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Fox Television Stations, Inc. v. Filmon X LLC

United States District Court, District of Columbia

November 12, 2015

FOX TELEVISION STATIONS, INC., et al., Plaintiffs,
v.
FILMON X LLC, et al., Defendants.

OPINION

ROSEMARY M. COLLYER UNITED STATES DISTRICT JUDGE

This case involves a clash between two important national policies and interests. On the one hand, there is the need to protect and reward copyright owners for creating valuable intellectual property - here, original television programming. On the other hand, it is important to promote competition and ensure broad public access to diverse television programming. When enacting the Copyright Act of 1976, specifically the compulsory license regime prescribed in 17 U.S.C. § 111, Congress struck a delicate balance between these two important interests. It is up to this Court to interpret and apply that balance to determine whether a service that engages in Internet retransmission of over-the-air television programming violates the Copyright Act.

Defendant FilmOn X, LLC (formerly known as Aereokiller LLC) operates a service that captures the signals of multiple television channels that are broadcast over-the-air and streams them over the Internet to the public.[1] FilmOn X assigns an individual user the content stream from one of thousands of minute, dime-sized antennas that it operates in major metropolitan areas, including Washington, D.C. As a result, this service allows viewers to watch over-the-air television programming on any computer or digital device. Plaintiffs, [2] a group of television broadcasters and programmers that own much of the streamed content, sued FilmOn X, its affiliates, [3] and CEO Alkiviades David (collectively Defendants) for retransmitting their copyrighted works without a license. See Second Am. Compl. [Dkt. 66]. Plaintiffs claim that Defendants have violated their intellectual property rights, particularly the exclusive right to public performance of their copyrighted programming. See Id. ¶¶ 39-47.

On September 5, 2013, this Court held that FilmOn X’s conduct likely violated Plaintiffs’ exclusive rights and preliminarily enjoined FilmOn X and its affiliates from streaming Plaintiffs’ broadcast programming without authorization. See Fox Television Stations, Inc. v. FilmOn X LLC, 966 F.Supp.2d 30 (D.D.C. 2013) (2013 D.C. Prelim. Inj.), [Dkt. 34]. In a separate case, the Supreme Court ultimately validated this Court’s conclusion that the Copyright Act forbids the unauthorized retransmissions of copyrighted programs over the Internet even when such retransmissions rely on the use of separate antennas and data streams. Am. Broad. Cos. v. Aereo, Inc., 134 S.Ct. 2498, 2511 (2014) (Aereo III). In doing so, the Supreme Court drew an analogy between Internet-based retransmitters and the community antenna television (CATV) systems that Congress brought within the scope of the Transmit Clause, 17 U.S.C. § 101, in the 1976 amendments to the Copyright Act. Id. at 2507. Aereo III described the practices of Internet-based retransmission services as highly similar to those of CATV systems (precursors of modern cable systems). Id. at 2511. As a result, it held that retransmitting copyrighted programming over the Internet constitutes a public performance within the meaning of the Transmit Clause. Id.

Although Defendants had expressly disclaimed the argument that they are “cable systems” within the meaning of § 111, they now rely on the Supreme Court’s analogy in Aereo III to amend their answers. Compare David Decl. in Supp. of Opp’n to Mot. for Prelim. Inj. [Dkt. 31-1] (Prelim. Inj. David Decl.), Ex. B at 13 (CEO David stating that FilmOn X “is not a Cable system”) with Answers to Am. Compl. [Dkts. 69 and 70] (raising affirmative defense that Defendants are entitled to compulsory license under § 111(c)). Defendants now argue that they are entitled to a § 111 compulsory license to retransmit Plaintiffs’ broadcast programming as a cable system. Id. at 8-9. Plaintiffs move for summary judgment, arguing that Defendants’ nearly-simultaneous and time-delayed retransmission services violate the Copyright Act and that Defendants are not entitled to a § 111 license. Pls.’ Mot. for Partial Summ. J. [Dkt. 81] (Pls.’ Mot.). Defendants cross-move for summary judgment on their counterclaim that they are entitled to such statutory license and they also contend that it is premature to decide whether Plaintiffs’ exclusive rights of public performance were actually infringed in the past. Defs.’ Mot. for Summ. J. [Dkt. 97] (Defs.’ Mot.).

