Huge damages award may spell end for Provo's VidAngel filtering service

By John Rogers 

Late last month, a jury ordered Provo-based video filtering service VidAngel to pay $62.4 million in damages to Disney, Fox and Warner Bros. for streaming hundreds of movies on its service without permission.

The verdict is potentially a death blow to the company, which sought to allow family audiences to watch Hollywood fare while skipping past violence, sex and other objectionable content.{mprestriction ids="1,3"}

“We disagree with today’s ruling and have not lessened our resolve to save filtering for families one iota,” said VidAngel CEO Neal Harmon. “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 pursing options on that front as well.”

U.S. District Judge Andre Birotte had already ruled that VidAngel’s service was illegal, leaving the jurors to decide only the amount of damages. VidAngel ripped movies from DVD copies and then streamed them to users with offensive content filtered out. The company argued this was allowed under the federal Family Movie Act, but Birotte did not agree and ordered the service to shut down in December 2016. The company later relaunched a filtering service for Netflix and Amazon, which it continues to operate.

The case has been working its way through court since then. At trial, the studios asked the eight-member jury to impose the maximum penalty of $125 million for illegally streaming 819 movies, arguing that the company had willfully violated copyright law. VidAngel’s attorney, Mark Eisenhut, asked jurors to levy the minimum of $600,000.

In their verdict, the jurors landed halfway between those two figures.

“It feels like the jury split the baby,” Harmon said in an interview. “It just so happens that halfway in-between is not a good situation for us.”

In the wake of the judgment, the studio group filed a motion in U.S. Bankruptcy Court in Utah that week that seeks to keep VidAngel from hiding assets ahead of the plaintiff’s attempts to collect on the judgment. The studios said in the filing that they believe the recent transfer of intellectual property from VidAngel to a company named Skip Foundation Inc. is a “sham transaction” designed to hide assets. Skip Foundation is a registered Utah nonprofit headed by Bill Aho, former CEO of ClearPlay, another local video filtering service.

VidAngel is already in bankruptcy in Utah, and has about $2.2 million in the bank, according to court records. The jury’s verdict — if it is upheld — could force the company into liquidation.

In a statement, the studio plaintiffs applauded the verdict.

“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 plaintiffs said through their attorney Kelly Klaus.

Klaus, who argued the case for the plaintiffs, noted in his opening statement that VidAngel customers could stream movies for as little as $1, undercutting services like Amazon and iTunes that had paid for their content.

Harmon said that customers who use the current service will not notice any immediate changes. “In a matter of months, we should have a better picture of what kind of guidance we can give customers going forward,” he said.

Harmon said he was frustrated that the trial did not allow the jurors to decide whether filtering is legal — only the penalty for the violations. “It wasn’t a trial of both liability and damages,” he said. “Had it been so, it would have been easier for the jury to see our side of the story.”

In the wake of the judgment, the studio group filed a motion in U.S. Bankruptcy Court in Utah that week that seeks to keep VidAngel from hiding assets ahead of the plaintiff’s attempts to collect on the judgment. The studios said in the filing that they believe the recent transfer of intellectual property from VidAngel to a company named Skip Foundation Inc. is a “sham transaction” designed to hide assets. Skip Foundation is a registered Utah nonprofit headed by Bill Aho, former CEO of ClearPlay, another local video filtering service.{/mprestriction}