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EchoStar Satellite, L.L.C. v. Viewtech

February 5, 2008

ECHOSTAR SATELLITE, L.L.C., A COLORADO LIMITED LIABILITY COMPANY, ET AL., PLAINTIFFS,
v.
VIEWTECH, INC., A CALIFORNIA CORPORATION, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Hon. Thomas J. Whelan United States District Judge

ORDER GRANTING IN-PART AND DENYING IN-PART MOTION TO DISMISS [DOC. No. 15]

Plaintiffs EchoStar Satellite, L.L.C., EchoStar Technologies Corporation and Nagrastar, L.L.C. (collectively, "EchoStar") commenced this action against Defendants Viewtech, Inc., and Jung Kwak (collectively, "Viewtech"), alleging that Viewtech unlawfully designed, developed, and distributed devices and other technology intended to facilitate the illegal and unauthorized reception and decryption of EchoStar's subscription and pay-per-view television programming. Viewtech filed this motion to dismiss EchoStar's complaint on the grounds that it fails to state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6).

The Court decides the matter on the papers submitted and without oral argument. See Civil Local Rule 7.1(d.1). For the reasons stated below, the Court GRANTS IN-PART and DENIES IN-PART the motion.

I. BACKGROUND

The facts as EchoStar alleges are as follows. EchoStar provides a variety of video, audio, and data services to consumers throughout the United States via a Direct Broadcast Satellite system. (Compl., ¶ 2.) EchoStar operates this broadcast system under the trade name "DISH Network." (Compl., ¶ 3.) EchoStar uses satellites to broadcast movies, sports, and entertainment programming to consumers who have been authorized to receive the services for a subscription fee or the purchase price of a payper-view movie. (Compl., ¶ 2.) To obtain the copyrighted material that EchoStar broadcasts, EchoStar contracts and purchases the distribution rights of copyrighted programming from providers such as network affiliates, pay and specialty broadcasters, cable networks, motion picture distributors, sports leagues, event promoters, and other content providers. (Compl., ¶ 3.)

In order to prevent the unauthorized reception of DISH Network programming, EchoStar utilizes a management and security system that encrypts (electronically scrambles) EchoStar's satellite signals using proprietary security keys and technology codes. (Compl., ¶¶ 5-6.) A customer who wishes to subscribe to the programming must first have the necessary equipment, including (1) a satellite dish antenna; (2) an integrated receiver/decoder; and (3) a credit card sized EchoStar Access Card. (Compl., ¶ 17.) The Access Card enables the receiver to process and descramble EchoStar's satellite signals using the data and technology housed within an embedded microprocessor. (Compl., ¶¶ 6, 18-19.) Absent a subscription to DISH Network, EchoStar will not provide a consumer an Access Card or authorize access to encrypted DISH Network programming. (Compl., ¶ 19.)

EchoStar alleges that Viewtech designs, develops, and distributes "Viewsat" branded "free-to-air" receivers ("FTA Receivers") that, when coupled with pirate software, allow consumers to intercept and steal EchoStar's encrypted satellite signal. (Compl., ¶¶ 39-40.) A satellite dish, mounted on a rooftop or deck railing, receives programming signals from one of EchoStar's satellites. (Compl., ¶ 18.) The dish then transmits the programming by wire into Viewtech's FTA Receiver. (Compl., ¶ 18.) FTA Receivers are devices that can receive "free-to-air" satellite television signals, which are either not scrambled or are scrambled but available free of charge. (Compl., ¶ 28.) "Free-to-air" channels do not offer the same popular programming such as HBO or ESPN, but instead typically include ethnic, religious, business, music, information, and advertising content. (Compl., ¶ 28.) Absent an additional technological measure, the FTA Receivers cannot descramble and receive DISH Network programming without utilizing the security keys and technology codes that protect EchoStar's satellite signal. (Compl., ¶ 30.) EchoStar also alleges that Viewtech designs, develops, and distributes pirate software that allows consumers to intercept and steal EchoStar's encrypted satellite signals. (Compl., ¶¶ 39-40.)

On July 13, 2007, EchoStar commenced this action against Viewtech, asserting claims based on the Digital Millennium Copyright Act (Count I), the Communications Act of 1934 (Counts II and III), the Electronic Communications Privacy Act (Count IV), California Unfair Competition Law (Count V), and unjust enrichment predicated on Viewtech's garnishment of profits and goodwill from EchoStar (Count VI). Viewtech's motion to dismiss argues that(1) EchoStar lacks standing to pursue a Digital Millennium Copyright Act claim; (2) the Communications Act of 1934 does not govern Viewtech's alleged conduct; (3) EchoStar has failed to allege its basis for a private cause of action under the Electronic Communications Privacy Act; and (4) EchoStar's state law claims are preempted by federal law.

II. LEGAL STANDARD

A motion to dismiss under Rule 12(b)(6) tests the complaint's sufficiency. See North Star Int'l. v. Arizona Corp. Comm'n., 720 F.2d 578, 581 (9th Cir. 1983). Dismissal of a claim according to this rule is proper only in "extraordinary" cases. United States v. Redwood City, 640 F.2d 963, 966 (9th Cir. 1981). A complaint may be dismissed as a matter of law for two reasons: (1) lack of a cognizable legal theory, or (2) insufficient facts under a cognizable theory. Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 534 (9th Cir. 1984).

As the Supreme Court recently explained, "[w]hile a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the 'grounds' of his 'entitlement to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atlantic Corp. v. Twombly, -- -- -- U.S. -- -- --, -- -- --, 127 S.Ct. 1955, 1964 (2007). Rather, the allegations in the complaint "must be enough to raise a right to relief above the speculative level." Id. at 1964--65. Additionally, all material allegations in the complaint, "even if doubtful in fact," are assumed to be true. Id. The court must assume the truth of all factual allegations and must "construe them in the light most favorable to the nonmoving party." Gompper v. VISX, Inc., 298 F.3d 893, 895 (9th Cir. 2002). The complaint and all reasonable inferences therefrom are construed in the plaintiff's favor. Walleri v. Fed. Home Loan Bank of Seattle, 83 F.3d 1575, 1580 (9th Cir. 1996). Nevertheless, conclusory legal allegations and unwarranted inferences are insufficient to defeat a motion to dismiss. Ove v. Gwinn, 264 F.3d 817, 821 (9th Cir. 2001).

III. DISCUSSION

A. Standing under the Digital Millennium Copyright Act

Viewtech argues in its moving papers that EchoStar is not the copyright owner, and thus lacks standing to pursue claims under the Digital Millennium Copyright Act of 1998 ("DMCA"), 17 U.S.C. §§ 1201(a)(2) and 1201(b)(1). EchoStar counters by arguing that § 1203(a) gives any person who has been injured by a violation of the DMCA standing to sue. 17 U.S.C. § 1203(a). Because EchoStar alleges that it was injured by the interception and theft of its encrypted satellite signals (see Compl., ¶¶ 1-7, 48, 54), EchoStar asserts that it has standing. The Court agrees.

It appears that the Ninth Circuit has not addressed the particular issue of standing under the DMCA. However, several district court cases have dealt with this issue.

In Comcast of Illinois X, L.L.C. v. Hightech Electronics, Inc., No. 03 C 3231, 2004 WL 1718522 (N.D. Ill. July 29, 2004), a cable television provider filed suit under §§ 1201(a)(2) and 1201(b) against defendants involved in distributing devices used to pirate cable channels. Defendants filed a motion to dismiss arguing, among other things, that only copyright holders could pursue claims under the DMCA. Relying on § 1203(a)'s language that "any person injured by a violation of ...


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