Cole L. Bingham (Bar No. 14131) DURHAM JONES & PINEGAR, P ...blog.vidangel.com/wp-content/uploads/2017/06/Vid... · Scott M. Malzahn (Cal. Bar No. 229204) [email protected]

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Douglas B. Thayer (Bar No. 8109) Andy V. Wright (Bar No. 11071) Cole L. Bingham (Bar No. 14131) DURHAM JONES & PINEGAR, P.C. 3301 N. Thanksgiving Way, Suite 400 Lehi, Utah 84043 Telephone: (801) 375-6600 Facsimile: (801) 375.3865 Email: [email protected] [email protected] [email protected] David Quinto (Cal. Bar No. 106232) VIDANGEL, Inc. 3007 Franklin Canyon Dr. Beverly Hills, CA 90210-1633 Telephone: (213) 604-1777 Email: [email protected] (pro hac vice) Attorneys for Plaintiff VidAngel, Inc.

Ryan G. Baker (Cal. Bar No. 214036) [email protected] (pro hac vice) Jaime Marquart (Cal. Bar No. 200344) [email protected] (pro hac vice) Scott M. Malzahn (Cal. Bar No. 229204) [email protected] (pro hac vice) Brian T. Grace (Cal. Bar No. 307826) [email protected] (pro hac vice) BAKER MARQUART LLP 2029 Century Park East, Sixteenth Fl. Los Angeles, California 90067 Telephone: (424) 652-7800 Facsimile: (424) 652-7850

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH, CENTRAL DIVISION

VIDANGEL, INC.,

Plaintiff,

vs. SULLIVAN ENTERTAINMENT, et al., Defendants.

Case No. 2:17cv00989 DN

VIDANGEL’S OPPOSITION TO MOTION TO DISMISS OR, IN THE ALTERNATIVE, TO TRANSFER OR STAY The Honorable David Nuffer Trial Date: None Set

Case 2:17-cv-00989-DN Document 93 Filed 11/27/17 Page 1 of 35

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TABLE OF CONTENTS

Page

I. INTRODUCTION………………………………………………………………………..i II. FACTUAL AND PROCEDURAL BACKGROUND………………………………….1 A. The Copyright Action in the Central District of California Against VidAngel’s Old Technology…………………………………………………………………...1 B. VidAngel’s Development of a New Technology and the California Court’s Refusal to Address Its Legality……………………………………………………3 C. This Declaratory Relief Action Concerns Only VidAngel’s New Technology…..7 D. Moving Defendants Engage in Significant Business Activities in Utah………….8 E. VidAngel’s Bankruptcy Filing…………………………………………………….9 III. ARGUMENT……………………………………………………………………………..9 A. This Court Has Specific Personal Jurisdiction Over the Moving Defendants…….9 1. The Moving Defendants Have Sufficient Minimum Contacts With Utah………………………………………………………………………10 a. This Court Has Jurisdiction Over the Moving Defendants Under the Calder v. Jones “Effects Test.”……………………….11 b. The Moving Defendants Have Purposefully Availed Themselves of This Forum………………………………………13 2. The Assertion of Personal Jurisdiction Over Moving Defendants Is Reasonable and Weighs Strongly in Favor of Jurisdiction………………14 3. Alternatively, This Court Should Permit Jurisdictional Discovery……...17 B. This Court Should Entertain This Declaratory Relief Action……………………17 1. VidAngel Properly Seeks to Adjudicate a Live Controversy Regarding the Legality of Its Stream-Based Service………………………………...18


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2. This Utah Action Is Both the First-Filed and the First Involving the Moving Defendants ..……………………………………………………21 C. A Transfer or Stay of This Action Would Be Inappropriate…………………….23 IV. CONCLUSION…………………………………………………………………………25


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TABLE OF AUTHORITIES

Page(s)

Federal Cases

Allstate Ins. Co. v. Scott, No. CIV. 11-00036 ACK, 2012 WL 1136336 (D. Haw. Apr. 3, 2012) ....................................9

Asahi Metal Indus. Co. v. Super. Court, 480 U.S. 102 (1987) ...........................................................................................................13, 15

Benton v. Cameco Corp., 375 F.3d 1070 (10th Cir. 2004) ...............................................................................................10

Burger King Corp. v. Rudzewicz, 471 U.S. 462 (1985) .......................................................................................................10, 14, 6

Buzas Baseball, Inc. v. Bd. of Regents of Univ. Sys. of Ga., 189 F.3d 477 (10th Cir. 1999) ...........................................................................................21, 22

C5 Med. Werks, LLC v. CeramTec GmbH, No. 14-CV-00643-RBJ, 2014 WL 4413054 (D. Colo. Sept. 8, 2014).....................................12

Calder v. Jones, 465 U.S. 783 (1984) .................................................................................................................11

Chrysler Credit Corp. v. Country Chrysler, Inc., 928 F.2d 1509 (10th Cir. 1991) ...............................................................................................23

Craft Smith, LLC v. EC Design, LLC, No. 2:16-CV-1235-DB, 2017 WL 2633502 (D. Utah June 15, 2017).....................................23

Dairy Health Prods., Inc. v. IBA, Inc., No. 1:07CV75DAK, 2008 WL 345846 (D. Utah Feb. 6, 2008) ..............................................11

Disney Enterprises, Inc. v. VidAngel, Inc., 869 F.3d 848 (9th Cir. 2017) ........................................................................................... passim

Dudnikov v. Chalk & Vermilion Fine Arts, Inc., 514 F.3d 1063 (10th Cir. 2008) .............................................................................10, 11, 12, 14

Employers Mut. Cas. Co. v. Bartile Roofs, Inc., 618 F.3d 1153 (10th Cir. 2010) ...............................................................................................10


v

Fox Television Stations, Inc v. Aereokiller, LLC, 851 F.3d 1002 (9th Cir. 2017) .................................................................................................20

Fox Television Stations, Inc. v. FilmOn X LLC, 150 F. Supp. 3d 1 (D.D.C. 2015) .............................................................................................20

In re Harris, 590 F.3d 730 (9th Cir. 2009) ...................................................................................................24

Harris v. U.S. Fid. & Guar. Co., 569 F.2d 850 (5th Cir. 1978) ...................................................................................................19

Hospah Coal Co. v. Chaco Energy Co., 673 F.2d 1161 (10th Cir. 1982) ...............................................................................................20

Icon Health & Fitness, Inc. v. Relax-a-cizor Prod., Inc., No. 1:12-CV-00017-SA, 2012 WL 1604376 (D. Utah May 7, 2012) .....................................20

Inamed Corp. v. Kuzmak, 249 F.3d 1356 (Fed. Cir. 2001)................................................................................................12

Intercon, Inc. v. Bell Atl. Internet Solutions, 205 F.3d 1244 (10th Cir. 2000) .........................................................................................10, 15

J. Mcsyre Mach., Ltd. v. Nicastro, 131 S. Ct. 2780 (2011) (plurality opinion) ..............................................................................13

Kindig It Design, Inc. v. Creative Controls, Inc., 157 F. Supp. 3d 1167 (D. Utah 2016) ........................................................................................9

Layne Christensen Co. v. Levelland/Hockley Cty. Ethanol, LLC, No. CIV. A. 08-2203-CM, 2009 WL 352832 (D. Kan. Feb. 12, 2009)...................................19

Lexington Ins. Co. v. Integrity Land Title Co., 721 F.3d 958 (8th Cir. 2013) ...................................................................................................19

Linkway Inv. Co. v. Olsen (In re Casamont Inv’rs), 196 B.R. 517 (9th Cir. B.A.P. 1996)........................................................................................24

Lipari v. U.S. Bancorp NA, 345 F. App’x 315 (10th Cir. 2009) ..........................................................................................21

Ltd. v. Insta-Mix, Inc., 438 F.3d 465 (5th Cir. 2006) ...................................................................................................13


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In re Marshall, 600 F.3d 1037 (9th Cir. 2010) .................................................................................................24

MedSpring Grp. v. Atl. Healthcare Grp., No. 1:05 CV 115, 2006 WL 581018 (D. Utah Mar. 7, 2006) ............................................22, 23

Monge v. RG Petro-Mach. (Gr.) Co., 701 F.3d 598 (10th Cir. 2012) .................................................................................................13

