The Honorable GEORGE H. WU, UNITED STATES DISTRICT JUDGE
The Court DENIES without prejudice Defendant's Ex-Parte application to stay [201].
The Court's Tentative Ruling is circulated and attached hereto. Court hears oral argument. The Court orders counsel to meet and confer and file a joint form of partial summary judgment by July 23, 2015. The Court continues the matter to
Fox Television Stations, Inc. v. FilmOn X, LLC, Case No. CV-12-6921, consolidated with NBCUniversal Media, LLC v. FilmOn X. LLC, Case No. CV-12-6950 Tentative Rulings on Cross-Motions for Summary Judgment as to Compulsory License Eligibility under 17 U.S.C. § 111
Plaintiffs Fox Television Stations, Inc., Twentieth Century Fox Film Corp., Fox Broadcasting Co., Inc., NBCUniversal Media LLC, Universal Network Television LLC, Open 4 Business Productions LLC, NBC Subsidiary (KNBC-TV) LLC, Telemundo Network Group LLC, WNJU-TV Broadcasting LLC, American Broadcasting Companies, Inc., ABC Holding Company Inc., Disney Enterprises, Inc., CBS Broadcasting Inc., CBS Studios Inc., and Big Ticket Television, Inc. (collectively, "Plaintiffs") move for summary judgment that Defendants FilmOn X LLC, Alkiviades "Alki" David, FilmOn.TV Networks, Inc., Filmon.TV, Inc., FilmOn.com, Inc., and DOES 1-3 (collectively, "Defendants") are not entitled to a compulsory license under § 111 of the Copyright Act, 17 U.S.C. § 111. Docket No. 183. Defendants cross-move for summary judgment that they are so entitled. Docket No. 167. The Court would, for reasons stated herein, DENY Plaintiffs' motion, GRANT Defendants' motion, and hold that Defendants are entitled to a § 111 compulsory license if they meet the applicable requirements.
However, because: (1) the legal issues are close and of significant commercial importance, both to these parties and to others; (2) this Court disagrees with the Second Circuit's decision in an analogous case; and (3) the resolution of the issues presented on summary judgment is likely to be determinative in this action, the Court would authorize an immediate appeal to the Ninth Circuit pursuant to Fed. R. Civ. P. 54(b), Fed. R. App. P. 5, and 28 U.S.C. § 1292(b). For the same reasons, and because Defendants have not yet been able to timely or consistently comply with the procedures attendant to a § 111 license, the Court would preserve the status quo, and maintain the existing preliminary injunction pending the outcome of the appeal. Finally, because of the relative importance of the issues decided here compared to those remaining in the case, the Court would stay this action pending the outcome of the appeal.
The same parties were before this Court in December 2012, when it granted Plaintiffs' motion for a preliminary injunction. Fox Television Stations, Inc. v. Barry-Driller Content Sys., PLC, 915 F.Supp.2d 1138, 1139 (C.D.Cal.2012). At that time, Defendants expressly disclaimed the argument
This case is not the first between the parties concerning a similar service. In 2010, a group of plaintiffs who overlap with Plaintiffs here sued FilmOn.Com, an entity related to Defendants here, in the Southern District of New York. CBS Broadcasting, Inc. v. FilmOn.Com, Inc., No. 1:10-cv-07532, 2010 WL 4000592 (filed Oct. 1, 2010). Plaintiffs in that case asserted that FilmOn.Com was operating a broadcast retransmission system similar to that operated by the defendants in a companion case, WPIX, Inc. v. ivi, Inc., No. 1:10-cv-07415-NRB (S.D.N.Y., filed Sep. 28, 2010). In that companion case, the Southern District of New York later held that the defendants' internet retransmission system did not qualify as a "cable system," and was thus not entitled to a § 111 compulsory license. WPIX, Inc. v. ivi, Inc., 765 F.Supp.2d 594, 617 (S.D.N.Y.2011) ("ivi II"). Shortly before that decision was affirmed on appeal, 691 F.3d 275 (2d Cir.2012) ("ivi II"), cert. denied, ___ U.S. ___, 133 S.Ct. 1585, 185 L.Ed.2d 607, FilmOn.Com stipulated to a consent judgment and permanent injunction. Docket No. 49 in 1:10-cv-07532 (S.D.N.Y. Aug. 9, 2012).
