In a victory for Hollywood's major studios and yet another setback for a video editing operation, a California Central District Judge has dismissed VidAngel's counterclaim of antitrust violations against the studios, who are suing the company over its online delivery of filtered content.
VidAngel said it was disappointed and was considering its legal options.
Judge André Birotte Jr. also rejected VidAngel's defense of Copyright misuse, which would have required VidAngel to make the case that the studios were restraining the development of competing products.
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The studios named in the suit are Disney, Lucasfilm, Twentieth Century Fox Film, and Warner Bros., and it was just the latest in a string of court decisions stretching over many months.
The studios had asked the judge to throw out VidAngel's antitrust counterclaim on the grounds that it had failed to make a plausible claim either for a horizontal or vertical conspiracy or "intentional interference with prospective economic advantage." They had also asked the judge to reject the Copyright misuse defense since it was tied to the antitrust counterclaims.
The judge agreed with the studios and granted the motion to dismiss. He also said they could not amend their claim.
VidAngel had alleged that the Directors Guild of American agreement on motion picture editing prohibits alteration of a work without director approval, which is an unreasonable restraint of trade. The judge instead concluded that while the language limits editing without initial consultation with the director, it is not a mandate to obtain permission.
The judge also concluded that VidAngel had mischaracterized an email from a Google representative, which it alleged informed VidAngel that Google was concerned that directors would block content filtering.
VidAngel had asserted that the studios would not all have rejected a licensing agreement if they had not agreed collectively to refuse to allow filtering, but the judge instead concluded that their refusal to engage in licensing discussions "with a company that they allege is operating an infringing service is a rational business decision and does not support a plausible inference of an agreement to eliminate filtering."
VidAngel had also argued that the refusal to sell VidAngel their DVDs—VidAngel buys a copy of a DVD, filters out the swearing and nudity, and streams it to a subscriber—was counter to their economic self-interest since they were cutting out the retailer middleman. But VidAngel also said that the studios had an economic motive in "subverting" VidAngel's business model because VidAngel DVD's are re-sold and streamed to new cuteroms, from which the studios get no money. "VidAngel seemingly concedes that Plaintiffs have rational economic motives not to deal with VidAngel," said Birotte.
As to Copyright misuse, the judge said: "VidAngel has not, and cannot allege that their filtering service is “a competing product” to Plaintiffs’ movie production studios."
Just last week, the same judge denied a motion by VidAngel to declare that its new app-based online stream scrubbing business model does not violate an injunction it is under from operating under its previous model of buying, scrubbing and streaming DVDs.
"We are once again disappointed by another decision by Judge Birotte that badly misconstrued VidAngel’s allegations," said VidAngel CEO Neal Harmon. "During the more than seven months it took the Court to rule, there were a number of highly-publicized events showing that VidAngel’s antitrust allegations are correct, including the Directors Guild of America’s assertion of its collective bargaining agreement with the studios to force Sony to cease offering clean content to home viewers. Such events notwithstanding, the Court inexplicably denied VidAngel’s request for leave to amend its counterclaim to allege additional facts in support of its claim. We are conferring with our attorneys and will announce VidAngel's legal response to the Court’s ruling as soon as possible."