Nacogdoches Oil & Gas, L.L.C. v. Leading Sols., Inc., No. 06-2551-CM, 2007 WL 2402723 (D. Kan. Aug. 17, 2007) .............................................22

Nat’l Union Fire Ins. Co. v. ESI Ergonomic Sols., LLC, 342 F. Supp. 2d 853 (D. Ariz. 2004) .......................................................................................18

Newsome v. Gallacher, 722 F.3d 1257 (10th Cir. 2013) ...............................................................................................17

O’Hare Int’l Bank v. Lambert, 459 F.2d 328 (10th Cir. 1972) .................................................................................................20

OMI Holdings v. Royal Ins. Co., 149 F.3d 1086 (10th Cir. 1998) .....................................................................................9, 14, 16

Pacor, Inc. v. Higgins, 743 F.2d 984 (3rd Cir.1984) ....................................................................................................24

Scheidt v. Klein, 956 F.2d 963 (10th Cir. 1992) .................................................................................................23

Shannon’s Rainbow, LLC v. Supernova Media, Inc., 683 F. Supp. 2d 1261 (D. Utah 2010) ......................................................................................20

Shepherd Invs. Int’l., Ltd. v. Verizon Comm’cns. Inc., 373 F. Supp. 2d 853 (E.D. Wis. 2005) .....................................................................................15

SNMP Research, Inc. v. Avaya, Inc., No. 3:12-CV-117, 2013 WL 474846 (E.D. Tenn. Feb. 7, 2013) .............................................22

State Farm and Cas. Co. v. Mhoon, 31 F.3d 979 (10th Circ. 1994) ..................................................................................................18

Texas Gulf Sulphur Co. v. Ritter, 371 F.2d 145 (10th Cir. 1967) .................................................................................................23


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United States v. State of Wash., 759 F.2d 1353 (9th Cir. 1985) .................................................................................................18

Wilton v. Seven Falls Co., 515 U.S. 277 (1995) .................................................................................................................17

Federal Statutes

17 U.S.C § 106 .................................................................................................................................1

17 U.S.C. § 107 ................................................................................................................................4

17 U.S.C. § 110(11) ................................................................................................................... i, 21

17 U.S.C. § 1201(a)(1)(A) ...............................................................................................................1

28 U.S.C. § 1334(b) .......................................................................................................................23

28 U.S.C. § 2201 ............................................................................................................................17

28 U.S.C. § 2202 ................................................................................................................. ii, 17, 18

Rules

Fed. R. Civ. P. 68 ........................................................................................................................... iii

Fed. R. Civ. P. 12(b)(2)....................................................................................................................9


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I. INTRODUCTION

This action will shape the future of motion picture filtering. It will also determine the

future of VidAngel, Inc. (“VidAngel”), one of only two filtering companies operating today,

each of which is fighting for survival. Filtering was recognized as a public interest with the

passage of the Family Movie Act of 2005 (“FMA,” codified at 17 U.S.C. § 110(11)), sponsored

in the Senate by Orrin Hatch. The FMA allows individuals and families to watch motion

pictures they have lawfully purchased, but without content they find objectionable. It expressly

allows third parties to provide such a service. Two Utah companies – ClearPlay and VidAngel –

are the largest providers of filtering pursuant to the FMA. Most major motion picture studios

vehemently opposed the FMA and have since attempted to limit filtering wherever they can.

This motion is their latest attempt to quash legitimate filtering and avoid a merits determination

of the legality of VidAngel’s highly innovative technology that filters in ways ClearPlay cannot.

This Court should decide this case for several reasons. First, the Moving Defendants are

subject to personal jurisdiction in Utah. This action arises out of the Moving Defendants’

activities in Utah and their demands that VidAngel cease and desist from filtering their works.

The Moving Defendants purposefully availed themselves of Utah’s laws by making, buying, and

distributing films and engaging in other activities within Utah. They or their affiliates have

entered into agreements with licensed streaming services (“LSSs”) to stream their movies to

Utahns. In demanding that VidAngel cease and desist from filtering their works, the Moving

Defendants knew that injury would be felt in Utah where VidAngel is based and where

approximately 25 percent of VidAngel’s customers are located. Through this action, VidAngel

seeks to establish that people who have lawfully paid an authorized LSS for the right to stream

Moving Defendants’ movies have the right to use VidAngel’s new service to filter those movies.

Second, the assertion of personal jurisdiction over the Moving Defendants is also entirely

reasonable. The FMA essentially originated in Utah, the only significant filtering companies are


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based here, Moving Defendants or their affiliates have lobbied Utah-based representatives over

the FMA, and approximately 25 percent of VidAngel’s customers are Utahns. Now that there is

litigation involving a Utah-based industry of enormous importance to Utahns, major film studios

claim it would be unfair for them to litigate their efforts to destroy that industry in Utah. This

Court should not shed any crocodile tears. But Moving Defendants also film movies in Utah,

apply for tax credits here, attend the Sundance Festival and other film festivals to bid on and

purchase films, have executives who sit on the Sundance Institute’s boards, and own motion

pictures publicly performed and distributed in Utah.1 Moreover, this case does not turn on

Moving Defendants’ witnesses and documents but on VidAngel’s witnesses and documents — in

Utah. Moving Defendants simply cannot establish that it would offend traditional notions of fair

play and substantial justice for this action to proceed in Utah.

Third, this Court may also exercise its well-established power under the Declaratory

Judgment Act (the “Act”) to adjudicate this copyright dispute. To date, the California courts

have focused exclusively on the legality of VidAngel’s earlier disc-based service. VidAngel has

since completely revamped its service to address their criticisms and now asks this Court to

decide the propriety of its new service. It is appropriate for this Court and Circuit to decide how

the FMA and fair use doctrine apply to VidAngel’s new service.

Finally, a transfer or stay of this action would be inappropriate when, as here, the

defendants’ conduct is not at issue and they are unlikely to have any evidence bearing on the

legality of a technology developed in Utah. Importantly, the persons who developed, and the

documents related to, VidAngel’s new technology are in Utah. Additionally, VidAngel has a

Chapter 11 case pending in this District.

Moving Defendants have no good faith basis for opposing VidAngel’s new service2,

1 See Declaration of David Quinto dated November 27, 2017 (“Quinto Dec.”), ¶¶ 12-13. 2 VidAngel has voluntarily provided the Moving Defendants with all the discovery the California Plaintiffs’ expert advised the Central District he would need to evaluate the legality of


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which actually increases the market for their movies and makes use of lawfully-purchased

streams. Instead, they improperly seek to end VidAngel’s existence (and, thereby, modern-day

filtering) on a technicality.3 For them, a resolution allowing VidAngel to remain in business is

unacceptable. The studios will undoubtedly point to ClearPlay’s seemingly peaceful existence,

and its amicus brief against VidAngel in the Ninth Circuit, to show that the studios do not oppose

all filtering. However, they ignore the facts that the ClearPlay service referenced in its amicus

brief was shut down as to new releases prior to the preliminary injunction against VidAngel (and

was never restored), it does not work natively on most modern devices, and it still violates the

terms of service of authorized streaming services (meaning it operates under constant threat of

shut-down by the studios’ licensed partners), and ClearPlay's former CEO of 7 years, Bill Aho,

who helped pass the 2005 FMA, submitted a declaration on VidAngel's behalf in California and

in early 2017 launched protectfamilyrights.org to “preserve the right of families to

filter...streamed movies.” (ClearPlay’s amicus brief should also be taken with a grain of salt in

light of its long-standing dispute with VidAngel; in fact, ClearPlay even filed for a temporary

restraining order and preliminary injunction against VidAngel in 2014.) If the Court decides this

case on the merits, VidAngel is confident that its new service will be declared legal and it will be

able to emerge from Chapter 11. The ultimate winner will be families who wish to remove

objectionable content from motion pictures viewed in their homes.

VidAngel’s new service. (Quinto Dec., ¶ 24.) 3 Lest there be any doubt that certain motion picture studios are attempting to destroy the filtering industry beginning with VidAngel (which is by far the largest filtering service), one need only look at how the California plaintiffs responded to the offer of judgment VidAngel made pursuant to Fed. R. Civ. P. 68. VidAngel offered to (i) allow the preliminary injunction issued by the California court to be made permanent, (ii) pay more than the minimum statutory damages for each alleged DMCA violation and each allegedly infringed motion picture, and (iii) pay the plaintiffs’ costs and reasonable attorneys’ fees as determined by the trial court. Although reasonable plaintiffs would never reject a defendant’s offer to stipulate to all the relief they sought, the studios did.