The record does not state why FilmOn.Com did not wait for the appeal in the companion case before stipulating to a judgment. Nor does it state why, when Defendants here launched a new internet retransmission service a few months later in 2012, Plaintiffs did not seek a finding of contempt from the Southern District of New York, and instead, filed this case. The reason for both of those strategic choices was likely a decision handed down by the Southern District of New York on July 22, 2012: American Broadcasting Companies v. AEREO, Inc., 874 F.Supp.2d 373, 382 (S.D.N.Y.2012) ("Aereo I"). In that case, the court held that, under Cartoon Network LP, LLLP v. CSC Holdings, Inc., 536 F.3d 121 (2d Cir.2008) (the "Cablevision" case), Aereo's use of a separate antenna and a separate data stream for each user meant that Aereo did not infringe the networks' public performance rights. In filing this case, Plaintiffs hoped for a different result under the law of the Ninth Circuit. And they got one. See Fox Television Stations, 915 F.Supp.2d at 1151.
After this Court preliminarily enjoined Defendants, the Second Circuit affirmed the decision in Aereo I. WNET, Thirteen v. Aereo, Inc., 712 F.3d 676 (2d Cir.2013) ("Aereo II"). But the Supreme Court then reversed, agreeing with this Court that using separate antennas and data streams did not avoid "transmit" clause liability. Aereo III, 134 S.Ct. at 2503.
After the Supreme Court's Aereo III decision, Defendants switched theories. They argued to the Southern District of New York, as they argue here, that statements in Aereo III implied that Defendants' system qualified as a "cable system," and thus, for a compulsory license. The Southern District of New York rejected
Plaintiffs, satisfied with the trajectory of the case in New York and the rule of ivi II, then argued here that any further litigation of the compulsory license question should take place in the Second Circuit. See Reply Mem. of Plaintiffs Responding to the Court's Request for Briefing on Defendants' Section 111 Defense, Docket No. 133. This Court declined that suggestion, holding that "Plaintiff's wanted a fresh look at the Second Circuit's conclusions in Cablevision/Aereo, and they will now get a fresh look at the Second Circuit's conclusions in [ivi II], which is the case which they feel should be dispositive as to the Section 111 issue." Mins. of Sept. 8, 2014 Status Conference, Docket No. 136.
Defendants have used two different systems to receive and retransmit broadcast programming: a "trailer system" and a "Lanner system." Meldal Decl. in Supp. of Defs.' Mot., Docket No. 177 at ¶ 14. The trailer system involved an array of small antennas on the roof of a trailer. Id.
FilmOn X's system modified the broadcast program by inserting FilmOn X's logo and omitting the closed captioning. Jones Decl. in Supp. of Pls.' Mot., Docket No. 182 at ¶¶ 10, 14-15. FilmOn X also made available local major channels in standard definition format for free. Id. at ¶¶ 5-6. FilmOn X also played an advertisement before the user could view the selected program. Id. at 10.
In addition to the credit card check, Defendants say that their system now also requires the viewing device to be located within the designated market area at the time of transmission. Meldal Decl. at ¶¶ 34-35. For a mobile device, this requires that the geolocation services on the device be turned on; if not, the system is supposed to deny access to the broadcast channel. Id. at ¶ 36. Whether or not this actually happens, or whether instead, the system just uses the device's IP address, is genuinely disputed. Suppl. Jones Decl. at ¶ 10. For a non-mobile device, such as a desktop computer, without a geolocation service, the system checks the IP address of the network connection and looks up its geolocation through a third-party database. Meldal Decl. at ¶ 36. The accuracy of that third-party database depends on the type of connection: for a wired device in a metropolitan area, the accuracy can be within a mile or two. Id. For a device connected by a satellite system, the location could be off by hundreds of miles. Id. Additionally, it is not clear whether Defendants actually try to place the user within the boundaries of a designated market area, as they claim, or whether they only restrict a user to a radius around a certain point, which is usually 100 miles, but for New York City is 250 miles, and which Defendants have set as high as 1000 miles. Suppl. Jones Decl. at ¶¶ 12-13.
Previously, users could employ proxy servers to access broadcast content through FilmOn X from outside of their designated market areas. For example, from 2012 to 2014, Plaintiffs' expert regularly connected to FilmOn X from Maryland using a Virtual Private Network proxy server, which allowed him to watch local broadcast content in Los Angeles, New York, Chicago and other locations. Suppl. Jones Decl. at ¶ 7. To prevent this, Defendants also plan to engage a third party proxy detection service. Meldal Decl. at ¶ 37. However, Plaintiffs' expert examined Defendants' source code, and determined that the third-party detection service was not actually being "called": in other words, the software did not actually implement this portion of code. Suppl. Jones Decl. at ¶ 7.
Defendants also claim to have prepared a system for encrypting the broadcast stream using the HTTPS standard. Meldal Decl. at ¶ 50. Plaintiffs' expert points out that Defendants' prior system encrypted only the internet address of the stream, and not the user's IP address, the identity of the channel the user may access, or the expiration time after which access is no longer granted. Suppl. Jones Decl. at ¶ 15. And Defendants' streams have previously been redirected, contrary to Defendants' expressed intent. Id. at ¶ 21 (citing May 12, 2013 email from David to Kharchevin, AK002643, postulating that Defendants' stream was taken by "simply reus[ing] links generated by our website or maybe pars[ing] website responses as some xbmc enthusiast did before.").
