ABC Incorp. v. Primetime 24, 98-2313

• Decision Date: 05 May 1999
• Docket Number: No. 98-2313,CA-97-90-1,98-2313
• Citation: 184 F.3d 348
• Parties: (4th Cir. 1999) ABC, INCORPORATED, Plaintiff-Appellee, v. PRIMETIME 24, joint venture, Defendant-Appellant. () Argued:
• Court: U.S. Court of Appeals — Fourth Circuit

Page 348

184 F.3d 348 (4th Cir. 1999)

ABC, INCORPORATED, Plaintiff-Appellee, v. PRIMETIME 24, joint venture, Defendant-Appellant.

No. 98-2313 (CA-97-90-1)

UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT

Argued: May 5, 1999

Decided: July 6, 1999

Appeal from the United States District Court for the Middle District of North Carolina, at Durham. Frank W. Bullock, Jr., Chief District Judge. [Copyrighted Material Omitted] COUNSEL ARGUED: Andrew Zane Schwartz, FOLEY, HOAG & ELIOT, L.L.P., Boston, Massachusetts, for Appellant. Wade H. Hargrove, BROOKS, PIERCE, MCLENDON, HUMPHREY & LEONARD, L.L.P., Raleigh, North Carolina; Reid L. Phillips, BROOKS, PIERCE, MCLENDON, HUMPHREY & LEONARD, L.L.P., Greensboro, North Carolina, for Appellee. ON BRIEF: Stephen B. Deutsch, Richard W. Benka, Richard M. Brunell, FOLEY, HOAG & ELIOT, L.L.P., Boston, Massachusetts; W. Andrew Copenhaver, WOMBLE, CARLYLE, SANDRIDGE & RICE, P.L.L.C., WinstonSalem, North Carolina, for Appellant. Jennifer K. Van Zant, BROOKS, PIERCE, MCLENDON, HUMPHREY & LEONARD, L.L.P., Greensboro, North Carolina, for Appellee.

Before WILKINSON, Chief Judge, and WIDENER and MOTZ, Circuit Judges.

Affirmed in part and vacated in part by published opinion. Chief Judge Wilkinson wrote the opinion, in which Judge Widener and Judge Motz joined.

OPINION

WILKINSON, Chief Judge:

PrimeTime 24, a satellite television carrier, enrolled thousands of subscribers in the Raleigh-Durham area to receive transmissions of network television programs from other cities. ABC, Inc., the owner of the local ABC network affiliate and of copyrights in ABC network programming, sued for copyright infringement under the Satellite Home Viewer Act of 1988 (SHVA), Pub. L. No. 100-667, 102 Stat. 3949 (as amended). Finding that PrimeTime had engaged in a pattern or practice of infringing ABC's copyrights, the district court enjoined PrimeTime from transmitting ABC network programs to households in ABC's Raleigh-Durham market. We affirm. We also vacate as moot the district court's judgment against PrimeTime for violating the reporting provisions of the Act.

I.

The rapid growth of the satellite television industry in the 1980s raised tensions between the purveyors of this nascent technology and the network broadcasting industry. In particular, some satellite carriers began to take network programming from across the country and resell it to owners of satellite dishes. This service had the salutary effect of providing network programming to remote areas that otherwise could not receive it. In areas where local television network affiliates were able to provide service, however, the satellite carriers threatened those affiliates' viability. Moreover, the carriers often transmitted these signals without paying the networks for them. H.R. Rep. No. 100-887(II), at 10-15, 19-20 (1988), reprinted in 1988 U.S.C.C.A.N. 5577, 5638.

Congress crafted the SHVA in an effort to reconcile these competing interests -providing network television service to remote areas, protecting the networks' interest in their copyrighted material, and preserving the public interest in the maintenance of a system of local network affiliates. Id. The SHVA gives satellite carriers a limited statutory license to retransmit network signals without securing the networks' consent. 17 U.S.C. § 119(a)(2)(A), (B). Because this license is in derogation of the networks' copyrights, however, Congress limited its scope. The license extends only to transmissions to private households that are "unserved" by affiliates of those networks. Id. § 119(a)(2)(B). The SHVA also requires satellite carriers to furnish monthly lists of their subscribers to the networks, id. § 119(a)(2)(C), and to pay royalties for each subscriber, id. § 119(b).

PrimeTime asserts that it has taken care to ensure that it transmits its signals only to unserved households. Before enrolling a potential subscriber PrimeTime asks that customer whether he can receive an acceptable over-the-air network television picture with a conventional rooftop antenna. If the potential subscriber answers negatively -and satisfies several other requirements -Prime-Time considers him to be eligible for service under the SHVA.

