CBS Broadcasting v. Echostar Communication Corp.

• Decision Date: 17 September 2001
• Docket Number: No. 00-15378,00-15378
• Parties: (11th Cir. 2001) CBS BROADCASTING, INC., FOX BROADCASTING COMPANY, ABC, INC., NATIONAL BROADCASTING CO., FBC TELEVISION AFFILIATES ASSOCIATION, et al., Plaintiffs-Appellees, v. ECHOSTAR COMMUNICATION CORPORATION, d.b.a. DISH Network, ECHOSTAR SATELLITE CORPORATION, SATELLITE COMMUNICATIONS OPERATING CORPORATION, DIRECT SAT CORP., Defendants-Appellants, UNITED STATES OF AMERICA, Intervenor. ECHOSTAR COMMUNICATION CORPORATION, a Nevada Corporation, Plaintiff-Counter- Defendant-Appellant, ECHOSTAR SATELLITE CORPORATION, a Colorado corporation, SATELLITE COMMUNICATIONS OPERATING CORPORATION, a Colorado corporation DIRECT SAT CORPORATION, a Delaware corporation, Plaintiffs-Appellants, v. CBS BROADCASTING INC., a New York corporation, FOX BROADCASTING, CO., a California corporation, NATIONAL BROADCASTING CO., a New York corporation, ABC, INC., a New York corporation, Defendants-Counter- Claimants-Appellees, UNITED STATES OF AMERICA, Intervenor
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1193

265 F.3d 1193 (11th Cir. 2001)

CBS BROADCASTING, INC., FOX BROADCASTING COMPANY, ABC, INC., NATIONAL BROADCASTING CO., FBC TELEVISION AFFILIATES ASSOCIATION, et al., Plaintiffs-Appellees, v. ECHOSTAR COMMUNICATION CORPORATION, d.b.a. DISH Network, ECHOSTAR SATELLITE CORPORATION, SATELLITE COMMUNICATIONS OPERATING CORPORATION, DIRECT SAT CORP., Defendants-Appellants, UNITED STATES OF AMERICA, Intervenor.

ECHOSTAR COMMUNICATION CORPORATION, a Nevada Corporation, Plaintiff-Counter- Defendant-Appellant, ECHOSTAR SATELLITE CORPORATION, a Colorado corporation, SATELLITE COMMUNICATIONS OPERATING CORPORATION, a Colorado corporation DIRECT SAT CORPORATION, a Delaware corporation, Plaintiffs-Appellants, v. CBS BROADCASTING INC., a New York corporation, FOX BROADCASTING, CO., a California corporation, NATIONAL BROADCASTING CO., a New York corporation, ABC, INC., a New York corporation, Defendants-Counter- Claimants-Appellees, UNITED STATES OF AMERICA, Intervenor.

No. 00-15378

UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT

September 17, 2001

[Copyrighted Material Omitted]

Appeal from the United States District Court for the Southern District of Florida, D. C. Docket Nos. 98-02651-CV-LCN, 99-06382-CV-LCN.

Before ANDERSON, Chief Judge, BIRCH and WOOD^*, Circuit Judges.

ANDERSON, Chief Judge:

This is an interlocutory appeal from the entry of a preliminary injunction in a copyright infringement suit that was initiated by four major television network stations and associations representing hundreds of local network affiliates against EchoStar Satellite Company and its subsidiaries. The propriety of the preliminary injunction depends in large part upon the Satellite Home Viewer Act ("SHVA"), 17 U.S.C. § 119, and its most recent amendments in the Satellite Home Viewer Improvement Act of 1999 ("Improvement Act" or "the Act"), Pub. L. No. 106-133, § 1001, et seq., 113 Stat. 1537, 515 (West Supp. 2001). SHVA, as amended by the Improvement Act, creates a compulsory, statutory license for satellite carriers to transmit copyrighted network programming for private home viewing to "persons resid[ing] in unserved households." 17 U.S.C. § 119 (1996 & West Supp. 2001). The district court found, inter alia, that there was a substantial likelihood that the Networks could establish that EchoStar provides distant network signals to "served" residences thereby falling outside of the Act and violating the Networks' copyrights. Because we conclude that this finding was an abuse of discretion, we vacate the preliminary injunction and remand for further proceedings consistent with this opinion.

BACKGROUND

A. Factual Background

CBS Broadcasting, Inc. ("CBS"), Fox Broadcasting Company ("Fox"), ABC, Inc., National Broadcasting Co.("NBC") are the respective owners of the CBS, Fox, ABC, and NBC television networks. CBS Television Network Affiliates Association, FBC Television Affiliates Association, ABC Television Affiliates Association, and NBC Television Affiliates and are the trade associations representing hundreds of CBS, Fox, ABC, and NBC affiliate stations. The Networks own the copyright or exclusive rights in numerous television programs broadcast by CBS, Fox, ABC, and NBC network stations. EchoStar Communications Corporation and its subsidiaries, EchoStar Satellite Corporation, Satellite Communications Operating Corporation, and Direct Sat Corporation (collectively "EchoStar"), provide satellite television programming to over five million Americans under the name "DISH Network."

