At first blush, the Ninth Circuit decision allowing Dish to continue to offer its “Hopper” service may not look great for broadcasters, but don’t hop to any conclusions just yet.
The TV industry has suffered some setbacks on the copyright front in the Aereo litigation in the Second Circuit and, as we have reported, the industry is keeping its fingers crossed, hoping for support from the Ninth Circuit on the Left Coast (in the pending Aereokiller appeal).
Bad news. In an unrelated case the Ninth Circuit has issued a decision that doesn’t help broadcasters although, much like the Aereo decisions so far, the damage here is by no means catastrophic.
The decision involves the “Hopper” from Dish.
You may be familiar with the Hopper from its truly annoying commercials. It’s the Dish satellite service’s home DVR system, which includes a feature called “PrimeTime Anytime” (PTA). PTA allows a subscriber to record any and all primetime programming on any of the four major broadcast networks every night of the week. The PTA service defaults to recording all the programming, which (again by default) it saves on the user’s DVR for eight days (although the subscriber can modify these defaults).
As with most (if not all) other DVR systems, the user can start watching PTA-recorded programming right away, but if they can wait until the next morning, they can take advantage of the Hopper’s main selling point: the ability to “AutoHop” over commercials, skipping them entirely, automatically. No need to fast forward through commercials – Dish has taken care of that for you.
The prospect of automatic ad-skipping technology is obviously not something that commercial broadcasters – whose existence depends on the ads being skipped – cotton to.
Enter Fox Broadcasting Company.
The network that first introduced the world to 21 Jump Street filed suit in the U.S. District Court for the Central District of California, trying to ground the Hopper. Since that’s the same court that has preliminarily enjoined Aereokiller (now known as FilmOn.com), you might think that the chances would be good for Fox to Arrest the Development of the Hopper technology.
Not so fast.
The same court, maybe, but two different judges. And while Judge Wu (the Aereokiller judge) was inclined to side with the broadcasters, Judge Dolly Gee wasn’t. She refused to enjoin Dish from marketing the Hopper. Fox was unable to convince Judge Gee that Fox was likely to be able to prove either that the Hopper infringes (directly or secondarily) Fox programming or that the Hopper constitutes a breach of Dish’s carriage agreement with Fox.
In its recent decision, the Ninth Circuit has affirmed Judge Gee.
Now that the appeals court that will rule on the Aereokiller appeal has shown no love for broadcasters, broadcasters should be scared that their victory in that case will be short-lived, right?
Again, not so fast.
Sure, there is some commonality between the Aereokiller and Hopper cases – primarily in the general sense that both call on the courts to apply 1976-vintage copyright laws to technologies that not even Scully and Mulder could have foreseen. But the specific issues in each case are distinct.
Perhaps most importantly, though, both the Aereokiller and Hopper cases – and, sure enough, the Aereo case as well – are all still at the preliminary injunction phase. As we have previously explained (in the context of Aereo), that phase is a pre-trial process in which one party (in all these cases, the broadcasters) try to halt the other side’s operation until the trial court can hear all the evidence and arguments and resolve the litigation on its merits. The actual trial on the merits of the broadcasters’ claims of infringement has not yet happened in any of the three cases. It’s at least theoretically possible that, having picked up some cues during the arguments relative to the preliminary injunction, the broadcast plaintiffs will be able to improve their arguments in the merits phase of the proceeding.
And let’s not forget that, in reviewing a trial judge’s decision on a preliminary injunction, a court of appeals is stuck with the facts as they have been developed thus far in the trial court. Further, the appellate court can’t overrule the lower court unless the lower court committed an “abuse of discretion”, an awesomely deferential standard.
Don’t take our word about the importance of those caveats. Just read the Ninth Circuit opinion affirming Judge Gee. It’s hard not to get the impression that: (a) the Circuit really didn’t want to rule in favor of Dish here; and (b) there’s hope for the broadcasters in the Aereokiller case if the three judges on the Aereokiller panel show even a scintilla of the dedication to the abuse of discretion standard as their brethren in the Hopper case.
So what did Ninth Circuit say in its decision?
Recall that Fox claimed that the Hopper infringes its copyrights and breaches several provisions in its retransmission consent agreements with Dish. Judge Gee, the trial judge, concluded that Fox had not demonstrated that it was likely ultimately to prevail on those claims, with one possible exception. The exception involves the process by which Dish processes broadcast programming for the AutoHop system.
You may have noted in our description of the AutoHop feature that it’s not available until the day after the program has aired. Why the wait? Because AutoHop requires the intervention of Dish technicians (located, for some reason, in Cheyenne, Wyoming) who have the wonderful job of reviewing all the primetime programming and manually inserting electronic tags exactly when the commercials begin and end so the Hopper can AutoHop over them. Fox pointed out that that tagging process requires that Dish make a copy of Fox programming for Dish’s own use, which would ordinarily be a cut-and-dried copyright violation. (Dish protested that the copy it makes is for “quality assurance” purposes.) Judge Gee figured that Fox will likely prevail on that claim . . . BUT, in order to get a preliminary injunction, Fox would also have to demonstrate that the infringement would cause it “irreparable harm”. Gee wasn’t satisfied that Fox would suffer such harm here.
