Cartoon Network Lp, Lllp v. Csc Holdings, Inc.

• Citation: 536 F.3d 121
• Decision Date: 04 August 2008
• Docket Number: Docket No. 07-1511-cv(CON).,Docket No. 07-1480-cv(L).
• Parties: The CARTOON NETWORK LP, LLLP and Cable News Network L.P., L.L.L.P., Plaintiffs-Counter-Claimants-Defendants-Appellees, Twentieth Century Fox Film Corporation, Universal City Studios Productions LLLP, Paramount Pictures Corporation, Disney Enterprises Inc., CBS Broadcasting Inc., American Broadcasting Companies, Inc., NBC Studios, Inc., Plaintiffs-Counter-Defendants-Appellees, v. CSC HOLDINGS, INC. and Cablevision Systems Corporation, Defendants-Counterclaim-Plaintiffs-Third-Party Plaintiffs-Appellants, v. Turner Broadcasting System, Inc., Cable News Network LP, LLP, Turner Network Sales, Inc., Turner Classic Movies, L.P., LLLP, Turner Network Television LP, LLLP, Third-Party-Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

536 F.3d 121

The CARTOON NETWORK LP, LLLP and Cable News Network L.P., L.L.L.P., Plaintiffs-Counter-Claimants-Defendants-Appellees, Twentieth Century Fox Film Corporation, Universal City Studios Productions LLLP, Paramount Pictures Corporation, Disney Enterprises Inc., CBS Broadcasting Inc., American Broadcasting Companies, Inc., NBC Studios, Inc., Plaintiffs-Counter-Defendants-Appellees, v. CSC HOLDINGS, INC. and Cablevision Systems Corporation, Defendants-Counterclaim-Plaintiffs-Third-Party Plaintiffs-Appellants, v. Turner Broadcasting System, Inc., Cable News Network LP, LLP, Turner Network Sales, Inc., Turner Classic Movies, L.P., LLLP, Turner Network Television LP, LLLP, Third-Party-Defendants-Appellees.

Docket No. 07-1480-cv(L).

Docket No. 07-1511-cv(CON).

United States Court of Appeals, Second Circuit.

Argued: October 24, 2007.

Decided: August 4, 2008.

Jeffrey A. Lamken (Robert K. Kry and Joshua A. Klein, on the brief), Baker Botts L.L.P., Washington, D.C., and Timothy A. Macht (on the brief), New York, N.Y., for Defendants-Appellants.

Katherine B. Forrest (Antony L. Ryan, on the brief), Cravath, Swaine & Moore LLP, New York, N.Y., for Plaintiffs-Appellees The Cartoon Network LP, LLLP, et al.

Robert Alan Garrett (Hadrian R. Katz, Jon Michaels, Peter L. Zimroth, and Eleanor Lackman, on the brief), Arnold & Porter LLP, Washington, D.C., for Plaintiffs-Appellees Twentieth Century Fox Film Corporation, et al.

Marc E. Isserles, Cohen & Gresser LLP, New York, N.Y., for Amici Curiae Law Professors.

Henry A. Lanman, Trachtenberg Rodes & Friedberg LLP, New York, N.Y., for Amicus Curiae Professor Timothy Wu.

Solveig Singleton, The Progress & Freedom Foundation, Washington, D.C., for Amicus Curiae Progress & Freedom Foundation.

Carol A. Witschel, White & Case LLP, and Richard H. Reimer, New York, N.Y., for Amicus Curiae The American Society of Composers, Authors & Publishers.

Michael E. Salzman, Hughes Hubbard & Reed LLP, and Marvin Berenson, Broadcast Music Inc., New York, N.Y., for Amicus Curiae Broadcast Music, Inc.

David Sohn, Center for Democracy & Technology, Washington, D.C., Fred von Lohman, Electronic Freedom Foundation, San Francisco, Cal., Sherwin Siy, Public Knowledge, Washington D.C., William P. Heaston, Broadband Service Providers Association Regulatory Committee, Jonathan Band PLLC, Washington, D.C., Julie

Kearney, Consumer Electronics Association, Arlington, Va., Michael F. Altschul et al., CTIA-The Wireless Association®, Washington, D.C., Jonathan Banks, USTelecom, Washington, D.C., Michael K. Kellogg et al., Kellogg, Huber, Hansen, Todd, Evans & Figel, P.L.L.C., Washington D.C., for Amici Curiae Center for Democracy & Technology et al.

Donald B. Verrilli, Jr., et al., Jenner & Block LLP, Washington, D.C., Kenneth L. Doroshow & Scott A. Zebrak, Recording Industry Association of America, Washington, D.C., Jacqueline C. Charlesworth, National Music Publishers' Association, Washington, D.C., Victor S. Perlman, American Society of Media Photographers, Inc., Philadelphia, Pa., Allan Robert Adler, Association of American Publishers, Washington, D.C., Linda Steinman, Davis Wright Tremaine LLP, New York, N.Y., David Korduner, Directors Guild of America, Inc., Los Angeles, Cal., Frederic Hirsch & Chun T. Wright, Entertainment Software Association, Washington, D.C., Susan Cleary, Independent Film & Television Alliance, Los Angeles, Cal., Gary Gertzog, National Football League, New York, N.Y., Thomas Ostertag, Office of the Commissioner of Baseball, New York, N.Y., Duncan Crabtree-Ireland, Screen Actors Guild, Inc., Los Angeles, Cal., John C. Beiter, Loeb & Loeb, LLP, Nashville, Tenn., Anthony R. Segall, Writers Guild of America, West, Inc., Los Angeles, Cal., for Amici Curiae American Society of Media Photographers, Inc. et al.

