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Fox Broadcasting Co. Inc. v. Dish Network, L.C.C.

United States District Court, C.D. California

November 7, 2012

FOX BROADCASTING COMPANY INC., Twentieth Century Fox Film Corp., and Fox Television Holdings, Inc., Plaintiffs,
v.
DISH NETWORK, L.C.C. and Dish Network Corp., Defendants.

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[Copyrighted Material Omitted]

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[Copyrighted Material Omitted]

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Amy M. Gallegos, Andrew J. Thomas, David R. Singer, Richard Lee Stone, Jenner and Block LLP, Los Angeles, CA, for Plaintiffs.

Annette L. Hurst, Orrick Herrington and Sutcliffe LLP, San Francisco, CA, E. Joshua Rosenkranz, Elyse D. Echtman, Lisa T. Simpson, Peter A. Bicks, Orrick Herrington and Sutcliffe LLP, New York, NY, Mark A. Lemley, Michael H. Page, Durie Tangri LLP, San Francisco, CA, William A. Molinski, Orrick Herrington and Sutcliffe LLP, Los Angeles, CA, for Defendants.

ORDER RE PLAINTIFFS' MOTION FOR PRELIMINARY INJUNCTION

DOLLY M. GEE, District Judge.

This matter is before the Court on Plaintiffs' Motion for Preliminary Injunction [Doc. # 41]. Defendants filed an opposition to the Motion on September 4, 2012 [Doc. # 71]. Plaintiffs filed their reply on September 7, 2012 [Doc. # 79].

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The Court held a hearing on the Motion on September 21, 2012 and, thereafter, took the matter under submission.

The parties ask this Court to fast-forward Sony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417, 104 S.Ct. 774, 78 L.Ed.2d 574 (1984), to consider whether " PrimeTime Anytime" and " Auto Hop" are merely technological innovations as innocuous as the Betamax video tape recorder (" VCR" ) of yore or are instruments of infringement causing Defendants to suffer irreparable harm. On the current record, Plaintiffs have not borne their burden of showing that the technologies at issue are the latter such that a preliminary injunction is warranted. For the reasons set forth below, Plaintiff's Motion is DENIED.

I.

FACTUAL AND PROCEDURAL BACKGROUND

Plaintiffs, Fox Broadcasting Company, Inc., Twentieth Century Fox Film Corp., and Fox Television Holdings, Inc. (" Fox" ), own the copyrights to the television programs that air on the Fox Network during the primetime window each night, including Glee, The Simpsons, Family Guy, Touch, and Bones (" the Fox Programs" ). See Declaration of Sherry Brennan, ¶¶ 2-3, Exh. A [Doc. # 41-12]. [1] Fox is one of four network broadcasting companies that offers television programming over the airwaves by local television stations free of charge to viewers. Id. at ¶¶ 4, 8. Fox also enters into Retransmission Consent (" RTC" ) contracts with multichannel video programming distributors (" MVPDs" ), such as cable, telco, and satellite television providers, which grant the MVPDs a license to retransmit the Fox broadcast to consumers through their own systems. See Brennan Decl., ¶ 12. Some of Fox's RTC contracts also grant MVPDs access to video-on-demand (" VOD" ) programs selected by Fox. Id. at ¶ 14. In addition, Fox enters into separate licensing agreements with companies like Hulu, Apple, Netflix, and Amazon that allow consumers to view Fox programs via Internet streaming on their computers and mobile devices, either with or without commercials depending on the nature of the licensing

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agreement and the user's subscription. Id.

Defendants, Dish Network L.L.C. and Dish Network Corp. (" Dish" ), are the third largest pay-television service provider in the United States. Declaration of David Shull, ¶ 2 [Doc. # 61]. Dish provides satellite cable services to over 14 million American households. Declaration of Vivek Khemkha, ¶ 8 [Doc. # 62]. Dish retransmits the Fox broadcast to its subscribers via satellite pursuant to an RTC Agreement with Fox. See Shull Decl., ¶ 11, Exh. 3. Since 1999, Dish has also offered subscribers Digital Video Recording (" DVR" ), which " allows a subscriber to digitally record television content for watching at a later time, which is commonly known as ‘ time-shifting.’ " Declaration of Dan Minnick, ¶¶ 5, 8 [Doc. # 59].

A. The RTC Agreement and the 2010 Letter Agreement

Dish's right to retransmit the Fox broadcast is governed by the RTC Agreement, which Fox entered into in 2002 with EchoStar Satellite Corporation, Dish's former parent company and current technology provider. See Shull Decl., ¶ 11, Exh. 3. For a substantial fee, the RTC Agreement grants Dish a non-exclusive right to retransmit the Fox broadcast to its subscribers. Id. at ¶ 2. Dish's rights under the RTC Agreement are limited in several ways. First, the RTC Agreement states that Dish

shall have no right to distribute all or any portion of the programming contained in any Analog Signal on an interactive, time-delayed, video-on-demand or similar basis; provided that Fox acknowledges that the foregoing shall not restrict [Dish's] practice of connecting its Subscribers' video replay equipment....

