High Stakes for Television Networks in Failure To Unseat Dish Customers Recording Device

The “Hopper,” the recording and commercial-skipping technology developed by Dish Network, first survived a preliminary injunction motion brought by Fox Broadcasting Co. in 2012, then prevailed on appeal this summer in a decision by the U.S. Court of Appeals for the Ninth Circuit. Fox Broadcasting Co. v. Dish Network, 12-57048.

Relying on the 1984 Supreme Court precedent involving use of a VCR to “time-shift” home viewing of television shows, Sony v. Universal City Studios, 464 U.S. 417 (1984), and the 2008 U.S. Court of Appeals for the Second Circuit decision concerning Cablevision's remote DVR technology, Cartoon Network v. CSC Holdings, 536 F.3d 121 (2d Cir. 2008), the Ninth Circuit appears to have concluded that “the more things change, the more they remain the same.” Thus, the Ninth Circuit determined that the recording of Fox programs, although enabled by the Hopper in conjunction with a complex technological infrastructure developed and run by Dish, was nevertheless directed by the customer for private, noncommercial use and constituted a fair use.

Although only Dish and an affiliated company were defendants, they prevailed as a result of the court's conclusions that only the customers engaged in direct copying and the customers' copying was a noninfringing fair use. Therefore, Dish was neither liable for direct copying nor was it secondarily liable because its customers' fair use eliminated the element of direct infringement required to establish secondary liability. (Fox also based its preliminary injunction motion on contract claims which fared no better, although the court characterized them “much closer” than the copyright claims.)

In the Hopper

Dish, a leading provider of pay television service, is licensed by Fox to retransmit its broadcast signal to Dish customers pursuant to a 2002 contract. The broadcast signal, which transmits Fox copyrighted programs such as Glee, Family Guy and The Simpsons, is retransmitted via a satellite that interfaces with a receptor dish installed at Dish customers' homes. In March 2012, Dish released to its customers the device called the Hopper, a set-top box with digital video recorder (DVR) and video-on-demand capabilities. It is capable of servicing up to four television sets in a home in conjunction with a companion box called a “Joey.” When used together with a Sling Adapter, the Hopper also enables the customer to view the recorded programs on computers and mobile devices.

Simultaneously, Dish released a feature called PrimeTime Anytime (PTAT) designed to work only with the Hopper. PTAT enables the Dish customer, pursuant to the customer's specific direction, to record all primetime programs broadcast on the ABC, CBS, NBC and Fox TV networks. To do so, the customer must take certain specific steps: First, the customer must press “*” (star) on a remote control, which causes the PTAT setup screen to appear; and second, must select “Enable,” which causes a new menu to appear on the PTAT screen containing options to vary the PTAT default setting for recording and saving the programs. If the customer does not choose “Enable,” the PTAT system will not record any programs. If the customer chooses “Enable” but makes no further selection regarding networks or days to record or length of time to save the recordings, PTAT automatically records all primetime shows broadcast on each of the major networks every night of the week and saves them for eight days.

Soon after introducing PTAT, Dish began to offer its customers a new feature called “Autohop,” which is only available for shows recorded using PTAT. Autohop enables a Dish customer to choose, with respect to a specific recording made by PTAT at that customer's direction, that the recording be played back without commercials. (The commercials are not actually eliminated from the recording; rather, the technology allows them to be skipped over unless the viewer chooses to see one or more of them, in which case he or she can fast forward or rewind into the commercial.) To view the commercial-skipping version, the customer must select the option labeled “automatically skip over commercials” that appears on a pop-up screen when the customer views the PTAT recording. The Autohop default setting is not to skip over commercials. As with the PTAT “Enable” setting, skipping commercials requires an affirmative choice and confirmatory action (selecting a menu option) by the customer.

To make this “enhanced” (assuming the programs are more entertaining than the commercials) television experience possible, Dish technicians view the primetime shows each night and electronically mark the beginning and end of each commercial. The marked files are eventually transmitted to Dish customers for later viewing, usually beginning the day after initial broadcast. Dish also copies these marked files at its quality control facilities where they are reviewed to ensure that the commercials have been properly marked off and that no parts of the programs were inadvertently deleted.

Customer'Made Recording

The Ninth Circuit first considered whether the recordings of Fox shows were made by Dish or by its customers. On this point, the appeals court considered the Second Circuit decision in Cartoon Network, where Cablevision's customers, using a remote-storage DVR (RS-DVR) system provided by Cablevision, sent signals to its central facility where the program selected by a customer was copied and stored on Cablevision's servers. The copy or copies chosen by the Cablevision customer were stored in a space allocated to the customer on a hard disk at the Cablevision central facility. The customer could then request playback of his or her requested recordings from a list on the screen.

