NAOMI REICE BUCHWALD, District Judge.
Plaintiffs, major copyright owners in television programming, have moved to preliminarily enjoin defendants ivi, Inc. ("ivi," with a lowercase "i") and its chief executive officer, Todd Weaver ("Weaver"),
Plaintiffs are leading producers and owners of copyrighted television programming, including (1) broadcast television networks (ABC, CBS, CW, FOX, NBC, Telefutura, Telemundo, and Univision), (2) distributors of non-commercial education programming (PBS, WNET.ORG, and WGBH), (3) a major professional sports league (Major League Baseball), (4) top motion picture studios (Walt Disney Studios, 20th Century Fox, and NBC Universal), and (5) individual New York and Seattle broadcast television stations owned and operated by the named plaintiffs
ivi is a company that captures over-the-air broadcasts of plaintiffs' programming and simultaneously, without plaintiffs' consent, streams those broadcast signals over the Internet to subscribers who have downloaded the ivi TV player. Declaration of Todd Weaver in Opposition to Motion for Preliminary Injunction ("Weaver Decl.") ¶¶ 2-3. Specifically, ivi captures signals transmitted by FCC-licensed broadcast stations in Seattle, New York, Chicago, and Los Angeles. Weaver Decl. ¶ 3; Transcript of Oral Argument ("Transcript") at 3.
ivi's service is limited to the simultaneous retransmission over the Internet of plaintiffs' copyrighted programming in real time. According to defendants, ivi operates through a "closed" system in which the programming is provided exclusively to its paying subscribers. The content is "encrypted and only decrypted and formatted in small increments shortly before viewing by ivi subscribers. Thereafter the content is rendered unusable, removed, and cannot readily be captured or passed along by consumers." Weaver Decl. ¶ 5.
A significant difference between watching programming through ivi rather than on a traditional television is that instead of only being able to access what is currently being offered by the viewer's local stations, ivi's customers can watch whatever is being
Defendants do not obtain plaintiffs' consent to use their programming, unlike traditional cable operators who are obligated to acquire retransmission consent under the Communications Act, 47 U.S.C. § 325.
After sending several cease-and-desist letters, plaintiffs brought the instant suit objecting to the unsanctioned public performance of their copyrighted works.
Defendants claim that they are entitled to a compulsory license to perform plaintiffs' programming pursuant to Section 111 of the Copyright Act, 17 U.S.C. § 111 ("Section 111"). This statute allows "cable systems" in compliance with the rules and regulations of the FCC to perform plaintiffs' programming as long as they make payments to the Copyright Office as determined by the statute.
Section 111(c)(1) of the Copyright Act provides that, subject to certain conditions:
17 U.S.C. § 111(c)(1). The statute later defines "cable system" as:
17 U.S.C. § 111(f)(3).
Defendants argue
To place defendants' argument in a real world context, they assert that for the payment of approximately $100 a year to the Copyright Office (the payment for a
For the reasons discussed below, we conclude that ivi is not a cable system under Section 111, and thus do not reach the question of whether they are governed by the Communications Act.
Plaintiffs filed their complaint seeking damages and injunctive relief on September 28, 2010. Plaintiffs' complaint notified the Court of a declaratory action brought by ivi days earlier in the Western District of Washington.
In fact, this result eventuated. On January 19, 2011, the Western District of Washington dismissed ivi's declaratory action as an impermissible anticipatory filing. ivi, Inc. v. Fisher Comms., Inc., Case No. C10-1512JLR, 2011 WL 197419, 2011 U.S. Dist. LEXIS 4925 (W.D.Wash. Jan. 19, 2011). The question of forum having been resolved, this Court undertook to schedule oral argument on plaintiffs' motion for a preliminary injunction. Oral argument was held on February 2.
The standard for the issuance of a preliminary injunction in a copyright case has recently been reviewed in Salinger v. Colting, 607 F.3d 68 (2d Cir.2010). A preliminary injunction is appropriate when: (1) the plaintiff demonstrates either a likelihood of success on the merits or sufficiently serious questions going to the merits and a balance of hardships tipping decidedly in the plaintiff's favor; (2) the plaintiff demonstrates that he is likely to suffer irreparable injury in the absence of an injunction; (3) the balance of hardships between the plaintiff and defendant tips in the plaintiff's favor; and (4) the "public interest would not be disserved by the issuance of a preliminary injunction." Id. at 79-80 (citing eBay, Inc. v. MercExchange, LLC, 547 U.S. 388, 126 S.Ct. 1837, 164 L.Ed.2d 641 (2006)). As a result of Salinger, a preliminary injunction is no longer presumed to be the appropriate remedy in a copyright action upon a demonstration that there is a likelihood of success on the merits. Id. at 74-79. Rather than relying on a presumption of irreparable harm, as was the practice prior to eBay and Salinger, plaintiffs must show that "on the facts of their case, the failure to issue an injunction would actually cause irreparable harm." Id. at 82.