On appeal, the Ninth Circuit held that Gee had not abused her discretion in holding that Fox hadn’t shown either that it was likely to win on the copyright infringement and breach of contract claims or that it was likely to suffer irreparable harm from continued creation of “quality assurance” copies. In so doing, though, the Circuit panel repeatedly emphasized the narrowness of its focus (thanks to the deferential “abuse of discretion” standard of review) and the consequent narrowness of the overall decision.
Addressing the question of whether Dish’s PTA service is directly infringing Fox’s copyrights, the Circuit agreed with Gee that Dish’s mass copying of Fox’s programs was akin to the copying in the Second Circuit’s 2008 Cablevision case (yes, the same Cablevision successfully relied upon by Aereo). In both cases, the key question is “who is making the copy”? And in both cases, the courts concluded that the answer is the viewer, not the technological system. Since we know (from the Supreme Court’s Betamax decision from the early 1980s) that individual audience members are entitled to record programming for their own personal use, the PTA did not constitute infringement.
Whether that determination will survive after a full evidentiary trial remains to be seen. It’s important to keep that in mind because even Gee acknowledged that Dish’s PTA service went well beyond the system approved by the Second Circuit in Cablevision in terms of Dish’s “exercise of control” over the recording process. She found that “Dish decides how long the copies are available for viewing, Dish maintains the authority to modify the start and end times of the primetime block, and a user cannot stop a copy from being made once the recording has started.”
Curiously, that wasn’t enough to convince Gee that Dish doesn’t exercise control of the recording process. The Ninth Circuit, in full deferential mode, accepted her conclusion with the less than ringing endorsement that “the District Court did not err” (as opposed to, say, “we wholeheartedly agree with the District Court”).
The Circuit’s affirmance of Gee’s ruling on the secondary infringement issue was also hardly solid as a Roc. Fox’s theory on that point is that, even if Dish isn’t infringing Fox’s programming, Dish users are, and Dish is contributing to that infringement. But Gee found that the end users – i.e., the viewers – were engaging in mere “time-shifting”, which is a “fair use” of the programming (thanks to the Supremes’ Betamax decision), so no infringement appears to be occurring. If anyone is aggrieved by the AutoHop process, according to the courts, it should be the advertisers whose commercials are being hopped.
In terms of Shaky Ground, though, Dish’s initial success on Fox’s breach of contract claims appears to be the shakiest of all. Fox had argued that its deals with Dish prevented Dish from recording, copying or duplicating Fox programming or distributing it on an interactive, time-delayed, video-on-demand basis or the like.
In Gee’s view, if anybody was engaging in such conduct, it was Dish’s customers, not Dish itself. And the Ninth Circuit didn’t find enough in the lower court’s record to reverse her on that point. The Circuit did observe that Fox’s contractual claims – specifically as to whether Dish was distributing the programming – were at least “plausible”; however, so too was Judge Gee’s take on those claims, so that darned “abuse of discretion standard” standard carried the day again. Significantly, though, the Circuit emphasized that it was expressing “no view on whether, after a fully developed record and arguments the district court’s construction of ‘distribute’ will prove to be the correct one.”
Again, it’ll be important to see how the full trial-on-the-merits shakes out before declaring any final victors here.
Fox also argued that Dish’s operation violated a contractual bar against fast forward functionality in a VOD service. In the District Court, Judge Gee held that, if PTA were a VOD service, it would indeed be a contract breach. But Gee somehow concluded that, while having some VOD elements, PTA is more akin to a DVR service. And on that point, the Ninth Circuit was as close to Undeclared as it could be: “The district court’s finding that [PTA] was more akin to a DVR than to video on demand was not clearly erroneous”.
Finally, the Ninth Circuit agreed with Gee that Dish’s “quality assurance” copies were likely to constitute copyright infringement, but it also agreed such infringement would not irreparably harm Fox (since, if it ultimately prevails, Fox could be adequately compensated via monetary damages).
Bottom line: PrimeTime Anytime and the Hopper will remain in operation and the case goes back to Judge Gee for further proceedings. Fox could seek en banc review from all the judges on the Ninth Circuit but we saw how well that went for the broadcasters in the Aereo case. Given the Firefly-level energy radiating from the Ninth Circuit’s opinion, I suppose there may be hope that the full 27-judge Court would step up and reverse the District Court. But let’s get real – it’s far more likely that Fox’s best chance lies in building a full record before the District Court, especially on the breach of contract claims. With a better factual record, the network should have a much better idea as to whether it will be Grounded for Life or whether, like Parker Lewis, it Can’t Lose.