Other than the proxy detection feature, Defendants' expert has tested this new system, id. at ¶ 39, but it has not been made available to Plaintiffs' expert for testing. From the inspections performed by Plaintiffs' expert and the limited window into the actual system performance provided by discovery, it appears that while Defendants have attempted to develop a more robust geolocation and content protection system, that system: (1) has not been fully developed, (2) makes approximations and compromises that result in access being granted outside of the designated market area, (3) is not immune to manipulation, and (4) has not always been accurately described by Defendants to the Court.
As part of their effort to comply with the rules applicable to cable systems, Defendants submitted Statements of Account to the Copyright Office for each six-month period between August 2012 and July 2014, the period in which it retransmitted over-the-air broadcast content to users, and paid the corresponding fees. Hurwitz Decl. ISO Defs.' Mot., Docket No. 167-6 at ¶ 5. However, Defendants "inadvertently omitted" "some stations" in the filings, and so submitted corrected statements on June 18, 2015, i.e., not until the summary judgment briefs were being filed in this case. Id. ¶¶ 13, 17-18, 20, 25, 30, 35. Remarkably (but in the end perhaps not surprisingly), the omitted stations were "the main ABC, CBS, FOX, and NBC broadcast stations" for locations including Los Angles, San Francisco, Seattle, and Phoenix. Defs.' Responsive Separate Statement, Docket No. 191-1 at ¶ 24. Thus, Defendants managed to not pay the required royalties for the very networks with whom they were then in litigation.
During the period that Defendants were operating, they retransmitted Plaintiffs' local broadcast programming to the public in standard definition without charge. Defs.' Responsive Separate Statement, Docket No. 191-1 at ¶ 19. Defendants now say that they did so "as part of [their] Subscriber Activation Strategy, which was a marketing technique to get consumers to try broadcast content for free in standard definition for a period of time, which would terminate at some point." Id. This self-serving explanation is unencumbered by
In October 2014, Defendants mailed approximately 130 letters to broadcasters informing them of Defendants' intent to restart operations as a MVPD in certain markets, and requesting the broadcasters to inform Defendants if they elect "must-carry status." Hurwitz Decl., Docket No. 167-6 at ¶ 40, Ex. Q. "Several" broadcasters elected "must carry status" or retransmission consent. See, e.g., Letter from KTBN-TV, Los Angeles (Trinity Broadcasting Networks, provider of "wholesome, family oriented and inspirational programming"). Hurwitz Decl. Ex. R, Docket No. 167-7.
Summary judgment shall be granted when a movant "shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). In other words, summary judgment should be entered against a party "who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Parth v. Pomona Valley Hosp. Med. Ctr., 630 F.3d 794, 798-99 (9th Cir.2010).
T.W. Elec. Serv., Inc., v. Pac. Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir.1987) (internal citations and quotation marks omitted). At the summary judgment stage, the court does not make credibility determinations or weigh conflicting evidence, and views all evidence and draws all inferences in the light most favorable to the non-moving party. See id. at 630-31 (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986)).
In 1968, the Supreme Court considered the case of a cable television system. That system included antennas located on hills above the cities of Clarksburg and Fairmont, West Virginia, "with connecting coaxial cables, strung on utility poles, to carry the signals received by the antennas to the home television sets of individual subscribers." Fortnightly Corp. v. United Artists Television, Inc., 392 U.S. 390, 392, 88 S.Ct. 2084, 20 L.Ed.2d 1176 (1968). The system also contained "equipment to amplify and modulate the signals received, and to convert them to different frequencies, in order to transmit the signals efficiently while maintaining and improving their strength." Id. The Supreme Court held that the cable system did not infringe, since it:
Id. at 399-400, 88 S.Ct. 2084 (footnotes omitted).
In 1974, the Supreme Court again addressed cable television, which had evolved in the preceding six years. Cable systems were by that time originating their own programs, selling commercials, and interconnecting with other cable television systems—features that allowed cable systems "to compete more effectively with the broadcasters for the television market." Teleprompter Corp. v. Columbia Broad. Sys., Inc., 415 U.S. 394, 405, 94 S.Ct. 1129, 39 L.Ed.2d 415 (1974). None of those features changed the result: the Court held the systems non-infringing. The Court also rejected an argument based on the fact that the cable systems imported `distant' signals, which the broadcasters argued had a "deleterious impact" on the economics and structure of copyright licensing. The Court held that "a reallocation of the potential number of viewers each station may reach" is "a fact of no direct concern under the Copyright Act." Id. at 413, 94 S.Ct. 1129. The Court concluded:
Id.
