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Fox Television Stations, Inc. v. Filmon X, LLC
Citations: 966 F. Supp. 2d 30; 108 U.S.P.Q. 2d (BNA) 1593; 58 Communications Reg. (P&F) 1579; 2013 U.S. Dist. LEXIS 126543; 2013 WL 4763414Docket: Civil Action No. 2013-0758
Court: District Court, District of Columbia; September 5, 2013; Federal District Court
Original Court Document: View Document
Defendants, operating under the name FilmOn X, provide an internet service that allows users to watch live over-the-air television channels and offers DVR capabilities. They assign individual users access to a content stream from one of many antennas positioned in major cities, including Washington, D.C. Plaintiffs, a group of copyright holders including major television networks and local broadcasters, allege that FilmOn X infringes their exclusive public performance rights by retransmitting their copyrighted content without permission. They reference a California court decision, Fox Television Systems, Inc. v. BarryDriller Content Systems, PLC, which found FilmOn X in violation of copyright law, contrasting it with a Second Circuit ruling in Cartoon Network, LP v. CSC Holdings, Inc., where a similar service was deemed non-infringing under specific conditions. The court acknowledges the rulings from both Cablevision and Aereo II but finds the BarryDriller decision more persuasive. Ultimately, the court concludes that FilmOn X's actions violate the Copyright Act, granting the Plaintiffs a preliminary injunction while converting the planned hearing into a status conference. The case includes claims of copyright infringement regarding local news and popular television shows. Plaintiffs assert ownership of copyrights for both local and national programming, a claim not disputed by FilmOn X. Evidence includes a declaration from Sherry Brennan, Senior Vice President of Fox Cable Network Services, which includes a copyright registration for a specific episode of *The New Girl*. FilmOn X has filed an Answer and a Counterclaim seeking a declaratory judgment of non-infringement, to which Plaintiffs have responded. A Joint Motion for Preliminary Injunction was filed on August 1, 2013. Since both parties agree on all material facts, the preliminary injunction hearing set for September 20, 2013, will now be a status conference. FilmOn X provides services allowing consumers to watch live and recorded television, including local affiliate channels of major networks. Launched in late 2012 in select cities, it has expanded its offerings. The company acknowledges that its technology resembles that of Aereo and BarryDriller, and both parties concur on the essential elements of FilmOn X's technology. They agree that the Aereo and BarryDriller courts accurately described this technology. Broadcasting 'over-the-air' allows users to receive signals via antennas. Plaintiffs claim FilmOn X temporarily stopped broadcasting in Washington, D.C., but resumed afterward, alleging it allowed viewers to access New York-based stations due to a technical issue, which FilmOn X attributes to an 'inadvertent spill-over' during database testing. However, Plaintiffs do not pursue this matter in their reply, leading the Court to exclude it from consideration. The technology differs slightly from Aereo's, particularly in the signal processing sequence, but the parties agree that these differences are legally insignificant. FilmOn X deploys 'mini antennas' for broadcasting, which are dynamically allocated to individual users, ensuring no single antenna is used by more than one user at the same time. Antennas connect to a tuner router and server, which link to a video encoder that converts signals into a viewable format for computers and mobile devices. The video encoder connects to a distribution endpoint, delivering content to FilmOn X users. When a user selects a channel via the FilmOn X website or app, the request goes to the web server, which coordinates with the tuner router and server to identify an available antenna and encoder. The selected antenna tunes into the channel, and data flows through the router and video encoder, where it is stored in a unique directory for that user. During viewing, video data remains in this directory, which is deleted once the user stops viewing or switches channels, freeing the antenna for others. Access to the service is through an authorized client application, available on desktops, laptops, and mobile devices, allowing users to select from available channels. FilmOn X provides live standard-definition viewing for free, while paid users can access high-definition viewing and the option to record shows in their unique directory. FilmOn X monetizes the service by inserting brief video advertisements before viewing and displaying banner ads during programming, along with a logo overlay on local programming. Plaintiffs assert that they did not consent to FilmOn X streaming their content and have no licensing agreements with the service. A district court has discretion to grant a preliminary injunction to maintain the parties' positions until a trial occurs. To obtain such an injunction, the movant must demonstrate four factors: (1) a likelihood of success on the merits, (2) likely irreparable harm without relief, (3) a favorable balance of equities, and (4) that the injunction serves the public interest. The D.C. Circuit mandates that all four factors must favor the movant. In the