Upon consideration of the parties’ briefs and for the reasons stated in this Opinion, this Court holds that Defendants are not entitled to a § 111 license. Section 111(f)(3) defines cable systems as physical facilities that both receive and retransmit broadcast signals to paying subscribers through wires, cables, microwave, and other types of communication channels. FilmOn X is not such a facility because it relies on the Internet, which is neither a tangible nor physical entity, to retransmit the broadcast signals to its paying subscribers. The Court also holds that FilmOn X infringed Plaintiffs’ exclusive right of public performance in violation of the Copyright Act.[4] As such, this Court will grant Plaintiffs’ motion for summary judgment in part and deny Defendants’ motion.

I. FACTS

A. Prior Litigation

In October 2010, a group of broadcasters and television networks, including some of the Plaintiffs, sued Defendant FilmOn.com, Inc. for copyright infringement in the U.S. District Court for the Southern District of New York. See Pls.’ Req. for Jud. Notice [Dkt. 90] (“Pls.’ RJN”), Ex. A (Mot. for TRO). Defendant FilmOn.com, Inc., which essentially streamed over the Internet the signals of various broadcast television stations on a live basis, argued that it was a cable system entitled to a § 111 license. Id., Ex. B (FilmOn Opp’n to Mot. for TRO) at 5. The district court (Buchwald, J.) disagreed and granted a temporary restraining order enjoining FilmOn.com, Inc. from streaming copyrighted programming. Id., Ex. C. (TRO). In a companion case, Judge Buchwald also held that an Internet-based retransmission service was not a “cable system” and, thus, was not entitled to a § 111 license. WPIX, Inc. v. ivi, Inc., 765 F.Supp.2d 594, 617 (S.D.N.Y. 2011) (ivi I), aff’d 691 F.3d 275 (2d Cir. 2012) (ivi II), cert. denied, 133 S.Ct. 1585 (2013). Shortly before the Second Circuit’s decision in ivi II, Judge Buchwald entered a Stipulated Consent Judgment and Permanent Injunction (“2012 Injunction”) binding FilmOn.com, Inc. and its affiliates from streaming Plaintiffs’ copyrighted programming without authorization. Pls.’ RJN, Ex. E (2012 Injunction).

In August 2012, Mr. David launched a new Internet-based retransmission service called FilmOn X. David Dep. [Dkt. 93-3], Ex. 1 at 58:3-21. Like FilmOn.com, Inc., this new service streamed broadcast television signals over the Internet without payment or authorization. Unlike the prior system, FilmOn X relied on a mini-antenna/data video recorder technology that provided viewers with both time-delayed and nearly simultaneous retransmissions of copyrighted content. David Decl. in Supp. of Defs.’ Mot. for Summ. J. [Dkt. 111] (Summ. J. David Decl.) ¶¶ 12, 16. Unlike FilmOn.com, Inc., FilmOn X explicitly disclaimed that it was a cable system entitled to a compulsory license. Prelim. Inj. David Decl., Ex. B, at 13. In fact, FilmOn X’s service was specifically designed to avoid copyright liability under then-applicable Second Circuit precedent in Cartoon Network LP, LLLP v. CSC Holdings, Inc., 536 F.3d 121, 137 (2d Cir. 2008) (Cablevision) (holding that a “Remote Storage DVR” system that makes “transmissions to one subscriber using a copy made by that subscriber” does not violate the Transmit Clause of the Copyright Act). Summ. J. David Decl. ¶ 12.

On July 22, 2012, the Southern District of New York (Nathan, J.) applied Cablevision to hold that the use of a separate small antenna and separate data stream for each subscriber did not violate the Copyright Act. Am. Broad. Cos. v. Aereo, Inc., 874 F.Supp.2d 373 (S.D.N.Y. 2012) (Aereo I). Judge Nathan found that Aereo - an established competitor to FilmOn X that offered a virtually identical service - made only nonpublic performances and, thus, avoided Transmit Clause liability. Id. at 385. Since FilmOn X’s new service replicated Aereo’s technology and complied with Second Circuit precedent, Plaintiffs did not ask Judge Buchwald to find Defendants in contempt for violating the 2012 Injunction. Instead, they filed a copyright infringement action against FilmOn X in the U.S. District Court for the Central District of California. See Fox Television Stations, Inc. v. BarryDriller Content Sys., PLC, 915 F.Supp.2d 1138 (C.D. Cal. 2012). The California district court (Wu, J.) disagreed with Aereo I and Cablevision and preliminarily enjoined FilmOn X’s unauthorized streaming of copyrighted content, but only in the Ninth Circuit. Id. at 1151.

