DISH

The Oracle v. Google case goes before the Federal Circuit on appeal today (stay tuned for a first take of the oral argument here on DisCo).  Although the specific issue on appeal is the copyrightability of APIs, the question of copyright fair use has figured prominently in that dispute, as well as numerous other significant copyright cases this year.  In fact, 2013 has shaped up to be an important year for fair use and Section 107 of the U.S. Copyright Act, with both tech sector and entertainment industry constituencies scoring impressive fair use wins.  Arguably, these victories have strengthened the doctrine.

On the tech side, victors have included the DISH Hopper and Google.  Film and theatre litigants have prevailed in prominent fair use defenses as well — inconveniently timed, it turns out, as motion picture industry interests have actively resisted the fair use doctrine in Australia even as it is being successfully invoked in U.S. courts.  This post provides a chronological review of some of the more significant fair use decisions in 2013.

The Year in Fair Use

In a March decision that may have set the tone for the year, SOFA Entertainment v. Dodger Productions, 709 F.3d 1273 (9th Cir. 2013), the Ninth Circuit demolished the plaintiff’s arguments in a case involving a 7-second clip from a 1966 episode of The Ed Sullivan Show.  The clip, which depicts Ed Sullivan introducing the Four Seasons musical act, was used in the Broadway musical about the Four Seasons, Jersey Boys.  SOFA Entertainment, who owned rights to the show, sued the musical production company Dodger over the seven-second use.

Quoting and citing several Supreme Court decisions, the Ninth Circuit summarized fair use thusly:

The Copyright Act exists “‘to stimulate artistic creativity for the general public good.’” It does so by granting authors a “special reward” in the form of a limited monopoly over their works. However, an overzealous monopolist can use his copyright to stamp out the very creativity that the Act seeks to ignite. To avoid that perverse result, Congress codified the doctrine of fair use.

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Many are familiar with the Sony Betamax case, the landmark Supreme Court decision which nearly 30 years ago ruled that selling videocassette recorders to consumers was not copyright infringement.  Not as well known, but equally important, was the case of the Diamond Rio.

Fifteen years after Sony, when the future of the home electronics industry turned on the vote of a single Supreme Court Justice, the recording industry sued to kill MP3 players.  In fact, it was exactly 15 years ago today when recording industry lawyers told a federal court that Diamond Multimedia’s Rio, one of the earliest MP3 players, was illegal and needed to be stopped before it found its way into consumers’ hands.

A federal appellate court finally spiked the industry’s campaign against the Rio, which paved the way for a wave of consumer products which ultimately converged into the modern smartphone.

Unfortunately, neither the Sony decision nor the Diamond Rio case ended the century-long trend of new technology being met with copyright litigation.  On the 15th anniversary of the Rio suit, here are 15 other products/services that have since met with litigation, and how they have fared:

  1. ReplayTV

ReplayTV, a DVR and time-shifting service, was launched in 1997 and marketed by SONICblue, a successor to Diamond Multimedia.  In October 2001, the company was sued by TV industry rights-holders over features including commercial-skipping (which was recently given a stamp of approval by multiple federal courts in the DISH Hopper litigation [1] [2]).  Legal costs drove the company into bankruptcy in March 2003.  The purchaser of the technology, Digital Networks North America (DNNA), announced in June 2003 that it was removing some of the contentious features, which prompted the entertainment industry plaintiffs to dismiss litigation against ReplayTV and SONICblue.  ReplayTV.com’s assets were ultimately acquired by DIRECTV.

  1. MP3.com

MP3.com, founded in 1997, preceded modern cloud-based file storage services.  The service aimed to permit users, after buying a CD, to listen to that CD at any Internet-connected location.  The recording industry sued MP3.com in January 2000, before the company launched.  A court ruled against MP3.com in September 2000, and the company was ordered to pay nearly $118 million in statutory damages for willful infringement.  As described in a paper by Prof. Michael Carrier, the company ultimately opted to settle for approximately $50 million.  According to an ABC News article, “U.S. District Judge Jed S. Rakoff said it was necessary to send a message to the Internet community to deter copyright infringement.”  In 2003, CNET bought the domain name, but not the technology or music assets, and currently maintains the site.

  1. MP3tunes

In 2005, Michael Robertson, the founder of MP3.com, again attempted to launch a music service – MP3tunes – which operated personal online storage lockers and a music search engine.  In November 2007, stemming from disagreements over a takedown notice issued to MP3tunes, EMI filed suit for copyright infringement against MP3tunes and Robertson.  In 2011, after four years of litigation, MP3tunes filed for bankruptcy.