In Cartoon Network, the Second Circuit held that the customer made the copy, not Cablevision, notwithstanding the remote features of the Cablevision system and the ways in which Cablevision facilitated the copying, storage, delivery and viewing of the recordings. The court considered the RS-DVR system to be comparable to the traditional copying consumers have done on their VCRs, because the Cablevision customer chose what to copy and directed Cablevision to do so.

On these facts, the Second Circuit held that “copies produced by the RS-DVR system are 'made' by the RS-DVR customer, and Cablevision's contribution to this reproduction by providing the system does not warrant the imposition of direct liability.” In reaching this conclusion, the Second Circuit focused on which party actually directed that the copy be made, rather than which one facilitated the copying. Looking to tort law for guidance, the court noted that the copies made under the RS-DVR system were done so pursuant to the customer's demand, notwithstanding Cablevision's design, hosting and maintaining the system that automatically produced the copy upon the customer's instruction.

In Dish Network, as to direct copying, the Ninth Circuit fully adopted and extensively quoted the reasoning of the Cablevision case. Thus, notwithstanding the extensive involvement of Dish in the technological facilitation of the copying through the Hopper and its PTAT and Autohop features, the Ninth Circuit found no abuse of discretion in the district court's determination that the Dish customer “caused” the copies to be made. The appeals court therefore upheld the lower court's determination that “the 'user, not Dish, must take the initial step of enabling' PrimeTime Anytime ' and “[t]he [user] then, and not Dish, is the most significant and important cause of the copy.'”

Fair Use

Next, the appeals court addressed the question of whether Dish could be held secondarily liable for the copying done by its customers (who were not made parties to the lawsuit). For secondary liability to attach, there must first be an underlying infringement. Therefore the appeals court considered whether the unauthorized copying of Fox's copyrighted programs by Dish customers constituted fair use. The Ninth Circuit held that Fox was unlikely to succeed on the merits of its secondary liability claim because the underlying conduct of Dish customers was likely to be fair use.

The Ninth Circuit looked to the Supreme Court decision in Sony for guidance, and concluded that the copying by Dish customers was comparable to the private, in-home, time-shifting of television programs viewed as fair use in Sony . There, the Supreme Court held that the Betamax video recorder was capable of substantial non-infringing use because its primary use, in-home copying of television shows for later viewing, was a fair use. Despite the different setting in Dish Network , including the extensive involvement of Dish in providing the technology and ongoing external support for the PTAT system, the Ninth Circuit viewed the copying by Dish customers to be comparable to the private, home copying in Sony. The Fox plaintiffs argued that the Sony result should not apply because Dish customers use the PTAT and AutoHop services “for purposes other than time-shifting-namely commercial-skipping and library building,” but the Ninth Circuit found that “the court in Sony never expressly decided whether commercial-skipping and library building were fair uses.”

The Ninth Circuit then evaluated the fair-use factors set forth in '107 of the Copyright Act as follows: i) the noncommercial nature of the copying by Dish customers for their in-home viewing weighs in favor of fair use; ii) the programs were meant for private home viewing in their entirety and PrimeTime Anywhere enables that result; and iii) Fox failed to demonstrate potential market harm.

Although Fox submitted evidence that commercial skipping would cause potential harm by decreasing advertising revenues, the appeals court emphasized that Fox had no copyright interest in the commercials. Overall, the Ninth Circuit held that Dish established a likelihood of success on the defense that its customers' copying was a fair use and therefore no secondary liability could attach to Dish.

In what for now appears to have been a Pyrrhic victory for Fox, however, the Ninth Circuit held that the district court did not abuse its discretion in determining that, although Fox was likely to succeed on the merits of its infringement claim with respect to copies Dish Network made for quality assurance purposes, Fox failed to establish irreparable harm required for a preliminary injunction.

The broadcasters argued in Dish Network, as they did in the Cablevision case and the more recent Second Circuit case, WNET v. Aereo, 712 F.3d 676 (2d Cir. 2013), that the courts have been elevating form over substance. So far, the courts have not been persuaded. Although every new technology gives rise to a different form, the basic question remains: When does the technological and systemic support for home copying become so extensive as to cross the line between operational support and direct copying? An analogous issue arises when considering the right of public performance, which was an important issue in Cablevision as well and the main issue in Aereo : Should the court aggregate thousands of individual transmissions to private homes, when deciding whether a “public performance” has occurred? The Second Circuit in Aereo said they should not.

Conclusion

The stakes are high for both copyright owners and users, and worthy of consideration by the U.S. Supreme Court. Should an individual video recorder (Sony's Betamax) in a private home be considered comparable to the Hopper featuring PrimeTime Anywhere and an extensive infrastructure built by Dish to facilitate copying? Stay tuned.

Robert J. Bernstein practices law at The Law Office of Robert J. Bernstein in New York City. Robert W. Clarida is a partner at Reitler, Kailas & Rosenblatt, and is the author of Copyright Law Deskbook (BNA).