In a motion for a preliminary injunction, the burden lies with the moving party to demonstrate the four requirements identified above. See Salinger, 607 F.3d at 79-80. However, in determining whether plaintiffs here have met their burden of demonstrating a likelihood of success on the merits, we are cognizant of the fact that plaintiffs have demonstrated a prima facie case of copyright infringement, since it is undisputed that they own valid copyrights and that ivi is making public performances of their works without their consent. See, e.g., Warner Bros. Entm't Inc. v. RDR Books, 575 F.Supp.2d 513, 533 (S.D.N.Y.2008). Thus, defendants are liable for copyright infringement under 17 U.S.C. § 106(4) unless they meet a statutory exception. The burden of proof rests with defendants to demonstrate that they have a statutory defense. Cf. Infinity Broadcasting Corp. v. Kirkwood, 965 F.Supp. 553, 555 (S.D.N.Y.1997) (referring to "fair use" and "carrier defenses," the latter being another exception found in Section 111), rev'd on other grounds, 150 F.3d 104 (2d Cir.1998); National Football League v. Insight Comms. Corp., 158 F.Supp.2d 124, 126 (D.Mass.2001) (referring to the carrier exception of Section 111 as an "affirmative defense").
A review of the historic context, statutory text, and administrative record compels a finding that ivi is not a cable system under Section 111. Absent defendants' skewed interpretation of the statutory text and administrative record, there is absolutely no basis for holding otherwise.
In the thirty-five years since the passage of Section 111, many companies have constructed business models revolving around the use of new technologies and the statutory license. Some new technologies have been found to fall within Section 111. Others have motivated Congress to devise separate licensing schemes to address the unique issues they present. No technology, however, has been allowed to take advantage of Section 111 to retransmit copyrighted programming to a national audience while not complying with the rules and regulations of the FCC and without consent of the copyright holder.
Cable television initially developed as a means of facilitating reception of television stations by households who were unable to receive satisfactory over-the-air signals because of their geographic location. In other words, cable operators provided technology that brought television signals to households which otherwise could not receive broadcast reception. In fact, up until the 1970s, cable television simply retransmitted broadcast signals, rather than offering the lineup of original channels and programming that is typical of cable television today.
In 1968 and 1974, two Supreme Court decisions held that cable systems were not "performing" broadcast programming when retransmitting its signals, and as a result were not infringing any copyrights under the Copyright Act of 1909, the then governing statute. Teleprompter Corp. v. Columbia Broad. Sys., Inc., 415 U.S. 394, 94 S.Ct. 1129, 39 L.Ed.2d 415 (1974) (retransmission of distant television station signals); Fortnightly Corp. v. United Artists Television, 392 U.S. 390, 88 S.Ct. 2084, 20 L.Ed.2d 1176 (1968) (retransmission of local television station signals). As a result, cable systems had essentially received authorization to retransmit broadcast television programming without incurring any costs to the copyright owners.
Congress resolved to correct this perceived injustice by statute. Recognizing that cable systems were providing a societal benefit by facilitating greater access to broadcast television, Congress sought to create a system balancing copyright owners' entitlement to compensation for the use of their works with the promotion of cable systems. Simply making cable retransmissions a violation of the Copyright Act could have practically destroyed the cable business, since "cable operators typically carried multiple broadcast signals containing programming owned by dozens of copyright owners" and it was "not realistic for hundreds of relatively small cable operators to negotiate individual licenses with dozens of copyright owners." SHVERA Report at 3. Congress recognized the limitations of the free market and, believing that it would be unable to function on its own, resolved to create a public market.
The result of Congress' determination to compensate copyright owners while ensuring
Congress, however, did not legislate on a blank slate. The statutory license did not constitute the only regulation of cable systems. Congress was well aware of the significant role that the Communications Act and the rules of the FCC played in regulating the cable industry, and anticipated that the compulsory licensing system and the Communications Act would complement each other. Furthermore, Congress understood that the FCC regulated the cable industry as a "highly localized medium of limited availability." 67 Fed. Reg. 18705, 18707 (Apr. 17, 1997). The interaction between these regulatory schemes will be addressed more fully below.
Indeed, it is impossible to evaluate the outer boundaries of Section 111 without considering this historical context. It is "axiomatic . . . that in fulfilling our responsibility in interpreting legislation, we are not guided by a single sentence or member of the sentence but (rather) look to the provisions of the law, and to its object and policy." Langhorne v. Ashcroft, 377 F.3d 175, 180 (2d Cir.2004) (parentheses in original) (quoting Richards v. United States, 369 U.S. 1, 11, 82 S.Ct. 585, 7 L.Ed.2d 492 (1962)). The need to analyze congressional objectives and policy is particularly important when evaluating the limited exceptions to the public performance right found in Section 111. As Judge Kaplan noted in a case involving the passive carrier exception of Section 111(a)(3), and quoting the Second Circuit, we are "obliged to take into account" the "common sense" of the statute and "practical considerations of the suggested interpretations." Infinity Broadcasting Corp. v. Kirkwood, 63 F.Supp.2d 420, 426 (S.D.N.Y. 1999) (quoting Eastern Microwave, Inc. v. Doubleday Sports, Inc., 691 F.2d 125, 127 (2d Cir.1982)). In that case, Judge Kaplan declined to allow a businessman engaged in the retransmission of copyrighted materials to seek refuge under the carrier exception, noting that to hold otherwise would "threaten considerable mischief" in a world undergoing an "era of rapid technological change" and "would do violence to a fundamental premise of the 1976 revision" to the copyright law." Id.