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Though it’s not yet quite as confusing as the four jurisdictions considering the legality of Aereo and FilmOn X (for more on that, see this infographic), litigation against features of DISH’s Hopper service (a set-top box with DVR capabilities) has reached the point where we need to do an update.

We last covered this litigation in July, when the 9th Circuit affirmed a California district court’s denial of Fox’s motion for a preliminary injunction on “PrimeTime Anytime” (the Hopper feature that lets consumers record primetime content on the four major broadcast networks) and “AutoHop” (the Hopper’s commercial skipping feature).

On Monday, another one of Fox’s motions for a preliminary injunction was denied in the same docket in California over another feature, the “Hopper with Sling,” which comes with the “DISH Anywhere” app (the Hopper feature that lets consumers watch live or recorded TV on a computer, tablet, or mobile device).

This issue is also currently being litigated in New York, where last week a district court judge denied ABC’s motion for a preliminary injunction over the AutoHop feature.

As it stands now, DISH is allowed to continue offering consumers its innovative new services across the country.

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This post is Part II of A Brief History of Disruptive Innovation. Part I can be found here.

Clayton Christensen, in “The Innovator’s Dilemma,” points to disruptive innovations in a wide variety of fields. As I described in A Brief History of Disruptive Innovation, Part I, power brokers across space and time resisted disruptive innovations — most of which are now ubiquitous. In the second half of the 1900s, a high-tech revolution took place, heralding a new wave of rapid disruptive innovations. This second post will focus on a key few innovations, namely in high-tech, and the ongoing controversy which continues to pervade disruptive technologies.

Mechanical Excavators

Prior to the mid 20th century, mechanical excavators had been dominated by a cable based digging system. However, when hydraulic excavators showed up in the 1950s, they disrupted the legacy firms that focused on cables. Initially, hydraulics, lacking the raw power of cables, inhabited an entirely different niche. For example, for smaller projects, like landscaping or drainage, cheaper hydraulic excavators took precedent over their cable counterparts, which dominated large building projects. As a result, the companies which had succeeded most dramatically with cable excavators were not interested in investing in their hydraulic counterparts, largely because their most lucrative customers were not interested in what the earlier hydraulic excavators were capable of. By the time the superior hydraulic excavators had moved up into the mainstream, the legacy companies had spent their resources adapting the technology to pre-existing customer demands and market conditions, as opposed to recognizing that hydraulics would change the nature of market demand. In that sense, there was not a clear pushback against hydraulics by the established industry; they simply ignored or tried to reinvent the technology (but not maliciously) to suit their customers.

Home Video and Cable

Many disruptive innovations are even more closely connected to consumers’ lives. Over the course of the last fifty years, the television industry has endured dramatic disruptive competition. Although cable TV was originally created for mountainous areas unable to receive a clear broadcast signal, its early potential was recognized by opponents and proponents alike. Although early judicial decisions favored cable, its adversaries in the broadcast sector, more adept at Washington maneuvering, successfully pushed to enact numerous regulations in the early 1970s which dramatically impeded cable’s growth. However, when the FCC began rolling back the most intensive regulations in the 1980s, cable began to expand rapidly and NAB leapt into full gear. In addition, an ad campaign, “Save Free TV,” launched to cast cable as infringing upon Americans’ rights to free television. NAB made the case to the FCC that the lack of regulations imposed upon cable TV had upset the power balance in the industry, and that cable was threatening traditional broadcasts’ ability to attract advertising. Eventually, Congress passed The Cable Television Consumer Protection Act of 1992, which imposed stricter regulations on cable network, compelling them to carry broadcast signals.

In the 1970s, Sony developed Betamax technology, which allowed users to record television onto cassettes. Companies such as Disney and Universal were amongst the first to become aware of the supposed threat posed to them by Betamax technology. Unauthorized distribution of video cassettes, Universal claimed, would have severe economic consequences for the entertainment industry. The establishment industry actors were aware that Congress was in the final stages of major copyright overhaul legislation, and would be unlikely to include sufficient new protection for the video industry. Still, they took the fight to DC. Industry lobbyist Jack Valenti famously said that “The VCR is to the American film producer and the American public as the Boston strangler is to the woman home alone.” Given the unlikelihood of a legislative breakthrough, Universal sued Sony for copyright infringement, claiming that the fact that Betamax technology even allowed for unlawful distribution rendered Sony liable for any abuse that its consumers may commit. Although a circuit court sided with the incumbent film industries, ordering Sony to pay damages, the Supreme Court reversed the decision, stating that the distribution of pre-recorded television for certain purposes constituted fair use, and that Betamax was not inherently in violation of copyright law. The “legal safe haven” created for cassette-based recording technology ultimately gave Hollywood the edge it needed to compete with home television, immensely benefiting both industries.

