Last night, the Hollywood Reporter published a rewrite of Pando's recent scoop about the Motion Picture Association of America. The piece reviews what we originally reported: namely, new MPAA legal filings may have inadvertently helped U.S. visual effects workers in their efforts to shut down foreign government subsidies to MPAA studios. Those filings do this by arguing digital goods should be treated as regular imports under trade law. That would get the studios the copyright protections they so desperately want, but it would also inadvertently help visual effects workers subject the studios to trade laws’ anti-subsidy sanctions.

If you read our original story, you know most of this. You also already know that the visual effects workers want these foreign subsidies stopped because the subsidies let MPAA studios profit from offshoring post-production work.

However, toward the end of its summary, the Hollywood Reporter does add one piece of original reporting: the MPAA's official reaction to Pando's exclusive "Revenge of the Nerds" report. That reaction appears to confirm the strength of the VFX workers' legal strategy against Big Hollywood.

Responding to the prospect of having the MPAA’s own trade arguments about digital products used against studios by the visual effects industry, the MPAA said this:

“We have also always maintained that the production work done overseas is not governed by rules related to foreign subsidies because foreign production work is a service, not a good, and therefore not merchandise under the relevant provisions,” an Association spokesperson told THR. “Comparing that issue with the issue at hand in MPAA’s recent ITC filing is comparing apples – goods – to oranges – services.”

The Hollywood Reporter’s Jonathan Handel notes that “while VFX workers do perform a service, they also produce a thing – a finished VFX shot.” He consequently concludes that in responding to Pando’s report, the MPAA’s is trying to manufacture a “distinction (that) is not as clear cut as it might seem.”

That, of course, is a nice way of saying the MPAA has accidentally gotten itself into a quite a serious jam and is now trying to fix the situation by talking out of both sides of its proverbial mouth.

On its face, the MPAA’s new argument makes no sense. In the legal filings Pando obtained, the major Hollywood studios are insisting that, say, film footage recorded in a foreign country and then digitally transmitted back to the United States is a “good” and not merely a “service.” That, says, the MPAA, subjects those film products to the international trade laws that are designed to “protect domestic industries.”

Yet, now that visual effects workers are making precisely the same argument about visual effects products digitally transmitted back to the United States, the MPAA is claiming those products are merely “services” and “not a good.” That would mean those digital products may not be governed by the same international trade laws.

This contradictory argument is especially absurd when you consider that studios often contract out digital effects to third party vendors. That means the studios can’t even pretend the work is just an in-house service from another branch of their own companies.

So what’s going on here? Is the MPAA actually claiming that live-action video footage is a “good” but digitally created video footage isn’t? Is the MPAA really insisting that products created by film crews are “goods” but products created by visual effects workers aren’t? Is the MPAA somehow going to try to claim that 90-year-old trade laws make such a distinction? Or is this just a brazenly cynical attempt to simultaneously use trade laws to obtain lucrative copyright protections and thwart those same trade laws’ anti-subsidy provisions?

Most likely it is the latter, and that is emboldening visual effects workers like Daniel Lay who are organizing the trade case against the MPAA’s subsidized offshoring. Those workers were fearing a far stronger legal argument from the big studios. Instead, it looks like the MPAA has indeed boxed itself in.

As Lay put it: “I'm pleasantly shocked how bad the MPAA's argument is against our legal effort.”