Furthermore, we are mindful of the fact that in creating Section 111, Congress made an exception to the Copyright Act's exclusive right to public performance. In doing so, it took a right that is fundamentally exclusive and private and propelled it into the public market. Compulsory licenses are a "limited exception to the copyright holder's exclusive right to decide who shall make use of his [work]," and courts must not "expand the scope of the compulsory license provision beyond what Congress intended . . . nor interpret it in such a way as to frustrate that purpose." Fame Publishing Co. v. Alabama Custom Tape, Inc., 507 F.2d 667, 670 (5th Cir.1975).
57 Fed. Reg. 3284 (Jan. 29, 1992).
Given these guiding principles, the specific aim of the compulsory license for cable systems, and Congress' reliance on the Communications Act and understanding of the cable industry as a highly localized medium, we cannot conclude that Congress intended to sanction the use of a compulsory license by a company so vastly different from those to which the license originally applied. ivi's architecture bears no resemblance to the cable systems of the 1970s. Its service retransmits broadcast signals nationwide, rather than to specific local areas. Finally, unlike cable systems of the 1970s, ivi refuses to comply with the rules and regulations of the FCC. As the Second Circuit has noted, we must consider the practical impact of our decisions construing Section 111 in a technological world unimaginable to Congress in 1976. An opposite finding in this case would surely "threaten considerable mischief." See Infinity Broadcasting Corp., 63 F.Supp.2d at 426.
We do not reach this conclusion solely on our view of congressional intent. We also rely heavily on the thoroughly reasoned and extremely persuasive statements of the Copyright Office, as well as significant clues from the statutory text.
We now turn to a discussion of the Copyright Office's interpretations of Section 111.
The Copyright Office is the administrative agency charged with overseeing the compulsory license scheme of Section 111. See Cablevision Sys. Dev. Co., 836 F.2d at 608 (D.C.Cir.1988) (noting that the Copyright Office has the authority to issue binding interpretations of the Copyright Act and is entitled to deference when appropriate). It is the unwavering opinion of the Copyright Office that a distributor of broadcast programming over the Internet does not qualify for a compulsory license as a cable system under Section 111.
As early as 1991, the Copyright Office issued statements and engaged in regulatory activity which strongly undercut defendants' arguments before this Court. By 1999, the Copyright Office explicitly rejected the claim that Internet retransmission services could qualify for a Section 111 license.
Defendants' argue that the Copyright Office's most recent statements support their position and that there is "no contrary Copyright Office ruling entitled to deference." Defs.' Opp'n at 8-11. Both
The interpretations of the Copyright Office merit substantial weight when the Skidmore factors are applied. The Office has demonstrated extreme diligence and thoughtfulness in gathering comments, doing
The record that follows will demonstrate how thoroughly the Copyright Office has engaged with these issues. It will also incontrovertibly reflect three findings of the Copyright Office. First, a service providing Internet retransmissions cannot qualify as a cable system. Second, the compulsory license for cable systems is intended for localized retransmission services, and cannot be utilized by a service which retransmits broadcast signals nationwide. Third, the rules and regulations of the FCC, even if found not to be binding on a service such as ivi, are integral to the statutory licensing scheme established in 1976.
Our review of the Copyright Office's regulatory activity begins with the rulemaking process it initiated in 1986 to determine the applicability of Section 111 to satellite master antenna television
While the Copyright Office was engaged in this rulemaking process, Congress created a separate license for satellite carriers, found at 17 U.S.C. § 119 ("Section 119"). However, given the temporary nature of that statute,
In 1991, the Copyright Office issued a notice of proposed rulemaking in which it proposed new regulations governing the conditions under which SMATV systems could qualify as a cable system for Section 111, announced a policy decision that satellite carriers are not eligible for the license in Section 111, and declared a preliminary policy decision that MMDS services are also not eligible. In 1992, the Copyright Office affirmed its position that satellite carriers were not cable systems within the meaning of Section 111 in a final rulemaking. 57 Fed. Reg. 3284 (Jan. 29, 1992) (codified at 37 C.F.R. § 201.17(l)). This determination came on the heels of the Eleventh Circuit's decision in National Broadcasting Company, Inc. v. Satellite Broadcast Networks, Inc., 940 F.2d 1467 (11th Cir.1991), which had overturned a district court and found that satellites did fit within the Section 111 definition of a cable system.
Engaging in a thorough, point-by-point refutation of the Eleventh Circuit's decision, the Copyright Office noted several points that are particularly relevant to the factual context currently before us.
