Dish Network has emerged victorious in its most recent legal battle with a broadcaster over its PrimeTime Anytime and AutoHop technologies.  In Fox Broadcasting Co. v. Dish Network, the United States Court of Appeals for the Ninth Circuit held that the district court did not abuse its discretion in denying Fox’s request for a preliminary injunction against Dish.  But while the Ninth Circuit opinion casts doubt on whether Fox can succeed on the merits of its copyright claim, it leaves open the possibility that Fox may prevail at trial on its claim for breach of contract.

Most broadcasters and technology providers are well-versed in what the Ninth Circuit called Dish’s “marsupial-inspired products”: the Hopper and the companion Joey.  Using these devices, Dish offers the two services in dispute, PrimeTime Anytime and AutoHop.  When a user activates PrimeTime Anytime, the Hopper box will record prime time programming, as determined by Dish, from the four major broadcast networks, and retain those programs for up to eight days.  If a user also activates AutoHop, the Hopper will skip those portions of the recorded programs marked by Dish as commercials when the consumer plays back a recorded program after the day it was broadcast.

To obtain a preliminary injunction, Fox needed to demonstrate that: (1) it was likely to succeed on the merits, (2) it was likely to suffer irreparable harm absent preliminary relief, (3) the balance of the equities tipped in its favor, and (4) an injunction was in the public interest.  Fox argued that Dish was both directly and secondarily liable for copyright infringement [and was liable for breach of contract] as a result of its deployment and operation of the PrimeTime Anytime and AutoHop services.    The district court denied the preliminary injunction, finding that Fox was not likely to succeed on the merits of its claims. 

On the issue of direct liability, the Ninth Circuit, relying on the Second Circuit’s opinion in Cartoon Network LP v. CSC Holdings, Inc. (the “Cablevision” case), agreed with the district court that Dish could not be liable for direct infringement because it did not make the copies.  The Ninth Circuit found that, as with a VCR or a network DVR, “operating a system used to make copies at the user’s command does not mean that the system operator, rather than the user, caused the copies to be made.”  The Ninth Circuit rejected Fox’s attempt to distinguish Cablevision based on Dish’s involvement in deciding what programs were available for copying, what constituted prime time programming, and how long the copies would be available for viewing and on Dish’s otherwise controlling the user’s access to the copies.

The Ninth Circuit also concluded that the district court did not abuse its discretion in finding that Fox was not likely to succeed on its claim for secondary liability because secondary liability can only exist if there is direct infringement by a third-party, and, under the Supreme Court’s decision in Sony Corp. of America v. Universal City Studios, Inc., home recording of television programming by users for their own time-shifted use is fair use, not infringement.  Applying the relevant statutory fair use factors, the Ninth Circuit reasoned that: (1) the home viewing at issue is noncommercial, (2) the nature of the work and amount and substantiality are not dispositive when the issue is time-shifting, and (3) Fox has not established that widespread recording by customers would adversely affect the market for its copyrighted works.  The Ninth Circuit rejected Fox’s argument that Prime Time Anytime with AutoHop was different than the VCR at issue in Sony because of the former’s commercial skipping function, reasoning that Fox does not own the copyrights for the commercials that it broadcasts, and “the fact that viewers do not watch the ads not copyrighted by Fox cannot transform the recording into a copyright violation.”  The court spent little time addressing the potential effect on the market for the programming itself if commercial skipping were widespread, but its statement about “transform[ing] the recording” suggests that it viewed commercial skipping as a second user action distinct from the user’s decision to make the fair use copies in the first place.

The Ninth Circuit also agreed with the district court that, even if the “quality assurance” copies that Dish makes to test its AutoHop feature are direct infringement, Fox did not establish that it would be irreparably harmed by the continued making of those copies.  The court distinguished the harms that Fox alleged from the AutoHop itself, finding that those harms “did not ‘flow from’ the quality assurance copies themselves, but from the entire AutoHop program.”

Although the Ninth Circuit found that, under a “very deferential standard of review,” the district court did not error in refusing to issue a preliminary injunction on Fox’s breach of contract claims, it suggested that Fox could still succeed on the merits after trial.  In particular, the Ninth Circuit observed that a complete record may establish that Dish is violating a provision in its agreement with Fox that it may not “distribute all or any portion of the programming contained in any Analog Signal on an interactive, time-delayed, video-on-demand or similar basis.”  The district court had decided that Dish did not “distribute” the programming within the meaning of the contract because the copies are made by users, not Dish.  Additionally, the Ninth Circuit was “dubious” of Dish’s claim that PrimeTime Anytime is not “similar” to “interactive, time-delayed, [or] video-on-demand programming.”  Notably, however, this dubiousness may have stemmed from Dish counsel’s inability to explain at oral argument what the Fox-Dish contract meant by “similar” to video-on-demand (if not DVR functionality).  Notwithstanding that seeming omission, the concept of “near video on demand” was and is well known in the industry, even to the point of recognition in Wikipedia.  See http://en.wikipedia.org/wiki/Video_on_demand (description of “Near video on demand”).  That concept provides one possible answer to the court’s unanswered question.

In sum, Dish has survived the second round in Fox’schallenge to its PrimeTime Anytime and AutoHop features.  The Ninth Circuit’s opinion suggests, however, that broadcasters concerned about these features should examine their distribution agreements with Dish, as those agreements may provide a stronger argument for relief than claims of copyright infringement.

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