Be Kind, Rewind: Ninth Circuit Uses Betamax-Era Precedent to Approve Dish Network’s Ad-Skipping Technology

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It began initially with TIVO, and has since expanded to major cable and satellite providers such as DirecTV and Dish Network (Dish).  Television viewers are now able to digitally record multiple programs with the press of a single button, and replay them at their leisure.  To many consumers, the ability to manually fast-forward through commercial breaks alone is worth the premiums paid for such digital recording devices.

But what if new technology existed that automatically skipped those commercials for you?  Enter “AutoHop” by Dish.  And much to the chagrin of traditional cable broadcasters such as Fox, the Ninth Circuit Court of Appeals, in its recent decision in Fox Broadcasting Co. v. Dish Network, L.L.C., 2013 U.S. App. LEXIS 15075 (9th Cir. July 24, 2013), found that this ad-skipping technology likely does not violate Fox’s copyrights and should remain on the market.

Introducing the Kangaroo

In March 2012, Dish released the “Hopper,” a set-top box with digital video recorder (DVR) and video-on-demand capabilities.  Through use of companion boxes called “Joeys,” programming recorded on the Hopper can be viewed on up to four other televisions in a customer’s home.

 

Along with the Hopper, Dish introduced a feature it called “PrimeTime Anytime.”  PrimeTime Anytime (PrimeTime) allows a user to record primetime programming from all four major broadcast networks (including Fox) and to store those recordings for up to eight days on the Dish customer’s Hopper box.  Once a Dish customer enables the PrimeTime feature, the Hopper will by default record the entire primetime programming lineup of all four broadcast networks for every day of the week.  Recorded PrimeTime programming is stored on the Hopper for no more than eight days before being automatically deleted.

 

In May 2012, Dish announced “AutoHop”—a new Hopper feature that allows customers to automatically skip commercials in their PrimeTime recordings.  Like PrimeTime, the AutoHop feature must be enabled by the customer.  Upon doing so, Dish users see only the first and last few seconds of each commercial break, with a large kangaroo icon appearing in the corner of the screen to indicate that AutoHop is skipping commercials.

 

To create the AutoHop feature, Dish technicians manually view network programming each night and digitally mark the beginning and end of each commercial break.  Dish copies all programming onto its own computers, then has a technician review the copies for “quality assurance” in order to confirm the accuracy of the marking.  Quality assurance copies remain at Dish’s facilities.  At no point throughout this process, however, is the underlying programming content altered in any way.

 

Fox’s Legal Challenge

 

Objecting to Dish’s PrimeTime and AutoHop features, Fox commenced an action against Dish in the Central District of California for direct and secondary copyright infringement, as well as for breach of the parties’ distribution contract.  The matter came before the District Court on Fox’s motion for a preliminary injunction to enjoin Dish from operating, distributing, selling or offering to sell any version of PrimeTime or AutoHop.

 

Denying Fox’s motion, the District Court found that Fox did not meet its burden of demonstrating a likelihood of success on most of its copyright infringement and contract claims.  Although the court found that Fox was likely to prevail on its claim that Dish Network breached its contract with Fox by making “quality assurance copies,” it nevertheless held that the degree of irreparable harm Fox would suffer due to such copies was insufficient to warrant a preliminary injunction.  Two days after the District Court’s decision, Fox appealed to the Ninth Circuit. 

 

Ninth Circuit Rewinds Time

 

Fox’s appeal asked the Ninth Circuit to determine whether Fox is likely to succeed on its claims for direct copyright infringement, secondary copyright infringement, and breach of contract.  As it did in the District Court, Fox contended that Dish’s PrimeTime feature directly infringes Fox’s reproduction rights in its primetime programming.  Dismissing Fox’s arguments, the Ninth Circuit joined the Second Circuit Court of Appeals in holding that television and DVR providers cannot be liable for direct copyright infringement because it is the providers’ viewers who decide to record television shows, not the cable or satellite provider of those shows.  Quoting the lower court, the Ninth Circuit found that the user was the “most significant and important cause” of the copying, since the “user, not Dish, must take the initial step of enabling PrimeTime Anytime.”  The Ninth Circuit also affirmed the District Court’s decision that Fox had not shown that Dish's continued creation of its “quality assurance copies” would cause it to suffer irreparable harm.

