• by Wendy Davis  @wendyndavis, August 24, 2017

Siding with Hollywood studios, a federal appellate court has upheld an injunction that prevents tech company VidAngel from operating a supposedly "family friendly" streaming video service.

In 2015, VidAngel launched a $1 streaming video service that allowed users to censor objectionable material, including nudity or violence, from the videos they watch. The company purchased newly released DVDs like "The Martian" and "Star Wars: The Force Awakens," and then streamed them from its own servers, without obtaining licenses from the studios. In some cases, those films weren't otherwise available for on-demand streaming.

Disney, Warner Bros and 20th Century Fox sued VidAngel in June of 2016, arguing that the startup was infringing copyright by streaming programs without a license.

VidAngel countered that its activity was protected by the Family Movie Act, a 2005 law intended to enable parents to censor movies by stripping them of material they deem inappropriate for children. The Family Movie Act provides that copyright infringement laws don't apply to technology that mutes or hides "limited portions of audio or video content" from an authorized copy of the movie.

A district court judge enjoined VidAngel from operating late last year. The company then appealed to the 9th Circuit.

A three-judge panel of the 9th Circuit ruled on Thursday that the Family Movie Act doesn't apply to VidAngel, because the company filters a version of the movie that was ripped from a DVD, as opposed to an "authorized" file.

"VidAngel does not stream from an authorized copy of the Studios’ motion pictures; it streams from the 'master file' copy it created by 'ripping' the movies from discs after circumventing their [encryption]," the judges wrote.

The judges added that VidAngel's interpretation of the 2005 law "would create a giant loophole in copyright law."

"Virtually all piracy of movies originates in some way from a legitimate copy," the judges wrote. "If the mere purchase of an authorized copy alone precluded infringement liability under the FMA, the statute would severely erode the commercial value of the public performance right in the digital context, permitting, for example, unlicensed streams which filter out only a movie’s credits."