Id. at ¶ 3(d) (emphasis in original). Second, the RTC Agreement provides that Dish may not, " for pay or otherwise, record, copy, duplicate and/or authorize the recording, copying, duplication (other than by consumers for private home use) or retransmission of any portion of any Station's Analog Signal without prior written consent of the Station, except as is specifically permitted by this agreement." Id. at ¶ 9(a).

The parties have amended and supplemented their agreement several times since 2002 to account for developing technologies and changes in the television market. See Declaration of Michael Biard, ¶ 18 [Doc. # 41-15].[2] Most recently, their 2010 Letter Agreement addresses, among other things, the parties' rights and obligations with respect to VOD offerings. Shull Decl., ¶ 14, Exh. 5. The 2010 Letter Agreement states, " In all cases VOD content shall be made available by DISH solely to DISH subscribers of the corresponding linear service," and it lists four specific types of VOD programming. Id., Attach. A, ¶ 9. Each VOD sub-clause contains a term requiring Dish to " disable fastforward functionality during all advertisements." Id. In particular, the 2010 Letter Agreement gives Dish the ability to offer " Fox VOD" to subscribers at no additional licensing fee, which would allow users to watch primetime programming in a VOD format. Id. This term contains the added proviso that " Dish acknowledges and agrees that ... fast-forward disabling is a necessary condition to distribution of the Fox broadcast content via VOD." Id. According

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to David Shull, Dish Senior Vice President of Programming, Dish " has not been able to" make Fox VOD available to its subscribers for largely technical reasons unrelated to the subjects of this litigation. See Shull Decl., ¶ 23-24.

B. The Hopper, PrimeTime Anytime, and AutoHop

In January 2012, Dish announced the Hopper Whole Home High Definition Digital Video Recorder (" the Hopper" ) to its subscribers. Minnick Decl., ¶ 13. The Hopper is a set-top box (" STB" ) with both DVR and VOD capabilities. Id. at ¶¶ 14, 51. The Hopper is currently only available for consumer use, but it is unique in that subscribers may use up to three " Joeys," or additional boxes, to access programs saved on the Hopper on additional televisions in their homes. Id. at ¶ 14. The Hopper also works with the " Sling Adapter," which allows subscribers to view Hopper content on their computers and mobile devices via the Internet. Id. at ¶ 83. The Hopper arrived on the market for consumers in March 2012 and, as of August 2012, [redacted] approximately 13.5 million Dish accounts that use STBs. Id. at ¶¶ 8-9.

Because the Hopper was designed to service multiple televisions, it has three tuners and a two-terabyte hard drive, which together allow the user to record and save more programming at any given time. Minnick Decl., ¶ 16. The three tuners permit Hopper users to watch or record on three different television stations at once. Id. The Hopper has the additional unique capability of streaming all four of the major television networks on a single satellite transponder, which allows a user to watch or record all four network broadcasts while leaving the other two tuners available for recording non-network programs or watching them on other television sets equipped with a Joey. Id. at ¶ 17.

In January 2012, Dish also announced a feature called " PrimeTime Anytime" (" PTAT" ), which became available to Hopper subscribers in March 2012.[3] Shull Decl., ¶ 9. PTAT allows subscribers to set a single timer on the Hopper to record all primetime programming on any of the four major broadcast networks, including Fox, each night of the week.[4] Minnick Decl., ¶ 20. Dish determines the start- and end-time of the primetime block each night and, for certain types of programming, may alter the total length of the PTAT recording.[5] Id. at ¶ 31. In order to use PTAT, the user must enable it from the main menu by clicking " * " on his or her remote control. [6] Id. at ¶ 22. The user is

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led to a set-up screen, where he or she must select " Enable" to activate PTAT. Id. at ¶ 23. Once PTAT is enabled, a new screen appears, and the user may choose to disable recordings of certain networks on certain days of the week. Id. If the user does not select otherwise, the default settings cause the Hopper to record the entire primetime window on all four of the major networks, including Fox, every day of the week.[7] Id. at ¶ 24. A user may begin watching the recorded programs immediately after PTAT starts recording. Minnick Decl., ¶ 28. The user may cancel a particular PTAT recording on a given day until 20 minutes before the primetime programming begins; at that time, the user can no longer cancel the recording for that day but must instead delete it after it is completed. Declaration of David R. Singer, ¶ 45, Exh. L, Deposition of Dan Minnick, 224:19-225:14 (" Minnick Depo." ) [Doc. # 55].[8] According to Minnick, Vice President of Software Engineering for EchoStar Technologies, Dish's technology vendor, the decision to limit users' recording ability in this manner was based on " usability" : because cancelling a recording could result in the user inadvertently cancelling an entire night of recordings rather than just one program, Dish reasoned that the anti-cancel feature would improve users' experience by protecting against accidental cancellations. Id. at 193:14-194:13.

