A streaming company that has tried to seize a higher ground, taking Hollywood movies from discs and “cleaning” the films of pornography, nudity, and violence and then providing them online to its customers, has itself acted in naughty, naughty fashion, a federal judge has found.

In Los Angeles, U.S. District Judge Andre Birotte Jr. ruled that VidAngel Inc. has infringed copyrights held by Disney, Warner Bros., and Twentieth Century Fox after failing to get appropriate licensing from them, which resulted in an order that the company stop all editing and streaming of the studios’ films.

Since the ruling, VidAngel has flapped its corporate wings and claimed technical issues in complying with the federal injunction – then flouted it. Who wouldn’t want to zap the sleaze straight out of a flick like Fifty Shades of Gray? But the company is finding that it can be costly to be righteous. Poking Hollywood in the nose and telling a federal court judge that “we’re right and you’re wrong” landed VidAngel in contempt of court.

Studios sue the streamer

The dispute between VidAngel and Disney, Warner Bros. and Twentieth Century Fox, became formal back in June 2016 when the studios sued the company, asserting copyright infringement, and violation of the Digital Millennium Copyright Act.

The studios claim the company is copying its films by removing the encryption that protects works from being stolen. They also sought a preliminary injunction to halt VidAngel from copying and streaming copyrighted films since the company failed to pay for the films licensing rights.

VidAngel’s defense  

VidAngel asserts that the streaming service is not a copyright “pirate,” rather the company simply buys DVD or Blu-ray discs, edits their content, and then “sells” viewings to consumers who receive the material in digital form without violence, nudity, or pornography—as the consumers wish. VidAngel says the studios receive their just due because consumers pay them when they buy lawful copies—the discs. It says directors are protected because VidAngel doesn’t make any permanent copy of its edited versions—it just streams them in ephemeral fashion to audiences that want them.

It also asserted that its business model was legally endorsed in the Family Movie Act of 2005. VidAngel says the act exempts the company from infringement for skipping audio and video content in films. This exemption, by the way, applies to materials performed in or transmitted to homes for private viewing.

The act applies to an authorized copy of the film, or creation or provision of a computer program or other technology that allows for such, so long as no fixed copy of the edited version of the film is created by the computer program or other technology.

VidAngel also said that the company had not violated the Digital Millennium Copyright Act because of “fair use,” the aspect of copyright that permits narrow and transformative uses of others’ protected materials.

An unhappy judge

But U.S. District Judge Andre Birotte Jr. has rejected VidAngel’s arguments, ruling the streaming company was infringing studio copyrights and violating DMCA digital encryption measures. He said films, when they are uploaded for streaming, still bypass disc encryption. VidAngel’s buying and “selling” of its digital service is infringing because works are streamed from a master copy stored on company servers, not from original discs “purchased” by consumers. He also said that the Family Home Movie Act of 2005 doesn’t protect VidAngel from infringement: The act’s legislative history reflects zero intent by lawmakers to allow users to circumvent the DCMA.

He not only ordered the company to stop streaming, he also required it post a $250,000 bond. VidAngel filed a motion to stay the order until it appealed it. And the company and its counsel made a “strategic decision” to ignore the preliminary injunction, provoking Birotte’s ire. He awarded the studios $10,000 or so in attorney fees for their time working on the contempt matter.

VidAngel still insists the order was unclear, arguing it didn’t include the word immediately and it didn’t say the entire site needed to be shut down. The company sought to talk its way out of its legal hole, claiming that the company intended to follow the court’s order but did want to wait to see if the judge might stay it and change his mind after a motion. The company eventually apologized but Birotte left his contempt ruling in place, noting, “Our system is premised on [the] simple fact orders, once they are issued, are to be respected.”

The company, which earlier had its emergency appeal of the court order rejected, has returned to the U.S. Court of Appeals for the Ninth Circuit in hopes of a reversal.