several other film studios convinced a Los Angeles district court judge to grant injunctive relief pending a final ruling on the plaintiffs’ claim that the VidAngel service violates the anti-circumvention provision of the Digital Millennium Copyright Act (DCMA). Recently, VidAngel announced that it would alter its business model to comply with the injunction by using apps to filter streams of film content, supplied by Netflix and other over-the-top video streaming services that users have already paid to stream. Content from Disney, Warner Brothers and the other plaintiffs, however, would not be included in the filtered streams.

Challenging the injunction, attorneys for VidAngel told the Ninth Circuit panel in June that VidAngel’s practice of altering film content for the purpose of sanitizing that content for family use is protected by the FMA. VidAngel further advised the court that, because the sanitized content is streamed or otherwise transmitted to families for private use within their own homes, there is no issue of public performance that would violate studio copyrights. Counsel for the studios argued, however, that any authority to decrypt copyrighted works pursuant to the DCMA or the FMA rests with the manufacturers of DVD players and computer hard drives. Claiming that parties who purchase and view DVD content are thus legally barred from decrypting such works, counsel for the studios characterized VidAngel as “an unlicensed, on-demand streaming service that lacks any legal justification.”

In upholding the district court injunction, the Ninth Circuit panel agreed with the lower court’s conclusion that the plaintiffs are likely to succeed on their claim that “the anti-circumvention provision of the DCMA . . . covered the plaintiffs’ technological protection measures, which controlled both access to and use of the copyrighted works.” Because VidAngel did not filter authorized copies of the plaintiffs’ film content, the appellate panel also found that VidAngel was unlikely to succeed on its claim that the FMA exempts the company’s DVD filtering service from copyright liability. Although VidAngel CEO Neal Harmon emphasized that the Ninth Circuit ruling “has absolutely no impact on VidAngel’s current service,” the company’s counsel told reporters, “we are, of course, disappointed in this decision, and we are reviewing our strategy for moving forward.”