Fox is a major broadcast television network, broadcasting such shows as Glee, Bones and The Simpsons. Fox owns the copyrights to the television shows airing on its network. Dish Network is the third-biggest television service provider in the country. Dish has had a contract to retransmit Fox’s content since 2002. Dish’s current set-top box with digital video recorder (DVR) and video on demand capabilities is called the “Hopper.” One of the Hopper’s features is “AutoHop,” which allows users to automatically skip commercials. AutoHop is available only to users that have recorded programming using Dish’s PrimeTime Anytime service and is normally available the morning after the live broadcast. AutoHop does not delete the commercials, so that users can still access them if they want to see them. Dish technicians create the AutoHop feature by watching Fox’s primetime programming to mark the beginning and end of the commercial breaks.
Fox sued Dish in federal court, alleging copyright infringement and breach of contract. The district court denied Fox’s motion for a preliminary injunction. The district court ruled that Fox did not demonstrate a likelihood of success on most of its copyright infringement and contract claims. Although the district court found that Dish likely both breached the contract and infringed Fox’s reproduction rights in making its quality assurance copies, the district court ruled that Fox failed to establish that it would likely suffer irreparable harm resulting from the quality assurance copies and therefore held that Fox was not entitled to an injunction. The Ninth Circuit Court of Appeals affirmed the district court’s decision.
To obtain a preliminary injunction, Fox must demonstrate that (1) it is likely to succeed on the merits, (2) it is likely to suffer irreparable harm in the absence of preliminary relief, (3) the balance of equities tips in its favor, and (4) an injunction is in the public interest.
(Opinion pdf pages 9-10).
Direct copyright infringement
A claim of copyright infringement by reproduction is established by showing ownership of a copyright and copying by the defendant. Copyright ownership was not at issue. The issue was who made the copies, Dish or its customers. Although Dish influenced the copying process by controlling the length of time the copies are available for viewing, controlling the start and end times of the prime time block covered by PrimeTime Anytime, and not enabling the user to stop recording once recording has started, the district court was not satisfied that Dish’s actions created liability for direct copyright infringement. The district court thought the user was the most significant cause of the copying, as the user had to take the step of turning on PrimeTime Anytime.
The Ninth Circuit agreed with the district court:
Operating a system used to make copies at the user’s command does not mean that the system operator, rather than the user, caused copies to be made. Here, Dish’s program creates the copy only in response to the user’s command. Therefore, the district court did not err in concluding that the user, not Dish, makes the copy.
(Opinion pdf page 13).
Secondary copyright infringement
Secondary liability for copyright infringement does not exist in the absence of direct infringement by a third party.
(Opinion pdf page 13).
Fox established a prima facie case of direct infringement by Dish customers. Fox owned the copyrights to the shows and the customers made copies. The burden shifted to Dish to show that the customers’ copying was a fair use. The Ninth Circuit ruled that Dish met the burden.
The Ninth Circuit relied heavily on Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417 (1984) in its fair use analysis. In Sony, the U.S. Supreme Court held that Sony was not secondarily liable for customers using the Betamax VCR to time shift, i.e., record a program to view later, then erase the program. The Supreme Court held that “even the unauthorized home time-shifting of respondents’ programs is legitimate fair use.” The Sony court left open the questions of whether commercial-skipping and library-building were fair uses.
(Opinion pdf page 14).
Fox argued that commercial-skipping and library-building are not fair uses of PrimeTime Anytime and Auto-Hop. The Ninth Circuit ruled that Fox does not own the copyrights in the advertisements that are skipped and that its copyright interests are therefore not implicated. The Ninth Circuit did not address the question of whether library-building is a fair use, although it is seems improbable that Dish customers can build a library when Dish controls access to the copies and eight days is the maximum length of time that a recorded show can be saved.
The Ninth Circuit also ruled that Dish demonstrated a likelihood of success on its customers’ fair use defense. (17 U.S.C. §107). On the first factor, the “purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes,” the time-shifting use of PrimeTime Anytime by Dish customers is a noncommercial use, since the Hopper is available only to private consumers.
On the second and third fair use factors, the “nature of the copyrighted work” and “the amount and substantiality of the portion used in relation to the copyrighted work as a whole,” copying an entire program to watch later, when the viewer has been invited to see the entire work free of charge, does not have the same effect as copying the entire work usually does in fair use analysis. These factors weighed in Dish’s favor.
For the final fair use factor, the “effect of the use upon the potential market for or value of the copyrighted work,” Fox must demonstrate the likelihood of future market harm, because of Dish’s customers’ noncommercial purpose. The harm alleged by Fox was from commercial-skipping, not from recording Fox’s programs. Since commercial-skipping does not involve a copyright interest, this factor weighed in Dish’s favor, as well.
Because Dish demonstrated a likelihood of success on its customers’ fair use defense, the Ninth Circuit agreed with the district court that Dish was not secondarily liable for copyright infringement.
Quality assurance copies
Dish makes quality assurance copies to test the accuracy of marking commercials for the AutoHop commercial-skipping program before the PrimeTime Anytime recording is released to the customers. The quality assurance copies were not created by an AutoHop program process. The quality assurance copies did not cause Fox’s alleged harm. The entire AutoHop program caused the harms Fox objected to. So even though the quality assurance copies likely infringe Fox’s copyrights, making the copies did not cause Fox irreparable harm. In addition, the district court ruled that monetary damages could compensate Fox for its losses attributable to the copies, precluding the harm from being irreparable. The Ninth Circuit affirmed the district court’s ruling on this issue.
This case is Fox Broadcasting Company v. Dish Network LLC, No. 12-57048, Ninth Circuit Court of Appeals.