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II. FACTUAL AND PROCEDURAL BACKGROUND

A. The Copyright Action in the Central District of California Against VidAngel’s Old Technology

In August 2015, VidAngel publicly launched a filtering service (the “Disc-Based

Service”) that enabled individuals and families to privately watch custom-filtered, streamed

versions of motion pictures purchased on DVDs and Blu-Ray discs (collectively, “discs”).4

VidAngel bought discs at retail, sold the discs to customers, decrypted a copy of each movie,

filtered the movie to each customer’s specifications, and streamed it to the customer. It then

allowed customers to sell the discs back at a reduced price and resold the discs to other

customers, who could then receive a stream of the motion picture filtered as they requested.5

Ten months later, on June 9, 2016, four Hollywood studios – Disney Enterprises, Inc.,

Lucasfilm Ltd. LLC, Twentieth Century Fox Film Corp. and Warner Bros. Entertainment Inc.

(collectively, the “California Plaintiffs”) – sued VidAngel in the Central District of California.

See Disney Enters, Inc. v. VidAngel, Inc., No. CV-16-04109 (the “California Action”). They

alleged VidAngel violated section 1201(a)(1)(A) of the Digital Millennium Copyright Act

(“DMCA,” codified at 17 U.S.C. §§ 1201-04) when it decrypted discs incident to filtering and

streaming motion pictures.6 They further alleged that VidAngel infringed their exclusive rights

to make copies and publicly perform their works under section 106 of the Copyright Act.7

The California Plaintiffs moved to preliminarily enjoin VidAngel from decrypting,

copying, and streaming movies to customers who lawfully owned copies of those movies. They

argued that the Disc-Based Service caused them harm because VidAngel: (i) streamed content to

consumers without a streaming license (which they refused to sell to VidAngel); (ii) occasionally

offered filtered content before the unfiltered content was available through LSSs; and (iii) relied 4 Quinto Dec., ¶ 2. 5 Id., ¶ 5. 6 Id., ¶ 3. 7 Id.


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on the ownership of thousands of discs to stream filtered content less expensively than LSSs

could stream unfiltered content.8

At the preliminary injunction hearing, the California Plaintiffs’ counsel, Kelly Klaus

(who also represents the Moving Defendants), praised the filtering technology of ClearPlay, Inc.

(“ClearPlay”) as an alternative to VidAngel. Mr. Klaus represented to the district court that

“there is another service, one of [VidAngel’s] competitors, ClearlyPlay[,] . . . that “offer[s] a

service that works in conjunction with authorized streams from Google Play. So Google Play

has licenses with copyright owners. . . . [Thus,] ClearPlay has figured out a way to put a filter on

top of an authorized stream.”9 In fact, ClearPlay’s service had been shut down by Google as to

as to any movies released after September 3, 2016, over two months before the preliminary

injunction hearing, and that service has never been restored. 10

Even though Mr. Klaus admitted in a February 9, 2017 filing in the district court that

ClearPlay’s service had been shut down, his partner, Donald Verrilli, mentioned ClearPlay’s

amicus brief to the 9th Circuit during the June 8, 2017 oral argument on VidAngel’s appeal of the

preliminary injunction.11 Given that VidAngel poses a unique competitive threat to ClearPlay

and the long existence of legal disputes between those two competitors, it is not surprising that

ClearPlay filed an amicus brief in opposition to VidAngel. After mentioning that brief, Mr.

Verrilli asserted that ClearPlay’s technology “applies filtering to a licensed stream. It connects 8 Id., ¶ 5. 9 Id., ¶ 6, Ex. A. 10 Id., ¶ 6. ClearPlay’s argument in its amicus brief that it was still operating without a hitch when in fact it could not offer any new releases (the most popular of titles) was absurd. This would be akin to Disney arguing that its continued ability to offer older titles during a particular period totally offsets any harm from it being unable to release a few billion dollars of new films during that same period, such as Moana, Dr. Strange, Rogue One, Beauty and the Beast, Guardians of the Galaxy 2, etc. Clearly, ClearPlay’s service was severely hobbled by its inability to stream the most popular new releases, which demonstrates that something as simple as a “technical road bump” (as ClearPlay’s CEO described the new release shut-down in the Deseret News) can essentially shutter the service. 11 Id., ¶ 8, Ex. C.


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up with Amazon or Google, whoever it is who have actually done what they should have done

and gotten a license for the public performance rights and paid for it.”12 Mr. Verrilli also

declared that if VidAngel developed “some different system that doesn’t violate the DMCA,” it

should “talk to the district judge about modifying the injunction. I think that’s the proper course

here.”13

In affirming the district court’s preliminary injunction, the 9th Circuit relied on the false

assertion that, contrary to VidAngel’s contention, ClearPlay’s technology was a viable way to

stream filtered content in a manner the studios could not defeat (such as by contractually

obligating LSSs to disable APIs that allow a streaming service to operate).14 In fact, ClearPlay’s

filtering service was shut down from September 4, 2016 through the conclusion of the 9th Circuit

appeal.15 Even today, ClearPlay’s service does not work natively on modern mobile devices,

tablets or smart TVs, while VidAngel’s new service (discussed below) does. The California

Plaintiffs had sold a fiction to both the district court and the 9th Circuit. Worse still, when

VidAngel filed for bankruptcy protection, the California Plaintiffs were seeking the entry of

partial summary judgment as to liability based solely on the 9th Circuit’s opinion while opposing

VidAngel’s efforts to conduct fair use discovery.16

B. VidAngel’s Development of a New Technology and the California Court’s Refusal to Address Its Legality.

Six months after the California court’s preliminary injunction, VidAngel launched a new

service that – like ClearPlay’s technology – requires customers to first purchase an authorized

12 Id., ¶ 8, Ex. C, Oral Argument Tr. at 28:9-22. 13 Id. at 25:8-12. 14 Disney Enters’s. Inc. v. VidAngel, Inc., 869 F.3d 848, 867 (9th Cir. 2017) (“as the district court recognized, this argument “relies on VidAngel’s characterization of its service as the only filtering service” for streaming digital content. It is undisputed that ClearPlay offers a filtering service to Google Play users, and the district court did not clearly err in finding that other companies could provide something “similar to ClearPlay’s.”) 15 Quinto Dec., ¶ 10. 16 Id.


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stream through regular distribution channels such as Netflix, Amazon, or HBO. (However,

unlike ClearPlay’s technology, VidAngel’s technology also works on modern mobile devices,

tablets and smart TVs.) This “Stream-Based Service” eliminates all economic harms the studios

claimed the earlier Disc-Based Service might cause. It does not require decryption of a physical

disc; instead, VidAngel creates a framebuffer version of movie data from a digital transmission

that it lawfully acquires through an LSS. It allows the customer to apply desired filters to a

motion picture the customer has paid an LSS to watch. Thus, VidAngel customers pay an LSS

to watch content at the regular market price, but cannot watch any streamed content before it is

available from that LSS.17

Contrary to Moving Defendants’ contention that VidAngel immediately filed this Utah

action to evade the California court, VidAngel first met and conferred extensively concerning the

new service and filed two motions to clarify that the preliminary injunction did not bar a service

the California court had never evaluated.18

Defendants disingenuously argue that the California court “twice rejected” VidAngel’s

effort to have the Stream-Based Service declared outside the scope of the injunction and that this

suit therefore “violates the first-to-file rule.” In fact, VidAngel made three attempts to get the

California court to merely consider whether this service is lawful but the California plaintiffs

successfully opposed all three. They hope that if the preliminary injunction becomes a

permanent injunction, they may get VidAngel held in contempt for using its Stream-Based

Service in violation of the literal terms of the injunction without ever permitting a court to

consider whether that service is protected by fair use or the FMA and, thus, without ever

considering whether the Stream-Based Service is lawful.19

17 Id., ¶¶ 12-13. 18 Id., ¶ 14. 19 Id., ¶ 15.


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First Attempt: On June 19, 2017, VidAngel moved to clarify or construct the preliminary

injunction, asking the court to rule that if VidAngel’s Stream-Based Service operated as