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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.”

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On Wednesday, Bloomberg reported that Time Warner Cable is allegedly incentivizing media companies to withhold content from online competitors.  Given the facts reported, it is difficult to tell whether this is blatantly anticompetitive behavior that should be discouraged by competition authorities, or whether these contracts are commonplace and unremarkable.  Generally speaking, businesses are free to contract as they wish, and exclusive licenses are common copyright arrangements.  It’s standard practice for one network to get the sole rights to premiere a movie or television series during a specific window, for example.  The analysis might change if Time Warner Cable were abusing market power, either as a content buyer, or in its role a distribution platform.  It is too soon to tell.

The article nevertheless features some interesting interviews from various stakeholders.  One priceless quote was from Chris Winfrey, CFO of Charter Communications (which according to Bloomberg is the fourth-largest cable company), speaking at this week’s National Cable & Telecommunications Association (NCTA) conference:

It’s in everybody’s mutual interest that we are protecting the ecosystem in a way that continues to keep the value of that programming that we have and the way it’s delivered to our subscribers today.

Really, Mr. Winfrey?  I’m not sure that limiting the outlets through which consumers can access content is in “everybody’s mutual interest”.  Consumers would beg to differ, as Public Knowledge President Gigi Sohn explains later in the article.  “Protecting the ecosystem” is solely beneficial to the incumbent cable companies.  (And, notwithstanding its dominant position in the ecosystem, Charter was apparently bankrupt for most of 2009.)  Furthermore, the desire to maintain “the way [programming is] delivered to our subscribers today” exemplifies how cable companies are still in denial about cord-cutting, trying to delay consumers’ inevitable transition, by suing competitors with innovative new features like Aereo and DISH, rather than introducing their own new technologies.

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We’ve written several posts on the DISH Hopper dust-up, but to recap: CBS owns the popular tech site CNET, whom it forced to retract an award given to the best product from the recent 2013 Consumer Electronics Show (CES).  Why?  Because CNET granted the Best of CES award to the DISH Hopper product, a product that CBS and other networks were suing DISH over, on the grounds that its service constituted copyright infringement.  As Rob described, initial reports implied this came from the legal division, which prompted a round of ‘typical lawyer nonsense’ eye-rolling.  Subsequent developments indicated that the decision had not come from the Wet Blanket Department at all, however, but rather directly from CBS CEO Les Moonves.

DisCo has yet to give this kerfuffle any legal analysis, and this post admittedly only scratches the surface.  At Hollywood Reporter, Eriq Gardner previewed the questions that IP and tech watchers have been pondering: does CBS meddling in CNET reporting now undermine its ability to argue that it should not meddle in CNET reporting on other subjects?

The prime example, noted in Gardner’s article, involves Download.com.  After CBS acquired CNET along with CNET’s website, Download.com, CBS was sued for making available peer-to-peer software, including BitTorrent applications.  If you do not immediately grasp the connection between CBS and P2P apps, worry not.

In short, the allegations in the suit are:

  • CBS controlled CNET, which ran the website Download.com.  Download.com is a software distribution platform, ancient by Internet standards (1996), which reviews and makes available freeware, shareware, and trial versions of software.
  • Among the thousands of applications that Download.com made available were file-sharing applications, and among the applications that Download.com editors reviewed were BitTorrent applications.
  • Individuals downloaded and then allegedly used these BitTorrent applications to infringe copyright.  And thus CBS should be held responsible, the theory goes, for those end-users’ infringement.

Presently, judge-made rules do allow for plaintiffs to hold non-infringers responsible for the acts of other infringers under certain circumstances: this is called “secondary liability.”  In these special cases, judges have decided that it is in the broader interest of protecting copyright to penalize non-infringers for the misconduct of third parties.  (Thus, this notion is sometimes confusingly referred to as “third party liability.”)

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If CBS isn’t already wishing it could hit the rewind button on its attempt to deny publicity to DISH Network’s video recorder, the company will be grasping for the remote soon enough.

The festivities began last week, when editors at CBS’s tech-news site CNET had voted to give DISH’s updated Hopper DVR–which can automatically skip ads in recorded prime-time network fare–its “Best of CES” award. CBS is not so fond of that feature, having already sued DISH over it, and forced CNET to give the award to somebody else.

That’s gone over about as well as you’d expect. CNET writer Greg Sandoval tweeted his resignation on principle (“I no longer have confidence that CBS is committed to editorial independence”), and editor Lindsey Turrentine wrote that CBS executives banned the site from saying what had just happened.

Daniel O’Connor unpacked the foundations of this foolishness yesterday, and a legal analysis by Matt Schruers is forthcoming [EDIT: Matt’s post is now up]. Here, I’m going to tee off on two toxic defenses CBS has offered for its conduct, just in case any other media conglomerate wants to follow its example.