The Copyright Office first criticized the Eleventh Circuit for its failure to address the fact that Section 111 is "clearly directed at localized transmission services." 57 Fed. Reg. 3284 (Jan. 29,1992). The Office concluded that "[e]xamination of the overall operation of section 111 proves that the compulsory license applies only to localized retransmission services regulated as cable systems by the FCC." The Office focused on the second part of the definition in Section 111(f), which refers to "headends" and "contiguous communities." These two concepts "do not have any application to a
The Copyright Office also posited that the operation of Section 111 was "hinged on the FCC rules regulating the cable industry." Id. Since satellite carriers were not regulated by the FCC, Congress did not intend for them to be covered. The Office noted that when Congress passed the Copyright Act, its "understanding of the regulation of the cable industry was naturally based on FCC policy and precedent." Id. Thus, the Office asserted that it was "reasonable to conclude that the copyright compulsory license was adopted to apply to those same types of services then regulated by the FCC as cable systems." Id.
The 1992 final rulemaking also affirmed the Copyright Office's preliminary policy position pertaining to MMDS
In 1997, the Copyright Office concluded the rulemaking process for SMATV, which involves the use of cables for distribution to suppliers, finalizing its conclusion that it could qualify as a cable system under Section 111.
62 Fed. Reg. 18705, 18706 (Apr. 17, 1997).
We conclude our review of the Copyright Office's application of Section 111 to new, non-Internet technologies by noting a prescient statement from the 1992 final rulemaking on satellites and MMDS. In rejecting arguments that it should use public policy considerations to determine that MMDS technology could qualify for the compulsory license,
57 Fed. Reg. 3284 n. 5 (Jan. 29, 1992) (emphasis added).
To our knowledge, the Copyright Office's first statement pertaining to whether Internet retransmissions could qualify as a cable system may be found in a 1997 report to Congress reviewing the statutory scheme governing the retransmission of
In 2000, the Register of Copyrights was invited to testify before the House Subcommittee on Courts and Intellectual Property on the topic of "copyrighted broadcast programming on the Internet." During her testimony, the Register first addressed Congress' reauthorization in 1999 of the compulsory license for satellite carriers found in Section 119. According to the Register, the subject of Internet retransmissions was not addressed during each chambers' internal debate on the reauthorization. However, toward the end of the House and Senate conference an amendment was proposed that would "clarify that the section 111 cable compulsory license did not apply to broadcast retransmissions via the Internet." Copyrighted Broadcast Programming on the Internet: Hearings Before the Subcomm. on Courts and Intellectual Prop. of the House Comm. on the Judiciary, 106th Cong. (2000) (statement of Marybeth Peters, Register of Copyrights) ("Peters Statement"). Several Internet companies objected, since they thought they might ultimately desire to use the cable compulsory license for Internet retransmissions, much as ivi is attempting to do now.
At her testimony in 2000, the Register of Copyrights stated that at the time of the debate the Office thought the amendment was of "little consequence, since we believed that the cable compulsory license could not reasonably be interpreted to include Internet retransmissions." She also noted that as the debate surrounding the amendment grew, she wrote a letter to the Chairman and Ranking Member of the House Subcommittee on Courts and Intellectual Property which expressed her belief that the proposed amendment was "indeed a clarification, and not a change of existing law." Id. The letter stated:
Letter of Marybeth Peters, Register of Copyrights, to the Honorable Howard Coble (Nov. 10, 1999).
Ultimately, because of what the Register would describe in 2000 as an "inability to resolve the issue in the remaining days of the last session of Congress, the amendment was removed before the legislation was enacted." Peters Statement.
The Register further informed Congress that the Copyright Office thought that no such legislation should be enacted. The Office's principal concern was the perceived lack of ability to control the geographic scope of Internet retransmissions. Not only did this raise the possibility of piracy, but it also would place the United States dangerously close to violating its obligations under international treaties governing intellectual property rights, such as the Berne Convention. Id.
A report required by the 2004 extension and reauthorization of the satellite license provided another opportunity for the Copyright Office to set forth its views on the statutory licenses and its application to new technologies. Congress ordered the Copyright Office to provide a report on the Office's "findings and recommendations on the operation and revision of the statutory licenses under sections 111, 119, and 122 of title 17, United States Code." Satellite Home Viewer Extension and Reauthorization Act, Pub. L. No. 108-447, § 109, 118 Stat. 3393, 3407-08 (2004). This report, entitled the "Satellite Home Viewer Extension and Reauthorization Act Section 109 Report" ("SHVERA Report"), was to be submitted no later than June 30, 2008.
Both parties rely on this report in pressing their arguments to this Court. Defendants argue that the Report represents a "retreat" by the Office from its earlier statements concluding that Internet retransmissions could not qualify for a Section 111 license. Defendants are able to make such a claim only by cherry-picking quotations and ignoring the repeated and unambiguous assertions that Internet retransmission such as ivi's cannot qualify for a compulsory license under Section 111.
A review of the SHVERA Report makes clear that not only has the Copyright Office's position on the applicability of the compulsory license to Internet retransmissions remained consistent, but also that it essentially views the question as settled. Furthermore, while the SHVERA Report does not state that only entities regulated by the FCC could qualify as cable systems under Section 111, it provides no support for the notion that entities who refuse to comply with the rules and regulations of the FCC can obtain a statutory license.
