Cablevision Co. v. Motion Picture Ass'n, Civ. A. No. 83-1655

• Decision Date: 31 July 1986
• Docket Number: Civ. A. No. 83-1655,83-2785 and 84-3097.
• Citation: 641 F. Supp. 1154
• Parties: CABLEVISION COMPANY, Plaintiff, v. MOTION PICTURE ASSOCIATION OF AMERICA, INC., et al., Defendants (Two Cases). NATIONAL CABLE TELEVISION ASSOCIATION, INC., Plaintiff, v. COLUMBIA PICTURES INDUSTRIES, INC., et al., Defendants.
• Court: U.S. District Court — District of Columbia

641 F. Supp. 1154

CABLEVISION COMPANY, Plaintiff, v. MOTION PICTURE ASSOCIATION OF AMERICA, INC., et al., Defendants (Two Cases).

NATIONAL CABLE TELEVISION ASSOCIATION, INC., Plaintiff, v. COLUMBIA PICTURES INDUSTRIES, INC., et al., Defendants.

Civ. A. Nos. 83-1655, 83-2785 and 84-3097.

United States District Court, District of Columbia.

July 31, 1986.

Mark J. Tauber, Michael A. Schlanger, Piper & Marbury, Washington, D.C., for plaintiffs in Civ. A. Nos. 83-1655 and 84-3097.

Jay E. Ricks, David J. Saylor, Elliot M. Mincberg, Hogan & Hartson, Washington, D.C., for plaintiff in Civ. A. No. 83-2785.

Arthur Scheiner, Dennis Lane, Wilner & Scheiner, Philip H. Schaeffer, Jon A. Baumgarten, Paskus, Gordon & Hyman, Washington, D.C., for defendants.

OPINION

JUNE L. GREEN, District Judge.

These matters are before the Court on cross-motions for summary judgment, the respective opposition and reply briefs to the motions, a hearing on the motions, and the entire record herein.

I. Background

This civil action consists of three separately filed complaints which seek a judicial interpretation of a phrase contained in Section 111(d) of the Copyright Act of 1976, Pub.L. No. 94-553, 90 Stat. 2541 (1978) (codified at 17 U.S.C. §§ 101 et seq.) Plaintiff Cablevision Company ("Cablevision") filed two of those complaints, Civil Action Nos. 83-1655 and 84-3097. Cablevision provides cable television services to subscribers residing in Nassau, Westchester, and Suffolk Counties, New York, and in Bayonne and Bergen Counties, New Jersey. Plaintiff National Cable Television Association, Inc. ("NCTA") filed the third complaint, Civil Action No. 83-2785. NCTA is a trade association whose members include owners and operators of cable television systems in the United States. Cablevision, a member of NCTA, is also a plaintiff-intervenor in the NCTA action. See March 20, 1984, Order granting Cablevision's Motion to Intervene.

The defendants are the same in all three cases. They include eight copyright owners, co-owners or exclusive licensees of public performance, distribution and rights to the motion pictures which are the subject of this dispute and a trade association which represents the interests of these copyright owners. These copyright owners are Columbia Pictures Industries, Inc., Embassy Communications, MGM/UA Entertainment Co., Orion Pictures Corporation, Paramount Pictures Corporation, Twentieth Century-Fox Film Corporation, Universal City Studios, Inc., Warner Bros. Inc., and the Motion Picture Association of America ("Copyright Owner Defendants"). The U.S. Copyright Office and its Register ("Copyright Office Defendants") were joined as necessary party defendants in a separate count of an amended complaint pursuant to an order of this Court. See July 17, 1984, Order and Amended Complaint filed August 20, 1984. The Copyright Office is an office of the Library of Congress in Washington, D.C., which has certain responsibilities with respect to the Copyright Act of 1976 pursuant to that Act. The Register of Copyrights is the officer in charge of the Copyright Office.

Plaintiffs' complaints seek a declaratory judgment as to the proper interpretation of Section 111(d) of the Copyright Act of 1976, concerning the amount of gross receipts included in calculating the payment of copyright royalty fees by cable television systems for the basic service of providing secondary transmissions of primary broadcast transmitters. Both plaintiffs claim that the defendants interpret improperly section 111(d) so as to require cable operators to overpay substantially their copyright royalty fees and thereby unjustly enrich defendants. Moreover, Cablevision requests an order restraining Copyright Owner Defendants from instituting any further action against it for copyright infringement and such other relief as may be appropriate.

The defendants disagree with plaintiffs' reading of section 111(d). They argue instead that the plaintiffs' interpretation of the statute results in an underpayment of royalties. Defendant Copyright Owners filed a counterclaim for copyright infringement, statutory damages, injunctive relief, costs, and attorneys fees.

Before the Court discusses more fully the positions of the parties in this dispute, a short overview of section 111(d) and the development of the cable industry is in order.