Shortly after Judge Wu enjoined Defendants, the Second Circuit affirmed Judge Nathan’s decision in Aereo I. WNET, Thirteen v. Aereo, Inc., 712 F.3d 676 (2d Cir. 2013) (Aereo II). Facing a jurisdictional split and still hoping to obtain a nationwide injunction against FilmOn X’s service, Plaintiffs filed the instant copyright action against Defendants. In 2013, this Court preliminarily enjoined FilmOn X, as well as its affiliates and officers, from streaming unauthorized material throughout the United States, with the exception of the geographic boundaries of the U.S. Court of Appeals for the Second Circuit. 2013 D.C. Prelim. Inj. [Dkt. 34] at 2.

On June 25, 2014, the Supreme Court issued its decision in Aereo III, reversing the Second Circuit’s decision, resolving the split, and validating this Court’s reasoning. 134 S.Ct. at 2511.[5] The Supreme Court specifically noted that Aereo’s retransmission activities were substantially similar to those of the cable systems that Congress subjected to Transmit Clause liability in the Copyright Act of 1976. Id. at 2506-07. Therefore, Aereo III made clear that an Internet-based retransmission service, such as the one in the instant case, performs publicly within the meaning of the Transmit Clause.[6]

In the wake of Aereo III, Defendants, like Aereo on remand, switched their theories and amended their answers to articulate a new position - namely, that they are entitled to a § 111 compulsory license to retransmit Plaintiffs’ television programming. Answers to Am. Compl. [Dkts. 69 and 70]. In New York, they argued that the Supreme Court’s analogy to cable systems in Aereo III meant that the Copyright Act authorized the streaming of copyrighted content so long as the retransmission service complied with the requirements listed in § 111. See Pls.’ RJN, Ex. F. at 9-10 (CBS Broad. Inc. v. FilmOn.com, Inc., No. 10-cv-7532, 2014 WL 3702568 (S.D.N.Y. July 24, 2014)). Relying on the Second Circuit’s ivi II decision, Judge Buchwald rejected this new argument and found FilmOn.com, Inc. in contempt of the 2012 New York Injunction. See Id. at 9-17. Similarly, Judge Nathan rejected Aereo’s argument on remand and preliminarily enjoined it from streaming copyrighted television programming. Am. Broad. Cos. v. Aereo, Inc., No. 12-cv-1540, 2014 WL 5393867, at *3 (S.D.N.Y. Oct. 23, 2014) (Aereo IV).

The parties filed cross-motions for summary judgment in the California action before Judge Wu as to whether Defendants are entitled to a § 111 license to retransmit Plaintiffs’ broadcasts without infringing their copyrights. On July 24, 2015, Judge Wu found that FilmOn X’s service qualifies as a “cable system” entitled to a § 111 compulsory license and granted summary judgment in favor of Defendants. Fox Television Stations, Inc. v. Aereokiller, 2015 WL 4477797 (C.D. Cal. July 24, 2015) (“2015 California decision”). Judge Wu, however, maintained the existing preliminary injunction against Defendants because of a split in authority concerning a close legal issue and because Defendants “have not yet been able to timely or consistently comply with the procedures attendant to a § 111 license.” Id. at *1. Instead, that court authorized an immediate appeal of this issue to the Ninth Circuit pursuant to Federal Rule of Civil Procedure 54(b) and 28 U.S.C. § 1292(b). Id. at *15. On August 3, 2015, Plaintiffs filed a petition for permission to appeal Judge Wu’s Summary Judgment Order, which the Ninth Circuit granted on September 16, 2015. Status Report [Dkt. 216] in Case No. 12-6921. Consequently, the appeal before the Ninth Circuit is pending.

In this suit, Plaintiffs note that FilmOn.com, Inc. already litigated its § 111 defense unsuccessfully in the New York action. Pls.’ Mem. in Supp. for Summ. J. [Dkt. 92-1] (Pls.’ Mem.) at 9-10. Plaintiffs contend the doctrine of res judicata precludes FilmOn X and its co-defendants from re-litigating the same issue. Id. Even if res judicata does not apply, Plaintiffs ask this Court to adopt the reasoning in ivi II and Aereo IV and defer to the Copyright Office’s longstanding position that § 111 does not apply to Internet-based retransmission services. Id. at 12-20. Defendants argue that this Court should reject the Copyright Office’s interpretation of § 111 and adopt the reasoning in Judge Wu’s recent California decision. Defs.’ Mem. in Supp. for Summ J. [Dkt. 97-1] (Defs.’ Mem.) at 14-23; Defs.’ Suppl. Mem. in Opp’n to Pls.’ Mot. for Summ. J. [Dkt. 119] (Defs.’ Suppl. Mem.).