In order to prepare the SHVERA Report, on April 16, 2007 the Copyright Office released a Notice of Inquiry in which it sought public comments on issues relating to the "operation of, and continued necessity for, the cable and satellite statutory licenses." 72 Fed Reg. 19,039 (Apr. 16, 2007). In a section of this Notice entitled "expansion," the Office noted that it was "obligated to provide Congress with recommendations based on current circumstances," and thus was seeking "comment on whether the current statutory licensing schemes should be expanded to include the delivery of broadcast programming over the Internet or through any video delivery system that uses Internet Protocol."
It is clear that at the time of the Notice of Inquiry the Copyright Office had not altered its view of Internet retransmissions. However, it sought comments on Internet Protocol television, Internet retransmissions, the potential usefulness of a statutory license in the Internet setting, and whether there was any evidence of marketplace failure necessitating such a license.
The final SHVERA Report contained one chapter dedicated to a discussion of new distribution technologies, including the Internet. ivi would fit into this chapter. The chapter opens with the Report's "principal" finding:
SHVERA Report at 181 (emphasis added).
Not only did the Copyright Office conclude that Internet retransmissions were not substantially similar to pre-existing technologies and thus could not qualify as cable systems under current law, but the Office strongly recommended against new legislation expanding the licensing scheme to include Internet retransmissions.
SHVERA Report at 188 (emphasis added).
The Office also noted its concern that an "expansion" of the statutory license to the Internet could potentially place the United States in violation of international treaties. SHVERA Report at 188; see, e.g., AUSTRALIA FTA, U.S.-Austl., Article 17.4.10(b) (". . . neither Party may permit the retransmission of television signals (whether terrestrial, cable, or satellite) on the Internet without the authorisation of the right holder or right holders, if any, of the content of the signal and of the signal. . . .").
In the SHVERA Report, the Copyright Office was asked to provide an authoritative ruling on whether a proposal of the Capitol Broadcasting Company ("CBC") could qualify as a cable system. CBC offered a meticulous explanation of its business model. It suggested that it would comply with the FCC regulations under the Communications Act, and detailed the extensive, three-tiered security measures it would undertake to ensure that "its technology will confine Internet retransmissions of television station signals within each station's local television market." SHVERA Report at 190-191.
The Office was not persuaded. It noted that while CBC offered a "novel and interesting approach for distributing broadcast content over the Internet," the Office is "reluctant to explicitly state that its planned system clearly fits the definition of cable system under Section 111 of the Act because its architecture is very different from that of incumbent cable systems." SHVERA Report at 193. The Office elaborated that while CBC was working to ensure "massive signal security," it could not "immunize the system from the potential pitfalls of a distribution model that essentially relies on the Internet." Id. Given that its system relied on the Internet, it need only be "cracked" before "content leakage will ensue and massive unauthorized redistribution will occur."
The fact that the Copyright Office was unwilling to find that CBC qualified as a
Bottom line: there can be no doubt regarding how the Copyright Office would answer the question before this Court.
As noted above, the Copyright Office did endorse the notion that the distribution services which utilize Internet protocol could qualify as a cable system. Specifically, the Copyright Office evaluated AT & T's U-Verse TV and Verizon's FiOS.
We will now address two issues central to the Copyright Office's interpretations of Section 111 which we find particularly compelling. First, the fact that ivi retransmits plaintiffs' services nationwide, rather than to defined, local areas as is the case for traditional cable systems. Second, ivi's refusal to comply with the rules and regulations of the FCC.
We wholly agree with the analysis of the Copyright Office that the compulsory license cannot be utilized by a service which retransmits broadcast signals nationwide.
At oral argument, defense counsel noted that his "trouble with the local-only aspect is the very purpose of the statutory license in the first place was to extend signals to places beyond the reach of the antennas from which the signals were picked up. All of it was distant . . . all of it was going outside of the local community." Transcript at 19. It is true that the statute was aimed at bringing signals to areas they otherwise could not reach. In that narrow sense, the signals were being brought out of their "local" areas. However, it is logically flawed to conclude that the compulsory license allows companies to capture the signals directed at one area and bring them all over the country, to distant areas and time zones. As the Copyright Office has noted, "at the time Congress created the cable compulsory license, the FCC regulated the cable industry as a highly localized medium of limited availability, suggesting that Congress, cognizant of FCC's regulations and the market realities, fashioned a compulsory license with a local rather than a national scope." 62 Fed. Reg. 18705, 18707 (Apr. 17, 1997).
The rules and regulations of the FCC were integral to Congress' statutory scheme. We should note here that we do not hold that ivi is governed by the Communications Act and therefore in violation of plaintiffs' copyrights because its retransmissions are impermissible under the rules and regulations of the FCC. Such a finding would appear to be at odds with the views of both the Copyright Office,
While we recognize the ambiguity of Congressional inaction, nonetheless we find it significant that Congress has not taken any action over the decade since the Copyright Office first rejected the applicability of Section 111 to Internet retransmissions. This is despite the fact that Congress has actively legislated in response to the viewpoints of the Copyright Office in the past and has revised other aspects of Section 111 during this time. In fact, as far as this Court is aware, not a single member of Congress has even introduced legislation which would alter Section 111 in such a way that would positively impact ivi. In light of this history, it certainly appears that Congress has acquiesced to the prevailing administrative view, particularly given the consistency and resoluteness with which it has been established.
