California Satellite Systems, Inc. v. Nichols

• Decision Date: 21 June 1985
• Citation: 216 Cal.Rptr. 180,170 Cal.App.3d 56
• Court: California Court of Appeals Court of Appeals
• Parties: , 1985 Copr.L.Dec. P 25,831 CALIFORNIA SATELLITE SYSTEMS, INC., Plaintiff and Respondent, v. Ralph NICHOLS et al., Defendants and Appellants. Civ. 20883.

Page 180

216 Cal.Rptr. 180

170 Cal.App.3d 56, 1985 Copr.L.Dec. P 25,831

CALIFORNIA SATELLITE SYSTEMS, INC., Plaintiff and Respondent, v. Ralph NICHOLS et al., Defendants and Appellants.

Civ. 20883.

Court of Appeal, Third District, California.

June 21, 1985.

Review Denied September 12, 1985.

Jed Scully and Douglas H. Drake, Sacramento, for defendants and appellants.

de la Vergne & Murtry, James V. de la Vergne and Donna L. Freeman, Sacramento, for plaintiff and respondent.

PUGLIA, Presiding Justice.

Defendants Ralph Nichols, Adolph Gower, and Douglas Hyatt appeal from a preliminary injunction granted upon essentially undisputed facts. The principal issue posed is whether a state court may entertain a private action brought under the federal Communications Act (47 U.S.C.A. § 151 et seq. at § 605) to enjoin the unauthorized interception and use of microwave transmissions of television signals intended by the distributor for the exclusive use of its paying subscribers. As appears, we conclude that it may. We also reject defendants' remaining contentions and affirm the issuance of the preliminary injunction based on probable violations of 47 U.S.C.A. § 605. ¹

Plaintiff California Satellite Systems distributes Home Box Office (HBO) television programs uninterrupted by commercial messages and consisting primarily of movies and sports events to approximately 20,000 paying subscribers in the Sacramento area. The HBO programs originate in New York and are transmitted via satellite to an "earth station" east of Sacramento. The programs are then relayed to a microwave receiving station in Carmichael, near Sacramento, where they are transmitted by omnidirectional signal to multiple points in the Sacramento area. Microband Corporation holds a license as a "common carrier" to operate the Carmichael transmitting station as a multipoint distribution service (MDS) under Federal Communications Commission regulations. The frequencies assigned to it are 2154.75 megahertz for visual and 2150.25 megahertz for aural transmissions.

The MDS microwave signal is transmitted at such high frequency it is incapable of being received by conventional television receivers. Additional equipment is necessary for home viewing of HBO programs. This equipment consists of a specially designed microwave antenna directed at the Carmichael station to receive the signal, a "down converter" to translate the microwave signal into a lower frequency transmitted by ordinary television channels, and a power supply to convert ordinary household voltage into voltage usable by the down converter.

By contractual arrangements, plaintiff pays HBO for the exclusive license to distribute HBO programming in the area and pays Microband for the operation of its MDS system. Plaintiff in turn charges its HBO subscribers a monthly service fee, plus an initial charge for supplying and installing a specially designed directional microwave antenna, a down converter, and a power supply for the converter.

In support of its motion for a preliminary injunction, plaintiff produced evidence strongly suggesting that defendants manufacture, sell, and install microwave antennae, down converters, and power supplies locally for the understood purpose of enabling Sacramento-area residents to receive HBO television programs without paying the fee plaintiff charges its subscribers. While alleging severe economic distress as a result of the "pirating" of its signal, plaintiff presented no specific evidence of immediate financial difficulty. Plaintiff has, however, invested substantial sums to enable it to provide exclusive HBO programming to its subscribers. These sums include the costs of purchasing and servicing antennae and other special equipment, programming license fees and common carrier fees.

The trial court concluded a reasonable probability existed plaintiff would prevail in establishing that defendants were violating 47 U.S.C.A. § 605 (hereafter § 605). ² Because the equipment that defendants and other entrepreneurs sold in the interim would exist in households for years to come, the court also found plaintiff would suffer irreparable injury if a preliminary injunction were denied. After further balancing the equities between the parties, the court issued a preliminary injunction restraining defendants during the pendency of the action from selling or distributing any directional antenna, down converter, or power supply with the intent, understanding, or knowledge that such equipment "will or may be used" by residents in the Sacramento area to intercept and receive plaintiff's programs sent by microwave signal from the MDS station located in Carmichael.

