“Hop ‘Till You Drop”: DISH Network and major TV networks fight over copyright implications of DISH’s new Hopper technology
It’s déjà vu all over again: a new technology is introduced making it easier for consumers to experience copyrighted works, and suddenly, old arguments used to resist predecessors to that new technology become salient again. Sometimes those old arguments work and the new technology is vanquished, other times, the new technology emerges victorious.
On May 24th, 2012, DISH Network and the four major broadcast networks (ABC, CBS, NBC, and Fox) lay the groundwork for the next big “new technology versus old media” courtroom clash. (Links to the complaints are at the bottom of the article). With potential to significantly modify SCOTUS’s decision in Sony v. Universal City Studios, Inc., 464 U.S. 417 (1984), which authorized individuals to record television programs using their personal VCRs, the upcoming litigation over DISH’s “Hopper” device should be of concern not only to copyright law scholars, but to the general public as well. This post will thus explore the general background of the case, what each party claims, and the possible pit falls in those arguments.
DISH Network is a satellite TV provider, with approximately 14 million customers. They specialize in HD programming, and are licensed to rebroadcast both national and international content, including content from four major networks.
ABC, CBS, NBC, and Fox are the four major television broadcasters. They provide free over-the-air programming, which they fund by selling advertising space between breaks in programming. [author’s note: NBC is 51% owned by Comcast, the US’s largest cable television operator and DISH’s direct competitor]. The Networks also currently license their content to on-demand internet services such as hulu.com and Netflicks.
The case arises out of DISH’s launch of its “Hopper” device in March, and two Hopper services in March and May of this year: “Primetime Anytime” and “AutoHop.” The Hopper itself is a massive personal hard drive/digital video recorder (DVR), containing two terabytes of storage (about 2,000 hours of video). It is the largest DVR device on the market, holding twice the capacity of any other current DVR device. Primetime Anytime allows DISH subscribers who own a Hopper to simultaneously record the full three hour (four hours on Sunday) prime time lineup of all four major networks in High Definition (HD). The consumer chooses to activate the Primetime Anytime function, and when he or she does, the Hopper retains the video for up to eight days. The “AutoHop” feature supplements Primetime Anytime, and allows consumers who chose to use the service to automatically “hop” over the commercial segments interrupting the (now-recorded) prime time broadcast starting at 1:00 am the day after the original broadcast. The commercials are retained even with AutoHop is activated, and thus consumers can choose to watch them by hitting the rewind or fastforward button on their remotes.
On May 24th the action broke. On the east coast, DISH filed suit in the district court for the southern district of New York against the broadcasters for declaratory relief, seeking a court ruling that AutoHop does not violate its preexisting broadcast licenses with the major networks and that it does not infringe those broadcaster’s copyrights. Meanwhile, on the west coast, NBC, CBS, and Fox (ABC is sitting this one out so far) filed suit in the district court for the central district of California (in Los Angeles) almost simultaneously (in a crucial move, DISH submitted their complaint just ahead of the Networks). NBC and CBS seek an injunction against the continued sale of the Hopper, and the Primetime Anytime and AutoHop services, while Fox seeks the injunction, as well as damages for breach of contract and breach of an implied covenant of good faith. The Networks alleged that the Hopper, Primetime Anytime, and AutoHop infringes copyright in their programming because it “blocks the delivery of advertising to viewers and thereby deprives copyright owners of the means by which they are paid for their works … [thus it] threatens to diminish the quantity and quality of the programming Americans have come to expect and demand.”
Copyright infringement is a complex area of copyright law. Direct copyright infringement is the most basic form of infringement and occurs when someone other than the copyright owner does anything that the Copyright Act gives the copyright owner the exclusive right to do, unless the “infringer” is otherwise protected by fair use or another exception in the act. See 17 USC § 501(a). As outlined in 17 U.S.C. § 106, a copyright owner has the exclusive right to reproduce the work [§ 106(1)], distribute copies of the work [§ 106(3)], and prepare derivative works based upon the copyrighted work [§106(2)].
Over the last 30 years, technology has changed the way works are experienced and disseminated, and thus the way they are “copied.” To respond to situations where the defendant did not directly copy the work, but someone else has, the courts developed alternative theories of secondary liability infringement including contributory, inducement, and vicarious infringement. Importantly, there must be an underlying direct infringement before any of the secondary types of liability can attach.
The prototype secondary liability infringement is contributory infringement. This type of infringement is premised on actual knowledge of infringing activity and the party’s substantial participation in the infringing conduct, either through inducement, or through actually causing or materially contributing to the conduct. See Sony, supra. In Sony, Universal and a host of other broadcasters argued that Sony infringed their copyrights by manufacturing, selling, and advertising home recoding device that could be used by individual consumers to record whole television broadcasts on their own volition for later viewing. They reversed the Ninth Circuit in a 5-4 decision, holding that because the VCR was “capable of substantial non-infringing uses,” like a photocopier, and because recording a program for the purposes of time shifting was fair use under 17 U.S.C. § 107, Sony was neither a direct nor contributory infringer.