VidAngel claimed, it would be a “fair use” under 17 U.S.C. § 107. By order dated August 2,

2017, “the Court decline[d] to reach the merits of VidAngel’s fair use argument” on the basis

that VidAngel should have “brought this request in an action for declaratory relief as opposed to

a ‘summary method’ such as a motion to construe an injunction.” 20 The Court then denied

VidAngel’s motion “without prejudice to renewal, should [VidAngel] have further need for

clarification.”21

Second Attempt: On August 9, 2017, the parties’ counsel met and conferred concerning

other possible motions. VidAngel said that it might move to clarify that the injunction did not

cover technologies that differ materially from the Disc-Based Service at issue in California. In

response, the California Plaintiffs threatened to seek sanctions if VidAngel did so.22

On August 18, 2017, VidAngel moved to clarify that if its Stream-Based Service differed

materially from the Disc-Based Service the court considered in issuing the injunction,

VidAngel’s use of it with respect to the California Plaintiffs’ motion pictures would not result in

contempt. Holding that because its preliminary injunction order “sufficiently describes the acts

restrained in reasonable detail” (emphasis added), the court on September 13, 2017, again

refused to consider whether even a highly dissimilar technology might be protected by fair use.

It did state, however, that “[t]he terms of the injunction only restrained VidAngel from using

Plaintiffs’ works in any way that infringes these exclusive rights, and in no way enjoined

VidAngel from utilizing its initial technology and/or business model in conjunction with any

works not covered by the injunction.”23 Additionally, the district court declined the California

20 Id., ¶ 16, Ex. C. 21 Id. 22 Id., ¶ 17. 23 Id., ¶ 17, Ex. D.


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Plaintiffs’ request to sanction VidAngel for bringing its motion to clarify.24

Third Attempt: On August 10, 2017, VidAngel again attempted to have the legality of its

Stream-Based Service determined when the parties met and conferred concerning the plaintiffs’

request that VidAngel stipulate to allow the filing of an amended complaint. VidAngel’s

attorneys asked whether plaintiffs would add a declaratory relief claim to address VidAngel’s

Stream-Based Service, launched a year after the plaintiffs filed their suit. Mr. Klaus said that

they would not do so “because the conduct enjoined is clear,” contending that the injunction need

not be tethered to the facts that gave rise to it and could be applied even to activities that caused

no harm, irreparable or otherwise.25 Out of caution, VidAngel is not currently transmitting

filtered versions of any works owned or exclusively licensed by the California Plaintiffs,

including those added since VidAngel brought this suit.26

The Belated Joinder of Additional Plaintiffs in California: In an e-mail dated May 30,

2017, VidAngel’s counsel pointed out that the California Plaintiffs’ affiliated motion picture

studios were outside the injunction.27 When VidAngel sought to find out which movies were

subject to the injunction, the California Plaintiffs played “hide the ball,” identifying in a July 31,

2017 letter the movies they “or their subsidiaries” owned or “exclusively licensed.”28 VidAngel

raised that point again during the August 9 call, proposing to seek clarification that the injunction

applied only to the plaintiffs’ works and not to works owned or exclusively licensed by non-

party affiliates. Mr. Klaus responded that the complaint “could” be amended to add additional

plaintiffs (specifically, Marvel and New Line) to moot VidAngel’s proposed motion. He did not

24 Id. The California court has sanctioned VidAngel twice: for its failure to timely comply with the preliminary injunction white it sought at stay, and for filing a motion to clarify that did not concern the Stream-Based Service. 25 Quinto Dec., ¶ 19. 26 Id. 27 Id., ¶ 20. 28 Id., ¶ 20, Ex. E.


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state that any had decided to join the case. VidAngel’s counsel replied that VidAngel likely

would not seek the proposed clarification until later. The California Plaintiffs’ counsel thereafter

said nothing about adding parties to the California Action for over a month, doing so only after

VidAngel had filed this action.29

C. This Declaratory Relief Action Concerns Only VidAngel’s New Technology.

Since the California Action was filed, VidAngel has battled for survival, which depends

upon establishing the legality of its new service. It has named 13 defendants that object to its

service. Metro-Goldwyn-Mayer Studios, Inc. (“MGM”) sent a December 16, 2016 e-mail to

VidAngel demanding that it stop filtering its works. Other defendants have similarly objected.30

VidAngel operates its Stream-Based Service from its only office, in Provo, Utah. All but

two of its 46 employees, as well as all its directors, live in Utah. VidAngel developed its Steam-

Based Service in Provo. All documents and hardware related to its development are in Provo.31

Of 5.8 million credit card transactions VidAngel has processed, 25 percent were made by

Utahns. Only seven percent were made by Californians. Based on those percentages and the

states’ populations, Utahns are 48 times more likely to use VidAngel as Californians.32

Additionally, nearly three thousand Utah residents who either contributed to VidAngel’s legal

defense fund or purchased VidAngel stock, or both, have signed a declaration voicing their deep

interest in this lawsuit and expressing their hope that it proceed in Salt Lake City so they can

more easily follow the proceedings and attend court to listen to the arguments made for and

against VidAngel.33

None of the defendants were parties in the California Action when VidAngel filed this

action. But after it did so, the California Plaintiffs, in a display of gamesmanship, added three of 29 Id., ¶ 21. 30 Id., ¶ 22, Ex. F. 31 Id., ¶ 12. 32 Reilly Dec., ¶¶ 2-3. 33 Ellis Dec., ¶ 5, Ex. D.


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the defendants (Marvel, New Line and Turner) to the California Action. There was of course no

reason they could not have been included as plaintiffs in June 2016, when the California Action

was filed, or in May 2017, when VidAngel began asking the California Plaintiffs to distinguish

the motion pictures they owned from the movies their affiliates own. To avoid unnecessary

motion practice, VidAngel stipulated to their addition.34

D. Moving Defendants Engage in Significant Business Activities in Utah.

Moving Defendants are entities that produce, finance, and/or distribute films and

television shows available in Utah. Many were filmed in whole or in part in Utah. For example,

Themla & Louise, Planet of the Apes, Independence Day, Dumb and Dumber, 2001: A Space

Odyssey, and Austin Powers in Goldmember are all successful movies filmed in Utah that are

attributed to Moving Defendants.35 VidAngel is also aware that a representative for various

Disney entities is in contact with (and has lobbied) Senator Hatch with respect to movies filmed

in Utah and litigation involving VidAngel.36

Moreover, all the Moving Defendants or their corporate affiliates participate in Utah’s

unique film market, which includes the annual Sundance Film Festival, several other growing

film festivals, and the Utah Film Awards.37 Several Moving Defendants have purchased or

premiered films there, and others sit on the Sundance Institutes’ advisory boards.38 MGM

premiered Saved at Sundance in 2004 and celebrated it with a star studded after-party. MGM

also distributed many films that premiered at Sundance, including Four Weddings and a Funeral,

Pieces of April, Things You Can Tell Just By Looking at Her, and Personal Velocity.39

34 Quinto Dec., ¶ 23 35 Id., ¶¶25-26. 36 Simmons Dec., ¶¶ 2-5. 37 Quinto Dec., ¶ 28. 38 Id., ¶ 29. 39 Id.


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Similarly, Castle Rock purchased The Spitfire Grill at Sundance for a then-record $10

million. It also recently produced the film Being Charlie, shot primarily in Utah, and received

Utah state tax benefits as a result.40 Village Roadshow appears to be a regular bidder for films at

Sundance and will likely increase its ties to Utah, as its corporate affiliate, Roadshow Films,

recently acquired a one-third stake in FilmNation Entertainment, which is an active contributor

to the festival.41 Likewise, in 2015, New Line Cinema purchased the distribution rights to The

Wish Heard Round the World at the Slamdance Film Festival in Park City.42 Because Moving

Defendants’ officers, directors, and managing employees hold titles at multiple companies, there

are questions of fact concerning which entities they act on behalf of in their Utah-related

activities.

E. VidAngel’s Bankruptcy Filing.

On October 18, 2017, VidAngel filed for Chapter 11 bankruptcy protection. As reflected

in its filings, it faces large liabilities and debts and is attempting to reorganize around the new

Stream-Based Service, using the temporary protections afforded by Chapter 11.

