National Broadcasting Co., Inc. v. Satellite Broadcast Networks, Inc.

• Decision Date: 04 September 1991
• Docket Number: No. 90-8597,90-8597
• Citation: 940 F.2d 1467
• Parties: 1991 Copr.L.Dec. P 26,800, 20 U.S.P.Q.2d 1071, 19 Media L. Rep. 1271 NATIONAL BROADCASTING COMPANY, INC., Plaintiff-Appellee, v. SATELLITE BROADCAST NETWORKS, INC., Defendant-Appellant. NBC TELEVISION AFFILIATES, Plaintiff-Appellee, v. SATELLITE BROADCAST NETWORKS, INC., Defendant-Appellant.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1467

940 F.2d 1467

1991 Copr.L.Dec. P 26,800, 20 U.S.P.Q.2d 1071,

19 Media L. Rep. 1271

NATIONAL BROADCASTING COMPANY, INC., Plaintiff-Appellee, v. SATELLITE BROADCAST NETWORKS, INC., Defendant-Appellant.

NBC TELEVISION AFFILIATES, Plaintiff-Appellee, v. SATELLITE BROADCAST NETWORKS, INC., Defendant-Appellant.

No. 90-8597.

United States Court of Appeals, Eleventh Circuit.

Sept. 4, 1991.

David H. Flint, Alexander J. Simmons, Jr., Schreeder, Wheeler & Flint, Atlanta, Ga., Gardner F. Gillespie, Jeremy H. Stern, Steven J. Horvitz, Hogan & Hartson, Washington, D.C., for Satellite Broadcast Networks, Inc.

James A. Demetry, Terrence B. Adamson, Dow, Lohnes & Albertson, Atlanta, GA., Jonathan D. Hart, David J. Wittenstein, Werner K. Hartenberger, Dow, Lohnes & Albertson, Washington, D.C., for NBC Television Affiliates.

Joseph R. Bankoff, R. Byron Attridge, King & Spalding, Atlanta, Ga., Jerome J. Shestack, Ronald E. Karam, Schnader, Harrison, Segal & Lewis, Philadelphia, Pa., for National Broadcasting Co., Inc.

Appeals from the United States District Court for the Northern District of Georgia.

Before EDMONDSON and DUBINA, Circuit Judges, and ESCHBACH, ^* Senior Circuit Judge.

ESCHBACH, Senior Circuit Judge:

Is Satellite Broadcast Networks, Inc. ("SBN") a "cable system" under 17 U.S.C. Sec. 111? If it is, then it was free to rebroadcast the television signal of a National Broadcasting Company (NBC) affiliate. If not, then SBN is liable to NBC for copyright infringement. We conclude that SBN is a cable system and so reverse the District Court's summary judgment in NBC's favor.

The facts are undisputed. SBN has facilities in Georgia, Illinois and New Jersey that receive the broadcast signals from local television stations. SBN then scrambles the signals and rebroadcasts them across the country by satellite. Any owner of a home satellite dish can receive the signal and, for a fee, receive an unscrambling box from SBN. One of the local signals that SBN has retransmitted is that of WXIA, the Atlanta affiliate of NBC.

NBC filed this action in 1987 claiming that SBN has infringed NBC's exclusive rights in copyrighted work ¹ by rebroadcasting WXIA's signal without NBC's permission. NBC's suit is based on 17 U.S.C. Sec. 501(b), which entitles "[t]he legal or beneficial owner of an exclusive right under a copyright ... to institute an action for any infringement of that particular right...." SBN responds that it committed no infringement. It argues that NBC and its affiliates had no choice but to grant SBN the right to rebroadcast their transmissions because of a "compulsory license" provided in 17 U.S.C. Sec. 111, which states:

[S]econdary transmissions to the public by a cable system of a primary transmission made by a broadcast station ... shall be subject to compulsory licensing upon compliance with [procedural requirements and payment of mandatory royalties] where the carriage of the signals comprising the secondary transmission is permissible under the rules, regulations or authorizations of the Federal Communications Commission.

17 U.S.C. Sec. 111(c)(1). NBC must grant SBN the license as long as SBN meets the requirements of Sec. 111. If SBN qualifies for the license, it is not an infringer because it has violated no exclusive rights.

No one disputes that SBN's satellite broadcast was a "secondary transmission"; that WXIA is a broadcast station; and that SBN complied with all the procedural and royalty requirements. The question is whether SBN is a "cable system." The District Court concluded on summary judgment that SBN cannot be a "cable system," and so has no rebroadcast rights under Sec. 111, because its facilities are not located entirely within a single state. Our review of a district court's grant of summary judgment is plenary. Kendrick v. Jefferson County Bd. of Educ., 932 F.2d 910, 912 (11th Cir.1991).

The District Court's view ² was based on Sec. 111(f), which defines "cable system" as:

a facility located in any State, Territory, Trust Territory, or Possession, that ... receives signals transmitted or programs broadcast by one or more television broadcast stations ... and makes secondary transmissions of such signals....