Congress acted in short order. The 1976 Copyright Act adopted the § 111 compulsory license for cable systems. As described in the House report:
H.R. REP. 94-1476, 89-90, 1976 U.S.C.C.A.N. 5659, 5704. The compulsory license was conditioned on reporting requirements,
The 1976 Copyright Act thus established a compulsory license for cable systems, defined as "a facility, located in any State, territory, trust territory, or possession of the United States, that in whole or in part receives signals transmitted or programs broadcast by one or more television broadcast stations licensed by the Federal Communications Commission, and makes secondary transmissions of such signals or programs by wires, cables, microwave, or other communications channels to subscribing members of the public who pay for such service." 17 U.S.C. § 111.
This was not the last time Congress legislated in response to judicial decisions concerning new forms of broadcast retransmission. It did so again in the field of satellite retransmission. In Pacific & Southern Co. v. Satellite Broadcast Networks, Inc., 694 F.Supp. 1565, 1574 (N.D.Ga.1988), the court held that a satellite broadcaster was not entitled to the § 111 license as a "cable system" because its facilities were not located entirely within a single state. In response, Congress passed the Satellite Home Viewer Act in 1988, which enacted a six-year statutory license in 17 U.S.C. § 119. S. Rep. 103-4017 (1994), 1994 WL 577581 at *5. However, because "[t]he Congress was very careful to note that the Satellite Home Viewer Act is not to be interpreted as impacting [Satellite Broadcast Networks's] alleged status as a cable system in the current lawsuit," the litigation continued in the Eleventh Circuit. Nat'l Broad. Co. v. Satellite Broad. Networks, Inc., 940 F.2d 1467, 1469 n. 2 (11th Cir.1991). The Eleventh Circuit reversed the district court's decision, holding that it read "located in any state" too narrowly, and held that a statutory "facility" can exist partially in one state and partially in another. Id. at 1470. And, the court rejected the argument that no specific FCC rules, regulations, or authorizations covered the rebroadcast, holding that the rebroadcast was permissible because no FCC regulation forbade it. Id. at 1471.
After oral argument in Satellite Broadcast, the Copyright Office promulgated regulations denying satellite broadcasters the right to the § 111 license because they did not "receive and transmit signals from within a single state." 56 Fed.Reg. 31,580 (1991); 57 Fed.Reg. 3283 (1992). The Copyright Office also reasoned that § 111 was "clearly directed at localized retransmission services," due to the provision that "two or more cable systems in contiguous communities ... operating from one headend" constitute one "cable system" for royalty calculations. 57 Fed.Reg. at 3292. The Eleventh Circuit noted this regulation in Satellite Broadcast Networks, but held that it did not apply retroactively. 940 F.2d at 1469, n. 4. And the court disagreed with the Copyright Office's analysis:
Id. at 1471, n. 7.
While the Eleventh Circuit disagreed with the Copyright Office's restrictive interpretation, it noted that the Office's view might nonetheless be entitled to deference prospectively. Id. And that is just what happened a few years later in Satellite Broadcasting & Communications Association of America v. Oman, 17 F.3d 344 (11th Cir.1994), where satellite operators sued to invalidate the regulations criticized by the Eleventh Circuit in Satellite Broadcast Networks. But the Eleventh Circuit held that while the regulations conflicted with that court's previous interpretation of "cable system," they were neither arbitrary, capricious, nor in conflict with the clear meaning of the statute, and were therefore "valid exercises of the Copyright Office's statutory authority to interpret the provisions of the compulsory licensing scheme." Id. at 345.
And that was not the end of it. In 1999, Congress enacted § 122, which authorizes satellite carriers to retransmit local broadcast programming back into a local market. 2 Nimmer on Copyright § 8.18. § 122 was then amended in 2002, 2004, 2008, 2010, and 2014. In short, Congress continues to actively legislate in this area. One lesson from this history is that, until the Copyright Office issued regulations, courts tended to leave to Congress the task of adjusting the statute in response to changing technology.
The Aereo cases involved a competitor of Defendants that structured its retransmission system to comply with Second Circuit law. Aereo did so by using one antenna per subscriber, such that each retransmission of the broadcast signal was made to only a single subscriber. That sufficed to avoid infringing the broadcaster's public performance rights in the Second Circuit,
Id. Plaintiffs now contest this rationale, arguing that the technological differences between a cable company and Defendants' internet rebroadcasting system are exceedingly meaningful to the broadcaster. Because the Supreme Court was not answering the question at issue in this case, Aereo III does not control the result here. See N.L.R.B. v. Hotel & Rest. Employees & Bartenders' Union Local 531, 623 F.2d 61, 68 (9th Cir.1980).
