DISH Hopper Win is a Victory for Innovation, New Business Models

by Ali Sternburg on July 24, 2013

Today’s legal victory by DISH brings us back to a story we pointed to on the day DisCo launched.  Matt’s “We Resume Our Previously Scheduled Program. From 1955.” detailed controversy over DISH’s innovative new services, which allow users to skip commercials, something they have been doing for years.  The DISH Hopper is a set-top box with DVR capabilities, on which PrimeTime Anytime can be enabled to record primetime content on the four major broadcast networks.  Another feature of PrimeTime Anytime is AutoHop, which allows customers to skip commercials on certain primetime programs.  In November, the Central District of California denied Fox’s request for a preliminary injunction against DISH over these services.  Fox appealed, and today the Ninth Circuit affirmed the district court, holding that the district court did not abuse its discretion in holding that the broadcaster failed to demonstrate a likelihood of success on both its copyright infringement and breach of contract claims.

The Fox plaintiffs had requested a preliminary injunction against these services, raising both direct copyright infringement and secondary copyright infringement, and also breach of contract.  The district court denied the preliminary injunction, and the Ninth Circuit affirmed.  The direct infringement claims failed because plaintiffs did not establish that DISH made copies of the programs; the record reflected that “Dish’s program creates the copy only in response to the user’s command.”  The secondary liability claims — more on that doctrine in this post — also failed because even though a prima facie case of direct infringement by customers was established, DISH was likely to succeed on a fair use defense.  The Ninth Circuit also deferred to the district court’s ruling that the alleged contract breaches were not likely to succeed.

The court also addressed the issue of commercial skipping by explaining that “commercial-skipping does not implicate Fox’s copyright interest because Fox owns the copyrights to the television programs, not to the ads aired in the commercial breaks. If recording an entire copyrighted program is a fair use, the fact that viewers do not watch the ads not copyrighted by Fox cannot transform the recording into a copyright violation.”

DISH is a member of CCIA, and CCIA filed an amicus brief in this case in support of DISH, so we are pleased by this ruling.

A few things are notable about this ruling.  First of all, the Ninth Circuit applied the Second Circuit Cablevision case in holding that it’s the user making the copies, not DISH.  This is noteworthy because the Aereo business model, which was upheld recently in the Second Circuit Aereo case, depends on Cablevision.  There is also a similar case pending in the Ninth Circuit called Aereokiller (similar name, entirely different party.  It’s complicated).  The Ninth Circuit has yet to hear a case entirely equivalent to Cablevision, and this decision may hint at the possible direction of the pending Aereokiller appeal.

Another significant thing is the fair use analysis.  The court analogized the case to the Supreme Court Sony case.  It is important that courts continue to recognize users’ fair use right to make non-commercial recordings for private use, which has let a lot of innovative new services flourish.  As CCIA’s amicus brief explained, the plaintiffs’ “cramped view of fair use would hobble not just DVR technology, but also may threaten a wide range of new private copying technologies.”  The brief later added that:

Any reading of Sony that holds every Hopper DVR owner liable for copyright infringement would constitute a threat to private, noncommercial copying technologies. These technologies include not just existing product categories, such as the iPod and many DVR products, but also new technologies, such as online backup services and personal music lockers. These nascent-but-growing cloud services are premised on the presumption that a computer user may make a personal copy of what resides on her desktop computer in the cloud. This may include purchased music and television programs, as well as software programs. It may include articles copied and saved for personal research. Other new technologies doubtless are just over the horizon—assuming that Sony is not cabined to the technologies of analog tape.

This all comes down to incumbents not wanting to compete with new business models, a frequent theme on DisCo.  As Matt wrote in that first piece:

Before the litigation, one network CEO summed up what seems to be the networks’ position: “That’s the ecosystem that we live in, you can’t suddenly change that.” In other words, don’t mess with my business model.

But the networks can hardly claim to be blindsided. In 1955, one of the earliest ads for the Zenith TV remote controls enticed viewers to “shut off annoying commercials”.  Over 50 years ago.  It is difficult to take seriously complaints that DISH’s new feature is “upset[ting] the apple cart” when people have been avoiding commercials since the Eisenhower Administration.

Your business model won’t last if it demands that the rest of the world order their affairs around you. They won’t.

The Ninth Circuit affirmed that today.

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