All PTAT recordings are stored locally on the Hopper in users' homes, and users may access PTAT-recorded shows from a special " PTAT" folder in the " Graphical User Interface" (" GUI" ).[9] Minnick Decl., ¶ 28. Programs recorded manually by the user via DVR are stored in a separate folder called " My Recordings." Id. at ¶ 29. The user may select how many days he or she wants to save the PTAT recordings before they are automatically deleted. Minnick Decl., ¶ 24. Unless the user selects otherwise, PTAT recordings are automatically deleted after eight days. Id. at ¶ 24. During that period, the PTAT recordings are " protected," so they are not subject to automatic deletion for lack of space as are other DVR recordings stored in the " My Recordings" folder. Id. at ¶ 33. If a user wishes to " delete" a PTAT recording earlier than the pre-selected date, the icon for that recording will no longer appear in the PTAT folder and will be unavailable for playback; however, the actual recording will remain on the Hopper hard drive until the pre-selected deletion date. Id. at 35. Similarly, if a user wishes to save a particular program for more than eight days, he or she may elect to save a duplicate copy of that program in the " My Recordings" folder. Id. at ¶ 34. The duplicate copy is not actually created until the time for automatic deletion; until then, the icon for the program in the " My Recordings" folder is merely a link to the original PTAT recording. Id.

Although the Hopper has three " partitions," or areas of the hard drive where

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data can be stored, all of the audio-visual recordings, both PTAT and traditional DVR, are stored in the same partition. Id. at ¶¶ 43-45. If a user enables PTAT, the programs take up the remaining memory space as they are recorded until it becomes necessary to delete previously recorded programs. Minnick Depo., 170:21-172:10. At that point, the Hopper deletes previously recorded programs in the same manner that a traditional DVR would to make room for the new PTAT recordings. Id. According to Minnick, prior to July 20, 2012, Dish " reserved" 231 gigabytes of memory for the PTAT recordings, so the user could never use any portion of that memory for other DVR recordings. Id. at 172:20-6. After July 20, 2012, PTAT no longer receives this preferential memory treatment. Id. at 172:5-8. The same partition also contains 329 gigabytes of " reserved" space for " File-Based Video-On-Demand," which consists of pay-per-view movies, selected by Dish, which Dish anticipates the user might want to order and watch. Minnick Decl., ¶ 51.

In May 2012, Dish announced the AutoHop, an additional feature that allows users to " skip" commercials in PTAT recordings with the click of their remote control. See Shull Decl., ¶ 10. If AutoHop is available for a particular PTAT program, the user has the option to enable it for that show. Minnick Depo., 49:18-23. If the user enables AutoHop, the Hopper automatically skips commercial breaks during that program. Minnick Decl., ¶ 54. Although the user may see the first few seconds and last few seconds of the commercial break, the bulk of the commercials are replaced by a kangaroo icon telling the user that the AutoHop is skipping the commercials. Id. AutoHop is available only for PTAT recordings, but users can use the standard " 30-second skip" feature on other DVR recordings to fast-forward. Id. at ¶ 58.

[redacted]. These copies remain at the uplink facility and are used for quality assurance (" QA" ) only. Id. at 38:16-17. A technician views the recording, fast-forwarding through the program itself to the commercial breaks, to ensure that the marking announcement is accurate and no portion of the program is cut-off. Id. at 47:12-49:22. If the QA copies reveal an error in the marking process, technicians can correct the error on a later broadcast to ensure that AutoHop functions properly for users who enable it. Id. at 50:1-10. If there is not enough time to correct a marking error before the last broadcast ends, then AutoHop will not be available for that particular show. Id. at 50:12-14. Unlike PTAT, AutoHop does not become available to the user until 3:00 A.M. Eastern Standard Time. Id. at 52:22-23.

On May 24, 2012, Fox filed a Complaint against Dish in this Court alleging that PTAT and AutoHop infringe on Fox's copyrights and constitute a breach of the RTC Agreement and the 2010 Letter Agreement [Doc. # 1]. Fox filed a motion for a preliminary injunction to enjoin Dish from operating, distributing, selling, or offering to sell any version of PTAT or AutoHop or any comparable features [Doc. # 41].

II.

LEGAL STANDARD

Federal Rule of Civil Procedure 65 governs the issuance of preliminary injunctions. The purpose of such injunctive relief is to preserve the rights and relative positions of the parties, i.e., the status quo, until a final judgment issues. See U.S. Philips Corp. v. KBC Bank N.V., 590 F.3d 1091, 1094 (9th Cir.2010) (citing Univ. of Tex. v. Camenisch, 451 U.S. 390, 395, 101 S.Ct. 1830, 68 L.Ed.2d ...


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