When Defendants tendered their statutory license fees to the Copyright Office in 2014, the Office neither accepted them without comment nor rejected them, but instead, accepted them on a provisional basis, given that "the question of eligibility of internet-based retransmission services for the Section 111 license appears to have been raised again before the Courts." Letter from J. Charlesworth, Copyright Office General Counsel (July 23, 2014), Pls.' Appx. Ex. 1 at 3. The letter noted that the Office does not believe that internet retransmission services qualify for the § 111 license, and that the Second Circuit's ivi II decision agreed with the Office's interpretation. Id.
The Office's restrictive view concerning § 111 was no surprise, although the gentle and tentative nature of the letter perhaps was. "The Copyright Office has long been a critic of compulsory licensing for broadcast retransmissions." Statement of Marybeth Peters, Register of Copyrights, before the Subcommittee on Courts and Intellectual Property, Committee on the Judiciary (June 15, 2000). In the Office's view, "[a] compulsory license is not only a derogation of a copyright owner's exclusive rights, but it also prevents the marketplace from deciding the fair value of copyrighted works through government-set price controls." Id. The Copyright Office has consistently held this view, and has been calling for the repeal of § 111 since 1981. Id. The Copyright Office has also been consistently opposed to the satellite compulsory licenses. Id.
To be sure, the Office, acknowledging its general opposition to compulsory licensing, sees "a fundamental difference" between internet retransmissions, on the one hand, and cable and satellite retransmissions, on the other. The Office believes that "the nature of the delivery platform for the retransmissions" is substantially different in the sense that cable and satellite provide a channel that the broadcasters cannot practicably do by themselves, but broadcasters are able to transmit their programs over the internet if they wish. Id. Further, the Office's "principal concern is the extent to which internet retransmissions of broadcast signals can be controlled geographically." Id.
As a policy matter, these views may be correct. But it can hardly be overlooked that the Supreme Court held that any such considerations did not control in Fortnightly and Teleprompter, and that Congress in response passed the compromise regime to which the Office objects. Given that the Office disagrees with Congress, it is no surprise that it seeks to cabin the statute whenever possible. However, this administrative opposition to Congressional text requires a particularly close look at any assertion that courts should defer to the agency's interpretation. Further, the Office has itself acknowledged that "although the statutory licenses at issue are copyright provisions, they are intertwined with equally complex provisions of communications law and policy—the implications of which are outside the expertise of the Copyright Office and require further consideration by Congress." Copyright Office STELA Report (Aug. 29, 2011), Pls.' Appendix, Ex. 3 at 16.
Unlike in the satellite context, the Office has not issued regulations concerning internet retransmissions after a notice and comment process. Administrative statements not arrived after "a formal adjudication or notice and comment rulemaking" do not necessarily receive the same deference as more formal conclusions. Christensen v. Harris County, 529 U.S. 576, 587, 120 S.Ct. 1655, 146 L.Ed.2d 621 (2000). Christensen stated that "[i]nterpretations such as those in opinion letters—like interpretations contained in policy statements, agency manuals, and enforcement guidelines, all of which lack the force of law—do not warrant Chevron-style deference." Id. "Instead, interpretations contained in formats such as opinion letters are `entitled to respect' under our decision in Skidmore v. Swift & Co., 323 U.S. 134, 140, 65 S.Ct. 161, 89 L.Ed. 124 (1944), but only to the extent that those interpretations have the `power to persuade[.]'" Id. at 587, 120 S.Ct. 1655. However, the Supreme Court later clarified that formal notice and comment rulemaking is not determinative concerning the application of Chevron deference. See United States v. Mead Corp., 533 U.S. 218,
The first question in considering whether to defer to an agency interpretation is "whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress." Chevron, U.S.A., Inc. v. Natural Resources Def. Council, Inc., 467 U.S. 837, 841-43, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). In other words, "a reviewing court should not defer to an agency position which is contrary to an intent of Congress expressed in unambiguous terms." Estate of Cowart v. Nicklos Drilling Co., 505 U.S. 469, 476, 112 S.Ct. 2589, 120 L.Ed.2d 379 (1992). Thus, "[t]he most reliable guide to congressional intent is the legislation and an agency may not disregard clear language because it would prefer what it considers a better policy." 33 Fed. Prac. & Proc. § 8381 (citing Sierra v. EPA, 294 F.3d 155, 161 (D.C.Cir.2002) (holding that agency policy preference cannot not trump clear statutory language)). The question is not merely whether there is some "linguistic ambiguity," but instead, whether "Congress had delegated gap-filling power to the agency." United States v. Home Concrete & Supply, LLC, ___ U.S. ___, 132 S.Ct. 1836, 1844, 182 L.Ed.2d 746 (2012).
