Playboy Entertainment Group, Inc. v. U.S., Civ.A. 96-94-JJF.

Decision Date28 December 1998
Docket NumberNo. Civ.A. 96-94-JJF.,Civ.A. 96-94-JJF.
Citation30 F.Supp.2d 702
CourtU.S. District Court — District of Delaware
PartiesPLAYBOY ENTERTAINMENT GROUP, INC., Plaintiff, v. UNITED STATES of America, et al., Defendants.

A. Gilchrist Sparks, III, Maryellen Noreika, Morris, Nichols, Arsht & Tunnell, Wilmington, DE, Robert Corn-Revere, Jean S. Moore, Ronald J. Wiltsie, II, Hogan & Hartson, L.L.P., Washington, DC, of counsel Burton Joseph, of Barsy, Joseph & Lichtenstein, Chicago, IL, for Plaintiff.

Richard G. Andrews, Acting United States Attorney, Patricia C. Hannigan, Assistant United States Attorney of the United States Attorney's Office, Wilmington, DE, of counsel Daniel M. Armstrong, Associate General Counsel, P. Michele Ellison, Deputy Associate General Counsel, Nancy L. Kiefer, of the Office of General Counsel, Federal Communications Commission, Washington, DC, Frank W. Hunger, Assistant Attorney General, Dennis G. Linder, Director, Federal Programs Branch, Theodore C. Hirt, Assistant Director, Federal Programs Branch, James J. Gilligan, Judry L. Subar and Andrea G. Cohen, Trial Attorneys, United States Department of Justice, Washington, DC, for Defendants.

OPINION OF THE COURT

ROTH, Circuit Judge.

Plaintiff, Playboy Entertainment Group, Inc. ("Playboy") challenges the constitutionality of section 505 of the Communications Decency Act of 1996, 47 U.S.C. § 561 ("CDA") which regulates signal bleed, i.e., the partial reception of sexually explicit adult cable television programming in the homes of non-subscribers to that programming. Playboy seeks a declaratory judgment that § 505 violates the First Amendment and the Equal Protection guarantee of the Fifth Amendment of the United States Constitution and also seeks injunctive relief, preventing the United States, the United States Department of Justice, Attorney General Janet Reno, and the Federal Communications Commission (collectively "the Government") from enforcing Section 505.

I. Procedural Background

The procedural background of this lawsuit is described at length in our opinion denying the preliminary injunction. See Playboy Entertainment Group, Inc. v. United States of America, 945 F.Supp. 772 (D.Del.1996), aff'd mem., ___ U.S. ___, 117 S.Ct. 1309, 137 L.Ed.2d 473 (1997) ("PI Opinion"). We will set out that background briefly here.

On February 26, 1996, Playboy filed an action challenging § 505 of the CDA. Playboy's action was consolidated with one brought by Graff Pay-Per-View ("Graff"), owner of two adult networks, Adam & Eve and Spice. Judge Dolores K. Sloviter of the United States Court of Appeals for the Third Circuit then granted the parties' request to appoint a three-judge district court pursuant to § 561(a) of the CDA.1 She named to the panel Judge Joseph J. Farnan, Jr., of the U.S. District Court for the District of Delaware, Judge Jerome B. Simandle of the U.S. District Court for the District of New Jersey, and Judge Jane R. Roth of the U.S. Court of Appeals for the Third Circuit.

On March 7, 1996, Judge Farnan granted Playboy's motion for a temporary restraining order, enjoining enforcement of § 505 until the matter could be heard by the three judge panel. Playboy Entertainment Group, Inc. v. United States of America, 918 F.Supp. 813 (D.Del.1996) ("TRO Opinion").

After a hearing, the three judge panel on November 9, 1996, denied Playboy's application for a preliminary injunction and lifted the temporary restraining order. See PI Opinion, 945 F.Supp. at 792. After affirmance of that order by the Supreme Court, Graff withdrew from the litigation, but Playboy pressed on.

Playboy contends that § 505 infringes the free speech protections provided by the First Amendment of the U.S. Constitution. Additionally Playboy asserts that the language of § 505 is unconstitutionally vague. Finally, Playboy claims that § 505 violates the Equal Protection guarantee of the Fifth Amendment of the U.S. Constitution by singling out Playboy as a network "primarily dedicated to sexually oriented programming," while not regulating signal bleed from other premium networks which transmit sexually oriented programs. The parties cross-moved for partial summary judgment on the vagueness issue; these motions were denied on October 31, 1997. A pretrial conference was held on February 19, 1998, and trial was held on March 4-6, 1998, and post-trial argument on May 28, 1998.