analysis section, the court evaluates contrasting legal precedents, particularly focusing on the Second Circuit's decisions in Cablevision and Aereo. FilmOn X argues that the court should follow these precedents without question. However, the court concludes that it must make an independent legal judgment based on the Copyright Act and finds that the plaintiffs are likely to succeed in their claim that FilmOn X infringes upon their exclusive public performance rights. Since the other factors for a preliminary injunction also support the plaintiffs, their request is granted. The court reviews key cases cited by the parties, particularly the Cablevision case, which involved a Remote Storage DVR system that allowed users to record cable programming remotely. The Second Circuit had previously ruled that this system did not infringe the plaintiffs' public performance rights, finding that the district court’s preliminary injunction against the service was erroneous based on the interpretation of the Copyright Act's Transmit Clause. The Cablevision court interpreted the Transmit Clause of the Copyright Act to require identification of the audience capable of receiving a transmission to determine if it is made "to the public." It rejected the notion that the audience should be based on the potential viewers of the underlying work, emphasizing that each RS-DVR transmission is uniquely tied to a single subscriber's copy, thus limiting the audience to that subscriber alone. The court concluded that since RS-DVR transmissions are not public performances, they do not infringe on public performance rights. In 2012, Judge Alison Nathan ruled in Aereo I that Aereo, Inc., which provides similar services to Cablevision, likely did not infringe copyright due to the precedent set by Cablevision. Although she expressed that she might have reached a different conclusion without Cablevision's ruling, she acknowledged that the court was bound by this precedent. The Aereo I court found that Aereo's system, which creates unique, user-requested copies for individual users, paralleled Cablevision's RS-DVR, leading to the conclusion that Aereo’s streaming constituted nonpublic performances. The similarities in operational facts—unique copies accessible only by users who requested them—reinforced the decision. Judge Nathan found that the plaintiffs, despite likely failing on the merits, demonstrated a significant threat of irreparable harm due to Aereo's operations. She noted Aereo would undermine the plaintiffs’ advertising negotiations by diverting viewers from traditional media channels measured by Nielsen ratings and would negatively affect retransmission agreements by prompting cable companies to demand concessions. Aereo's service was also deemed harmful as it competed with the plaintiffs' online content and jeopardized their relationships with other content providers, advertisers, and licensees. In assessing the balance of hardships, Judge Nathan concluded it did not favor the plaintiffs significantly since an injunction could potentially drive Aereo out of business. She reasoned that an injunction would not harm public interest, as it would simultaneously encourage innovation (represented by Aereo) and protect copyrighted content (represented by the plaintiffs). The Second Circuit, in Aereo II, upheld Judge Nathan’s denial of the preliminary injunction. It referenced the Cablevision case, establishing principles regarding the Transmit Clause, which requires courts to assess who can receive a transmission to determine if it constitutes a public performance. The court identified four key points: (1) the potential audience of a transmission determines its public performance status; (2) private transmissions should not be aggregated; (3) an exception exists for aggregating private transmissions from the same original copy; and (4) any factor limiting the audience of a transmission is relevant to the Transmit Clause. Applying these principles, Aereo II noted that each transmission to an Aereo customer resulted in a unique copy stored exclusively for that user, indicating each transmission was private and did not infringe on public performance rights. The court acknowledged the potential need to focus on functionality over technical details but emphasized that current Second Circuit precedent prioritizes technical architecture. Aereo II affirmed its decision based on the legislative history of the 1976 Copyright Act and opted not to overrule Cablevision. In dissent, Judge Denny Chin argued that Aereo infringed public performance rights by retransmitting copyrighted content to the public without authorization. He contended that Aereo's system, even if limiting audience size and providing unique copies to subscribers, still constituted public transmission under the Copyright Act's Transmit Clause. Judge Chin further articulated that transmitting television signals to paying subscribers qualifies as broadcasting "to the public," regardless of intermediary devices. The plaintiffs' request for an en banc rehearing of Aereo II was denied 10-2, with dissenting opinions from Judges Chin and Richard C. Wesley, who criticized the majority for extending Cablevision's interpretation in a way that undermined the Copyright Act. In a related California case, Fox Television Systems, Inc. v. BarryDriller Content System, PLC, the plaintiffs sought a nationwide injunction against the FilmOn X service, arguing that the