During the 1990's, EchoStar began providing satellite television programming to subscribers with small (18 inch) satellite dishes. To provide such programming, EchoStar contracted with PrimeTime 24 Joint Ventures ("PrimeTime") to obtain distant network signals.¹

In December 1996, in the district court for the Southern District of Florida, CBS, Fox, and various CBS affiliates sued PrimeTime, asserting that PrimeTime was infringing on the networks' copyrights by transmitting network material to individuals who did not qualify as "unserved" (herein "PrimeTime litigation"). See CBS, Inc., v. PrimeTime 24 Joint Venture, 245 F.3d 1217 (11th Cir. 2001). By orders dated May 13, 1998, and July 19, 1998, the district court preliminarily and permanently enjoined PrimeTime from "deliver[ing] CBS or Fox television network programming to any customer that does not live in an `unserved household' as defined in" SHVA. See CBS, Inc. v. PrimeTime 24 Joint Ventures, 9 F. Supp. 2d 1333 (S.D. Fla. 1998) (preliminary injunction) (CBS I); CBS Broadcasting v. PrimeTime 24 Joint Venture, 48 F. Supp. 2d 1342 (S.D. Fla. 1998) (permanent injunction) (CBS II).²

On July 20, 1998, the day after the permanent injunction in the PrimeTime litigation was entered, EchoStar announced publicly that it would be providing its own package of distant network programming. EchoStar created two such packages to include signals from ABC, CBS, Fox, and NBC affiliates in New York City and Los Angeles.

At that time, EchoStar also implemented its own screening process for new customers to ensure SHVA compliance.³ First, EchoStar hired an independent engineering firm to provide a nationwide "red light/green light" database that uses the Longley-Rice predictive model to predict Grade A and Grade B signal intensity within specific zip codes. In screening prospective subscribers, EchoStar scanned their zip-code to determine whether the subscriber resided in a red or green light area, i.e., whether the residence was predicted to receive a Grade A or B intensity. If predicted to reside in a Grade A or B contour, the subscriber was allegedly refused distant network services unless that subscriber obtained a waiver from the local network affiliate or a professionally administered signal intensity test indicating that the residence does not receive a Grade A or B signal from the network affiliates in that market.

Beginning sometime after February 1999, EchoStar hired Dataworld, a second independent engineering firm, to construct a Grade A/Grade B database using the Individual Location Longley-Rice propagation model ("ILLR model"). This database was provided to EchoStar sometime in 1999, and upon receipt of the software, EchoStar alleges that it has run all prospective subscribers through the ILLR model in the same manner that it utilized the red light/green light database. Finally, in 1999, EchoStar began negotiations with Decisionmark Corporation, a third independent engineering firm, to provide ILLR testing for all of EchoStar's pre-July 1998, PrimeTime-derived subscribers to confirm their eligibility under SHVA.

B. Procedural Background

On October 19, 1998, EchoStar filed a declaratory judgment action against the Networks in the United States District Court for the Southern District of Colorado, Case No. 98-CIV-02285, seeking a declaration that it was complying with SHVA. The Networks did not respond initially in the Colorado litigation.

Instead, on November 5, 1998, the Networks filed a complaint in the United States District Court for the Southern District of Florida alleging that EchoStar was infringing on the Networks' copyrights by providing distant network programming to "served" households. A few days later, on November 9, 1998, the Networks filed a motion in the Colorado district court to transfer EchoStar's declaratory judgment action to the Southern District of Florida. The Colorado district court granted the Networks' motion to transfer on March 29, 1999, and on April 28, 2000, the Colorado litigation was consolidated with the Networks' copyright infringement suit in the Southern District of Florida.

Meanwhile, on December 2, 1998, the Networks filed a motion for a preliminary injunction in the Southern District of Florida seeking to enjoin EchoStar from infringing on its copyrights. By written motion, EchoStar requested an evidentiary hearing and requested the court to compel the Networks to comply with its discovery requests. The district court did not respond to these motions, but set oral argument on the Networks' preliminary injunction motion for September 21, 1999.

Oral argument was held on September 21, 1999, and on September 29, 2000, the district court granted the Networks' motion for a preliminary injunction against EchoStar. In the order granting the preliminary injunction, the court denied EchoStar's requests for an evidentiary hearing and motions to compel.

Finding all four prerequisites for a preliminary injunction satisfied, the district court enjoined EchoStar from transmitting distant network programming to "served households" within the meaning of SHVA. Specifically, the court first found that there was a substantial likelihood that the Networks' copyright infringement suit would succeed because the evidence demonstrated that EchoStar "likely provides distant network transmissions to numerous households which are not `unserved'" and EchoStar's violations of SHVA are willful and repeated. Second, the court found that "[b]ecause the network parties have established that they are likely to prevail on the merits, they are entitled to a presumption of irreparable injury." Third, the court weighed the equities, finding that the potential injuries to the Networks should the injunction not issue outweighed any injury to EchoStar that could occur from issuance. Lastly, the court reasoned that the preliminary injunction would not disserve the public interest because the public interest lies with protecting the rights of copyright owners. Finding the four prerequisites satisfied, the court granted the Networks' motion, directing EchoStar to terminate distant network programming to "served households."

In addition to entering the preliminary injunction, the court interpreted 17 U.S.C. § 119(e). The parties disputed whether this provision enables a subscriber to transfer to a different satellite provider with his or her grandfathered rights under § 119(e)....