III. ARGUMENT

A. This Court Has Specific Personal Jurisdiction Over the Moving Defendants.

Utah’s long-arm statute extends to the full extent of the U.S. Constitution.43 The specific

jurisdiction inquiry has two stages. First, the Court determines “whether the defendant has such

minimum contacts with the forum state ‘that he should reasonably anticipate being haled into

court there.’”44 If the defendant’s actions create sufficient minimum contacts, the court then

40 Id., ¶¶ 32-33. 41 Id., ¶ 31. 42 Id., ¶ 34. 43 Kindig It Design, Inc. v. Creative Controls, Inc., 157 F. Supp. 3d 1167, 1172 (D. Utah 2016) (citing Starways, Inc. v. Curry, 980 P.2d 204, 206 (Utah 1999)). 44 OMI Holdings v. Royal Ins. Co., 149 F.3d 1086, 1091 (10th Cir. 1998) (quoting World-Wide Volkswagen v. Woodson, 444 U.S. 286, 297 (1979)).


10

considers “whether the exercise of personal jurisdiction over the defendant offends traditional

notions of fair play and substantial justice.”45 Where, as here, a Rule 12(b)(2) motion is decided

on the basis of affidavits and written materials, the plaintiff need only make a prima facie

showing of personal jurisdiction.46 The Court accepts uncontroverted allegations as true and

resolves all factual disputes in the plaintiff’s favor.47

1. The Moving Defendants Have Sufficient Minimum Contacts With Utah.

“[T]he Supreme Court has instructed that the ‘minimum contacts’ standard requires, first,

that the out-of-state defendant must have ‘purposefully directed’ its activities at residents of the

forum state, and second, that the plaintiff’s injuries must ‘arise out of’ defendant’s forum-related

activities.”48 Both parts of this minimum contacts test are satisfied here.

“Purposeful direction” comes in “different guises.”49 “In the tort context, we often ask

whether the nonresident defendant ‘purposefully directed’ its activities at the forum state; in

contract cases. . .we sometimes ask whether the defendant ‘purposefully availed’ itself of the

privilege of conducting activities or consummating a transaction in the forum state.”50 The

“shared aim of purposeful direction” is to “ensure that an out-of-state defendant is not bound to

appear to account for merely ‘random, fortuitous, or attenuated contacts' with the forum state.”51

45 OMI Holdings, 149 F.3d at 1091. 46 Benton v. Cameco Corp., 375 F.3d 1070, 1074 (10th Cir. 2004); Intercon, Inc. v. Bell Atl. Internet Solutions, 205 F.3d 1244, 1247 (10th Cir. 2000). 47 Employers Mut. Cas. Co. v. Bartile Roofs, Inc., 618 F.3d 1153, 1159 (10th Cir. 2010). 48 Dudnikov v. Chalk & Vermilion Fine Arts, Inc., 514 F.3d 1063, 1071 (10th Cir. 2008) (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985).) 49 Dudnikov, 514 F.3d at 1071. 50 Id. 51 Id.


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a. This Court Has Jurisdiction Over the Moving Defendants Under the Calder v. Jones “Effects Test.”

Under the “Effects Test,” conduct directed at a forum state is sufficient to establish

personal jurisdiction there as to claims arising from the effects of that conduct.52 For example, in

Dudnikov v. Chalk & Vermilion Fine Arts, Inc., two Colorado-based Internet retailers sued non-

resident copyright owners in the District of Colorado seeking a declaratory judgment that their

fabric prints did not infringe the owners' copyrights.53 The defendants had mailed a notice of

copyright infringement to California, intending “to halt a Colorado-based sale by a Colorado

resident.”54 Relying on Calder, the Tenth Circuit found that the defendant had purposefully

directed its activities at the Colorado forum because it acted: (1) intentionally, (2) with express

focus on Colorado, and (3) with knowledge that a resident of Colorado would feel the injury

primarily.55 Here, Moving Defendants have likewise purposefully directed their activities

towards Utah by accusing VidAngel of infringement.

Accusing a forum resident of infringement may also give rise to specific personal

jurisdiction in a declaratory relief action, especially when a defendant has other forum contacts.

For example, where a Utah company sued an out-of-state patent holder for a declaration that

would “enable it to sell its own product in direct competition with [plaintiff’s] product within

Utah without the risk of an infringement suit,” the court exercised personal jurisdiction because

the defendant’s “sale of the patented product in Utah and the issuance of cease and desist letters

clearly relate to [the plaintiff’s] claims for declaratory relief.”56 It explained, “[t]he law is clear

that an infringement letter sent into a forum state accompanied by the grant of a license to an in-

state competitor doing business in the state [are] sufficient to justify assertion of personal

52 Calder v. Jones, 465 U.S. 783 (1984). 53 Dudnikov, 514 F.3d at 1067. 54 Id. at 1076. 55 See id. at 1072–78. 56 Dairy Health Prods., Inc. v. IBA, Inc., No. 1:07CV75DAK, 2008 WL 345846, at *4 (D. Utah Feb. 6, 2008).


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jurisdiction against an out-of-state patentee.”57 A non-resident defendant was thus subject to

specific personal jurisdiction in Colorado when it sent a cease-and-desist letter to the plaintiff in

Colorado and “sent agents to Colorado repeatedly to promote its products at national

conferences,” giving rise to the declaratory relief action brought by the in-state plaintiff.58

As in Dudnikov, there is “no meaningful dispute that plaintiffs’ injury was suffered

entirely in the forum state.”59 Moving Defendants indisputably knew that VidAngel is based in

Utah, and knew the injury would be felt here. MGM sent an e-mail to VidAngel’s general

counsel requesting that it cease and desist from streaming MGM’s copyrighted works. Similarly,

the other Moving Defendants, through their counsel, expressed to VidAngel their belief that

VidAngel’s Stream-Based Service infringed their copyrights. Moving Defendants knew those

accusations would cause harm in Utah, and were part of a broader strategy to extinguish the

filtering industry, which is Utah-based. Moreover, Utahns have expressed significant interest in

watching filtered content.60 Thus, the Moving Defendants knew their accusations toward

VidAngel would cause disproportionate injury to Utah consumers. Under the Tenth Circuit

Dudnikov analysis, VidAngel has established that Defendants’ intentional actions were aimed at

Utah knowing that the injury would be felt in Utah. And, as in C5 Med. Werks, Moving

Defendants regularly send agents to make films, premier films, and acquire content and talent in

Utah.

Jurisdiction over this declaratory relief action is also proper based on the effects of the

infringement accusations. But for the Moving Defendants’ accusations, VidAngel would not

need to call upon this Court to declare its rights under copyright law.61 Moreover, these

57 Id. (internal citations omitted) 58 C5 Med. Werks, LLC v. CeramTec GmbH, No. 14-CV-00643-RBJ, 2014 WL 4413054, at *3–4 (D. Colo. Sept. 8, 2014) 59 Dudnikov, 514 F.3d at 1077. 60 Ellis Dec., Exs. A-C. 61 See Inamed Corp. v. Kuzmak, 249 F.3d 1356 (Fed. Cir. 2001) (jurisdiction found in


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accusations have had a significant effect in Utah. VidAngel operates from Utah and a substantial

portion of its customers reside here.62 This showing sufficiently establishes purposeful direction. b. The Moving Defendants Have Purposefully Availed Themselves

of This Forum.

