Primetime 24 Joint v. Nat'l Broadcasting

Decision Date01 August 1998
Docket NumberDocket No. 98-9392
CourtU.S. Court of Appeals — Second Circuit

Appeal from an order of the United States District Court for the Southern District of New York (Lawrence M. McKenna, Judge) dismissing appellant's antitrust claims on the ground that appellees' conduct had Noerr-Pennington immunity. We reverse.

HARRY FRISCHER, Solomon, Zauderer, Ellenhorn, Frischer & Sharp (Louis M. Solomon, Jonathan D. Lupkin, of counsel), New York, New York, for Plaintiff-Appellant.

CHARLES F. RULE, Covington & Burling, Washington, D.C. (Neil K. Roman, Jonathan Galst, Covington & Burling; Eric Seiler, Friedman Kaplan & Seiler LLP, New York, New York, of counsel), for Defendants-Appellees.

Before: : WINTER, Chief Judge, JACOBS, Circuit Judge, and SWEET, District Judge.*

WINTER, Chief Judge:

This appeal arises out of an antitrust action brought by PrimeTime 24 Joint Venture ("PrimeTime") against the major television networks, their affiliates' trade associations, independent television stations, and the National Association of Broadcasters. The complaint alleged that appellees violated Section 1 of the Sherman Act, 15 U.S.C. § 1, through concerted, baseless, signal-strength challenges brought under the Satellite Home Viewer Act, 17 U.S.C. § 119 (1995), and through a concerted refusal to license copyrighted television programming to PrimeTime. Judge McKenna granted appellees' motion to dismiss under Fed. R. Civ. P. 12(b)(6) on the ground that their conduct was protected under the Noerr-Pennington doctrine. We reverse.


The complaint alleged the following. PrimeTime retransmits network broadcast signals either directly to satellite dish owners or to direct-to-home satellite distributors who include the network broadcasts in packages of hundreds of channels sold to consumers. When the complaint was filed, PrimeTime was the leading American provider of network television broadcasts to satellite dish owners. It had over two million subscribers and was the "only satellite carrier of network programming . . . neither owned nor controlled by network or cable television interests."

Appellees are the major television networks, ABC, Inc. ("ABC"), CBS, Inc. ("CBS"), the National Broadcasting Company ("NBC"), and the Fox Broadcasting Company ("Fox"); their affiliates' trade associations; the National Association of Broadcasters ("NAB"); and businesses owning and/or operating stations affiliated with the networks. The network companies both supply the affiliates with programming and distribute it directly to consumers through broadcasts from their owned and operated stations. The NAB is a trade association comprising both the networks and the affiliates.

Until recently, consumers received television programming principally through over-the-air broadcasts from stations owned and operated by, or affiliated with, the network companies. This technology, however, limited adequate reception to signals transmitted by relatively nearby stations. New technology has both provided improved reception and multiplied the programming options available to consumers through the introduction of cable and satellite television.

Unlike conventional broadcasters that transmit free signals and rely on advertising revenues, satellite operators such as PrimeTime charge users a fee. Users can improve reception or access the satellite system's provision of geographically distant station broadcasts. Access to distant stations allows consumers to avoid local preemptions of network programming; to watch sports, news, or other broadcasts from distant stations; or to take advantage of variations in programming timing caused, for instance, by time-zone differences.

Due to its continuing appeal, network programming is essential to the competitive position of satellite operators. However, satellite providers cannot offer copyrighted network television programming without permission or a license. In an effort to balance the networks' copyright interests with consumers' interests in receiving programming through satellites, Congress passed the Satellite Home Viewers Act of 1988 ("SHVA"), Pub. L. No. 100-667, 102 Stat. 3935 (Nov. 8, 1988), codified in 17 U.S.C. § 119 (1995), subsequently amended by Satellite Home Viewer Improvement Act of 1999, Pub. L. No. 106-113, 113 Stat. 1501, 1501A-526 to 1501A-545 (Nov. 29, 1999).1 The SHVA, inter alia, requires networks to license their signals to satellite broadcasters at a statutorily fixed royalty fee, for distribution to viewers who cannot receive a sufficiently strong over-the-air broadcast signal. See generally id.