A related type of secondary liability is inducement to infringe. Inducement occurs when a party either promotes by clear expression or affirmative steps, or distributes a device with the objective of promoting its use to infringe. See MGM Studios, Inc. v. Grokster,Inc., 545 U.S. 913 (2005). This theory of infringement grew up in the context of Peer-to-Peer (P2P) file-sharing, when sites like Napster and Grokster specifically created, promoted, and provided consumer software for the purposes of allowing users to share music by copying, uploading, and downloading digital files of those works without the author’s permission.
Alternatively, the third type of secondary liability, vicarious infringement, requires that the defendant not only receive a direct financial benefit from the infringing activity, but that the defendant also have the right to control the actions of the direct infringer, either through contract, inherent power, or some other theory of agency. See e.g. Religious Tech. Ctr. v. Netcom On-line Comm. Servs., Inc., 907 F. Supp. 1361 (N.D. Cal. 1995). This theory of liability is inapplicable when the direct infringer acts free of the defendant’s control or compulsion.
(1) Direct Liability
In perhaps their weakest argument, the Networks argue that DISH directly infringes because it is responsible for creating a “library of approximately 100 hours” of primetime television when the Primetime Anytime function is activated on the Hopper, and that this copying violates the Networks’ programming copyright. The Networks further contend that the content is copied to a “partitioned section of the Hopper’s hard drive that is fully under Defendants’ ongoing remote control.” At no point do the Networks recognize that the users, and not DISH, are solely responsible for activating the PrimeTime Anytime function, and thus the actual copying.
Four years ago in Cartoon Network v. Cablevision, 536 F.3d 121 (2d Cir. 2008), the Second Circuit held that a service provider is not directly liable for any direct copyright infringement where the customer controls and chooses to record a program broadcast to them, even if they use the service provider’s device or service to create that personal copy. In that case, Cartoon Network sued Cablevision, a cable television provider, over a remote digital video recording (R-DVR) service offered by Cablevision that allowed customers to record and store content on a remote server hosted by Cablevision. Similarly, in DISH’s case, it is the customer, and not DISH, who chooses to activate PrimeTime Anytime, and therefore whether to record the content.
Interestingly, the CBS and NBC fail to argue that the AutoHop feature is a direct infringement of their copyright. This omission is curious because many of the remarks earlier in their complaints suggest that the Networks conceive of their entire broadcast, including commercial advertisements, as one copyrightable work, and that by allowing customers to chose to skip over the commercials, DISH tampers with the Networks’ copyrighted work, and thus infringes on it. But again, like PrimeTime Anytime, it is the customers, and not DISH, who choose whether to record the program on their personal devices, and thus the case law suggests that it is only the customers, and not DISH, who could be liable for direct infringement.
(2) Inducement to Infringe
Under this heading, the Networks argue that users infringe on their reproduction right when they use PrimeTime Anytime and AutoHop, and that DISH induces this infringement because it intentionally promotes the Hopper as a means to copy the programming and then watch it commercial free. They buttress their allegation by accusing DISH of targeting the Hopper at “known markets for infringement, including consumers who wish to obtain access to commercial-free programming without payment and consumers who wish to avoid paying market prices for permanent copies of commercial-free programs,” and by advertising the Hopper as a substitute for hulu.com (which forces viewers to watch commercials) and Netflixs-like video-on-demand (which, like DISH’s satellite service, is a for-fee service).
By using that language, the Networks attempt to draw comparison between DISH’s conduct, and the conduct of P2P file-sharing services like Grokster, whose stated purpose was to capitalize on the vacuum left in the illegal file-sharing market by Napster’s court-mandated exit. See Grokster, supra. The problem the Networks will face with this line of arguments is that unlike Grokster, DISH pays for and is licensed to broadcast the Network’s content. DISH’s problem, however, is that it does advertise the Hopper as a means to copy and playback broadcasted content. Thus, depending on how the courts view the consumer’s choice to copy, the Networks could prevail on this issue.
(3) Contributory Infringement
The Networks claim that because DISH supplies its consumers with the technology, it facilitates the infringements, and because DISH monitors its consumers to know when and what they are watching, DISH should know about and is able to stop the infringement.
There are two conceivable problems with this specific allegation. First, DISH could argue that it doesn’t think its customers are engaging in infringing activity: that’s why it filed for declaratory judgment. Second, Sony shows that while infringing, individuals recording over-the-air broadcasts for later viewing operate under principles of fair use, and thus their infringement is excused. Consequently, if the underlying consumer activity is non-infringing, there is no underlying infringing act to support DISH’s secondary liability.