In the face of this record, defendants are forced to argue that the definition of cable system is "remarkably simple and broad." Transcript at 18. In making this assertion, they rely exclusively on the first sentence of the definition of cable system in Section 111(f)(3), namely that a cable system must be a "facility, located in any state . . . that in whole or in part receives signals transmitted or programs broadcast. . . and makes secondary transmissions of such signals or programs by wires, cables, microwave, or other communications for channels to subscribing members of the public who pay for such service."
Defendants' view of the text is unpersuasive. For one, they omit the second sentence of the definition in Section 111(f)(3), which refers to concepts such as "headends" and "contiguous communities" which as the Copyright Office has noted bear no relationship to technologies such as ivi.
In any event, it is far from clear that ivi fits "neatly" within the first sentence of the definition. For example, as plaintiffs' point out, it is not obvious that ivi is a "facility" which both "receives" signals and "makes" secondary transmissions. If one were to subscribe to the view of the FCC in Sky Angel, it could well be that the viewer's Internet service provider is making the secondary transmission, not ivi. Furthermore, as the Copyright Office expressed it is relevant that ivi does not own any transmission facilities, but rather hosts and distributes "video programming through software, servers, and computers
As plaintiffs argue, defendants' view of Section 111 essentially means that anyone with a computer, Internet connection, and TV antenna can become a "cable system" for purposes of Section 111. It cannot be seriously argued that this is what Congress intended.
When weighed against a lengthy and unequivocal administrative record, a reading of the statute consistent with Congress' purpose as well as the practical implications of this decision, and the fact that Congress has remained silent in the face of consistent and ardent Copyright Office declarations, defendants' limited reading of the text does not persuade us that ivi is a cable system under Section 111. ivi streams signals to a nationwide audience, without copyright owners' consent or compliance with the rules and regulations of the FCC. Allowing ivi to continue its retransmissions would stretch the compulsory license far beyond the boundaries that the enacting or any later Congress could have ever imagined, and would "do violence to [the] fundamental premise of the 1976 revision" which sought to ensure that copyright owners would be compensated for the use of their works. See Infinity Broadcasting, 63 F.Supp.2d at 426.
Thus, plaintiffs have easily met their burden of likelihood of success on the merits.
Our next obligation is to determine whether the plaintiffs will suffer irreparable harm in the absence of a preliminary injunction. Pursuant to the Supreme Court's decision in eBay and its application by the Second Circuit in Salinger, we may not simply presume irreparable harm. Salinger, 607 F.3d at 82 (citing eBay, 547 U.S. at 393, 126 S.Ct. 1837). Plaintiffs must demonstrate that, on the facts of their specific case, the absence of a preliminary injunction would actually cause irreparable harm. Id. Thus, a court must "actually consider the injury the plaintiff will suffer if he or she loses on the preliminary injunction but ultimately prevails on the merits, paying particular attention to whether the remedies available at law, such as monetary damages, are inadequate to compensate for that injury." Id. at 81 (internal quotation and citation omitted).
According to the Second Circuit, harm might be "irremediable, or irreparable, for many reasons, including that a loss is difficult to replace or difficult to measure, or that it is a loss that one should not be expected to suffer." Id. In copyright cases, harm can often be irreparable either in light of possible market confusion, because it is "notoriously difficult" to prove the loss of sales due to infringement, and because of loss of the First Amendment "right not to speak." Id. (internal quotations and citations omitted).
Plaintiffs' various declarations identify numerous harms, which they narrow down into six specific claims in their memorandum of law: (1) destruction in value of licensed programming as a result of greater access to the programming should ivi's service continue; (2) disruption of advertising models and loss of revenue since viewers will now be able to watch television programs when they are shown in Seattle, New York, Chicago, or Los Angeles, and thus potentially at times other than when they are available from local broadcasters with local advertising; (3) interference with distribution agreements
Plaintiffs' alleged harms thus fall into two broad categories: one, there is the financial harm, which arises out of the fact that ivi's streaming of their television programming will undermine the value of that content and the ability of plaintiffs to reap the profits from their investment; and two, there is the harm associated with the loss of control over their programming and the possibility of viral infringement.