I

On appeal from an order issuing a preliminary injunction, we are guided in our consideration of defendants' contentions by the principles expounded in Continental Baking Co. v. Katz (1968) 68 Cal.2d 512, 67 Cal.Rptr. 761, 439 P.2d 889: " 'The authorities are numerous and uniform to the effect that the granting or denial of a preliminary injunction on a verified complaint, together with oral testimony or affidavits, even though the evidence with respect to the absolute right therefor may be conflicting, rests in the sound discretion of the trial court, and that the order may not be interfered with on appeal, except for an abuse of discretion.' ... [p] 'The granting or denial of a preliminary injunction does not amount to an adjudication of the ultimate rights in controversy. It merely determines that the court, balancing the respective equities of the parties, concludes that, pending a trial on the merits, the defendant should or that he should not be restrained from exercising the right claimed by him.' [Citations.] The general purpose of such an injunction is the preservation of the status quo until a final determination of the merits of the action. [Citations.] Thus, the court examines all of the material before it in order to consider 'whether a greater injury will result to the defendant from granting the injunction than to the plaintiff from refusing it; ...' [Citations.] In making that determination the court will consider the probability of the plaintiff's ultimately prevailing in the case.... 'In the last analysis the trial court must determine which party is the more likely to be injured by the exercise of its discretion [citation] and it must then be exercised in favor of that party [citation].' " (68 Cal.2d at pp. 527, 528, 67 Cal.Rptr. 761, 439 P.2d 889; see also IT Corp. v. County of Imperial (1983) 35 Cal.3d 63, 69-70, 196 Cal.Rptr. 715, 35 Cal.3d 63; National Subscription Television v. Formula International Inc. (1984) 153 Cal.App.3d 308, 314-315, 200 Cal.Rptr. 213; People v. Adult World Bookstore (1980) 108 Cal.App.3d 404, 408, 166 Cal.Rptr. 519.)

II

Defendants initially contend that plaintiff's complaint sounds in copyright infringement, a subject over which a state court lacks jurisdiction because preempted by federal law (see 17 U.S.C.A. § 301). As we view it, however, the issue is not one of preemption but whether a state court has subject matter jurisdiction over private causes of action arising under § 605 (see fn. 2, ante, p. 183).

It is clear that the federal Copyright Act preempts legal and equitable causes of action brought "under the common law or statutes of any State " which are "equivalent to" any of the exclusive rights within the general scope of copyright. (17 U.S.C.A. § 301(a); see also 1 Nimmer on Copyright (1983 ed.) § 1.01[B], p. 1-6; Orth-O-Vision, Inc. v. Home Box Office (S.D.N.Y.1979) 474 F.Supp. 672, 682-684.) By its terms, the preemptive effect of section 301(a) is limited to state law. (See Historical Note 17 U.S.C.A. § 301.) Nothing in federal copyright law "annuls or limits any rights or remedies under any other Federal Statute." (17 U.S.C.A. § 301(d), and Historical Note thereto in 17 U.S.C.A. § 301; see also 1 Nimmer on Copyright, supra, 1.01[B], p. 1-28.) Here, the preliminary injunction issued on the basis of probable violation of a federal statute ( § 605). It is a non sequitur to argue that because state causes of action are preempted by federal copyright law, state courts lack subject matter jurisdiction to entertain a federal claim, even one sounding in copyright.

It is now established that a private right of action arises under § 605. (Chartwell Communications Group v. Westbrook (6th Cir.1980) 637 F.2d 459, 466; National Subscription Television v. S & H TV (9th Cir.1981) 644 F.2d 820, 821, fn. 1.) Unless Congress has conferred exclusive jurisdiction on federal courts, state courts have concurrent jurisdiction to adjudicate the federally created cause of action. (See Brown v. Pitchess (1975) 13 Cal.3d 518, 521, 119 Cal.Rptr. 204, 531 P.2d 772; Williams v. Horvath (1976) 16 Cal.3d 834, 837, 129 Cal.Rptr. 453, 548 P.2d 1125.)

The general rule is that state courts have concurrent jurisdiction to enforce rights and obligations arising under a federal statute absent an express or implied "provision by Congress to the contrary or disabling incompatibility between the federal claim and state-court adjudication." (Gulf Offshore Co. v. Mobile Oil Corp. (1981) 453 U.S. 473, 477-478, 101 S.Ct. 2870, 2875, 69 L.Ed.2d 784, 791; see also generally 1 Witkin, Cal.Procedure (2d ed. 1970) Jurisdiction, § 57, p. 580.) A presumption lies that state courts enjoy concurrent jurisdiction unless it is "rebutted by an explicit statutory directive, by unmistakable implication from legislative history, or by a clear incompatibility between state-court jurisdiction and federal interests." (Gulf Offshore Co., supra, 453 U.S. at p. 478, 101 S.Ct. at p. 2875, 69 L.Ed.2d at p. 791.)

We find nothing in the language, legislative history, or underlying policies of the federal Communications Act (Act) to suggest any incompatibility or conflict between federal and state court adjudication of private rights of action arising under § 605. (See Gulf Offshore Co., supra, 453 U.S. at pp....