The “Hopper,” the recording and commercial-skipping technology developed by Dish Network, first survived a preliminary injunction motion brought by Fox Broadcasting Co. in 2012, then prevailed on appeal this summer in a decision by the U.S. Court of Appeals for the Ninth Circuit. Fox Broadcasting Co. v. Dish Network, 12-57048.

Relying on the 1984 Supreme Court precedent involving use of a VCR to “time-shift” home viewing of television shows, Sony v. Universal City Studios, 464 U.S. 417 (1984), and the 2008 U.S. Court of Appeals for the Second Circuit decision concerning Cablevision's remote DVR technology, Cartoon Network v. CSC Holdings, 536 F.3d 121 (2d Cir. 2008), the Ninth Circuit appears to have concluded that “the more things change, the more they remain the same.” Thus, the Ninth Circuit determined that the recording of Fox programs, although enabled by the Hopper in conjunction with a complex technological infrastructure developed and run by Dish, was nevertheless directed by the customer for private, noncommercial use and constituted a fair use.

Although only Dish and an affiliated company were defendants, they prevailed as a result of the court's conclusions that only the customers engaged in direct copying and the customers' copying was a noninfringing fair use. Therefore, Dish was neither liable for direct copying nor was it secondarily liable because its customers' fair use eliminated the element of direct infringement required to establish secondary liability. (Fox also based its preliminary injunction motion on contract claims which fared no better, although the court characterized them “much closer” than the copyright claims.)

In the Hopper

Dish, a leading provider of pay television service, is licensed by Fox to retransmit its broadcast signal to Dish customers pursuant to a 2002 contract. The broadcast signal, which transmits Fox copyrighted programs such as Glee, Family Guy and The Simpsons, is retransmitted via a satellite that interfaces with a receptor dish installed at Dish customers' homes. In March 2012, Dish released to its customers the device called the Hopper, a set-top box with digital video recorder (DVR) and video-on-demand capabilities. It is capable of servicing up to four television sets in a home in conjunction with a companion box called a “Joey.” When used together with a Sling Adapter, the Hopper also enables the customer to view the recorded programs on computers and mobile devices.

Simultaneously, Dish released a feature called PrimeTime Anytime (PTAT) designed to work only with the Hopper. PTAT enables the Dish customer, pursuant to the customer's specific direction, to record all primetime programs broadcast on the ABC, CBS, NBC and Fox TV networks. To do so, the customer must take certain specific steps: First, the customer must press “*” (star) on a remote control, which causes the PTAT setup screen to appear; and second, must select “Enable,” which causes a new menu to appear on the PTAT screen containing options to vary the PTAT default setting for recording and saving the programs. If the customer does not choose “Enable,” the PTAT system will not record any programs. If the customer chooses “Enable” but makes no further selection regarding networks or days to record or length of time to save the recordings, PTAT automatically records all primetime shows broadcast on each of the major networks every night of the week and saves them for eight days.

Soon after introducing PTAT, Dish began to offer its customers a new feature called “Autohop,” which is only available for shows recorded using PTAT. Autohop enables a Dish customer to choose, with respect to a specific recording made by PTAT at that customer's direction, that the recording be played back without commercials. (The commercials are not actually eliminated from the recording; rather, the technology allows them to be skipped over unless the viewer chooses to see one or more of them, in which case he or she can fast forward or rewind into the commercial.) To view the commercial-skipping version, the customer must select the option labeled “automatically skip over commercials” that appears on a pop-up screen when the customer views the PTAT recording. The Autohop default setting is not to skip over commercials. As with the PTAT “Enable” setting, skipping commercials requires an affirmative choice and confirmatory action (selecting a menu option) by the customer.

To make this “enhanced” (assuming the programs are more entertaining than the commercials) television experience possible, Dish technicians view the primetime shows each night and electronically mark the beginning and end of each commercial. The marked files are eventually transmitted to Dish customers for later viewing, usually beginning the day after initial broadcast. Dish also copies these marked files at its quality control facilities where they are reviewed to ensure that the commercials have been properly marked off and that no parts of the programs were inadvertently deleted.

Customer'Made Recording

The Ninth Circuit first considered whether the recordings of Fox shows were made by Dish or by its customers. On this point, the appeals court considered the Second Circuit decision in Cartoon Network, where Cablevision's customers, using a remote-storage DVR (RS-DVR) system provided by Cablevision, sent signals to its central facility where the program selected by a customer was copied and stored on Cablevision's servers. The copy or copies chosen by the Cablevision customer were stored in a space allocated to the customer on a hard disk at the Cablevision central facility. The customer could then request playback of his or her requested recordings from a list on the screen.

