Founded in 2013, Utah-based startup VidAngel entered the video streaming market with a rather innovative business model.
The company allowed its users to rent popular movies and TV-shows, with the option to filter out violence, sex, profanity, and other objectionable content.
While there was plenty of demand for the service, it operated without permission from the major movie studios. Instead, the company acquired DVDs, which it would then rip using AnyDVD, so they could be streamed online.
Users interested in a movie were able to rent it for $20, and then sell it back after a day for $19. This made rentals as cheap as $1 per streamed movie, effectively beating all legal competitors.
VidAngel made sure that it would have physical DVDs in its archive for all movies and TV-shows that were rented out at any given time. This resulted in a rather extensive library of duplicate discs, as the massive collection of “The Revenant” DVDs below shows.
After operating its service for a few months, VidAngel drew the attention of several major movie studios including Disney and Warner Bros. In 2016, they teamed up to file a lawsuit against VidAngel, accusing it of copyright infringement and violating the DMCA’s anti-circumvention provision.
“VidAngel does not have permission to copy Plaintiffs’ movies and television shows or to stream them to VidAngel’s users,” the studios’ complaint read.
“Instead, VidAngel appears to circumvent the technological protection measures on DVDs and Blu-ray discs to create unauthorized copies and then uses those copies to stream Plaintiffs’ works to the public without authorization.”
VidAngel was convinced, however, that its business was legal. It argued that it was protected by the Family Movie Act, which allows consumers to skip objectionable movie content without committing copyright infringement.
The movie studios disagreed and earlier this year were backed by the U.S. District Court for the Central District of California. The Court granted summary judgment, ruling that VidAngel is liable for violating the DMCA’s anti-circumvention provision and committing copyright infringement.
The only question that remained was the scale of the damages. This was determined yesterday, following a multi-day trial where the jury concluded that a $62.4 million damages award was appropriate.
The bulk of the damages, $61.4 million, is for copyright infringement. With 819 titles mentioned in the suit, this amounts to $75,000 per infringed work, half of the maximum statutory damages.
The additional million in damages is for circumventing the DMCA’s anti-circumvention provisions by ripping the DVDs. This cost VidAngel $1,250 per title.
The movie studios are happy with the outcome. In a joint statement, they state that it sends a clear message to others who might consider operating a similar service.
“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,” the studios note.
VidAngel, however, vows to fight on and is likely to appeal the case.
“We find today’s ruling unfortunate, but it has not lessened our resolve to save filtering for families. VidAngel plans to appeal the District Court ruling, and explore options in the bankruptcy court.
“Our court system has checks and balances, and we are pursuing options on that front as well,” VidAngel CEO Neal Harmon adds.
As KSL’s excellent timeline shows, VidAngel filed for bankruptcy in 2017 to protect itself from the lawsuit. However, the company isn’t going anywhere just yet.
VidAngel’s original video streaming operation was shut down following a permanent injunction, but it later introduced a new service that allows users to “filter” Netflix, HBO and Amazon content for a fixed monthly subscription.