Plaintiffs claim that ivi's existence threatens their ability to profit from their works by diminishing their value through greater access and interfering with advertising models. This harm is analogous to the claim often found in cases alleging that violations of the reproduction right by an infringing work will cause a loss of sales. If ivi continues its infringement, viewers will be able to obtain plaintiffs' programming from unsanctioned sources, and thus the ability of plaintiffs to profit from sanctioned sources would inevitably drop. Additionally, because viewers will be able to watch stations outside of their geographic area, the amount that local advertisers would be willing to pay to advertise during plaintiffs' broadcasts would fall. These losses are "notoriously difficult" to prove and nearly impossible to quantify, and accordingly are considered irreparable. See, e.g. Salinger, 607 F.3d at 82 (loss of sales due to infringement is "notoriously difficult" to prove); Pearson Educ., Inc. v. Vergara, 09 Civ. 6832(JGK)(KNF), 2010 WL 3744033, 2010 U.S. Dist. LEXIS 101597 (Sept. 27, 2010) (post-Salinger case holding that decline in sales of textbook as a result of greater access to infringing works is an injury difficult to quantify and which plaintiffs should not be expected to suffer).
Defendants' various responses to plaintiffs' allegations of financial harm are unavailing. In answer to the claim that ivi's service will diminish the amount that plaintiffs will be able to charge licensed cable operators for their programming, defendants aver that plaintiffs are merely complaining that ivi provides increased competition, which could ultimately lead to lower prices. They argue that this is not a legitimate harm because any time a company exercises its right to a statutory license, this issue arises. According to defendants:
Defs.' Opp'n at 19
This argument proceeds on the fallacy that ivi qualifies as a cable system. Obviously, if ivi were a cable system, plaintiffs could not complain about lost licensing opportunities and diminution of value as a
Defendants assert a similar and equally meritless argument in order to challenge the claim that ivi's activities unfairly compete with websites that are owned or licensed by plaintiffs and which carry plaintiffs' programming. They state that if ivi unfairly competes with licensed websites, then "every cable system, satellite system, recording device, SlingBox, and on-demand service would also interfere with such websites." Defs.' Opp'n at 21. They continue that "this same content is already available in so many ways and in so many places, including the Internet, that ivi's service cannot possibly interfere with any of it." Defs.' Opp'n at 21.
We will not accept any argument premised on the fact that preexisting technologies operating within the law may potentially devalue plaintiffs' copyrights as a basis to justify defendants' conduct which is unsanctioned and contrary to law.
Defendants also take issue with the general notion that ivi could "destroy" the value of plaintiffs' content. They argue that ivi is far too small, and that since plaintiffs' programming is already given away over the air and through the internet and retransmitted by thousands of cable systems, "adding ivi to the mix can scarcely `destroy' the value of the programming content." They even contend that the plaintiffs' use of the word "destroy" underscores that plaintiffs' alleged harms are hyperbolic and "utterly abstract." Defs.' Opp'n at 19.
This is a recasting of the same faulty arguments rejected above. Defendants cannot seriously argue that the existence of thousands of companies who legitimately use plaintiffs' programming and pay full freight means that ivi's illegal and uncompensated use does not irreparably harm plaintiffs. Likewise, they cannot contend that since ivi is small and plaintiffs are large, they should be allowed to continue to steal plaintiffs' programming for personal gain until a resolution of this case on the merits. Such a result leads to an unacceptable slippery slope.
Lastly,
In any event, plaintiffs' primary concern regarding advertising revenue is that
Plaintiffs' complain that defendants put them in a precarious position and divest them of control over their content by streaming it on the Internet without allowing plaintiffs any control over copy protection measures. Furthermore, there is a concern that since plaintiffs have no control over ivi's distribution, they cannot prevent their works from being retransmitted abroad, which may violate international treaties.
While these are potentially serious harms, this is not the appropriate time to address these complex and technical issues. Suffice it to say that plaintiffs have amply shown irreparable harm in other ways, and that is sufficient.
Above all else, defendants rely on their belief that all of plaintiffs' alleged harms are speculative and hypothetical. This contention is made in their memorandum, and at oral argument counsel triumphantly insisted that in the four months since briefing, there have been "no harms" and that there was no "submission of any [of] the speculative alleged harms coming true." Transcript at 3. Counsel argued that instead of the "imminent, substantial, and real" harms required by case law, "before the Court are a listing of things that are all hypothetical and speculative. As far as we are aware, none of those has occurred or genuinely is likely to occur." Transcript at 21-22.
It appears obvious to us that defendants have unwittingly demonstrated why the harm they present to plaintiffs is irreparable. There can be no dispute that by taking away viewers from sanctioned entities which compensate or otherwise obtain permission from plaintiffs for the use of their works, defendants are intruding on plaintiffs' copyrights and taking away business opportunities. This being the case, one might wonder why it is that plaintiffs have not "submitted" specifically identifiable, enumerated, and quantified harms, as defendants seem to believe is necessary. The logical conclusion is that plaintiffs have not made such "submissions" because they cannot specifically demonstrate or quantify the harm that ivi has caused. There is no way to know how many people have used ivi rather than sanctioned methods to watch plaintiffs' programming, or how many people have used ivi to watch programming that should not have been available in their geographic area. Furthermore, even if we could determine these numbers, we would still not be able to ascertain the precise financial impact on the plaintiffs.
Defendants contend that because plaintiffs cannot specify the harm, it must be speculative. In contrast, we find that it is because the harms are unquantifiable, and thus irreparable.