defendants' internet retransmission service infringed their copyright rights. The defendants claimed their transmissions were private, referencing Cablevision and Aereo I. Judge George Wu granted the plaintiffs a preliminary injunction, concluding they were likely to succeed on their copyright infringement claims. Wu rejected the Cablevision analysis, asserting that it misinterpreted the 1976 Act by focusing on whether individual copies were made for users rather than on the nature of the public transmission. He noted that the defendants' reliance on the unique-copy argument was not binding in the Ninth Circuit and criticized Cablevision's framing of the issue as unsupported by the Copyright Act. FilmOn X was initially sued in California under the names BarryDriller Content Systems, PLC and BarryDriller Inc., with the case name reflecting this. The case involved the FilmOn X service, also known as Aereokiller, and followed precedents set by Cablevision and Aereo I, which found no infringement because users' broadcasts captured by individual antennas were not shared with others. BarryDriller distinguished itself from these precedents, asserting that the reasoning behind them had been rejected by Congress in the context of commercial services versus individual actions. Judge Wu emphasized that the distinction made by Congress was significant, based on the Supreme Court's earlier cable television jurisprudence, particularly citing Fortnightly Corp. v. United Artists Television, Inc. The BarryDriller court found that the plaintiffs were likely to suffer irreparable harm, impacting their revenues, goodwill, and internet distribution capabilities. The court determined that FilmOn X had no equitable interest in continuing infringing activities, which was critical to the conclusion of likely success on the merits. A preliminary injunction was granted, confined to the Ninth Circuit, as principles of comity prevented a nationwide injunction. The court imposed a bond of $250,000 for the injunction. Cross-appeals were filed with the Ninth Circuit, which has yet to issue a ruling. FilmOn X has requested the court to take judicial notice of the Ninth Circuit docket due to support from amicus briefs, while the plaintiffs oppose this request. The Court acknowledges FilmOn X's request for judicial notice regarding the filing of documents but denies the request to recognize the content or arguments within those filings. Judicial notice is appropriate solely to confirm that documents were submitted, not for their truth (referencing Fed. R. Evid. 201 and relevant case law). Regarding the likelihood of success on the merits, to establish a prima facie case for direct copyright infringement, a plaintiff must demonstrate ownership of the material and a violation of copyright rights, as outlined in 17 U.S.C. § 106. There is agreement on the ownership of the allegedly infringed material, with the dispute centering on the violation aspect. Plaintiffs argue that the Court should follow the reasoning of BarryDriller and a dissenting opinion from Judge Chin in Aereo II, asserting that the Transmit Clause's language clearly applies to FilmOn X's retransmission activities. They contend that FilmOn X, which transmits television broadcasts to multiple subscribers using antennas and the Internet, qualifies under the Transmit Clause, which they believe was intended to encompass all commercial retransmissions, regardless of the technology used at the time of the Copyright Act's enactment. Plaintiffs dismiss FilmOn X’s "one antenna per user" model, arguing that it does not exempt them from the need for licenses. They claim that the Second Circuit's interpretation of the Transmit Clause in Aereo was flawed due to its reliance on the Cablevision case, suggesting it misinterpreted the term 'performance' in the context of the statute. Plaintiffs note that Aereo is an outlier in judicial decisions against retransmission without consent, and they highlight criticism from commentators regarding the Second Circuit’s rulings, arguing that such interpretations are inconsistent with the statutory text and legislative intent. FilmOn X contends that the Court should disregard the BarryDriller precedent and instead adhere to the Second Circuit's findings in Aereo, which dismissed similar arguments from plaintiffs, concluding that a comparable service did not allow public performance of copyrighted works. FilmOn X maintains that its service facilitates only individual private performances of the 20 copyrighted works, thereby not infringing on the plaintiffs' exclusive rights. The legislative history indicates that Congress intended its transmission definition to restrict the ability to prohibit private transmissions, supporting FilmOn X's argument from the perspective of individual consumers. FilmOn X draws parallels to the Sony Corp. v. Universal City Studios case, where the Supreme Court ruled that consumer use of a Betamax to duplicate copyrighted programs constituted fair use and did not incur secondary liability. The relevant statute, the Copyright Act of 1976, was a comprehensive revision of the 1909 Act, initiated to address technological advancements, particularly due to the rise of cable television. The 1976 Act aimed to establish a licensing framework for cable providers to ensure copyright royalties were paid for the retransmission of over-the-air broadcasts. It explicitly grants copyright holders the exclusive