Moving Defendants purposefully availed themselves of Utah’s laws by making and

distributing films and engaging in other activity within Utah, establishing “minimum contacts”

under the stream of commerce doctrine. That doctrine permits a forum state to exercise personal

jurisdiction over a party if the party places a product into distribution channels with full

awareness that it will be sold in the forum state.63 In Asahi Metal Industries Co. v. Superior

Court, the Supreme Court was evenly divided as to whether the “stream of commerce” test

requires “additional conduct” by the party “purposefully directed toward the forum State” or

whether the “mere act of placing the product into the stream” is sufficient.64 The Supreme Court

remains divided and the circuit courts are split. 65 The Tenth Circuit has no clear position and

considers both views.66

In Luv N’ care, Ltd. v. Insta-Mix, Inc., 438 F.3d 465 (5th Cir. 2006), a Louisiana-based

designer and manufacturer of infant care products sued a Colorado company for copyright

infringement.67 The court found sufficient minimum contacts because the allegedly infringing

product traveled through the stream of commerce from Colorado to Louisiana.68

declaratory judgment action claiming non-infringement arose from or related to contacts in negotiating license agreements regarding patents-in-suit and sending cease-and-desist letter.) 62 See Reilly Dec., ¶ 2. 63 Asahi Metal Indus. Co. v. Super. Ct., 480 U.S. 102 (1987). 64 See id. at 112 (O’Connor, J.), 117 (Brennan, J.). 65 See J. McIntyre Mach., Ltd. v. Nicastro, 131 S. Ct. 2780 (2011) (plurality opinion). 66 See Monge v. RG Petro-Mach. (Gr.) Co., 701 F.3d 598, 619-20 (10th Cir. 2012). 67 Id. at 468. 68 Id. at 473 (holding that if a defendant knowingly benefits from a state’s market for products, the defendant is amendable to suit in that state).


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Here, Moving Defendants are affiliated with the world’s largest motion picture

distributors. They each film, finance, or purchase motion pictures here and/or own copyrights in

motion pictures distributed for viewing in Utah. To effectuate that intent, Moving Defendants or

their affiliates have established distribution channels so that physical copies of their movies can

be purchased in Utah. They or their affiliates have also entered into agreements with LSSs so

that their movies can be streamed to Utahns. Moving Defendants have accused VidAngel of

infringing the very motion pictures they sell in Utah for viewing by Utahns.

As in Luv N’ care, Moving Defendants have benefited from the availability of Utah’s

market by using distribution channels to sell films here. They could reasonably have expected to

be haled into court in Utah when they accused VidAngel of infringement. Further, by accusing

VidAngel of infringement, they sought to protect their established relationships with LSSs to

preserve their distribution channels in Utah. VidAngel purchases the Moving Defendants’

movies in Utah as the first step to providing filtering to its customers. The movies VidAngel

purchases in Utah are the same ones Moving Defendants claim are infringed.

In sum, Moving Defendants’ direct contacts with Utah and their consistent, intentional

film distribution in Utah provide sufficient “minimum contacts” for personal jurisdiction in Utah.

2. The Assertion of Personal Jurisdiction Over Moving Defendants Is Reasonable and Weighs Strongly in Favor of Jurisdiction.

Once sufficient minimum contacts are established, the defendant must prove “a

compelling case that the presence of some other considerations would render jurisdiction

unreasonable.”69 This inquiry is not limited to the facts giving rise to, or related to, the litigation.

A defendant’s “contacts may be considered in light of other factors to determine whether the

assertion of personal jurisdiction would comport with ‘fair play and substantial justice.’”70

69 Dudnikov, 514 F.3d at 1080 (internal quotations omitted). 70 Burger King, 471 U.S. at 476 (emphasis added) (quoting Int'l Shoe, 326 U.S. at 320, 66 S. Ct. 154).


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To determine whether the exercise of jurisdiction violates traditional notions of “fair play

and substantial justice,” the Court considers: (1) “the burden on the defendant,” (2) the forum

state’s interest in resolving the dispute, (3) the plaintiff's interest in receiving convenient and

effective relief, (4) “the interstate judicial system's interest in obtaining the most efficient

resolution of controversies,” and (5) “the shared interest of the several States in furthering

fundamental substantive social policies.”71

Here, the reasonableness of asserting personal jurisdiction over Moving Defendants

strongly favors jurisdiction. First, the burden on Moving Defendants to defend VidAngel’s

action in Utah will be negligible given that the litigation concerns VidAngel’s technology rather

than their actions. This is the “primary concern in determining the reasonableness of personal

jurisdiction.”72 Moving Defendants are multi-million dollar companies whose movies and

television shows are distributed across the globe. They conduct business in all 50 states,

including Utah, and have undoubtedly litigated disputes across the country.73 This action will

not place any unfair burden on Moving Defendants.

Although Moving Defendants, with the exception of MGM, declare that they do not

“regularly” solicit business in, or send agents to, Utah74, they all have contacts with Utah,

whether it be filming, distributing, and/or purchasing movies in Utah. Utah has developed a

burgeoning film industry in which several Moving Defendants participate, as evidenced by their

annual activity at the Sundance Festival and other growing Utah-based film festivals. The parent

companies of the Moving Defendants have considerable contacts with Utah as well and they

often act on behalf of their subsidiaries. For example, a Disney representative has lobbied Utah

71 Asahi, 480 U.S. at 113. 72 OMI, 149 F.3d at 1096. 73 See Intercon, Inc. v. Bell A. Internet Sols., Inc., 205 F.3d 1244, 1249 (10th Cir. 2000) (finding jurisdiction in Oklahoma reasonable in part because defendant was “a large interstate company accustomed to conducting business and litigation in multiple states”). 74 Dkt. Nos. 60-69.


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officials regarding filtering.75 His efforts undoubtedly benefit defendants MVL Film Finance

and Marvel Characters.

On the other hand, VidAngel is a local start-up dwarfed by the Moving Defendants.

VidAngel’s interest in receiving convenient and effective relief in Utah outweighs any burden on

Moving Defendants. All of VidAngel’s employees and witnesses reside in Utah. It developed

its Stream-Based Service in Provo, and all evidence related to its development is in Utah. Just as

the California Plaintiffs had the right to sue VidAngel in their home forum, VidAngel has the

right to do the same in Utah for its new service.

Further, Utah has a “manifest interest” in providing a forum in which its residents can

seek redress for this legal dispute over the propriety of filtering on modern devices.76 VidAngel

is a Utah resident that provides filtering services to thousands of Utahns. In fact, nearly three

thousand Utah residents who either contributed to VidAngel’s legal defense fund and/or

purchased VidAngel stock have expressed their deep interest that this lawsuit be tried in Utah.

Approximately 25 percent of its business is with Utahns. Utah has a strong interest in providing

VidAngel with a fair forum to defend itself against Moving Defendants’ accusations of

infringement. And, Utahns have an especially strong interest in the FMA, which was

championed by Utahns (including its Senate sponsor, Orrin Hatch) who sought the right to

privately filter motion picture content. All significant filtering companies are located in Utah,

and Utahns have expressed a keen desire to watch filtered content.77

Utah is also the most efficient forum to resolve the dispute over the legality of

VidAngel’s Stream-Based Service. “Key to this inquiry are the location of witnesses, where the

wrong underlying the lawsuit occurred, what forum’s substantive law governs the case, and 75 See Shepherd Invs. Int’l, Ltd. v. Verizon Communications, Inc., 373 F. Supp. 2d 853, 865 (E.D. Wis. 2005) (lobbying activities within a forum weigh in favor of exercising personal jurisdiction in that forum). 76 See Burger King, 471 U.S. at 473. 77 Ellis Decl., Exs. A-C.


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whether jurisdiction is necessary to prevent piecemeal litigation.”78 VidAngel developed the

Stream-Based Service in Utah and all the evidence and witnesses related thereto are located in

Utah. Accordingly, the exercise of jurisdiction over Moving Defendants in Utah is eminently

reasonable, especially given that “an especially strong showing of reasonableness may serve to

fortify a borderline showing of [minimum contacts].”79

3. Alternatively, This Court Should Permit Jurisdictional Discovery.

Should the Court find that VidAngel has not sufficiently shown that the exercise of

personal jurisdiction is appropriate, VidAngel should be allowed to discover the extent to which

Moving Defendants have negotiated licenses with Utah-based entities or distributed, bought,

filmed, or produced movies in Utah. VidAngel is filing a separate motion for leave to take

discovery related to jurisdictional issues.

B. This Court Should Entertain This Declaratory Relief Action.

This Court should exercise its well-established power under the Declaratory Judgment

Act (the “Act”) to adjudicate this dispute. Under the Act, a federal court may grant declaratory

relief “in a case … within its jurisdiction.”80 Here, the controversy regarding the legality of

VidAngel’s Stream-Based Service is clearly within the Court’s subject matter jurisdiction.

Moving Defendants urge the Court to decline to decide VidAngel’s claims, but VidAngel is not

required to litigate all its disputes with the entire film industry in one forum. It is entirely

appropriate for VidAngel to seek an interpretation of the FMA and fair use doctrine from this

Court, especially given that no other court is addressing, or has agreed to address, these issues.