B. Broadcast Programming and FilmOn X’s Service [7]

Plaintiffs own copyrights to certain local news broadcasts and nationally-broadcast television programs. Local television stations broadcast the programming over the public airwaves subject to the rules of the Federal Communications Commission (FCC). Once these signals are broadcast “over-the-air, ” cable systems, satellite services, and other multichannel video programming distributors (MVPDs) retransmit the signals to the public and pay specified amounts in order to do so.

FilmOn X operated a website that combined the functions of a television and a digital video recorder (DVR). Through this website, viewers could access original and licensed content, as well as over-the-air broadcast programming. In August 2012, FilmOn X launched its service in Los Angeles and then expanded to various cities across the United States, including Washington, D.C. In order to retransmit broadcast programming over the Internet, FilmOn X used a remote mini-antenna/DVR technology. As part of the technology, FilmOn X used one master antenna located on the roof of a commercial data center.[8] Its centers were physical facilities across the country, which contained the necessary electronic equipment to capture, store, and retransmit broadcast programming. The master antenna transmitted signals to an antenna box and mini-antennas, in turn, captured the amplified signals._____________________

Whenever a viewer wished to access a program being broadcast, the viewer would go to FilmOn X’s website and select the show from a list of supposed local programming. _____________ As a result, no single antenna was used by more than one viewer at the same time. Once the mini-antenna received the signal, the data of the selected program was transmitted to the antenna router and then to the video encoder. The encoder stored the data on FilmOn X’s hard drive in a “unique directory” created for the specific viewer. The encoder converted the signals into a viewable format and then streamed the data over the Internet to FilmOn X’s website through a distribution endpoint and hence to the viewer. The data in the “unique directory” was only deleted after the viewer finished watching the program or selected a different program to watch.

Through this technology, the viewer could watch live television on a digital device through FilmOn X’s nearly simultaneous retransmission of the selected program; the viewer could also select a program to watch at a later time.[9] In the past, FilmOn X charged for both monthly and annual local channel packages. Paying subscribers could watch live television in high definition (HD) and select shows for later viewing. FilmOn X would occasionally offer free trials of HD television. FilmOn X also offered viewers live standard-television for free. In addition, FilmOn X modified the broadcast program in various ways, such as inserting its logo during the retransmission, omitting closed captioning, and playing a short ten to thirty-second video advertisement prior to the program’s streaming.[10]

C. FilmOn X’s Efforts to Operate as a Cable System

FilmOn X has recently modified its service in an effort to bring it into compliance with § 111 requirements; it has also expressed that it is ready to recommence retransmissions as a cable system. Summ. J. David Decl. ¶ 28; Meldal Decl. ¶¶ 19-52. FilmOn X specifies that its users will only be able to watch broadcast programs if they piuchase local channel subscription packages, which will be limited to those television channels available in a designated market area. Meldal Decl. 135. FihnOn X has developed a geolocation system to deny access to broadcast programming unless the viewer's digital device is located within the original broadcast's market area at the time of the retransmission.[11] Id. ¶¶ 19-52; see also Siunm. J. David Decl. ¶33 _______ Finally, FilmOn X explains that it intends to retransmit over-the-air broadcasts with closed captioning and without its logo. Summ J. David Decl. ¶ 36-37.

______________________

In addition to modifying its service, FilmOii X has attempted to comply with § 111 requirements by making past royalty payments and filing Statements of Account with the Copyright Office for each of the six-month reporting periods since July 1, 2012. hi a July 2014 letter, the Copyright Office informed FilmOn X that it does not consider Internet-based retransmission systems to be § 111 cable systems. App'x of Copyright Office [Dkt. 91], Ex. 1 (July 23, 2014 Copyright Office Letter) at 1-2 (footnotes omitted). Nonetheless, the Copyright Office explained that given that "the question of eligibility of [I]nternet-based retransmission services for the Section 111 license appears to have been raised again before the courts, " the Office would accept FilmOn X's documentation on a "provisional basis." Id.

