Fox Loses Appeal to Block Dish Network's TV Ad-skipping Service: Ninth Circuit | Practical Law

Fox Loses Appeal to Block Dish Network's TV Ad-skipping Service: Ninth Circuit | Practical Law

In Fox Broadcasting Co. v. Dish Network LLC, the US Court of Appeals for the Ninth Circuit affirmed the district court's denial of Fox's motion for a preliminary injunction, finding Fox had not shown a likelihood of success on either its copyright infringement or breach of contract claims.

Fox Loses Appeal to Block Dish Network's TV Ad-skipping Service: Ninth Circuit

Practical Law Legal Update 2-535-4047 (Approx. 5 pages)

Fox Loses Appeal to Block Dish Network's TV Ad-skipping Service: Ninth Circuit

by PLC Intellectual Property & Technology
Published on 26 Jul 2013 • USA (National/Federal)
In Fox Broadcasting Co. v. Dish Network LLC, the US Court of Appeals for the Ninth Circuit affirmed the district court's denial of Fox's motion for a preliminary injunction, finding Fox had not shown a likelihood of success on either its copyright infringement or breach of contract claims.
On July 24, 2013, the US Court of Appeals for the Ninth Circuit issued an opinion in Fox Broadcasting Co. v. Dish Network LLC affirming the district court's denial of Fox's request for a preliminary injunction against Dish Network based on its copyright infringement and breach of contract claims. The Ninth Circuit held that the district court did not abuse its discretion in holding that Fox failed to demonstrate a likelihood of success on these claims.

Background

In 2002, Fox Broadcasting Co. and Dish Network LLC entered into a license agreement for Dish to retransmit Fox's broadcast signal. The terms of the agreement provided, among other things, that Dish:
  • Would not distribute Fox programming on an interactive, time-delayed, video-on-demand or "similar" basis.
  • May connect its subscribers to video replay equipment.
  • Could not itself or authorize others to record, copy or duplicate Fox's broadcast signal, other than by consumers for private home use.
In a 2010 letter amendment to the 2002 agreement, the parties also agreed that:
  • Dish could provide subscribers with Fox video-on-demand services, provided that Dish disabled users' ability to fast forward during advertisements.
  • Each party would be forbidden from attempting to frustrate or circumvent their rights under the agreement.
In March 2012, Dish introduced a cable box called the Hopper which had both digital video recorder (DVR) and video-on-demand capabilities. Armed with a Hopper, and a companion box called a Joey for additional television sets, Dish subscribers could record television shows for later playback or access Fox's video-on-demand service. As a feature of the Hopper, Dish also released a service called PrimeTime Anytime, by the use of which subscribers could set a timer to record primetime programming on any of the four major broadcast networks. PrimeTime Anytime recordings were stored on the user's Hopper for a preselected period, after which they were automatically deleted. If a user attempted to save a recording, an icon would be created in the customer's My Recordings folder but a duplicate copy would not be created until the time of automatic deletion.
In May 2012, Dish introduced a new feature called AutoHop, which allowed users to automatically skip over commercials and was available only for shows viewers recorded using PrimeTime Anytime. The AutoHop feature was typically made available beginning on the morning after a live broadcast. While viewing a recorded broadcast, a user would see a pop up notification advising that AutoHop was available. The AutoHop option was not the PrimeTime Anytime default setting, and the user would have to activate the AutoHop function to skip all but the first and last seconds of each commercial break in the recording.
The AutoHop technology requires a Dish employee to manually view and electronically mark the commercial breaks in the night's primetime programming. The electronically marked program files are then uplinked and transmitted to the Hoppers. Dish also creates a copy of each night's electronically marked programming for quality assurance purposes to ensure the commercial blocks have been accurately marked.
Fox sued Dish for copyright infringement and breach of contract, and moved for a preliminary injunction. The US District Court for the Central District of California denied Fox's motion, finding that:
  • Except for its challenge to Dish's intermediate copying of its programs for purposes of quality assurance, Fox had not shown a likelihood of success on most of its copyright infringement and breach of contract claims.
  • Although Dish likely infringed Fox’s copyrights and breached its contract with Fox in making the quality assurance copies of Fox's programs, Fox failed to establish a likelihood that it would suffer irreparable harm as a result of those copies.

Outcome

On appeal, the Ninth Circuit determined that the district court did not abuse its discretion in ruling that Fox had neither demonstrated a likelihood of success on most of its copyright infringement and contract claims nor shown a likelihood of irreparable harm.