78 Newsome v. Gallacher, 722 F.3d 1257, 1274 (10th Cir. 2013) (quoting OMI, 149 F.3d at 1097). 79 See OMI Holdings, 149 F.3d at 1091 (brackets in original) (citing Ticketmaster-New York, Inc. v. Alioto, 26 F.3d 201, 210 (1st Cir. 1994)). 80 28 U.S.C. § 2201.


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1. VidAngel Properly Seeks to Adjudicate a Live Controversy Regarding the Legality of Its Stream-Based Service.

The “normal principle” in declaratory judgment cases is that courts should adjudicate

claims within their jurisdiction.81 “The purpose of the Act is ‘to relieve potential defendants

from the Damoclean threat of impending litigation which a harassing adversary might brandish,

while initiating suit at his leisure—or never.’”82 Here, VidAngel has been repeatedly threatened

with suits over its filtering service and thus seeks an early adjudication of its rights in this Court.

The Court should reject Moving Defendants’ request that it deviate from the “normal

principle” that courts should adjudicate claims within their jurisdiction. The Tenth Circuit has

enumerated five factors to guide a court in assessing such a request: (1) whether a declaratory action would settle the controversy; (2) whether it would serve a useful purpose in clarifying the legal relations at issue; (3) whether the declaratory remedy is being used merely for the purpose of procedural fencing or to provide an arena for a race to res judicata; (4) whether use of a declaratory action would increase friction between our federal and state courts and improperly encroach upon state jurisdiction; and (5) whether there is an alternative remedy which is better or more effective.83

These factors are either neutral or weigh in favor of the exercise of jurisdiction.

First, this action will settle the instant controversy as to the legality of the Stream-Based

Service. Although this case will not settle the separate dispute in California (where the court has

already twice refused to address this controversy), the Act does not require that a plaintiff sue all

possible defendants over all possible disputes. “Declaratory judgments may appropriately

resolve only the existence of certain rights”; it is thus normal and proper to focus litigation on

certain defendants and on a particular issue (here, the Stream-Based Service).84 Indeed, it would

81 Wilton v. Seven Falls Co., 515 U.S. 277, 288 (1995). 82 Nat’l Union Fire Ins. Co. v. ESI Ergonomic Sols., LLC, 342 F. Supp. 2d 853, 862 (D. Ariz. 2004) (quoting Societe de Conditionnement v. Hunter Eng’g Co., 655 F.2d 938, 943 (9th Cir. 1981)). 83 State Farm and Cas. Co. v. Mhoon, 31 F.3d 979, 983 (10th Circ. 1994). 84 See United States v. State of Wash., 759 F.2d 1353, 1364–65 (9th Cir. 1985)


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be wasteful of the parties’ and this Court’s resources for VidAngel to sue every possible

defendant and to seek declaratory relief with respect to its old service, which is no longer in use.

Second, this action will clarify the parties’ obligations regarding the Stream-Based

Service. “The controversy settled by the declaratory judgment need only be an autonomous

dispute.”85 Thus, again, VidAngel need not adjudicate all disputes with all parties in one action.

Third, this action is the opposite of improper “procedural fencing.” VidAngel did not

preempt another suit to deprive the “natural plaintiff” of its preferred forum. When the

California Action was filed on June 9, 2016, all the major studios (including Moving

Defendants) had the opportunity to join in that lawsuit. They chose not to do so. VidAngel

litigated the California Action for more than a year before launching its new Stream-Based

Service on June, 13, 2017, and it then waited to file this declaratory relief action for an additional

two-and-a-half months until August 31, 2017. It did so only after confirming that the California

Plaintiffs would not amend their complaint to seek declaratory relief as to VidAngel’s new

technology AND after twice being rebuffed by the California judge when it sought to find out if

it would be in contempt if it used its new technology to filter movies owned by the California

plaintiffs. This is thus “a much-delayed choice” to seek a federal declaratory judgment in a

different circuit against a different set of plaintiffs over a new service.86

The “procedural fencing” decisions Moving Defendants cite are therefore inapposite. In

Layne Christensen Co. v. Levelland/Hockley Cty. Ethanol, LLC, No. CIV. A. 08-2203-CM, 2009

WL 352832, at *2 (D. Kan. Feb. 12, 2009), the district court declined to exercise jurisdiction

over a declaratory relief action because plaintiff filed a “duplicative” suit against the identical

party who previously sued him in another court over the identical issue. To the contrary,

VidAngel sued different parties seeking a ruling on a different issue. And, the majority of the

85 See Harris v. U.S. Fid. & Guar. Co., 569 F.2d 850, 852 (5th Cir. 1978); Allstate Ins. Co. v. Scott, No. CIV. 11-00036 ACK, 2012 WL 1136336, at *6 (D. Haw. Apr. 3, 2012). 86 See Lexington Ins. Co. v. Integrity Land Title Co., 721 F.3d 958, 972 (8th Cir. 2013).


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defendants herein are not parties to the California Action (three were added after this suit was

filed).

Hospah Coal Co. v. Chaco Energy Co., 673 F.2d 1161 (10th Cir. 1982), is also

distinguished easily. There, the District of New Mexico enjoined two defendants from

proceeding with a previously filed action in the Northern District of Texas based on a contractual

venue selection clause.87 The Tenth Circuit reversed, reasoning that the Texas court had priority

to decide the proper venue and the New Mexico court’s injunction “invad[ed] the [Texas court’s]

province.”88 Here, VidAngel is not interfering with any other court’s adjudication of its dispute.

This action and the California Action may each proceed to judgment without offending notions

of federalism; in fact, the federal judicial system contemplates that courts in different circuits

may be called upon to give their own interpretations of the same federal statute, even in cases

involving overlapping parties.89

Fourth, there is no risk that this declaratory action will increase friction between federal

and state courts or otherwise improperly encroach upon state jurisdiction, “as the underlying law

is federal [copyright] law” and federal courts have exclusive jurisdiction over copyright.90

Fifth, adjudicating this dispute in California will not result in a “better or more effective

alternative remedy” than adjudicating it in Utah. VidAngel has a legitimate interest in trying this

dispute in Utah where it and many of its customers are based, and also has a valid interest in

obtaining guidance from the Tenth Circuit. It cannot be said that California is a “better” or

“more effective” forum to resolve this action.

87 Hospah Coal Co. v. Chaco Energy Co., 673 F.2d 1161, 1162 (10th Cir. 1982). 88 Id. at 1163-64. 89 See, e.g., Fox Television Stations, Inc v. Aereokiller, LLC, 851 F.3d 1002 (9th Cir. 2017); Fox Television Stations, Inc. v. FilmOn X LLC, 150 F. Supp. 3d 1 (D.D.C. 2015). 90 Icon Health & Fitness, Inc. v. Relax-a-cizor Prod., Inc., No. 1:12-CV-00017-SA, 2012 WL 1604376, at *2 (D. Utah May 7, 2012).


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2. This Utah Action Is Both the First Filed and the First Involving the

Moving Defendants.

As the Tenth Circuit has held, the first-to-file rule “pertains when two district courts have

jurisdiction over the same controversy, affording deference to the first filed lawsuit. It does not

pertain to distinct controversies arising seriatim.”91 “To aid in achieving [its] goal, the ‘first-to-

file’ rule permits a district court to decline jurisdiction where a complaint raising the same issues

against the same parties has previously been filed in another district court.”92 This Court is

“afforded discretion when deciding whether the first-to-file rule or an exception to that rule

applies to the case at hand.”93

This action relates to VidAngel’s Stream-Based Service, which did not exist when the

California Action was filed. While the Central District and the Ninth Circuit have rendered

preliminary injunction opinions on the old Disc-Based Service, they have not considered the

Stream-Based Service.94 On two occasions, the Central District has refused to adjudicate the

Stream-Based Service because “further factual development” is needed to “determine exactly

how VidAngel’s new service manages to copy movie streams without circumventing the TPMs

that Plaintiffs allege are a part of each movie stream” and on other issues relevant to the Family

Movie Act and fair use doctrine.95 The Central District also provided that VidAngel should have

“brought this request in an action for declaratory relief as opposed to a ‘summary method’ such

91 Lipari v. U.S. Bancorp NA, 345 F. App'x 315, 317 (10th Cir. 2009). 92 Buzas Baseball, Inc. v. Bd. of Regents of Univ. Sys. of Ga., 189 F.3d 477 (10th Cir. 1999); see also O'Hare Int'l Bank v. Lambert, 459 F.2d 328, 329 (10th Cir. 1972) (first-file rule applies to an “identical” suit involving same parties and same claims). 93 Shannon's Rainbow, LLC v. Supernova Media, Inc., 683 F. Supp. 2d 1261, 1278 (D. Utah 2010). 94 Dkt. 144; see also Dkt. 198 at 6 (“The terms of the injunction only restrained VidAngel from using Plaintiffs’ works in any way that infringes these exclusive rights, and in no way enjoined VidAngel from utilizing its initial technology and/or business model in conjunction with any works not covered by the injunction.”). 95 Dkt. 198 at 6; see also Dkt. 207.