II. LEGAL STANDARD

Under Rule 56 of the Federal Rules of Civil Procedure, summary judgment shall be granted "if the 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); accord Anderson v. Liberty Inc. Lobby, Inc., 477 U.S. 242, 247 (1986). Moreover, summary judgment is properly granted against a party who "after adequate time for discovery and upon motion . . . 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." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); see also Armstrong v. Archuleta, No. 13-cv-392, 2014 WL 7399282, at *7 (D.D.C. Dec. 30, 2014). In ruling on a motion for summary judgment, the court must draw all justifiable inferences in the nonmoving party's favor and accept the nonmoving party's evidence as true. Anderson, 477 U.S. at 255.

When evaluating cross-motions for summary judgment, each motion is reviewed “separately on its own merits to determine whether [any] of the parties deserves judgment as a matter of law.” Family Trust of Mass., Inc. v. United States, 892 F.Supp.2d 149, 154 (D.D.C. 2012) (citation and internal quotation marks omitted). Neither party is deemed to “concede the factual assertions of the opposing motion.” Competitive Enter. Inst. Wash. Bureau, Inc. v. Dep’t of Justice, 469 F.3d 126, 129 (D.C. Cir. 2006) (citation omitted)). “[T]he court shall grant summary judgment only if one of the moving parties is entitled to judgment as a matter of law upon material facts that are not genuinely disputed.” Am. Ins. Ass’n v. HUD, No. 13-cv-00966, 2014 WL 5802283, at *5 (D.D.C. Nov. 7, 2014) (internal quotation marks and citation omitted). A genuine issue exists where “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson, 477 U.S. at 248.

III. ANALYSIS

A. The Copyright Act of 1976

Copyright law protects copyright owners from the infringement of any of their six exclusive rights under § 106. See 2013 D.C. Preliminary Injunction, 966 F.Supp.2d at 43. One of these exclusive rights is the owners’ right of exclusive performance. 17 U.S.C. § 106(4). Section 106(4) provides that “the owner of copyright . . . has the exclusive right . . . [, ] in the case of . . . motion pictures and other audiovisual works, to perform the copyrighted work publicly.” Id.; see also EchoStar Satellite LLC v. FCC, 457 F.3d 31, 33 (DC Cir. 2006) (stating that broadcasters “generally [have] ‘exclusive rights’ . . . to authorize the public display of [their] copyrighted content, including the retransmission of [their] broadcast signal[s]”).

Under the Copyright Act of 1909, CATV retransmissions of over-the-air signals did not constitute public performances and, thus, did not infringe the owners’ exclusive right of public performance. See Fortnightly Corp. v. United Artists Television, Inc., 392 U.S. 390, 401 (1968); Teleprompter Corp. v. Columbia Broad. Sys., Inc., 415 U.S. 394, 408-409 (1974). Congress disagreed with the Supreme Court decisions in Fortnightly and Teleprompter and enacted the Copyright Act of 1976, Pub. L. 94-553, 90 Stat. 2541, codified as amended at 17 U.S.C. § 101 et seq., to bring the activities of cable systems within the Act’s scope. Aereo III, 134 S.Ct. at 2505 (citing H.R. Rep. No. 94-1476 at 86-87 (1976), reprinted in 1976 U.S.C.C.A.N. 5659, 5703 (1976 H.R. Rep.)). In doing so, Congress responded to “significant changes in technology [that] affected the operation of the copyright law, ” such as the advent of cable television. 1976 H.R. Rep. at 1, 86-87 (stating that the Copyright Act of 1976 was enacted because “[p]ursuant to two Supreme Court decisions . . ., under the 1909 copyright law, the cable television industry ha[d] not been paying copyright royalties for its retransmission of over-the-air broadcast signals”).

As part of the 1976 amendments to the Copyright Act, Congress enacted the Transmit Clause, which defines a public performance as to:

transmit or otherwise c1ommunicate a performance . . . of the [copyrighted] work . . . to the public, by means of any device or process, whether the members of the public capable of receiving the performance . . . receive it in the same place or in separate places and at the same time or at different times.

17 U.S.C. § 101.[12] In other words, any unauthorized public transmission of copyrighted content infringes the owners’ exclusive right of public performance. Consequently, the amendments “redefined the term performance to include such secondary transmissions [by CATV companies], creating potential copyright liability for cable systems and carriers involved in such transmissions.” Hubbard ...


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