Again, the Office noted its view that internet retransmission is even more harmful to copyright holders than cable and satellite retransmission. Id. But if in the Copyright Office's view § 111 is "bad," and "really bad" if applied to internet transmission, we must ask what the Office's view of internet retransmission would be if it considered § 111 to be "good," as Congress deemed it.
The Office's policy views appear to have found expression in a very strange reading of the words "facility" and "communications channels" in § 111. It is questionable whether, even if Chevron applied, it would be appropriate to defer to the Office's interpretation. The Second Circuit did so, and whether such deference was correct is the question to which we now turn.
At the preliminary injunction stage, Plaintiffs argued that "the Copyright Act is expressly technology agnostic and prohibits the public performance of a work by a transmission to the public `by means of any device or process.'" Preliminary Injunction Mot., Docket No. 49 at 2. Plaintiffs argue that "Congress intended that a service such as [FilmOn X's] that makes Plaintiffs' copyrighted works available to its subscribers must have a license irrespective of any technological gimmickry...." Id. Here, the question is whether Defendants are entitled to a license "irrespective of any technological gimmickry."
Essentially, at the preliminary injunction stage, unhappy with the consideration of the details of the "technological gimmickry" by the Second Circuit and the Southern District of New York, Plaintiffs asked this Court to paint with a broader brush. And the Court agreed with Plaintiffs that Cablevision was wrongly decided because the Copyright Act applies to "any device or process." By the same token, another case upon which Plaintiffs rely, ivi II, might also be wrongly decided because it also employs an overly narrow reading of the Copyright Act. ivi II held that an internet re-transmission service was not entitled to the compulsory license for cable systems established by 17 U.S.C. § 111 in the 1976 Copyright Act because it was not a "cable system." 691 F.3d at 277.
Recall that the 1976 Copyright Act defines a "a cable system" as:
In finding that ivi's internet streaming service did not qualify for the § 111 compulsory license, the Second Circuit affirmed the district court's determination that it was unclear whether ivi was a "facility" that receives broadcast signals and makes secondary transmissions, or whether the
This is all at loggerheads with the thrust of Plaintiffs' prior "technology agnostic" argument in this case. And it is difficult to recognize the ambiguity the Second Circuit saw in the statute, at least as applied to the facts of this case. See United States v. Home Concrete & Supply, LLC, ___ U.S. ___, 132 S.Ct. 1836, 1844, 182 L.Ed.2d 746 (2012) ("linguistic" ambiguity insufficient to invoke Chevron). The "internet" is not the "facility" urged by Defendants here. And it can't be a "facility" for purposes of the § 111 analysis because without Defendants' facilities, the internet does not receive Plaintiffs' public broadcast signal. Thus, the undisputed facts in this case are that the signals are not received by "the internet." They are received by antennas, located in particular buildings wholly within particular states. They are then retransmitted out of those facilities on "wires, cables, microwave, or other communications channels." We know that they are so communicated because Defendants' users received them. Hence, the preliminary injunction.
Thus, the nebulous nature of the internet does not seem to bear on whether Defendants operate equipment that "receives signals transmitted or programs broadcast by one or more television broadcast stations," reformats those signals, and then sends them out to the viewing public. In the language of Buck v. Jewell-La Salle Realty Co., 283 U.S. 191, 51 S.Ct. 410, 75 L.Ed. 971 (1931), the Second Circuit's ivi II opinion focuses on the mysterious "ether" (then spelled "either") through which the retransmission is made, but the "facility" that Defendants have control over and operate consists of the "complicated
Thus, contrary to the Second Circuit's conclusion, it is unnecessary to turn to the legislative history or the administrative interpretation: "if the intent of Congress is clear and unambiguously expressed by the statutory language at issue, that would be the end of our analysis." Zuni Pub. Sch. Dist. No. 89 v. Dep't of Educ., 550 U.S. 81, 93-94, 127 S.Ct. 1534, 167 L.Ed.2d 449 (2007) (citing Chevron, 467 U.S. at 842-43, 104 S.Ct. 2778). Here, no matter how strong the policy arguments for treating traditional cable services and Defendants' service differently, 17 U.S.C. § 111(f)(3) simply does not draw the distinction Plaintiffs urge.