22

as a motion to construe an injunction.”96 Thus, this Court’s adjudication of the legality of the

Stream-Based Service would not “conflict with the rulings of the California district court and

interfere with that court’s injunction.”97

Moreover, the Moving Defendants’ argument that the California injunction applies to the

Stream-Based Service is grossly misleading. The plain terms of the injunction apply only to the

California Plaintiffs’ copyrighted works. With the exception of Marvel, New Line and Turner ̶

added to the California Action after this Utah action was filed ̶ the preliminary injunction does

not protect works owned by Moving Defendants.

In addition, there are significant differences between the parties in the two actions. When

this action was filed, no Moving Defendant was a party to the California Action. The lead

defendant – Sullivan – is not a party to and is admittedly not affiliated with any California

Plaintiff. After this action was filed, three Moving Defendants (Marvel, New Line and Turner)

were added to the California Action. Although some of the defendants are affiliates of certain

California Plaintiffs, their works are not subject to the preliminary injunction in the California

Action and they willingly chose not to join in that action.

Finally, this action is not an improper anticipatory action. “[T]he anticipatory filing

exception to the first-to-file rule is used to protect “those parties who were prepared, and had

every intention, to pursue foreseeable legal action but failed to bring suit first due solely to their

attempt to settle the matter without court involvement.”98 Indeed, in both cases cited by the

Moving Defendants where the courts found a filing to be anticipatory, the parties were engaged

in active settlement negotiations.99 Here, to the contrary, there have been no such negotiations

96 Quinto Dec., ¶ 16, Ex. D. 97 Mot. at 25. 98 MedSpring Grp. v. Atl. Healthcare Grp., No. 1:05 CV 115, 2006 WL 581018, at *4 (D. Utah Mar. 7, 2006). 99 See Buzas Baseball, 189 F.3d at *1-2 (10th Cir. 1999) (suit filed during on-going settlement discussions); Nacogdoches Oil & Gas, L.L.C. v. Leading Sols., Inc., No. 06-2551-CM, 2007 WL


23

because the studios want to put VidAngel out of business rather than negotiate a settlement that

permits VidAngel to survive. If Marvel, Turner and New Line had wished to join in the

California Action, they neglected many opportunities to do so. The anticipatory filing exception

“does not operate to protect parties “who refrained from suing due to any, or any combination, of

the myriad of other factors that deter lawsuits, such as legal fees, costs, process server expenses,

the hope to avoid ‘raising the stakes' in the dispute, the desire not to appear unnecessarily

litigious, and the uncertainty of the strength of one's claim.”100

In sum, confronted with the Damoclean threat of claims for copyright infringement,

VidAngel exercised its right to bring a declaratory relief action.101

C. A Transfer or Stay of This Action Would Be Inappropriate.

The party moving to transfer pursuant to § 1404(a) bears the burden of establishing that

the existing forum is inconvenient.102 The Tenth Circuit has identified various factors relevant to

a transfer analysis.103 “Unless the balance is strongly in the favor of the movant, the plaintiff's

choice of forum should rarely be disturbed.”104

Moving Defendants cannot carry their burden to establish that Utah is inconvenient

because keeping this action in Utah is the most practical way to ensure an easy, expeditious, and

economical trial. Utah is VidAngel’s choice of forum. As in California with the California

Plaintiffs, VidAngel’s choice of forum should be given weight and should not be disturbed.

2402723, at *1, 3 (D. Kan. Aug. 17, 2007) (suit filed after plaintiff received a demand letter attaching a draft complaint). 100 MedSpring, 2006 WL 581018, at *4. 101 See SNMP Research, Inc. v. Avaya, Inc., No. 3:12-CV-117, 2013 WL 474846, at *6 (E.D. Tenn. Feb. 7, 2013) (“A party has the right to seek declaratory judgment where a reasonable apprehension exists that if it continues an activity, it will be sued by another party.”) (internal quotations omitted); Craft Smith, LLC v. EC Design, LLC, No. 2:16-CV-1235-DB, 2017 WL 2633502, at *2 (D. Utah June 15, 2017). 102 Chrysler Credit Corp. v. Country Chrysler, Inc., 928 F.2d 1509, 1515 (10th Cir. 1991). 103 See Texas Gulf Sulphur Co. v. Ritter, 371 F.2d 145, 147 (10th Cir. 1967). 104 Scheidt v. Klein, 956 F.2d 963, 965 (10th Cir. 1992) (quotation omitted).


24

Utah is also where all the witnesses with knowledge of VidAngel’s technology reside and where

the documents and technical devices that comprise the new system are located. Although

Moving Defendants reside in California, their witnesses’ testimony is unlikely to bear on the

propriety of the Stream-Based Service. Furthermore, because this action is colorably different

from the California Action, with different parties and a different technology, a stay pending

resolution of the California Action would be inappropriate.

In any event, a transfer of this action to California would not end litigation in Utah.

VidAngel has a pending Chapter 11 case in the District of Utah where it is seeking to reorganize

around a Chapter 11 plan to pay all creditors in full over time from its business revenues. The

outcome of this case is central to the disposition of Plaintiff’s bankruptcy estate. If VidAngel is

granted declaratory relief and the Stream-Based Service is found lawful, VidAngel will

reorganize around a Chapter 11 plan to pay all creditors in full over time from its business

revenues. If its request is denied, VidAngel will likely be forced to cease operations and

liquidate, and creditors will be lucky to recover pennies on the dollar. This case could not

possibly have a greater effect on the bankruptcy case. Accordingly, this case is “related to”

Plaintiff’s Chapter 11 case, and this District Court has jurisdiction over it.105 In sum, this Court

may and should entertain this declaratory relief action.

105 28 U.S.C. § 1334(b) (district courts “have original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11.”) (emphasis added); In re Harris, 590 F.3d 730, 737 (9th Cir. 2009); In re Marshall, 600 F.3d 1037, 1054 (9th Cir. 2010). “An action is ‘related to’ a bankruptcy case if the outcome of the proceeding could conceivably alter the debtor's rights liabilities, options or freedom of action (either positively or negatively) in such a way as to impact on the administration of the bankruptcy estate.” Linkway Inv. Co. v. Olsen (In re Casamont Inv’rs), 196 B.R. 517, 521 (9th Cir. B.A.P. 1996) (citing In re Fietz, 852 F.2d 455, 457 (9th Cir. 1988) (adopting “related to” test of Pacor, Inc. v. Higgins, 743 F.2d 984 (3rd Cir.1984))).


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IV. CONCLUSION

Based upon the foregoing, VidAngel respectfully requests that the Court deny Moving

Defendants’ Motion. Alternatively, should the Court find this record insufficient to deny

Moving Defendants’ Motion, it should grant VidAngel’s concurrently-filed motion for

jurisdictional discovery and allow VidAngel the opportunity to submit a supplemental opposition

based upon that discovery. DATED this 27th day of November, 2017. BAKER MARQUART LLP /s/ Jaime W. Marquart Jaime W. Marquart Attorneys for Plaintiff VidAngel, Inc.


Documents

Cole L. Bingham (Bar No. 14131) DURHAM JONES & PINEGAR, P ...blog.vidangel.com/wp-content/uploads/2017/06/Vid... · Scott M. Malzahn (Cal. Bar No. 229204) [email protected]