Jury orders Provo’s VidAngel to pay $62.4 million for violating Hollywood studios’ copyright by filtering movies

(Photo courtesy of VidAngel) VidAngel is a Provo-based filtering company that provides customers with a means to stream TV shows and movies and alter the content according to their personal preferences.

A California jury Monday ordered the Provo-based VidAngel to pay $62.4 million to four Hollywood studios, for violating the studios’ copyrights by streaming filtered versions of their movies into customers’ homes.

U.S. District Court Judge André Birotte Jr. granted summary judgment against VidAngel in March, ruling that the studios had proved that VidAngel violated the studios’ copyrights and the Digital Millennium Copyright Act, which includes protection for security software to keep the movies from being pirated.

At the time, Birotte rejected VidAngel’s argument that its filtered streaming service was protected by the Family Movie Act, passed in Congress in 2005. VidAngel also defended its business model on First Amendment grounds, but Birotte said the company “has not raised a triable issue.”

The eight-person jury heard four days of testimony and arguments before deliberating.

The Hollywood trade paper Variety reported that attorneys for the four studios — Disney Enterprises Inc., LucasFilm Ltd. LLC, Twentieth Century Fox Film Corporation and Warner Bros. Entertainment Inc. — argued for the maximum penalty, $125 million, for streaming 819 movies illegally. VidAngel’s lawyer sought the minimum of $600,000.

“It feels like the jury split the baby,” VidAngel CEO Neal Harmon told Variety. “It just so happens that halfway in between is not a good situation for us.”

In a statement, Harmon said the company would appeal the verdict, and “explore options in the bankruptcy court.” Variety wrote that the company has $2.2 million in the bank, and the ruling could force VidAngel into liquidation.

“We disagree with today’s ruling and have not lessened our resolve to save filtering for families one iota,” Harmon said in his statement.

An appeal may be an uphill battle. Birotte noted in his March ruling that the Ninth Circuit Court of Appeals already rejected VidAngel’s arguments regarding the Family Movie Act and the First Amendment.

The studios, in a joint statement, said: “The jury today found that VidAngel acted willfully, and imposed a damages award that sends a clear message to others who would attempt to profit from unlawful infringing conduct at the expense of the creative community.”

VidAngel was launched in 2014, offering its customers Hollywood movies in a way that could filter out nudity, violence and profanity.

It’s the way VidAngel did it that prompted the copyright suit. VidAngel would buy a DVD, use software to decrypt the studios’ anti-piracy measures, and store the movie as files in a streaming format. The company would “sell” the DVD to a customer for $20, then buy it back after viewing for $19, with the physical disc almost never leaving VidAngel’s hands. The result was, in practice, a streaming service from VidAngel to a customer’s streaming device — such as Roku or Apple TV — for $1 per viewing.

The studios argued, successfully, that VidAngel violated their copyrights by making unauthorized copies of their films, and violated the DMCA by thwarting the studios’ anti-theft technology.

The four studios first sued VidAngel in June 2016, and the Provo company was forced by a preliminary injunction to stop streaming movies from DVDs that December. The case was delayed after VidAngel declared Chapter 11 bankruptcy in October 2017, but a stay was lifted last November to let the studios’ case proceed.

In June 2017, VidAngel started offering its filtering on streaming services, such as Netflix and Amazon. The legality of that filtering is still to be resolved. Birotte in March rejected VidAngel’s request to exempt that streaming from the injunction that stopped its DVD-based streaming.

VidAngel also streams its own content, family-friendly movies and comedy programs. Those are still available on VidAngel’s service.

VidAngel is the latest Utah company to face legal problems for trying to show edited versions of Hollywood movies. The Varsity Theatre in Provo, owned by Brigham Young University, was not allowed to screen Steven Spielberg’s 1993 film “Schindler’s List” because Spielberg refused to let it be cut. Edited-video services flourished in Utah in the late 1990s and early 2000s, led by a company called Cleanflix, which went out of business after courts ruled their editing violated studio copyrights.