(Disclosure: DISH Network is a member of the Computer & Communications Industry Association, which hosts this blog.)

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On Friday, news broke that CNET was forced to pull its consideration of DISH’s awesome new Hopper set-top box from consideration for its “Best of CES” award because of a legal fight between DISH and CNET’s parent company, CBS.  At least, that was the pretext.  More likely CBS nixed the Hopper from receiving its rightful acclaim because — as another network, FOX,  jointly suing DISH with CBS said — the networks fear that DISH’s Autohop “will ultimately destroy the advertising-supported ecosystem that provides consumers with the choice to enjoy free, over-the-air, varied, high-quality primetime broadcast programming.”

CNN later reported (and CNET confirmed with a disclaimer) that CBS had hastily laid down a policy that prevented CNET from reviewing the DISH Hopper because it was involved in litigation with the company surrounding the product.  Unfortunately for CBS this ex-post legal rationalization did not completely ring true because CNET had already reviewed the DISH Hopper at CES and given it glowing praise.

As a quick summation of the legal controversy, the major networks filed suit against DISH’s Autohop technology earlier in the year for letting customers automatically cut commercials out of their primetime network television recordings.  Networks argued that this was a violation of copyright law and an affront to their hallowed business model.  DISH countered that TV viewers have been skipping commercials since the dawn of the commercial, and the Hopper just gives viewers more control.

Here at DisCo, our copyright law guru Matt Schruers discussed the Autohop technology in the context of prior technology aimed at giving users the ability to “tune out” commercials and noted, “your business model won’t last if it demands that the rest of the world order their affairs around you.”  The arguments of the networks are also un-refreshingly similar to the arguments used by the major movie studios in their attempts to make the VCR’s predecessor — the Betamax — illegal.

By today the situation was spiraling further out of control.  First, Greg Sandoval, longtime tech reporter and one of CNET’s most prominent bylines, resigned citing the dishonest way in which the situation was handled.

Then Lindsey Turrentine, an editor at CNET, revealed not only that (1) DISH had won the original vote for the “Best of CES” award, but also that (2) CBS prevented CNET from revealing that fact in its disclosure, forcing the tech news outlet to stick to the official, misleading script which was, “The Dish Hopper with Sling was removed from consideration due to active litigation involving our parent company CBS Corp.”  And not only had the order come down from CBS to meddle with the CNET’s editorial integrity, but it had come from CBS CEO Les Moonves himself.

In a final twist, the implications of which will be covered more extensively by Matt Schruers in a later DisCo post [EDIT: Matt’s post is now up], CBS had actually used its “editorial hands off” policy to defend itself from being implicated in a (questionable) lawsuit brought against CNET for facilitating copyright infringement.  Given that CBS now has admittedly exerted direct editorial control in this instance, it is quite possible that future lawsuits will target CBS for the content put out by its affiliates, as lawyers will argue that in not editing future content CBS is exercising editorial control as it has now bulldozed the Chinese wall it used to defend itself in the past.

All in all, this was a myopically short-sighted attempt by CBS to censor editorial comments about a product that its own affiliate said was awesome.  (CBS must agree, seeing as they let CNET post the original review, right?)

In fact, one prescient company perhaps summed up the need for editorial independence best when it argued that forcing parent companies to take editorial control of its news outlets “would create grave uncertainties for writers and publishers — including search engines, web encyclopedias, blogs and most technology journalists — that seek to communicate truthful information about emerging technologies.”  Who was that company you might ask?  It was actually CBS defending itself against the above-mentioned charges accusing it of facilitating copyright infringement through articles published on its tech news affiliate, CNET.

And to would-be censors out there, take note that in attempting to censor something you actually increase its PR exposure, as this controversy has generated far more news than CNET’s “Best of CES” list ever would have.  Another clear instance of the Streisand effect.

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Fast Forward is Killing Television: Watch Your CommercialsWhich of these are you prohibited from doing?

A. You watch the game live, and get up for a beer during the commercials.

B. You set your DVR to record the game, and watch it later, fast-forwarding past commercials.

C. You set your DVR to record prime time, and watch some of it later, fast-forwarding past commercials.

D. You set your DVR to record all prime time, and watch some of it later, advancing past all commercials using an automatic feature on your DVR.

E. None of the above.

If you picked Answer E, you may be dismayed to learn that major broadcasters don’t agree with you. Late last month, DISH Network had to sue ABC, CBS, NBC, and FOX to establish whether you or the networks control your TV viewing experience – i.e., whether you’re a pirate for not watching commercials. MORE »

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