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Dish Network, L.L.C., et al v. Sonicview Usa

May 31, 2012

DISH NETWORK, L.L.C., ET AL., PLAINTIFFS,
v.
SONICVIEW USA, INC., ET AL.,
DEFENDANTS.



The opinion of the court was delivered by: M. James Lorenz United States District Court Judge

ORDER: (1) GRANTING PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT [DOC. 136], AND (2) DENYING DEFENDANTS' CROSS-MOTION FOR SUMMARY JUDGMENT [DOC. 141]

On July 17, 2009, Plaintiffs DISH Network, L.L.C., EchoStar Technologies L.L.C. ("EchoStar"), and NagraStar L.L.C. filed their complaint against Defendants Sonicview USA, Inc., Roberto Sanz, Danial Pierce, Alan Phu, Duane Bernard, Courtney Bernard, and others, alleging violations of the Digital Millennium Copyright Act ("DMCA"), the Federal Communications Act ("FCA"), and the Electronic Communications Privacy Act. Now pending before the Court are the parties' cross-motions for summary judgment.

The Court found these motions suitable for determination on the papers submitted and without oral argument. See Civ. L.R. 7.1(d.1). (Doc. 172.) For the following reasons, the Court GRANTS Plaintiffs' motion for summary judgment (Doc. 136), and DENIES Defendants' cross-motion for summary judgment (Doc. 141).

BACKGROUND

A. Plaintiffs' Subscription-Based Satellite TV Programming

DISH Network, EchoStar, and NagraStar operate various elements of the DISH Network satellite television distribution system. DISH Network is a multi-channel provider that delivers video, audio, and data services via a direct broadcast satellite system to authorized subscribers throughout the United States. (Duval Decl. ¶ 4 [Doc. 136-2].) EchoStar designs, develops, and distributes receiver systems, satellite dishes, and other digital equipment for use in the DISH Network system. (Id. ¶ 9.) NagraStar provides DISH Network with "smart cards" that are used in EchoStar's satellite receivers to facilitate the decryption of DISH Network's programming signals. (Id. ¶ 13.)

DISH Network contracts for and purchases the distribution rights for the copyrighted programming it broadcasts from outlets such as network affiliates, cable networks, motion-picture distributors, sports leagues, event promoters, and other holders of programming rights. (Duval Decl. ¶ 6.) It uses high-powered satellites to broadcast, among other things, movies, sports, and general entertainment services to consumers who have been authorized to receive such services after payment of a subscription fee, or in the case of a pay-per-view movie or event, the purchase price. (Id. ¶ 5.) DISH Network then digitally encodes and scrambles the broadcast signals using NagraStar's encryption technology, and delivers the scrambled signals via satellite to the EchoStar dishes and receivers owned or leased by authorized subscribers. (Id. ¶ 8.)

Plaintiffs use an encryption system to restrict access to their signals such that only authorized subscribers can decrypt the signals. (See Duval Decl. ¶ 11.) To effectuate this decryption system, Plaintiffs use smart cards that carry a secured embedded microprocessor provided by NagraStar. (Id. ¶¶ 9, 12.) The microprocessor contains information that provides instructions and commands to the smart card in the everyday operation of the NagraStar security system as well as decryption keys. (Id. ¶ 12.) The EchoStar receiver possesses an incoming DISH Network satellite signal by locating an encrypted part of the transmission, known as the entitlement control message, and then forwards that message to the smart card. (Id. ¶ 13.) If the subscriber is tuned to a channel he is authorized to watch, the smart card uses its decryption keys to unlock the message, uncovering a control word. (Id.) The control word is then transmitted back to the receiver in order to decrypt the DISH Network satellite signal. (Id.) Then the receiver and smart card convert DISH Network's encrypted satellite signal into viewable programming that can be displayed on the attached television of an authorized DISH Network subscriber. (Id.)

B. Piracy of DISH Network Programming Using Free-To-Air Receivers

Satellite television pirates have developed several means of circumventing the DISH Network security system and intercepting DISH Network satellite broadcasts using Free-To-Air ("FTA")*fn1 satellite receivers. (Duval Decl. ¶ 15.) In one method of circumvention, the pirates created software which was programmed onto the FTA receiver so as to mimic a DISH Network smart card. (Id. ¶¶ 15--16.) Once the FTA receivers were programmed with the card-hack software, the "modified" receiver could decrypt DISH Network's signals without authorization. (Id. ¶ 16.) This method requires the piracy software to be regularly updated in order to overcome countermeasures employed by DISH Network, such as changing the decryption keys required to access proprietary information. (Id. ¶ 17.)