17 U.S.C. Sec. 111(f) (emphasis added). ³ The District Court concluded that to be a "facility located in any State," the facility must be located entirely within a single state. ⁴ In drawing this construction, the Court was attempting to limit cable system status to traditional cable companies that serve only local communities. But nothing in the words Congress chose counsel that only local cable companies be included, ⁵ and if Congress had intended to benefit only community-based systems, it could have defined "cable system" more narrowly. Cf. 47 U.S.C. Sec. 522(6) (defining "cable system" in the Cable Communications Policy Act to mean a facility that provides video programming to multiple subscribers "within a community"). We are thus unpersuaded that "located in any State" means located entirely within a single state. Indeed, if this narrow reading were to prevail, many of the concededly traditional local systems serving communities that cross a state border ⁶ would lose their cable system status.

Reading "located in any State" so narrowly also ignores the definition that immediately precedes that of "cable system"--the definition of "secondary transmission." A secondary transmission:

"is the further transmitting of a primary transmission simultaneously with the primary transmission, or nonsimultaneously with the primary transmission if by a 'cable system' not located in whole or in part within the boundary of the forty-eight contiguous States, Hawaii, or Puerto Rico ..."

Sec. 111(f) (emphasis added). The highlighted portion is a rather cumbersome way of describing a cable system located entirely within Alaska. But a nonsimultaneous broadcast is not a secondary transmission if made by a cable system located partly in Alaska and partly in some other state. If a cable system must be located entirely within a single state, it would have been sufficient for Congress to say "if by a 'cable system' located in Alaska." This suggests that Congress understood it would be possible for a cable system to exist "in part" within Alaska and "in part" elsewhere. This suggestion is consistent with our analysis, but conflicts with the District Court's view, that a cable system can never exist in part in one state and in part in another.

Finally there is no good reason why a satellite broadcasting company such as SBN should not be a cable system. ⁷ Without dispute, SBN could have broadcasted its signal to other cable systems located throughout the nation with each of these cable systems passing the signal along to the public. See EMI, 691 F.2d at 132-35 and n. 17 (EMI transmitted its signal to 600 cable systems.); Hubbard Broadcasting, 777 F.2d at 401-05. SBN has simply eliminated the middleman. See EMI, 691 F.2d at 131, 133. Moreover, to conclude that SBN cannot be a cable system because of its geographic reach would be to prevent those in sparsely populated areas from receiving the quality television reception technology can provide. Common practice in the traditional community-based cable television industry assumes it is uneconomical to wire homes in areas with less than 40 households per square mile. Affidavit of Mary (Kazie) Catherine Metzger p 10. The majority of SBN's customers live in these sparsely populated areas not served by traditional cable television. Id. at p 14. Indeed, many live outside the reach of the signals of one or all of the networks' programming. Id. at p 15. If these people are to receive cable at all, it will have to be satellite-based cable. In short, there is no good reason to read "cable system" narrowly to deny SBN its license, and to do so will do an injustice to those who live in rural areas. SBN is a cable system.

A minor issue that remains is that Sec. 111(c)(1) gives SBN rebroadcast rights only if that rebroadcast was "permissible under the rules, regulations, or authorizations" of the FCC. The short answer is that the rebroadcast was permissible because no rule or regulation forbade it.

NBC has argued that before SBN's transmissions could become "permissible," the FCC had to affirmatively approve them. But to require express approval of the FCC would be to reach a result from the FCC's inaction that the FCC unequivocally does not intend. The FCC has expressed sympathy for NBC's concerns that direct-to-home satellite distribution threatens the network-affiliate relationship (see supra note 7), but the FCC has explicitly stated it would not address these concerns until after the courts have resolved the copyright infringement issue. See Inquiry into the Scrambling of Satellite Television Signals, First Report, 2 FCC Rcd. 1669 pp 200-01 (1987). More to the point, the FCC has said "The question of whether the cable compulsory license applies to [home satellite dish] sales is unresolved. We do not purport to resolve it." Inquiry into the Scrambling of Satellite Television Signals, Second Report, FCC 88-67, Docket No. 86-336 n. 27 (released March 11, 1988) (emphasis added). We will not read a result from the FCC's failure to act that the FCC neither intends nor foresees. The secondary transmissions were "permissible" under existing FCC rules, regulations and authorizations.

SBN is a cable system as defined under Sec. 111 whose secondary transmissions were permissible under FCC rules and regulations. Therefore, SBN's rebroadcast of WXIA's signal infringed no copyright. The judgment of the District Court is REVERSED. The award of attorney's fees in favor of NBC is also REVERSED.

* Honorable Jesse E. Eschbach, Senior U.S. Circuit Judge for the Seventh Circuit, sitting by designation.

1 NBC owns the copyright to a very few television programs, such as NBC Nightly News and Today. For the majority of its programs, NBC possesses the exclusive right to...