Copyright Infringement Claims

In its pleadings, Fox alleged the following copyright infringement claims:
  • Dish committed copyright infringement by unauthorized reproduction when it allowed its users to create and store copies of Fox's primetime broadcast through PrimeTime Anytime.
  • Dish had secondary liability for its customers' copyright infringement through their use of Dish's PrimeTime Anytime and AutoHop technologies to reproduce Fox's programs.
Concerning the first claim, the Ninth Circuit ruled that the district court did not abuse its discretion in basing its denial of a preliminary injunction on the following factors:
  • Although Dish determines how long the PrimeTime Anytime copies will be available for viewing, has the ability to modify the start and end times of the recording block, and prevents a user from cancelling a recording once it has already started, the PrimeTime Anytime feature does not record any programming unless the user commands it to do so.
  • Because the user, not Dish, creates the copy of Fox's programming, Fox was not likely to succeed on its direct copyright infringement claims.
  • Fox was also unlikely to succeed on its claim of secondary copyright infringement because it could not show that Dish's users were committing direct infringement in recording Fox's programs because:
    • the Supreme Court's Sony decision makes clear that consumer recording of TV programming to view and erase at a later date (time-shifting) is a fair use for which Dish's customers bear no direct copyright infringement liability;
    • Dish's Hopper, PrimeTime Anytime and the AutoHop technologies are only available to private consumers for the principal, fair use purpose of time-shifting their viewing of primetime TV programs.
  • Fox does not have a copyright interest in the advertisements shown during its broadcasts.
  • AutoHop's automatic skipping of commercials is not a copyright violation.
  • While the ease of commercial skipping may cause Fox market harm, commercial skipping itself does not violate any Fox copyright interest.

Breach of Contract Claim

Although the Ninth Circuit recognized that the question of whether Dish breached its contract with Fox was a closer issue than the infringement claims, it nonetheless held that the district court did not abuse its discretion in holding that Fox was unlikely to succeed on this claim based on its findings and conclusions that:
  • Dish did not violate the contract prohibiting Dish's distribution of its programming when it introduced PrimeTime Anytime because:
    • distribution, as used in Section 106(3) of the Copyright Act, requires that a copy of the copyrighted work be transferred or "change hands", 17 U.S.C. § 106(3); and
    • Dish's PrimeTime Anytime technology is used by Dish's viewers to create copies of TV programming that remain in their individual homes and do not change hands.
  • Dish also did not breach the 2010 letter agreement licensing it to offer Fox’s video-on-demand (VOD) service on condition that it disable fast-forwarding during commercials because the PrimeTime Anytime technology is more akin to a DVR and this video-on-demand restriction therefore did not apply.
However, the Ninth Circuit deemed plausible Fox's argument that the contract term that prohibited Dish to "distribute" its programming should not be construed in the narrow sense in which this term is used in the Copyright Act, but rather, as also including any making of these programs available to Dish's subscribers. Nevertheless, the Ninth Circuit found that the district court's interpretation of "distribute" was also plausible and that:
  • While the district court would not be justified in holding the term unambiguous, it did not read the district court’s opinion as resting its decision on this ground.
  • Having no argument or extrinsic evidence on the term before it, the district court did not err by relying on the Copyright Act to interpret “distribute.”

Dish's Quality Assurance Copies

The district court held that Dish directly infringed Fox's copyright and breached its contract with Fox by creating quality assurance copies of Fox's programming to test its AutoHop service's functionality. However, it denied Fox's request for a preliminary injunction, reasoning that Fox had not shown that Dish's continued creation of these copies would cause it to suffer irreparable harm.
Despite Fox's arguments that, without the injunction, it would lose both advertising revenue and control over its copyrighted works, the Ninth Circuit agreed with district court's conclusions that:
  • These harms stemmed from viewers' use of the AutoHop technology rather than the quality assurance copies themselves.
  • Monetary damages could adequately compensate Fox for any losses it suffered related to these copies (although the panel noted that calculating Fox's damages might be difficult because Fox does not license copies of its programs for distributors to create ad-skipping technologies).

Practical Implications

This case is notable for:
  • The Ninth Circuit's determination that ad-skipping does not constitute copyright infringement because:
    • a broadcast network has a copyright interest in the televised program, not the commercials aired during the program's broadcast; and
    • technology that allows a viewer to skip over commercial content in a DVR recording of a TV program does not violate the respective copyright holder's interests in the program or the commercials accompanying the program.
  • The lesson in contract drafting presented by Fox's failure to cover DVR as well as video-on-demand technology in requiring Dish to disable the technology's fast forward functionality during advertisements.

Court Document

Update: On January 24, 2014, the Ninth Circuit issued an order and amended opinion (No. 1-57048, (9th Cir. January 24, 2014)). The order and amended opinion:
  • Denied Fox's petitions for a panel rehearing and for a rehearing en banc of the July 2013 ruling.
  • Added a footnote in the opinion which notes that the district court misquoted an excerpt from a Prosser & Keeton treatise.