(4) Vicarious Infringement
Along with direct infringement, this claim is likely the weakest. The Networks argue that DISH has control over its consumers’ actions because the DISH user agreements authorizes DISH to “add, delete, and/or change any and all programming, programming packages, and other services,” and because DISH automatically codes the Networks’ primetime programs to facilitate AutoHop when it is turned on.
The problem with this argument is that the vicarious liability cases show that “control” only attaches when the principle control’s the agent’s conduct, not when the principle facilitates the conduct. Thus, unless DISH actually controls user’s choice to activate PrimeTime Anytime and/or AutoHop, the Network’s argument should fail. While not a copyright case, Akamai Tech, Inc. v. Limelight Networks, Inc., (Fed Cir 2010), illustrates this point nicely. In that case, Akamai invented, patented, and used a multiple-step method of delivering internet content more efficiently over the internet. Limelight, a rival, thought Akamai’s method was efficient, and implemented each of the steps, except the last. Limelight then instructed its customers how to accomplish the last step. Akamai sued for infringement of their patent. Generally, in patent infringement cases, the alleged infringer must perform all the steps of the patent to infringe. The Federal Circuit Court of Appeals ruled that because Limelight’s customers performed one of the steps without any contractual obligation or agency duty, Limelight did not infringe. [author’s note: The Federal Circuit vacated this opinion in 2011, seeking party and amici briefs on the joint-infringement and vicarious liability issues. A decision is expected later this year].
Similarly, with the Hopper, DISH’s customers are under no obligation or compulsion, either at contract or common law, to use either feature in question. So even though DISH does receive a financial benefit from users for the service, because DISH has no right to control whether its customers engage that service, there is no vicarious liability.
So based on precedent, it looks like a slam-dunk case for DISH, right? I should go out, buy a Hopper, and never have to deal with commercials again!
Well, don’t start hopping for joy just quite yet. There are several complicating factors that will make this case a horse of a different color, two of which I will outline below.
First is the issue of where the parties filed. DISH filed for declaratory judgment in New York, part of the Second Circuit, where Cablevision sits as precedent and could help. Alternatively, the Networks filed in Los Angeles, under the Ninth Circuit, which is notorious for its strict views on copyright, as exemplified by its ruling in Sony, where the court held that the VCR was an infringing device, and that time-shifting by recording a program was not fair use. Thus, we can expect some argument over which court should stay which action until the other is resolved, and a lot of argument once it is resolved.
The second issue is how the technology works and how that corresponds to what was (and is) permitted under Sony. Some writers are arguing that the DISH case is merely a re-litigation of the issues decided in Sony and could thus spell doom for consumers should the courts come out differently. While facially appealing, this argument falters on several grounds.
First, when you apply Sony’s “is it capable of substantial non-infringing uses” test, the Hopper’s Primetime Anytime service is substantially different than the VCR’s. The VCR allowed consumers to record any program and to choose when recording would stop, start, and on what channels; alternatively Primetime Anytime, only allows recording of specific programs, on specific networks, at specific times, without allowing the consumer to change the recording parameters. Also, the VCR allowed users to play back their own copyrighted works (such as home videos) and cassettes of other’s copyrighted material purchased on the market. Alternatively, the Hopper’s only playback purpose and function is in relation to copyrighted programs broadcast through its satellite services.
Second, the VCR was a stand alone device, completely owned and controlled by the user and isolated from the source of the broadcast. Alternatively, the Hopper is connected to DISH’s network, and users rent or license Hoppers with their DISH subscription. Thus, DISH has substantially more control over both the device and the content on the device than any VCR manufacturer and distributor.
Third, the VCR worked on a principle of “one device, one television, one channel” recording; conversely, the Hopper records up to four programs simultaneously on one device. One could argue that the Hopper merely consolidates what anyone could do with four VCRs and four television sets; however, if the legal purpose of recording a program is to “time-shift” what would have otherwise been watched on TV, then since a person can’t ostensibly watch four programs at once on a single device, neither should a fairly-used recording device (although picture-in-picture technology would have us believe otherwise).
So what’s the point?
The point is that while people are trying to pitch this as a re-hash of Sony, it is not. It is a lot more complicated, and is going to be a lot messier. And as for AutoHop, there was a series of Panasonic VCRs in the late 90’s that coded recordings to automatically skip commercials and allowed you to watch two channels at once. It has yet to “diminish the quantity and quality of the programming Americans have come to expect and demand.”
On May 30, the presiding New York District Court judge issued a temporary restraining order staying the Network’s litigation. The order stops the Networks from suing DISH in California, and will be in force until July 2nd, when the next hearing in the litigation is scheduled. The July 2nd hearing is a motion to dismiss brought by DISH’s against CBS and NBC. The California District Court has thus far remained silent on this development.
Links to the Complaints
DISH’s motion for declaratory judgment, here.
NBC’s motion for injunction, here.
CBS’s motion for injunction, here.
Fox’s motion for injunction, and other actions, here.