right to public performance of their works, defining "to perform" broadly to encompass various methods of presentation. The dispute hinges on the interpretation of "publicly," which is defined in two ways: performing at a public place or transmitting to a public audience via any device or process, with the latter being the focus of the Transmit Clause. Transmitting a performance or display involves communicating it through any device or process that allows images or sounds to be received outside the original location. The House Report for the 1976 Act clarifies that public performance and display encompass not only the original rendition but also any subsequent transmission or communication to the public. This means that various parties, including singers, broadcasting networks, local broadcasters, and cable systems, are all considered to be performing when they transmit a performance. While any act of transmission is classified as a "performance" or "display," legal infringement occurs only if the transmission is done "publicly," as defined in Section 101. The report further emphasizes the expansive interpretation of "device or process," which includes all equipment for reproducing or amplifying sounds and images, as well as future technologies. The definition of "publicly" in Section 101 indicates that public performances and displays include those initially occurring in public places and those communicated to the public via any method. The definition of "transmit" is broad, covering all forms of wire and wireless communications, including radio and television. The law considers a performance made available to the public through transmission as "public," even if recipients are not in a single location or if there is no evidence that they were actively receiving it at the time of transmission. This applies even when the audience is limited, such as hotel guests or cable subscribers. Courts interpreting the statute must assess the entire text and its intent, rather than focusing on individual sentences. Courts are advised not to rely on legislative history when a statutory text is clear, but they may consider it to clarify congressional intent if the statutory language appears superficially clear. Broadly written statutes should be interpreted broadly, as their applicability to unanticipated situations reflects their expansive nature rather than ambiguity. The provisions of the 1976 Act that protect the Plaintiffs' work are deemed clear, asserting that FilmOn X’s service infringes upon the Plaintiffs' exclusive right to publicly perform their copyrighted works. By making Plaintiffs’ copyrighted performances accessible to the public via the FilmOn X service, it is performing publicly as defined by the Transmit Clause, which encompasses any device or process used to transmit a performance. The definitions in the Act are broad enough to include FilmOn X’s method of relaying television signals, including its DVR-like capabilities. FilmOn X transmits original broadcasts to any user accessing its service, which constitutes a violation of the 1976 Act, leading to a likely success for the Plaintiffs in their copyright infringement claim. The Court disagrees with Aereo's interpretation of the Transmit Clause, asserting that Aereo’s system also qualifies as a ‘device or process.’ Even if there were ambiguity in the 1976 Act, legislative history supports a broad application of the Transmit Clause and related provisions, indicating that concepts of public performance and display include any subsequent transmission or communication to the public. Plaintiffs argue that their programs are made publicly available through FilmOn X's Internet-enabled service, aligning with various court interpretations that define "public performance" broadly. Citing precedent, the excerpt states that the method of signal transmission should not affect the level of copyright protection afforded. It highlights that even if customers are not viewing in a traditional public space, they are still considered part of the public. FilmOn X asserts that it provides a private, one-to-one service, claiming that performances are received by subscribers in separate locations and times. However, the document counters that the technology employed by FilmOn X creates a networked system, effectively allowing a single transmission to reach multiple users, analogous to cable television services. The discussion emphasizes that the Copyright Act's definition of "transmit" encompasses various technologies and processes, and that FilmOn X's operations are comparable to those of cable companies, which are required to pay licensing fees to broadcast copyrighted content. This regulatory framework underscores Congress's intent to ensure fair compensation for copyright owners when their works are transmitted to the public. The Court does not address whether FilmOn X should be subject to a licensing regime, but notes that the 1976 Act does not indicate that commercial entities rebroadcasting copyrighted material, like FilmOn X, are exempt from liability for copyright infringement. The relationship between the defendants and their customers is characterized as a commercial public relationship, regardless of the viewing location, thus classifying the audience as ‘the public’ under the transmit clause. Plaintiffs demonstrate a substantial likelihood of success on their copyright infringement claim, with the Court agreeing that Congress aimed to regulate new technologies that exploit existing works. The analysis indicates that FilmOn X's model of allowing multiple users to view the same performance contradicts claims of a one-to-one transmission. The first factor supports granting preliminary injunctive relief. Plaintiffs assert that they will suffer irreparable harm without such relief, citing that courts have consistently found unauthorized Internet streaming causes irreparable harm to copyright owners. Three specific categories of irreparable harm are outlined: 1. **Harm to Advertising Value**: FilmOn X diverts viewers from traditional distribution channels measured by Nielsen ratings, negatively impacting negotiation power with advertisers. 