The Second Circuit also followed the Copyright Office in seizing on the words "headends" and "contiguous communities" in the second sentence of the statutory definition, ivi II 691 F.3d at 282, n. 8, and agreed with the district court that "[t]hese two concepts `do not have any application to a nationwide retransmission service such as satellite carriers.'" ivi I, 765 F.Supp.2d at 607-08, ivi II at 284. But the second sentence is not a "definition" of "cable system." The definition is contained in the first sentence. The second sentence merely provides that certain commonly owned cable systems will be treated as a single system for purposes of computing a royalty. To be sure, such language could have some bearing on the meaning of "cable system" if it required understanding "cable system" in a way that excluded Defendants' service. But it does not. It merely provides that certain groups of cable systems will be treated as a single system for royalty computation purposes. It appears that the purpose of the second sentence was to ensure that larger cable systems, required to make larger per-subscriber compulsory royalty payments, would not be able to artificially lower their royalty obligation by treating themselves as multiple, smaller systems. See Columbia Pictures Indus., Inc. v. Liberty Cable, Inc., 919 F.Supp. 685, 688 (S.D.N.Y.1996). A "headend" appears to merely be the facility that receives broadcast signals and transforms them into a format for further distribution. See id. at 689 (holding that where defendant received all broadcasts at a single location and then transmitted them to a network of buildings for further re-transmission, it was using a single headend and liable to pay the larger royalty due from a single, larger cable system).
Whether nominally separate cable systems were served by a common headend or operated under common ownership in contiguous communities logically bears on whether they should be considered a single, larger system for purposes of the royalty determination. But whether systems are contiguous or noncontiguous, or use a single or multiple headends, simply does not bear on whether they meet the definition provided in the first sentence of § 111(f)(3). Nothing about the usage of "headend" in the statute indicates that Defendants' system here does not employ one. Nor does anything about Defendants' system prevent it from operating in "contiguous communities" or frustrate the ability to treat two or more units of Defendants' system as a single system for royalty calculation purposes.
ivi I also relied, as Plaintiffs do here, on the Copyright Office's "concern that an `expansion' of the statutory license to the Internet could potentially place the United States in violation of international treaties." 765 F.Supp.2d at 613 (quoting Satellite Home Viewer Extension and Reauthorization Act Section 109 Report (2008) at 188). If that is correct, corrective legislation
The ivi cases are authority in this Circuit only insofar as they are persuasive, as Plaintiffs identify nothing in Ninth Circuit law that adopts their rules or reasoning. For the reasons stated, they are not persuasive.
The ivi decisions did not address the language in the § 111(f)(3) definition stating that a cable system is a facility that rebroadcasts programs "to subscribing members of the public who pay for such service." Plaintiffs point out that Defendants streamed standard-definition programming for free. Defendants do not contest that they did so, but contend that they did so only as a "free trial" that would be terminated at some unspecified date. Defendants argue that these free retransmissions are not disqualifying. Defendants rely on San Juan Cable LLC v. Telecommunications Regulatory Bd. of Puerto Rico, 598 F.Supp.2d 233 (D.P.R.2009). In San Juan Cable, the plaintiff challenged a plan for the Puerto Rico Telephone Company to provide cable service, arguing that the Cable Act, 47 U.S.C. §§ 521 et seq., and 17 U.S.C. § 111 require paying subscribers, while the challenged plan called for a temporary beta-testing phase during which service would be provided to two hundred of the company's employees free of charge for a minimum of eight weeks. The court rejected that argument, holding that "[b]ecause the trial phase is designed to advance PRTC's construction of a cable service for commercial purposes, the court finds that PRTC is indeed offering a `cable service,' as defined in the Cable Act, through the implementation of its limited test trial." Id. at 236.
Although San Juan Cable is only persuasive authority, and is not on all fours with this case, its reasoning is generally sound. While a system that operated without receiving fees from subscribers would not meet the plain language of the statute, neither does the statute suggest that subscribers must pay for each retransmission made. To the extent that the failure to collect fees for transmissions disqualifies those transmissions from the compulsory license, that does not affect the character of the transmissions for which Defendant has obtained, or will obtain, payment.
