Cbs Broadcasting v. Echostar Communications Corp.

• Decision Date: 07 July 2008
• Docket Number: No. 07-10178.,No. 07-10020.,07-10020.,07-10178.
• Citation: 532 F.3d 1294
• Parties: CBS BROADCASTING, INC., et al., Plaintiffs-Counter-Defendants, Fox Broadcasting Company, FBC Television Affiliates Association, ABC Television Affiliates Association, NBC Television Affiliates, CBS Television Affiliates Association, Plaintiffs-Counter-Defendants-Appellants-Cross-Appellees, v. ECHOSTAR COMMUNICATIONS CORPORATION, d.b.a. DISH Network, EchoStar Satellite Corporation, Satellite Communications Operating Corporation, Direct Sat Corp., Defendants-Counter-Claimants-Appellees, Michael Mountford, National Programming Service, LLC, Proposed Intervenors-Cross-Appellants. CBS Broadcasting, Inc., et al., Plaintiffs-Counter-Defendants, Fox Broadcasting Company, FBC Television Affiliates Association, ABC Television Affiliates Association, NBC Television Affiliates, CBS Television Affiliates Association, Plaintiffs-Counter-Defendants-Appellants, v. EchoStar Communications Corporation, d.b.a. DISH Network, EchoStar Satellite Corporation, Satellite Communications Operating Corporation, Direct Sat Corp., Defendants-Counter-Claimants-Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

532 F.3d 1294

CBS BROADCASTING, INC., et al., Plaintiffs-Counter-Defendants, Fox Broadcasting Company, FBC Television Affiliates Association, ABC Television Affiliates Association, NBC Television Affiliates, CBS Television Affiliates Association, Plaintiffs-Counter-Defendants-Appellants-Cross-Appellees, v. ECHOSTAR COMMUNICATIONS CORPORATION, d.b.a. DISH Network, EchoStar Satellite Corporation, Satellite Communications Operating Corporation, Direct Sat Corp., Defendants-Counter-Claimants-Appellees, Michael Mountford, National Programming Service, LLC, Proposed Intervenors-Cross-Appellants.

CBS Broadcasting, Inc., et al., Plaintiffs-Counter-Defendants, Fox Broadcasting Company, FBC Television Affiliates Association, ABC Television Affiliates Association, NBC Television Affiliates, CBS Television Affiliates Association, Plaintiffs-Counter-Defendants-Appellants, v. EchoStar Communications Corporation, d.b.a. DISH Network, EchoStar Satellite Corporation, Satellite Communications Operating Corporation, Direct Sat Corp., Defendants-Counter-Claimants-Appellees.

No. 07-10020.

No. 07-10178.

United States Court of Appeals, Eleventh Circuit.

July 7, 2008.

Thomas P. Olson, A. Stephen Hut, Jr., Jonathan E. Nuechterlein, Wilmer, Cutler, Pickering, Hale & Dorr, LLP, Washington, DC, Wade H. Hargrove, David Kushner, Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P., Raleigh, NC, for Plaintiffs.

Cynthia A. Ricketts, Mark A. Nadeau, DLA Piper U.S. LLP, Phoenix, AZ, Todd Gerald Vare, Barnes & Thornburg, LLP, Indianapolis, IN, for Defendants.

Appeals from the United States District Court for the Southern District of Florida.

Before WILSON, COX and BOWMAN,^* Circuit Judges.

WILSON, Circuit Judge:

The issue before us is whether the nationwide, permanent injunction mandated by the Satellite Home Viewer Act of 1988, Pub.L. No. 100-667, tit. II, 102 Stat. 3949 ("SHVA"), prohibits Appellee EchoStar Communications Corporation ("EchoStar") from leasing its transponder to National Programming Service, LLC ("NPS"), thereby allowing NPS to retransmit distant network programming to eligible subscribers. See 17 U.S.C. § 119(a)(7)(B)(i). We agree with the district court that EchoStar is not in violation of § 119(a)(7)(B)(i). We affirm.

I. BACKGROUND

Appellant Fox Broadcasting Company ("Fox") is the respective owner of the Fox television network. Fox possesses the copyrights or exclusive rights in numerous television programs broadcast by Fox network stations. Appellants CBS Television Affiliates Association, ABC Television Affiliates Association, FBC Television Affiliates Association, and NBC Television Affiliates are the respective trade associations representing hundreds of CBS, ABC, Fox and NBC affiliate stations. All appellants will hereafter be referred to as the "Networks."

During the 1990s, EchoStar began providing satellite television programming to subscribers with small (18 inch) satellite dishes, and conducted its business under the name "DISH NETWORK." The SHVA provided satellite carriers such as EchoStar a compulsory, statutory license to engage in secondary transmissions¹ of copyrighted distant network programming² to unserved households.³

In November 1998, the Networks filed suit in the United States District Court for the Southern District of Florida claiming that EchoStar was infringing on the Networks' copyrights by providing distant network programming to served—as opposed to unserved—households. In 2003, after a two-week bench trial, the district court found that EchoStar retransmitted the Networks' programs to hundreds of thousands of served households, which constituted "willful or repeated" copyright infringement under 17 U.S.C. § 119(a)(7)(A). CBS Broad., Inc. v. EchoStar Commc'ns Corp., 450 F.3d 505, 509, 516 (11th Cir. 2006). The district court declined to issue the severe "pattern or practice" injunction under 17 U.S.C. § 119(a)(7)(B); instead, it "crafted an injunction designed to remedy ... individual violations of the Act." Id. at 517. On appeal, we held that EchoStar had indeed engaged in a "pattern or practice" of secondary transmissions to served households on a nationwide basis in violation of § 119(a)(7)(B). Id. at 526. We remanded the case to the district court for the entry of a nationwide permanent injunction barring EchoStar from providing distant network programming pursuant to § 119(a)(7)(B). Id. at 527. On remand, the district court entered the mandated permanent injunction on October 20, 2006, which was to take effect on December 1, 2006.