In addition, if a network challenges a subscriber's eligibility to receive satellite transmissions -as it had a right to do from 1994 through 1996 under the SHVA's transitional rules for signal intensity measurements, 17 U.S.C. § 119(a)(8) (expired)-Prime-Time sends that subscriber a letter and questionnaire. The questionnaire asks the subscriber about the quality of his television reception (clear, snowy, ghosting, sparkles, or lines), the factors that may affect that quality (hills and valleys, trees, weather, buildings, and structures), and whether he has a conventional rooftop antenna. If Prime-Time then determines the subscriber to be ineligible for service, or if the subscriber fails to return the questionnaire, Prime-Time terminates the challenged service.

Finally, in 1997 and 1998 Prime-Time sent questionnaires to every subscriber in the Raleigh-Durham area located in a zip code within ABC's "predicted Grade B contour" -a circular region of approximately 75-mile radius, at the outer edge of which fifty percent of the customers are estimated with fifty percent accuracy to receive a broadcast signal of Grade B intensity fifty percent of the time. Prime-Time again screened for eligibility using those questionnaires.

ABC contends that PrimeTime's screening procedures are inadequate. The company thus asserts that PrimeTime engaged in copyright infringement by transmitting network broadcast signals to customers who are not "unserved" within the meaning of the SHVA. ABC further claims that PrimeTime failed to submit complete, timely customer lists as required by the statute.

In January 1997 ABC filed this action in the United States District Court for the Middle District of North Carolina. On ABC's motion for summary judgment the district court found that PrimeTime could not meet its burden of proving that its customers were"unserved households." The court held that PrimeTime's conduct constituted a repeated pattern or practice and that the carrier had not completely satisfied the SHVA's reporting requirements. ABC, Inc. v. PrimeTime 24, Joint Venture, 17 F. Supp. 2d 467 (M.D.N.C. 1998) (PrimeTime I). The district court enjoined PrimeTime from transmitting ABC network television signals to all households in the local market of the network's Raleigh-Durham affiliate, WTVD. The court defined this market as the area within WTVD's predicted Grade B contour. ABC, Inc. v. PrimeTime 24, Joint Venture, 17 F. Supp. 2d 478 (M.D.N.C. 1998) (PrimeTime II). PrimeTime appeals.

II.

A.

The SHVA defines an "unserved household" for a network affiliate as one that (A) cannot receive, through the use of a conventional outdoor rooftop receiving antenna, an over-the-air signal of grade B intensity (as defined by the Federal Communications Commission) of a primary network station affiliated with that network, and

(B) has not, within 90 days . . ., subscribed to a cable system. 17 U.S.C. § 119(d)(10). PrimeTime bears the burden of proving that it transmits only to unserved households. Id. § 119(a)(5)(D).

PrimeTime contends that it presented volumes of evidence showing that its customers were unserved households as defined by the SHVA. PrimeTime insists that it enrolls no one for service before obtaining an assurance that their household cannot "receive an acceptable overthe-air picture with a conventional rooftop antenna." The carrier further offers the responses its subscribers sent to its written questionnaires. But PrimeTime's evidence, voluminous though it is, shows only that its subscribers were unhappy with the quality of their conventional television pictures. Such subjective assessments of picture quality are simply irrelevant to the question of eligibility for satellite service under the SHVA.

The very terms of the SHVA define eligible households by means of an objective, measurable standard. As noted, PrimeTime's statutory license permits it to transmit a network's signals only to those households that "cannot receive, through the use of a conventional outdoor rooftop receiving antenna, an over-the-air signal of grade B intensity (as defined by the Federal Communications Commission)." 17 U.S.C. § 119(d)(10). A customer's eligibility for service hinges only upon his ability to receive an over-the-air network signal of the specified strength -according to the FCC, 56 dBu for the channel used by the Raleigh-Durham ABC affiliate. 47 C.F.R.§ 73.683; Satellite Delivery of Broadcast Signals under the Satellite Home Viewer Act, 64 Fed. Reg. 7113, 7115, 7117-19 (Feb. 12, 1999) (FCC Final Rule). The statute does not grant satellite carriers a license to transmit network signals to every household that, for whatever reason, considers its picture quality to be "unacceptable."

The legislative history only confirms this conclusion. See, e.g., H.R. Rep. No. 100-887(I), at 15, reprinted in 1988 U.S.C.C.A.N. 5577, 5611 ("In essence, the statutory license for network signals applies in areas where the signals cannot be received via rooftop antennas or cable."); H.R. Rep. No. 100-887(II), at 19 ("The bill confines the license to the so-called `white areas,' that is, households not capable of receiving the signal of a particular network by conventional rooftop antennas . . . ."). When explaining the unserved household restriction Congress spoke not of picture quality, but rather of the strength of the television signal a household is capable of receiving.¹

Two federal agencies have offered the same analysis. See U.S. Copyright Office, A Review of the Copyright Licensing Regimes Covering Retransmission of Broadcast Signals 127-28 (Aug. 1, 1997) (rejecting Prime-Time's request to substitute a "subjective" picture quality standard for the existing "objective" Grade B signal...