Specifically, the SHVA mandatory license extends only to households that "cannot receive, through the use of a conventional, stationary outdoor rooftop receiving antenna, an over-the-air signal of . . . Grade B intensity as defined by the Federal Communications Commission," 17 U.S.C. § 119(d)(10)(A), and have not received cable service in the preceding 90 days, 17 U.S.C. § 119(d)(10)(B). See 17 U.S.C. § 119(a)(2)(B). Thus, the SHVA establishes a relatively objective signal-strength rule rather than a subjective rule of reception quality. See id.; see also ABC, Inc. v. PrimeTime 24, 184 F.3d 348, 352 (4th Cir. 1999) ("The very terms of the SHVA define eligible households by means of an objective, measurable standard."); CBS Broadcasting, Inc. v. PrimeTime 24 Joint Venture, 48 F. Supp. 2d 1342, 1355 (S.D. Fla. 1998). The signal-strength rule at issue works by station, so that in a local area where the network affiliates' signals originate from different points, the satellite operator might have statutory rights to licenses for the programming of some but not all networks, e.g., ABC and CBS but not NBC. See 17 U.S.C. §§ 119(a)(2)(B), 119(d)(2)(A).

Satellite providers initially designate those households for which they claim a statutory right to serve under the mandatory licensing. Local broadcasters have the right under the SHVA to challenge the satellite operators' estimate of the signal-strength received by the designated households. See id. § 119(a)(8). If the subscriber is "within the predicted Grade B Contour of the station," the satellite operator must either cease providing the disputing broadcaster's channel to the challenged viewers or perform a signal-strength test for that household. Id. § 119(a)(8)(A). If the test shows that the challenged household is adequately served by the challenging stations, the satellite provider must cease providing the programming from that station; if the test shows that the challenged household is not adequately served, the challenging station must reimburse the satellite provider for the cost of conducting the test. See id. § 119(a)(8)(B). If the challenged subscriber is outside the particular station's predicted Grade B Contour, a station cannot force the satellite operator to conduct a signal-strength test. See id. § 119(a)(8)(D). However, the station may conduct its own test of service to a particular household, and, if the test shows that the household is adequately served, the satellite operator must reimburse the station for the cost of the test and terminate service of the station's programming to the household. See id.

The statute limits the rights of stations to force a satellite provider to conduct signal-strength tests. In any calendar year, a station may challenge no more than five percent of a satellite provider's subscriber base that existed at the SHVA's effective date. See id. § 119(a)(8)(C). Above the five-percent threshold, a station may challenge service to a household only by conducting its own test, as in the case of households outside the predicted Grade B Contour. See id. § 119(a)(8)(c)(ii).

PrimeTime's complaint alleged that appellees, in concert with themselves and with coordination by the NAB, intentionally abused the SHVA's signal-strength challenge provision by filing baseless challenges for the purposeof raising PrimeTime's cost structure and thereby reducing competition from it. PrimeTime alleged in particular that appellees based their challenges on a common NBC subscriber list, despite the fact that PrimeTime had provided different lists to each network. Because network affiliates broadcast from different points, the predicted Grade B Contours as described in the lists differ for each network. The purpose of using an NBC subscriber list, PrimeTime alleges, was intentionally to over-challenge subscribers, i.e., to challenge subscribers outside particular stations' Grade B Contours.

The complaint also alleged a concerted refusal to deal in that appellees agreed among themselves not to license content to PrimeTime, notwithstanding the fact that it would be in their interests, acting individually, to do so. Specifically, the complaint alleged that the NAB, bargaining on behalf of appellees, offered a per-viewer license at a price that it believed to be prohibitive. When PrimeTime immediately agreed to negotiate that price, the offer was withdrawn. Subsequently, according to the complaint, appellees engaged in a concerted effort not to deal with PrimeTime, and the NAB copied a letter to its members telling them not to deal with PrimeTime. The complaint further alleged that the networks discouraged their affiliates from dealing with PrimeTime and that none of the networks have dealt with PrimeTime.

Finally, the complaint alleged that PrimeTime was injured by appellees because it was forced to drop subscribers due to the number of challenges and the...

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