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Fox Broadcasting Co. v. Dish Network (9th Cir.)

 

by Barry Werbin

On July 24, 2013, the 9th Circuit affirmed the District Court's denial of a preliminary injunction against Dish Network over its "Hopper" DVR that skipped over commercials, as well as its PrimeTime Anytime service. The Court held (from the Syllabus) that "the record did not establish that the provider, rather than its customers, made copies of television programs for viewing. The broadcaster did not establish a likelihood of success on its claim of secondary infringement because, although it established a prima facie case of direct infringement by customers, the television provider showed that it was likely to succeed on its affirmative defense that the customers’ copying was a 'fair use.' Applying a 'very deferential' standard of review, the panel concluded that the district court did not abuse its discretion in denying a preliminary injunction based on the alleged contract breaches." (The contract claims related to the broadcast contract between Fox and Dish and are not summarized here).

In order to skip over ads on DVR recorded programs, an end user consumer has to enable an "Auto-Hop" feature for programming recording within the Dish PrimeTime Anytime service, which option is not selected by default. Once enabled, however, the consumer only sees the first and last few seconds of an ad. The ads themselves are not deleted from the recording. To create the Auto-Hop functionality, Dish technicians "manually view Fox’s primetime programing each night and technologically mark the beginning and end of each commercial. The program content is not altered in any way." These "marked" files are then uplinked and transmitted to subscribers in a special "file" made available to subscribers after a prime time show has aired. Simultaneously with the uplink, Dish records the marked programs for transmission in three selected states for quality assurance testing purposes to make sure no parts of the programs themselves are cut off.

Citing the Second Circuit's 2008 Cablevision decision [which has been getting quite a lot of mileage lately, but notably had been rejected by the Cal. District Court in the Fox v. Aereokiller case now on appeal], the Court note that “Cablevision’s remote-storage DVR system did not directly infringe the plaintiffs’ copyrights” because even though a copy made by a user was stored on Cablevision’s server and not the user’s own equipment, it was akin to making a copy with a VCR. Although here Dish exercised some discretion in setting up the Hopper system, ultimately it was the end user who “must take the initial step of enabling” the prime time viewing option where Auto-Hop was available as an option. Thus, the Court agreed there was no direct infringement because “operating a system used to make copies at the user’s command does not mean that the system operator, rather than the user, caused copies to be made. Here, Dish’s program creates the copy only in response to the user’s command.”

[This may foreshadow the 9th Circuit’s approach in the Aereokiller appeal with respect to the validity of Cablevision, even though it’s a different issue.]

Although the District Court had also found that “Dish likely breached its contract with Fox and directly infringed Fox’s reproduction rights” by making the quality assurance copies, it held that Fox was not entitled to injunctive relief because it failed to establish “irreparable harm” as a result of those copies, and the Ninth Circuit agreed because money damages could be assessed and awarded and “the harms Fox identified – including “loss of control over its copyrighted works and loss of advertising revenue” – did not “flow from” the quality assurance copies themselves, but from the entire AutoHop program.”

With respect to secondary infringement, the Court noted that Fox would first have to establish direct infringement by its end users. While the Court agreed that Fox had “established a prima facie case of direct infringement by Dish customers because Fox owns the copyrights to its shows and the users make copies,” Dish established that such end use was fair use under Section 107, citing to the Sup. Ct.’s 1984 Sony decision (the “Betamax” case). Fox argued that the time-shifting involved in Sony differed from ad skipping and library building (although the Sony Court had briefly discussed ad skipping by some users and had noted that 25% of users had been fast-forwarding past ads on their Betamax recorders). But the Sony Court never decided whether such skipping was fair use.

Nevertheless, the Ninth Circuit agreed with the District Court that “commercial-skipping does not implicate Fox’s copyright interest because Fox owns the copyrights to the television programs, not to the ads…. If recording an entire copyrighted program is a fair use, the fact that viewers do not watch the ads not copyrighted by Fox cannot transform the recording into a copyright violation.”

With respect to the PrimeTime Anytime service, the Court found that Dish made out a fair use defense. PrimeTime Anytime recordings are stored locally on a customer’s Hopper device for a preselected number of days. On the first Section 107 factor, the Court found home viewing was a non-commercial use, as in Sony, because PrimeTime Anytime was a form of time-shifting.

Sony also was cited to support the second and third Section 107 factors, addressing the “nature of the copyrighted work” and “the amount and substantiality of the portion used in relation to the copyrighted work as a whole.” The Ninth Circuit found that “the fact that Dish users copy Fox’s entire copyrighted broadcasts does not have its ordinary effect of militating against a finding of fair use.”

Finally, with respect to the fourth market harm factor, the Court held that this is the “most important element of fair use.” Because end users record for non-commercial uses, harm to the potential market for the copied works cannot be presumed but must be proven. Unlike in Sony where no secondary market existed, here Fox licensed its programs to distributors, including Hulu and Apple. However, the Court noted that the trial court record establishes “that the market harm that Fox … allege[s] results from the automatic commercial-skipping, not the recording of programs through PrimeTime Anytime. Indeed, Fox often charges no additional license fees for providers to offer Fox’s licensed video on demand, so long as providers disable fast-forwarding.” Thus, “the commercial skipping does not implicate any copyright interest.”