II. Findings of Fact

While many of the background facts, especially regarding the technology of cable transmission, are set out in our opinion denying the preliminary injunction, see PI Opinion, 945 F.Supp. at 776-782, some bear repeating.

1. Playboy challenges § 505 of the CDA, 47 U.S.C. § 561,2 entitled "Scrambling of sexually explicit adult video service programming." This section requires a multisystem operator ("MSO")3 either to fully scramble4 or to time channel "sexually explicit adult programming or other programming that is indecent" on any of its channels that are "primarily dedicated to sexually-oriented programming." The purpose of this provision is to eliminate "signal bleed," which is the partial reception of video images and/or audio sounds on a scrambled channel. The stated methods of eliminating signal bleed are either by blocking the transmission of the targeted programming or by limiting its transmission to the hours of the day when a significant number of children are not likely to view it ("safe harbour hours"). The FCC regulation implementing time channeling would limit adult programming to the period between 10:00 p.m. and 6:00 a.m. In re Implementation of Section 505 of the Telecommunications Act of 1996, CS Dkt. No. 96-40, FCC 96-84, Order & Notice of Proposed Rulemaking amending 47 C.F.R. § 76 ¶ 6.

2. MSOs provide cable subscribers with various packages of cable channels for which the subscribers pay a monthly fee. There is a "basic" package of local broadcast networks (e.g., ABC, CBS, Fox, and NBC), leased and public access channels, and news, education, music, sports and shopping networks. MSOs also provide "premium" channels, for which they charge an additional fee. These premium channels include HBO, Cinemax, Showtime, and the adult entertainment channels. Premium programming may also be offered on a "pay-per-view" basis. The pay-per-view customer places an order with the cable operator for a specific program or a specific period of time. When a consumer places a pay-per-view order, the MSO unscrambles the signal for the viewing period and then rescrambles it by remote accessing a converter box in the subscriber's home.

3. Playboy and Graf provide MSOs with adult, sexually oriented video programming. The MSOs then transmit the programming to premium subscribers and pay-per-view purchasers. Playboy owns two adult-programming networks, Playboy Television and AdulTVision. The programming on the Playboy network is virtually 100% sexually explicit adult programming. On a yearly basis, 3 million households subscribe to and/or receive pay-per-view sexually explicit adult programming through the Playboy or Graf channels.

4. Other non-adult premium networks have obtained licenses to exhibit particular Playboy films. In addition, non-adult premium and basic cable channels will at times transmit sexually explicit programs or programs which contain some sexually explicit scenes. At the PI hearing, we noted as an example that the number of sexually explicit programs available on non-adult channels on one Friday evening in Denver, Colorado, was one-sixteenth that shown on the adult channels. Moreover, unlike the adult channels, the sexually explicit programming on non-adult channels was mainly "R" rated movies which contained some sexually explicit scenes but were not continuously sexually explicit.

5. MSOs receive signals, mainly in analog form, from many sources, such as master antennas, satellites, and local television stations. The signals are received at the system transmitter or "head-end" where they are amplified and retransmitted by coaxial cable. Cable subscribers receive the channels directly by cable, if they own a cable-ready television, or by attaching the cable to a converter box if they own a non-cable-ready television.5 A recent development in signal transmission is the Head-End-in-the-Sky ("HITS"), an orbiting digital platform which takes network signals, like Playboy's, and bounces them from a satellite in digital form to a cable system's receive station. The cable system then pumps the digital signal down an analog cable television wire to a consumer's home where a set-top box converts the signal back to an analog one suitable for the standard contemporary television set. The box required to make this conversion is fairly expensive and there are fewer than 50,000 homes today with a digital box. An additional 3 million cable homes receive a direct digital signal.

6. Because of the additional cost of premium and pay-per-view programming, MSOs seek to secure these signals for subscribers only. To prevent a signal from reaching the home of a non-subscriber, MSOs "scramble" the signal in an analog system by using either "RF" or "baseband" technology. Generally, the scrambling affects only the video portion of the transmission.

7. Cable television technology has evolved over the last 20 years. A variety of scrambling technologies are used by MSOs when broadcasting in analog form.6 Forms of scrambling are

a) "RF" or "baseband" scrambling. This is the method most MSOs use for a signal sent by coaxial cable from the MSO to cable subscribers. Generally, this type of scrambling affects only the video portion of the transmission. Some baseband systems, however, include audio encryption as well. Once the signal is scrambled, the MSO must then descramble it for subscribers.

b) Positive traps. These are devices that are installed at the MSO transmitter and jam the signal of the channel being secured. Nonsubscribers to that...

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