The Copyright Office is not the only agency involved in this issue. As the Copyright Office acknowledged, the FCC is considering new regulations in this area. Those potential regulations are relevant in two ways to this case; one direct and one indirect. The direct way is that § 111 requires that the retransmission be permissible under FCC regulations. Currently, Plaintiffs point to no ways in which Defendants are in violation of FCC regulations. There simply do not appear to be any that address Defendants' particular transmissions, and Plaintiffs have made no showing that Defendants are in violation of any more general regulations, for example, of the type we all comply with by operating devices bearing this familiar inscription; "This device complies with part 15 of the FCC Rules. Operation is subject to the following two conditions: (1) This device may not cause harmful interference,
The indirect way that the FCC proceedings are relevant is that the FCC is considering whether internet-based services qualify as "multichannel video programming distributors" under communications law. Media Bureau Seeks Comment on Interpretation of the Terms "Multichannel Video Programming Distributor" and "Channel" as Raised in Pending Program Access Complaint Proceeding, MB Docket No. 12-83, DA 12-507 (released Mar. 30, 2013), available at http://www.fcc.gov/document/media-bureau-seeks-comment-interpretation-mvpd-and-channel. Plaintiffs argue that the FCC's potential future rules are irrelevant, as they will not extend a § 111 license to anybody. Pls.' Opp'n, Docket No. 189 at 21. That might be literally true, but nevertheless the Copyright Office thinks the FCC proceedings are relevant to that question. Letter from J. Charlesworth, Copyright Office General Counsel (July 23, 2014), Pls.' Appx. Ex. 1 at 4, n.3. In any event, the proposed rules appear to provide a parallel path to program access for internet retransmitters. FCC Chairman Wheeler summarized the proposed regulations as follows:
Notice of Proposed Rulemaking ("NPM"), In the Matter of Promoting Innovation and Competition in the Provision of Multichannel Video Programming Distribution Services, MB Docket No. 14-261, FCC 14-210, at 51 (Dec. 19, 2014). Thus, the NPM proposes to modernize the FCC's interpretation of the term "multichannel video programming distributor ("MVPD") by including with its scope services that make available for purchase, by subscribers or customers, multiple linear streams of video programming, regardless of the technology used to distribute the programming. Id. at 2. This is intended to "enable cable operators to untether their video offerings from their current infrastructure, and could encourage them to migrate their traditional services to Internet delivery." Id. at 3. The NPM also requests comment on whether the proposed retransmission consent rules would "force broadcasters to negotiate with and license their signals to potentially large numbers of Internet-based distributors." Id. at 34.
Defendants emphasize this second, indirect involvement by the FCC, and represent that they will comply with any applicable regulations that arise out of this rulemaking. Defs.' Reply, Docket No. 191 at 22. What the FCC might or might not do does not directly impact the analysis here, which is necessarily grounded in current law. Nonetheless, the rulemaking again emphasizes that this is not the only forum in which these issues are being debated, and that this is not the only forum for resolving them.
Given the historic interplay between the courts and Congress concerning broadcast
For now, the Court would hold that (setting aside the above noted compliance failings for which Defendants may need to pay damages for infringement), once compliance under the statute is achieved, Defendants would be entitled to a § 111 license.
For the foregoing reasons, the Court would DENY Plaintiffs' motion, GRANT Defendants' motion, and hold that Defendants are potentially entitled to a § 111 license. However, because: (1) the legal issues are close and of significant commercial importance, both to these parties and to others, (2) the Court disagrees with the Second Circuit's decision in an analogous case, and (3) the resolution of the issues presented on summary judgment is likely to be determinative in this action, the Court would authorize an immediate appeal to the Ninth Circuit pursuant to Fed. R. Civ. P. 54(b), Fed. R. App. P. 5, and 28 U.S.C. § 1292(b). The Court would also preserve the status quo because Defendants have not yet been able to timely or consistently comply with the procedures attendant to a § 111 license. The Court therefore would maintain the existing preliminary injunction pending the outcome of the appeal. Finally, because of the relative importance of the issues decided here compared to those remaining in the case, the Court would stay this action pending the outcome of the appeal.
The Court would order the parties to collaborate on a joint form of judgment and file it no later than July 23, 2015, or if they are unable to agree, to submit redline comparisons of their competing versions no later than that date.
While legislative history aids the interpretation of a statute's language and effect, courts "cannot ignore clear statutory text because of legislative floor statements." United States v. Hall, 617 F.3d 1161, 1167 (9th Cir.2010), aff'd, ___ U.S. ___, 132 S.Ct. 1882, 182 L.Ed.2d 840 (2012). Additionally, these statements were made decades after § 111's enactment. Plaintiffs argue that "[w]hen Congress is aware of an agency's interpretation of a statute and takes no action to correct it while amending other portions of the statute, it may be inferred that the agency's interpretation is consistent with congressional intent." Pls.' Br., Docket No. 183 at 13 (quoting Greenhorn Farms v. Espy, 39 F.3d 963,965 (9th Cir.1994)). That certainly applies in some circumstances, but Greenhorn involved an agency's actual refusal to pay a farmer under a disaster relief program, which differs from the mere opinion given by the Copyright Office in the present arena, which had no direct effect on the ability of an internet retransmitter to operate. Plaintiffs also cite Utah v. Evans, 536 U.S. 452, 472, 122 S.Ct. 2191, 153 L.Ed.2d 453 (2002), but there, the Court ultimately did "not rely" on the agency interpretation, even though the statute in question expressly delegated authority to the Secretary of Commerce to conduct the census "in such form and content as he may determine." No such express gap-filling delegation has been identified here.