Recently, pirates have developed a new method of obtaining DISH Network's signals without authorization called Internet Key Sharing ("IKS"). (Duval Decl.¶ 18.) IKS uses internet-enabled FTA receivers. (Id. ¶ 19.) In IKS piracy, the decoding keys that allow the decryption of DISH Network's signals are captured from a computer server ("IKS server") that connects with multiple subscribed NagraStar smart cards. (Id. ¶ 20.) Control words obtained from the authorized smart cards are sent from the IKS server over the internet to unauthorized receivers, where they are used to decrypt DISH Network's satellite signal and view its programming without paying the subscription fee. (Id.) In short, IKS servers allow the decoding keys to be shared over the internet such that internet-enabled FTA receivers programmed with modified FTA/IKS piracy software can use these decoding keys to decrypt DISH Network's signals without authorization. Furthermore, because IKS is based on the trafficking of control words obtained from subscribed DISH Network receiving equipment, this method of satellite piracy remains effective even after DISH Network's transition to "Nagra 3," the latest generation security technology that was recently introduced by NagraStar. (Id. ¶ 21.)

C. Evidence of Defendants' Distribution of Piracy Devices and Piracy Software

1. Sonicview and the Individual Defendants

Sonicview's business is contracting for the manufacture of, importing, distributing, and servicing satellite receivers and add-on dongles. (Falvey Decl. ¶ 4 [Doc. 62-2].) The receivers are sold under the brand name "Sonicview" and include the SV-HD8000, SV-360 Elite, SV-360 Premier, and SV-4000. (Falvey Dep. 42:2--9 [Doc. 137-1].) The dongle is referred to as the Sonicview iHub. (Id. at 44:19--21.) Sonicview receivers and iHubs are manufactured in South Korea by Vicxon Corporation. (Id. at 40:24--41:9, 44:22--45:1.) The company distributed at least 307,401 Sonicview receivers (specifically, 34,236 of the SV-HD8000, 54,929 of the SV-360 Elite, 165,747 of the SV-360 Premier, and 52,489 of the SV-4000) and at least 17,500 Sonicview iHubs. (Id. at 65:21--66:3.)

Messrs. Pierce, Sanz, and Phu each has a one-third ownership of Sonicview. (Falvey Dep. 31:18--25; Pierce Dep. 68:3--8; Sanz Dep. 7:9--11; Phu Dep. 10:15--20.) Each of these defendants also serves as a director of Sonicview. (Defs.' Supplemental Interrog. Resps. 6:23--28.) And all three defendants hold officer positions: Mr. Pierce serves as Vice President, Mr. Sanz serves as the Chief Executive Officer, and Mr. Phu serves as the Chief Operations Officer and Vice President. (Id.) Each of these defendants also took part in selecting products that would be sold, setting the pricing, and appointing distributors. (Pierce Dep. 60:6--61:5, 62:16--63:6, 64:21--65:10; Sanz Dep. 83:10--85:5; Phu Dep. 92:12--14, 95:4--97:10.)

Mr. Sanz was in charge of running Sonicview and was the lead salesperson. (Falvey Dep. 86:17--22; Defs.' Supplemental Interrog. Resps. 6:23--25.) He was involved in making all the final decisions regarding the operation of Sonicview, and was also one of four distributors authorized to purchase Sonicview receivers and iHubs directly from Sonicview. (Falvey Dep. 37:17--20, 51:22--52:8, 103:11--13; Sanz Dep. 83:10--23.) He purchased receivers and iHubs from Sonicview, and then re-sold the devices to authorized Sonicview dealers. (Sanz Dep. 46:9--18, 48:11--18.) In that capacity, Mr. Sanz distributed at least 34,380 Sonicview receivers-specifically, 3,131 of the SVHD8000, 6,434 of the SV-360 Elite, 23,275 of the SV-360 Premier, and 1,540 of the SV-4000-and 12,191 iHubs. (Frank Decl. ¶¶ 7--8.)

Duane Bernard was an authorized Sonicview dealer. (Duane Bernard Dep. 48:20--22.) He purchased Sonicview receivers and iHubs from Mr. Sanz, and re-sold the devices to his customers. (Id. at 42:10--12, 43:5--7, 54:12--14, 55:14--18.) In that capacity, he distributed at least 4,020 Sonicview receivers-specifically, 563 of the SV-HD8000, 524 of the SV-360 Elite, 2,360 of the SV-360 Premier, and 573 of the SV-4000-and 165 Sonicview iHubs. (Frank Decl. ¶¶ 15--16.) Duane Bernard also distributed an add-on module for the Sonicview SV-HD8000 receiver known as the "A-1 module." (Duane Bernard Dep. 56:15--23, 58:8--12.) He also distributed at least 739 A-1 modules. (Frank Decl. ¶¶ 17--18.) The A-1 module was described on Duane Bernard's website as an "EchoStar DISH Network 8SPK Enhanced HDTV Module." (Duane Bernard Dep. 87:5--89:8.)