2. **Impact on Retransmission Consent Agreements**: Unauthorized streaming threatens Plaintiffs' ability to negotiate agreements with legitimate retransmission providers and damages goodwill with licensees. 3. **Interference with Legal Internet Distribution**: FilmOn X hampers the development of a lawful market for Internet distribution of television programming, affecting licensed entities like Hulu and Apple. FilmOn X competes directly with established services such as ABC's "Watch" and Fox's "Fox Now." The plaintiffs express concern over loss of control over their content, noting that once their programs are available online, they are susceptible to widespread unauthorized use and piracy, which they cannot prevent or regulate through FilmOn X. Sherry Brennan, Senior Vice President of Distribution Strategy and Development for Fox, supports claims of irreparable harm, asserting that FilmOn X's free retransmission of broadcasting programs undermines negotiations with retransmission providers, such as cable companies, which have referenced FilmOn X when seeking to reduce or eliminate retransmission fees. Plaintiffs argue that the potential damages are difficult to quantify and that FilmOn X, as a startup, may not be able to pay statutory damages if the plaintiffs win. FilmOn X counters that the plaintiffs have not provided sufficient evidence of imminent harm, claiming that any potential economic losses would not constitute irreparable harm. However, the plaintiffs have identified four significant categories of harm that could arise without an injunction: adverse effects on advertising negotiations, damage to contractual relationships with authorized retransmitters, disruption of proprietary online distribution methods, and loss of control over their copyrighted content's distribution and quality. Despite FilmOn X's characterization of these claims as speculative, the plaintiffs have backed them with evidence, including Brennan's declaration, which has not been disputed by FilmOn X. BarryDriller and Aereo I recognized that the harm caused by Aereo's actions constituted irreparable injury, impacting Plaintiffs' ability to negotiate with advertisers and retransmission agreements due to viewer siphoning. Aereo's exploitation of Plaintiffs' copyrighted works without appropriate licensing fees threatens Plaintiffs' revenue and the viability of their licensees. Evidence of price erosion and market position loss further supports claims of irreparable harm. The assessment favors Plaintiffs, as the balance of harms significantly leans towards them due to the severe consequences of continuing infringement by FilmOn X. FilmOn X's claims of potential business harm from an injunction are deemed overstated, given its lack of legitimate interest in infringing activities and its existing licensing agreements with other content partners. The public interest is served by upholding copyright protections, reinforcing the need for an injunction against ongoing infringement. Since all four factors favor Plaintiffs, the Court will grant the motion for a preliminary injunction. Regarding the scope of the injunction, Plaintiffs seek a nationwide injunction under 17 U.S.C. § 502(b), while FilmOn X argues for a limitation based on prior rulings. The Court notes it has broad discretion in determining the scope of injunctive relief. A federal court can issue broad injunctions to prevent future copyright infringement, specifically targeting acts similar to those already deemed unlawful based on the defendant's past behavior. Under 17 U.S.C. § 502(a) and (b), such injunctions are enforceable nationwide, though the D.C. Circuit may limit their scope due to comity considerations, as noted in *Holland v. Nat’l Mining Ass’n*. The court clarified that its injunction would bind the Commissioner only regarding coal companies not covered by an existing Eleventh Circuit injunction, and it does not conflict with any other circuits except for the Second Circuit, where *Aereo II* is binding precedent. Regarding security for injunctions, Federal Rule of Civil Procedure 65(c) allows the court discretion in setting bond amounts. It can waive the security requirement if it determines that the injunction would not materially harm the defendant, there is no likelihood of harm, and the applicant has sufficient assets to cover potential damages. FilmOn X requested a substantial bond due to potential revenue loss and damage to its business; however, the court noted that the copyright holders have significant assets and imposed a bond of $250,000, aligning this case with the precedent set in *BarryDriller*. Ultimately, the court granted the Plaintiffs’ Motion for a Preliminary Injunction, with a formal order to follow.