A. The Copyright Revision Act of 1976

The Copyright Revision Act of 1976, 17 U.S.C. §§ 101 et seq., established a compulsory copyright license for the retransmission of television broadcast signals by cable systems. The Act was the culmination of congressional efforts to respond to the Supreme Court's decisions in Fortnightly Corp. v. United Artists Television, Inc., 392 U.S. 390, 88 S.Ct. 2084, 20 L.Ed.2d 1176 (1968), and Teleprompter Corp. v. CBS, Inc., 415 U.S. 394, 94 S.Ct. 1129, 39 L.Ed.2d 415 (1974), which held that the distribution of television broadcasts was not a "performance" so as to be protected by the Copyright Act of 1909. Consequently, the cable operators were not required to make royalty payments to the copyright owners. The Court stated in Teleprompter that "any ultimate resolution of the many sensitive and important problems in this field ... must be left to Congress." 415 U.S. at 414, 94 S.Ct. at 1141.

Congressional efforts to safeguard the interest of the creators of copyright material being distributed on cable systems, while still allowing for the fullest development of the public's right of access to information through cable technology, began in 1964 and was followed quickly by the introduction of bills in 1965, 1966, 1967, 1969, 1971, 1973, and 1975, leading to the passage of the revised Copyright Act of 1976. See The Cable Television Provisions of the Revised Copyright Act, 27 Cath.U.L.Rev. 263, 279 n. 64 (1978). Congress realized that it would be impractical, if not impossible, for each and every cable operator to negotiate directly with every copyright owner and embarked upon a new approach.

This new approach required cable operators to obtain a compulsory license in order to retransmit television programs. Copyright owners of motion pictures and/or other works that are embodied in the retransmitted signals are compelled to license these works to cable systems in return for which they are compensated through the payment of semi-annual fees by individual cable systems. These semi-annual royalty fees are computed in accordance with a statutory formula based upon gross receipts from a basic statutory service.

The royalty schedule formula was the result of last-minute negotiations between the copyright owners and the cable television industry and, with some modifications, is found in section 111(d)(2)(B) which provides for the fee to be

computed on the basis of specific percentages of the gross receipts from subscribers to the cable service during said period for the basic service of providing secondary transmissions of primary broadcast transmitters....

17 U.S.C. 111(d)(2)(B). The royalty fees are then distributed to those copyright owners whose works were the subject of secondary transmissions of broadcast signals. The Copyright Tribunal ("Tribunal"), an independent agency of the legislative branch, determines the formulae for dividing the fees among the copyright owners. The Tribunal is also authorized to "... adopt regulations ... governing its procedures and methods of operation...." 17 U.S.C. § 803.

Semi-annual statements of account which list the broadcast signals carried by the cable system operators must also be filed with the semi-annual royalty payments. Cable systems with semi-annual gross receipts below $146,000 pay a flat royalty fee ($28) regardless of the number of distant signals carried, and are known as "Form 1" systems. 17 U.S.C. § 111(d)(2)(C); 37 C.F.R. § 308.2(b)(1) (1985). Cable systems with semi-annual gross receipts of $146,000 to $292,000, commonly known as "Form 2" systems, pay a royalty fee based on a set percentage of gross receipts regardless of the number of distant signals. 17 U.S.C. § 111(d)(2)(D); 37 C.F.R. § 308.2(b)(2) (1985).

Major cable systems with semi-annual gross receipts in excess of $292,000, known as "Form 3" systems, pay royalty fees based on a percentage of gross receipts, but the percentage varies with the number and nature of the broadcast signals retransmitted. The licensing fee of the major cable operators is based upon a percentage of gross receipts derived from basic subscriber charges multiplied by the number of distant signal equivalents ("DSE") carried. A DSE is a numerical value assigned to the secondary transmission of a non-network television program beyond the local service area of the primary transmitter by a cable system. 17 U.S.C. § 111(f). Different DSE values are assigned to three types of stations (independent, network affiliated, and noncommercial educational) that can be retransmitted as distant signals.¹ Id. See Copyright Owner Defendants' Motion for Summary Judgment on Phase One Issue at 10-12, filed March 2, 1984, for a detailed explanation of Form 3 System royalty fee calculation.

Congress defined the terms "secondary transmissions" and "primary transmissions" used in section 111(d)(2)(B) of the Act.² It failed, however, to define specifically the terms "gross receipts" or "basic service," the meaning upon which this controversy centers. The Copyright Tribunal, consistent with its mandate and over six months after NCTA filed its complaint, adopted rules of procedure and prepared forms for the use of cable operators to facilitate the filing of periodic statements of account and defined specifically "gross receipts." According to the Tribunal,

gross receipts for the "basic service of providing secondary transmissions of primary broadcast transmitters" include the full amount of monthly (or other periodic) service fees for any and all services or tiers of service which include one or more secondary transmissions of

...