Steven J. Metalitz & J. Matthew Williams, Washington, D.C., for Amicus Curiae Americans for Tax Reform.

Before: WALKER, SACK, and LIVINGSTON, Circuit Judges.

JOHN M. WALKER, JR., Circuit Judge:

Defendant-Appellant Cablevision Systems Corporation ("Cablevision") wants to market a new "Remote Storage" Digital Video Recorder system ("RS-DVR"), using a technology akin to both traditional, set-top digital video recorders, like TiVo ("DVRs"), and the video-on-demand ("VOD") services provided by many cable companies. Plaintiffs-Appellees produce copyrighted movies and television programs that they provide to Cablevision pursuant to numerous licensing agreements. They contend that Cablevision, through the operation of its RS-DVR system as proposed, would directly infringe their copyrights both by making unauthorized reproductions, and by engaging in public performances, of their copyrighted works. The material facts are not in dispute. Because we conclude that Cablevision would not directly infringe plaintiffs' rights under the Copyright Act by offering its RS-DVR system to consumers, we reverse the district court's award of summary judgment to plaintiffs, and we vacate its injunction against Cablevision.

BACKGROUND

Today's television viewers increasingly use digital video recorders ("DVRs") instead of video cassette recorders ("VCRs") to record television programs and play them back later at their convenience. DVRs generally store recorded programming on an internal hard drive rather than a cassette. But, as this case demonstrates, the generic term "DVR" actually refers to a growing number of different devices and systems. Companies like TiVo sell a stand-alone DVR device that is typically connected to a user's cable box and television much like a VCR. Many cable companies also lease to their subscribers "set-top storage DVRs," which combine many of the functions of a standard cable box and a stand-alone DVR in a single device.

In March 2006, Cablevision, an operator of cable television systems, announced the advent of its new "Remote Storage DVR System." As designed, the RS-DVR allows Cablevision customers who do not have a stand-alone DVR to record cable programming on central hard drives housed and maintained by Cablevision at a "remote" location. RS-DVR customers may then receive playback of those programs through their home television sets, using only a remote control and a standard cable box equipped with the RS-DVR software. Cablevision notified its content providers, including plaintiffs, of its plans to offer RS-DVR, but it did not seek any license from them to operate or sell the RS-DVR.

Plaintiffs, which hold the copyrights to numerous movies and television programs, sued Cablevision for declaratory and injunctive relief. They alleged that Cablevision's proposed operation of the RS-DVR would directly infringe their exclusive rights to both reproduce and publicly perform their copyrighted works. Critically for our analysis here, plaintiffs alleged theories only of direct infringement, not contributory infringement, and defendants waived any defense based on fair use.

Ultimately, the United States District Court for the Southern District of New York (Denny Chin, Judge), awarded summary judgment to the plaintiffs and enjoined Cablevision from operating the RS-DVR system without licenses from its content providers. See Twentieth Century Fox Film Corp. v. Cablevision Sys. Corp. (Cablevision I), 478 F.Supp.2d 607 (S.D.N.Y.2007). At the outset, we think it helpful to an understanding of our decision to describe, in greater detail, both the RS-DVR and the district court's opinion.

I. Operation of the RS-DVR System

Cable companies like Cablevision aggregate television programming from a wide variety of "content providers"—the various broadcast and cable channels that produce or provide individual programs—and transmit those programs into the homes of their subscribers via coaxial cable. At the outset of the transmission process, Cablevision gathers the content of the various television channels into a single stream of data. Generally, this stream is processed and transmitted to Cablevision's customers in real time. Thus, if a Cartoon Network program is scheduled to air Monday night at 8pm, Cartoon Network transmits that program's data to Cablevision and other cable companies nationwide at that time, and the cable companies immediately re-transmit the data to customers who subscribe to that channel.

Under the new RS-DVR, this single stream of data is split into two streams. The first is routed immediately to customers as before. The second stream flows into a device called the Broadband Media Router ("BMR"), id. at 613, which buffers the data stream, reformats it, and sends it to the "Arroyo Server," which consists, in relevant part, of two data buffers and a number of high-capacity hard disks. The entire stream of data moves to the first buffer (the "primary ingest buffer"), at which point the server automatically inquires as to whether any customers want to record any of that programming. If a customer has requested a particular program, the data for that program move from the primary buffer into a secondary buffer, and then onto a portion of one of the hard disks allocated to that customer. As new data flow into the primary buffer, they overwrite a corresponding quantity of data already on the buffer. The primary ingest buffer holds no more than 0.1 seconds of each channel's programming at any moment. Thus, every tenth of a second, the data residing on this buffer are automatically erased and replaced. The data buffer in the BMR holds no more than 1.2 seconds of programming at any time. While buffering occurs at other points in the operation of the RS-DVR, only the BMR buffer and the primary ingest buffer are utilized absent any request from an individual subscriber.

As the district court observed, "the RS-DVR is not a single piece of equipment," but rather "a complex system requiring numerous computers, processes, networks of cables, and facilities staffed by personnel twenty-four hours a day and seven days a week." Id. at 612. To the customer, however,...