Hollywood Victory In Film-Sanitizing Suit Imperils Mash-UpsHollywood Victory In Film-Sanitizing Suit Imperils Mash-Ups

In the war between Silicon Valley and Hollywood over the reach of copyright law, Tinseltown has won a victory that may cause online video sites like YouTube.com and Google Video to reconsider hosting altered versions of copyrighted content.

Last week, four companies that rent and sell Hollywood films stripped of their original sex, violence, and profanity were found to be violating copyright law.

A ruling issued July 6 by a federal judge in Colorado finds that CleanFlicks, ASR Management Corp., Family Flix USA, and Play It Clean Video are infringing copyrights by offering motion pictures that have been sanitized without consent of the copyright holder and must cease doing so.

"It is particularly gratifying that the court recognized that this conduct is not permitted under copyright laws," said Michael Apted, president of the Director's Guild of America (DGA), in a statement. "Audiences can now be assured that the films they buy or rent are the vision of the filmmakers who made them and not the arbitrary choices of a third-party editor."

The legal battle began in 2002 when CleanFlicks filed a suit seeking approval of its scrubbed films to pre-empt a lawsuit being prepared by the film industry. In September 2002, the DGA filed a counterclaim. The DGA has characterized the fight as a "war between Silicon Valley and Hollywood" over the future of copyright law.

"If you're keeping score, I guess you'd say score one for the content provider," observes attorney Lee Bromberg, co-founder of Bromberg & Sunstein, a Boston-based firm specializing in intellectual property law. "It's a very four-square ruling in favor of basic copyright law. It's refreshing in its clarity and a bit unusual in the present environment."

"It is a pretty straightforward application of copyright law," concurs Edward J. Naughton, a partner in the intellectual property group of international law firm Holland & Knight.

Both Bromberg and Naughton agree that the ruling makes it clear that the altered Hollywood videos on the Internet -- mash-ups and remixes -- could be subject to copyright claims.

"The same rule of law would apply to the folks that host those edited videos on YouTube and elsewhere," says Naughton. "The issue there is those are individual users who would be infringing, and the sites themselves ... generally have a fair amount of immunity under the Communications Decency Act."

Even so, Bromberg believes there's potential exposure for online video sites to claims of contributory infringement such as the case that brought down peer-to-peer file sharing sites Grokster and StreamCast.

U.S. District Court Judge Richard P. Matsch dismissed CleanFlick's argument that its editing is a form of cultural criticism and thus qualifies as "fair use" under the Copyright Act. "This argument is inconsequential to copyright law and is addressed to the wrong forum," Matsch wrote in his ruling. "This Court is not free to determine the social value of copyrighted works. What is protected are the creator's rights to protect its creation in the form in which it was created."

Congress, however, delights in making that determination and clearly signaled its sympathy for those who want to shield viewers from potentially objectionable content. Last year, it enacted the Family Movie Act of 2005 to provide an exemption from liability under copyright law for members of private households who alter films without creating a fixed copy of the altered work, as can be done with DVD filtering software systems such the one offered by ClearPlay.

ClearPlay sells a DVD player that uses the company's software-based filter to cleanse copyrighted content on the fly, without creating a fixed, edited copy of the protected work. ClearPlay's software is similar conceptually to the Firefox browser plug-in Grease Monkey, which allows users to alter Web page code between when it is downloaded and when it is rendered in the user's browser.

Despite the blessing of lawmakers, such dynamic alterations of copyrighted works remain a problem for the DGA. A DGA spokesman couldn't immediately elaborate on the guild's objections, except to reiterate the group's statement that "[t]he DGA remains concerned about this exception to copyright protection "

The danger for Hollywood is that this exception could become the rule.