The next consideration is a balance of hardships between plaintiffs and defendants. Plaintiffs, as addressed above, have adequately identified the hardships they will face without an injunction. ivi, on the other hand, argues that an injunction would be "catastrophic" and would "effectively put ivi out of business, most likely permanently." Defs.' Opp'n at 5.
While it is a practical hardship for ivi to go out of business, it is not a
We note that defendants are placed in the uncomfortable position of having to argue that they will suffer immense hardship as a result of an injunction because their use of plaintiffs' programming is popular, and that without the plaintiffs' programming there will not be enough demand for ivi's service. Essentially, defendants argue that the difference between profitability and bankruptcy is the ability to retransmit plaintiffs' programming. This argument underscores the threat ivi poses to the plaintiffs. ivi's popularity means that viewers who would otherwise access plaintiffs' works through legal means can now access them through ivi. Such unsanctioned use is precisely the harm that the copyright laws seek to avoid, subject to the limited situations where a work can claim to be a fair use, seek refuge in a compulsory license, or find some other limited defense to the copyright laws.
Lastly, we must consider the public interest. In so doing, we note that the object of copyright law is to "promote the store of knowledge available to the public." Salinger, 607 F.3d at 82. To the extent that the copyright law "accomplishes this end by providing individuals a financial incentive to contribute to the store of knowledge, the public's interest may well be already accounted for by the plaintiff's interest." Id.
In this case, the relevant "store of knowledge" is network television programming, and the public interest is clearly protected by issuing an injunction. If plaintiffs lose control over their products or potential revenue sources, they will lose valuable incentives to continue to create programming. In contrast, ivi simply provides an additional way, among many others, for consumers to view the copyrighted programming created by plaintiffs. Significantly, however, plaintiffs currently retain control over how and where this material gets distributed, including Internet retransmissions, through negotiated licenses and other mechanisms.
Defendants and amici argue that an injunction in this case would be anti-competitive, and thus against the public interest. In the copyright context this is not a significant concern. Copyright law by definition allows for monopolies and anti-competitive behavior. The premise of the copyright laws is to award the owner a set of exclusive rights in order to incentivize future authors and creators. This is why the framers granted Congress the power to enact copyright laws, and why every Congress since 1790 has seen fit to do so.
Furthermore, the Copyright Office has spoken clearly that it would be inappropriate for Congress to expand existing law and provide compulsory licenses for services such as ivi. This is the federal agency charged with enforcing the copyright laws and tasked with acting in the public interest. We have no reason to doubt its considered judgment, and we decline to do so.
For the aforementioned reasons, plaintiffs have demonstrated the need for a preliminary injunction. As it is extraordinarily unlikely that ivi will ultimately be deemed a cable system under Section 111, plaintiffs have demonstrated a likelihood of success on the merits of their copyright claim. They also have demonstrated irreparable harm, that the balance of hardships tip in their favor, and that the public interest will not be disserved by an injunction.
Thus, plaintiffs' motion for a preliminary injunction is granted and it is hereby
First, the contention that Congress has provided a clear command on the question before us, and that this command confirms defendants' view, cannot be taken seriously. The statute in question was passed in 1976 in an effort to strike a balance between providing cable access to broadcast television and compensation for copyright owners. It is unrealistic to say that Congress intended to answer the precise question of whether Internet retransmissions of network broadcasts could qualify for a compulsory license, and it is even less supportable to say that Congress indisputably answered that question in the affirmative.
Furthermore, defendants distort the history of administrative activity. The Copyright Office has not only produced reports and "informal statements to Congress," but has engaged in formal rulemaking as well. While these regulations do not specifically address the issue before this Court, and some have been mooted by later developments, it is simply incorrect to imply that the Copyright Office has not given serious thought to how the compulsory license of Section 111 interacts with emerging technologies.
Finally, defendants' position misstates applicable law. While Chevron deference is reserved for those situations in which "it appears that Congress delegated authority to the agency generally to make rules carrying the force of law, and that the agency interpretation claiming deference was promulgated in the exercise of that authority," Skidmore deference is still available. United States v. Mead Corp., 533 U.S. 218, 226-27, 121 S.Ct. 2164, 150 L.Ed.2d 292 (2001).
More significantly, AT & T offers its cable service to individual communities and only retransmits the signals intended for those communities. It does not capture signals from local stations and retransmit them nationwide.
Finally, while AT & T has maintained it is not governed by the Communications Act, as far as this Court is aware it has been complying with the rules and regulations applicable to cable systems under that statute in any event. Most notably, it obtains retransmission consent. Pls.' Reply at 6-7.
Sky Angel's service differs from ivi's in key respects, such as the fact that Sky Angel subscribers received programming through a set-top box that had video outputs to connect to a television set. Id. at 3879. If anything, these differences would appear to make Sky Angel even more like a traditional cable system than ivi. Indeed plaintiffs, who take no position on defendants' interpretation of Sky Angel, argue that it is further support that ivi cannot be a cable system since it does not provide a transmission path and thus does not use a "facility" which both receives and makes the secondary transmissions. Pls.' Reply at 8.