On November 29, two days before the effective date of the injunction, EchoStar entered into a lease agreement ("Lease Agreement") with NPS, a satellite programming provider that has been in the business of providing television programming (including distant network broadcast signals) for more than ten years.⁴ Under the Lease Agreement, NPS leases a transponder⁵ on EchoStar's satellite.⁶ In exchange for use of the transponder, NPS pays EchoStar $150,000 per month.⁷ The rent payments are not tied to providing distant network programming signals to subscribers. NPS is obligated to make the payments for at least two years from the date of the contract whether or not NPS signs up any subscribers for distant network programming. EchoStar does not receive, or share in, any revenues or profits received by NPS's provision of distant network programming. In addition, the Lease Agreement:

(1) Establishes NPS as the owner of distant network subscriber information and other related rights;

(2) Requires NPS to be responsible for the collection, transport, delivery, reception, monitoring, and uplinking of all signals to be transmitted using the leased transponder;

(3) Permits NPS to offer distant network channels to all eligible consumers, not just EchoStar subscribers;

(4) Prevents EchoStar from determining subscriber eligibility, or from activating or de-activating distant network subscribers; and prevents NPS from using EchoStar's call center, subscriber management, and other systems to determine subscriber eligibility, activate, and deactivate subscribers;

(5) Requires NPS to independently contract with Decisionmark⁸ to determine subscriber eligibility;

(6) Requires consumers to contact NPS directly in order to subscribe to distant network channels;

(7) Prohibits EchoStar from disconnecting distant network programming to NPS customers, even if those customers are also EchoStar customers and fail to pay EchoStar for the programming they receive from EchoStar;

(8) Prevents EchoStar from billing or collecting payments from distant network subscribers and requires that NPS use its own systems for billings and collection (if EchoStar and NPS share the same customer, the customer receives and pays two separate bills);

(9) Permits NPS to charge whatever price it desires for the services it delivers, including distant network programming;

(10) Requires NPS to pay all costs associated with NPS's provision of distant network programming to eligible consumers;

(11) Requires NPS to pay all taxes related to distant network subscribers; and

(12) Requires NPS to ensure compliance with Section 119 of the SHVA, including the payment of royalty fees and filing of necessary submissions.

In compliance with the injunction, EchoStar disconnected distant network channels to all of its approximately 900,000 distant network subscribers, which has caused EchoStar a loss of more than twenty-five million dollars annually.

Upon becoming aware of the Lease Agreement, the Networks moved the district court to issue an order to show cause why EchoStar and NPS should not be held in contempt of the October 20 injunction. On December 1, 2006, the Networks alternatively moved for clarification⁹ of the October 20 injunction prohibiting the EchoStar-NPS lease agreement. The district court denied both motions, holding that the injunction did not prohibit EchoStar from acting as a passive conduit for NPS's retransmissions of distant network programming:

Neither the Act nor the mandate impose a requirement that EchoStar refrain from any business with customers formerly receiving distant network signals, nor does it prohibit other providers from transmitting those signals to those former customers who qualify as unserved under the Act.

. . . .

As NPS points out, the injunction required for pattern or practice violations bars not only unlawful conduct but also would otherwise bar the legitimate provision of services under the Act, i.e., providing distant network services to unserved households .... What Plaintiffs seek goes beyond that, seeking to bar not only EchoStar from providing such services but also unaffiliated third parties who seek to use EchoStar's already existing equipment to fill a gap in the market. Plaintiffs have not demonstrated that the agreement between EchoStar and NPS is anything but an arms-length business transaction to lease satellite space, or that EchoStar is, at this point, anything more than a conduit for the signals which will be sent by NPS .... That EchoStar has found a way to minimize the harm to its customers and itself, and likely prevent a windfall to its competitors, does not require this Court to modify the injunctive relief entered to encompass conduct not intended to be banned by the Act or the Eleventh Circuit's mandate, and the Court does not find good cause to enter such broad relief.

(D.E. 1121 at 5-6.)

On appeal, the Networks ask us to reverse the district court and hold that EchoStar's participation in the Lease Agreement violates the injunction required by § 119(a)(7)(B)(i).

II. STANDARD OF REVIEW

Typically, a district court's refusal to clarify or modify an injunction is reviewed for an abuse of discretion, Dillard v. Baldwin County Comm'rs, 376 F.3d 1260, 1264-65 (11th Cir.2004), but a court "by definition abuses its discretion when it makes an error of law," Koon v. United States, 518 U.S. 81, 100, 116 S.Ct. 2035, 2047, 135 L.Ed.2d...