Courtney Bernard assisted his brother, Duane, in the distribution of Sonicview receivers, iHubs, and A-1 modules through various websites. (Courtney Bernard Dep. 36:16--37:6, 44:7--14.) He handled customer services, customer payments, and distribution of the products. (Id. at 44:7--14.) On one occasion, one of the websites owned by Courtney Bernard displayed the following question and answer: "Can I use an FTA receiver to receive premium channels like DISH Network or DIRECTV? Yes. To receive these channels requires 3rd party software which we do not provide or condone. Please visit the independent site FTAlife.com for free 3rd party software info." (Frank Decl., Ex. 29.)

2. Expert Analysis of Sonicview's Devices

a. Sonicview's Receivers, iHub, and A-1 Module

Plaintiffs' expert, Dr. Aviel Rubin, through his company Independent Security Evaluators ("ISE"), analyzed a sample of Sonicview receivers' factory firmware for the models SVHD8000, SV-360 Elite, and SV-360 Premier. (Rubin Decl. ¶¶ 1--3.) Each model analyzed contained more than one exact match of the proprietary code and data that resides on Plaintiffs' smart card, a particular algorithm important for encrypting and decrypting DISH Network satellite signals, and a graphical user interface. (Id. ¶¶ 5--8.) There were strong similarities between the Sonicview receivers' firmware and that of existing piracy firmware. (Id. ¶ 9.) Dr. Rubin concluded that Sonicview receivers "have multiple elements that serve no legitimate purpose or use in a receiver intended solely for [FTA] applications," and all of these elements suggest "a cooperative relationship between [Sonicview] and pirate firmware developers." (Id. ¶ 10.)

Another expert, Nigel Jones, through his company R.M.B. Consulting ("R.M.B."), analyzed the Sonicview iHub and A-1 module*fn2 in conjunction with Sonicview receivers. (Jones Decl. ¶ 2.) According to Mr. Jones, the iHub is a serial Ethernet adapter promoted by Sonicview for use with its receivers in order to automatically update receiver firmware, download images and music, and play games. (Id. ¶ 4.) However, the iHub lacks software support for firmware updates, and it is particularly impractical for such updates because it costs around $100 per device and updates are infrequent. (Id. ¶ 6.) The iHub is also impractical for downloading images and music, and for playing interactive games because of its low bandwidth. (Id. ¶ 7.) It comes with a 16-digit code that enables the Sonicview receiver to access the IKS server through the dongle, which in turn allows for the piracy of DISH Network programming when loaded with the piracy software. (Id. ¶ 9.) For the Sonicview piracy software to make access to the IKS server contingent on entry of a valid iHub code, the developers of the piracy software and the persons responsible for the IKS server must have a list of valid iHub codes. (Id.) Thus, Mr. Jones concluded that "the iHub is designed for and has no practical use other than DISH Network piracy," and "the suppliers of iHub are working closely with the persons responsible for Sonicview receiver piracy software and the IKS server supporting Sonicview receivers." (Id. ¶ 10.)

Defendants also provide deposition testimony of an expert, Richard D. Caylor, who stated that the iHub is capable of updating software. (Caylor Dep. 105:23--107:19.) He testified that he was able to get the iHub to successfully download new software after three or four times, but that he does not remember whether a new version or simply a different version of the software was installed. (Id. at 107:5--8.) Mr. Caylor also stated that he was "dissatisfied with the end results" when he connected the iHub to the receiver. (Id. at 108:16--22.) He did not test the iHub's capability to play games, or download music or images. (Id. at 109:4--17.)

When Mr. Jones analyzed the A-1 module, he found that the module works in conjunction with SV-HD8000-when loaded with piracy software-to receive DISH Network's high-definition programing. (Jones Decl.¶ 14.) The A-1 module contains same principal integrated circuit, the Broadcom BCM4500 demodulator, as the set-top boxes supplied by EchoStar for the DISH Network system. (Id. ¶¶ 11, 13.) Mr. Jones concluded that "the A-1 module is designed to receive DISH Network's high-definition programming, and has no legitimate commercial purpose or use," and that "the A-1 module and Sonicview receivers are originating from a common supplier." (Id. ¶ 16.)

b. The Piracy Software

Sonicview operated www.sonicviewusa.com, which contained piracy software-software intended for use with Sonicview receivers to decrypt DISH Network's satellite television programming-available for download. (See Rogers Decl. ¶¶ 1, 6.) These piracy software files were made available for download several weeks after certain Sonicview receiver models were mentioned on the website. (Id. ¶¶ 6--8; McMullen Decl. ¶ 13--14.) A NagraStar security technician tested various Sonicview receivers by loading them with the corresponding piracy software downloaded from Sonicview's website. (McMullen Decl. ¶ 15.) He found that the piracy software enabled the receiver to circumvent the NagraStar security system and receive DISH Network ...


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