 

It was the Ninth Circuit’s decision as to secondary infringement, however, that served to hit the “pause” button on the broadcaster’s copyright attack against Dish.  Conceding that by enabling PrimeTime and AutoHop, Fox is able to establish a prima facie case of direct infringement by Dish’s customers, the Ninth Circuit analyzed whether Dish’s customers’ copying was permissible fair use.  If it is, then Dish cannot be held liable for secondary copyright infringement.

 

In finding that Dish met its burden of establishing fair use, the Ninth Circuit looked to the Supreme Court’s 1984 decision in Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417 (1984).  Colloquially known as the “Betamax” case, in Sony, the Supreme Court was tasked with considering whether Sony’s creation of the videotape recorder violated copyright infringement laws.  Like Fox’s secondary infringement claims against Dish, Sony was sued by film and television studios for contributory copyright infringement on the grounds that the Betamax recorder could be potentially used by Sony’s customers to commit copyright infringement.

 

The Sony court recognized there was a significant likelihood that a substantial number of copyright holders who license their works for free public broadcasts would not object to having their broadcasts “time-shifted” by private viewers, and that Universal failed to show time-shifting would cause non-minimal harm to their copyrighted works.  Accordingly, Sony held that (a) recording a broadcast program for later viewing (i.e., “time shifting”), is fair use, and (b) the sale of copying equipment does not constitute contributory infringement if the product is widely used for legitimate, unobjectionable purposes, or is merely capable of “substantial noninfringing uses.”

 

Fast-Forward 30 Years and Sony Is Still Applicable

 

The Ninth Circuit wasted little time applying Sony to the modern-day technology of Dish’s PrimeTime and AutoHop features, determining that Dish’s users were involved in the same practice of “time-shifting” that the Supreme Court already ruled was a legitimate fair use.  To begin, the court recognized that the ability to enable commercial-skipping features does not implicate Fox’s copyright interest because Fox owns the copyrights to the television programs, not to the ads aired in the commercial breaks.  If the recording of an entire copyrighted program (with commercials) is a fair use under Sony, the Ninth Circuit reasoned, “the fact that viewers do not watch the ads not copyrighted by Fox cannot transform the recording into a copyright violation.”

 

Applying traditional fair use factors, moreover, the Ninth Circuit found Sony to be again on point.  Under Sony, Dish customers’ home viewing of recorded programming constitutes time-shifting for private home use and is therefore noncommercial.  Further, the Ninth Circuit confirmed that other fair use factors such as “the nature of the copyrighted work” and “the amount and substantiality of the portion used” do not militate against a finding of fair use because time-shifting merely enables a viewer to see a show that he or she had been invited to view in its entirety free of charge.  Finally, though the Ninth Circuit suggested that the ease of commercial skipping may cause Fox market harm, because Fox does not maintain an interest in the commercials that air, commercial skipping itself does not violate any of Fox’s copyright interests.

 

The Legal Battle Hops On

 

The Ninth Circuit’s recent decision in Fox Broadcasting is a unique example of how legal precedent can be sometimes both precise and flexible enough to govern even the most progressive tool of all:  technology.  Nevertheless, while Dish and other companies that are currently developing innovative new features for the way we view our primetime television programming may have been encouraged by the Ninth Circuit’s decision, the matter now proceeds to litigation on the merits of Fox’s claims.  Dish’s victory could be seen to some (particularly Fox and other major broadcast networks) as the product of a deferential standard of review, and a legal battle still remains over Fox’s contract claims, including whether Fox can collect damages for Dish’s quality assurance copies, and whether Dish exercises control over the copying process.  In the meantime, the Hopper remains on the market and Dish customers are free to continue viewing their recorded programs commercial-free.

 

Topics:  Advertising, Cable Television Providers, Television Broadcast Stations, Television Commercials, Television Service Providers

Published In: Civil Procedure Updates, General Business Updates, Communications & Media Updates, Constitutional Law Updates, Intellectual Property Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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