In Cartoon Network, the Second Circuit held that the customer made the copy, not Cablevision, notwithstanding the remote features of the Cablevision system and the ways in which Cablevision facilitated the copying, storage, delivery and viewing of the recordings. The court considered the RS-DVR system to be comparable to the traditional copying consumers have done on their VCRs, because the Cablevision customer chose what to copy and directed Cablevision to do so.

On these facts, the Second Circuit held that “copies produced by the RS-DVR system are 'made' by the RS-DVR customer, and Cablevision's contribution to this reproduction by providing the system does not warrant the imposition of direct liability.” In reaching this conclusion, the Second Circuit focused on which party actually directed that the copy be made, rather than which one facilitated the copying. Looking to tort law for guidance, the court noted that the copies made under the RS-DVR system were done so pursuant to the customer's demand, notwithstanding Cablevision's design, hosting and maintaining the system that automatically produced the copy upon the customer's instruction.

In Dish Network, as to direct copying, the Ninth Circuit fully adopted and extensively quoted the reasoning of the Cablevision case. Thus, notwithstanding the extensive involvement of Dish in the technological facilitation of the copying through the Hopper and its PTAT and Autohop features, the Ninth Circuit found no abuse of discretion in the district court's determination that the Dish customer “caused” the copies to be made. The appeals court therefore upheld the lower court's determination that “the 'user, not Dish, must take the initial step of enabling' PrimeTime Anytime ' and “[t]he [user] then, and not Dish, is the most significant and important cause of the copy.'”

Fair Use

Next, the appeals court addressed the question of whether Dish could be held secondarily liable for the copying done by its customers (who were not made parties to the lawsuit). For secondary liability to attach, there must first be an underlying infringement. Therefore the appeals court considered whether the unauthorized copying of Fox's copyrighted programs by Dish customers constituted fair use. The Ninth Circuit held that Fox was unlikely to succeed on the merits of its secondary liability claim because the underlying conduct of Dish customers was likely to be fair use.

The Ninth Circuit looked to the Supreme Court decision in Sony for guidance, and concluded that the copying by Dish customers was comparable to the private, in-home, time-shifting of television programs viewed as fair use in Sony . There, the Supreme Court held that the Betamax video recorder was capable of substantial non-infringing use because its primary use, in-home copying of television shows for later viewing, was a fair use. Despite the different setting in Dish Network , including the extensive involvement of Dish in providing the technology and ongoing external support for the PTAT system, the Ninth Circuit viewed the copying by Dish customers to be comparable to the private, home copying in Sony. The Fox plaintiffs argued that the Sony result should not apply because Dish customers use the PTAT and AutoHop services “for purposes other than time-shifting-namely commercial-skipping and library building,” but the Ninth Circuit found that “the court in Sony never expressly decided whether commercial-skipping and library building were fair uses.”

The Ninth Circuit then evaluated the fair-use factors set forth in '107 of the Copyright Act as follows: i) the noncommercial nature of the copying by Dish customers for their in-home viewing weighs in favor of fair use; ii) the programs were meant for private home viewing in their entirety and PrimeTime Anywhere enables that result; and iii) Fox failed to demonstrate potential market harm.

Although Fox submitted evidence that commercial skipping would cause potential harm by decreasing advertising revenues, the appeals court emphasized that Fox had no copyright interest in the commercials. Overall, the Ninth Circuit held that Dish established a likelihood of success on the defense that its customers' copying was a fair use and therefore no secondary liability could attach to Dish.

In what for now appears to have been a Pyrrhic victory for Fox, however, the Ninth Circuit held that the district court did not abuse its discretion in determining that, although Fox was likely to succeed on the merits of its infringement claim with respect to copies Dish Network made for quality assurance purposes, Fox failed to establish irreparable harm required for a preliminary injunction.

The broadcasters argued in Dish Network, as they did in the Cablevision case and the more recent Second Circuit case, WNET v. Aereo, 712 F.3d 676 (2d Cir. 2013), that the courts have been elevating form over substance. So far, the courts have not been persuaded. Although every new technology gives rise to a different form, the basic question remains: When does the technological and systemic support for home copying become so extensive as to cross the line between operational support and direct copying? An analogous issue arises when considering the right of public performance, which was an important issue in Cablevision as well and the main issue in Aereo : Should the court aggregate thousands of individual transmissions to private homes, when deciding whether a “public performance” has occurred? The Second Circuit in Aereo said they should not.

Conclusion

The stakes are high for both copyright owners and users, and worthy of consideration by the U.S. Supreme Court. Should an individual video recorder (Sony's Betamax) in a private home be considered comparable to the Hopper featuring PrimeTime Anywhere and an extensive infrastructure built by Dish to facilitate copying? Stay tuned.

Robert J. Bernstein practices law at The Law Office of Robert J. Bernstein in New York City. Robert W. Clarida is a partner at Reitler, Kailas & Rosenblatt, and is the author of Copyright Law Deskbook (BNA).