Twentieth Century Fox Film v. Cablevision Sys.

• Decision Date: 22 March 2007
• Docket Number: No. 06 Civ. 4092(DC).,No. 06 Civ. 3990(DC).,06 Civ. 3990(DC).,06 Civ. 4092(DC).
• Citation: 478 F.Supp.2d 607
• Parties: TWENTIETH CENTURY FOX FILM CORPORATION et al., Plaintiffs, v. CABLEVISION SYSTEMS CORPORATION et ano, Defendants. The Cartoon Network LP, LLLP, et ano, Plaintiffs, v. CSC Holdings, Inc. et ano, Defendants, etc.
• Court: U.S. District Court — Southern District of New York

478 F.Supp.2d 607

TWENTIETH CENTURY FOX FILM CORPORATION et al., Plaintiffs, v. CABLEVISION SYSTEMS CORPORATION et ano, Defendants.

The Cartoon Network LP, LLLP, et ano, Plaintiffs, v. CSC Holdings, Inc. et ano, Defendants, etc.

No. 06 Civ. 3990(DC).

No. 06 Civ. 4092(DC).

United States District Court, S.D. New York.

March 22, 2007.

Arnold & Porter, by Robert Alan Garrett, Esq., Hadrian R. Katz, Esq., Washington, D.C., and by Peter L. Zimroth, Esq., Eleanor M. Lackman, Esq., New York, NY, and Simon Barsky, Esq., Gregory P. Goeckner, Esq., Encino, CA, for Twentieth Century Fox Film Corporation et al.

Cravath, Swaine & Moore LLP, by Katherine B. Forrest, Esq., Antony L. Ryan, Esq., Chelsea Teachout, Esq., New York, NY, for The Cartoon Network LP, LLLP and Cable News Network LP, LLLP.

Goodwin Procter LLP, by John C. Englander, Esq., J. Anthony Downs, Esq., R David Hosp, Esq., Timothy A. Macht, Esq., Robert D. Carroll, Esq., Boston, MA, and by Benjamin Hershkowitz, Esq., New York, NY, for Cablevision Systems Corporation, Inc. and CSC Holdings, Inc.

OPINION

CHIN, District Judge.

In March 2006, Cablevision Systems Corporation ("Cablevision") announced that it would be rolling out a "new Remote-Storage DVR System" (the "RS-DVR"). The RS-DVR is intended for Cablevision customers who do not have a digital video recorder ("DVR") in their homes. The RS-DVR would permit these customers to record programs on central servers at Cablevision's facilities and play the programs back for viewing at home.

Cablevision has not obtained permission from plaintiffs, the owners of the copyrighted programs, to reproduce and transmit the programs through its proposed RS-DVR. It contends that a license is not required because the customer, not Cablevision, chooses the content and records the programs for personal viewing. It argues that, under Sony Corp. v. Universal City Studios, Inc., 464 U.S. 417, 104 S.Ct. 774, 78 L.Ed.2d 574 (1984), a company cannot be liable for infringement merely because it supplies Betamax recorders, video cassette recorders ("VCRs"), or DVRs to consumers to record television programs for in-home, personal viewing, and it further contends that its RS-DVR is no different from these traditional devices.

In these related cases, plaintiffs sue Cablevision and its parent, CSC Holdings, Inc. ("CSC"), for copyright infringement, seeking a declaratory judgment that Cablevision's RS-DVR would violate their copyrights and an injunction enjoining defendants from rolling out the RS-DVR without copyright licenses. Defendants counterclaim for a declaratory judgment holding that the RS-DVR would not infringe on plaintiffs' copyrights. The parties' cross-motions for summary judgment are before the Court.

Plaintiffs' motions are granted and defendants' motion is denied, for I conclude that Cablevision, and not just its customers, would be engaging in unauthorized reproductions and transmissions of plaintiffs' copyrighted programs under the RS-DVR. Indeed, the RS-DVR is not a stand-alone machine that sits on top of a television. Rather, it is a complex system that involves an ongoing relationship between Cablevision and its customers, payment of monthly fees by the customers to Cablevision, ownership of the equipment remaining with Cablevision, the use of numerous computers and other equipment located in Cablevision's private facilities, and the ongoing maintenance of the system by Cablevision personnel. Accordingly, judgment will be entered in favor of plaintiffs.

STATEMENT OF THE CASE

A. The Facts

As the parties agree, the facts are largely undisputed. (Tr. 9, 194).¹

1. The Parties

Plaintiffs, counterclaim-defendants, and third-party defendants are The Cartoon Network LP, LLLP; Cable News Network LP, LLLP; Turner Broadcasting System, Inc.; Turner Network Sales, Inc.; Turner Classic Movies, L.P., LLLP; Turner Network Television LP, LLLP; Twentieth Century Fox Film Corporation; Universal City Studios Productions LLLP, Paramount Pictures Corporation; Disney ,Enterprises, Inc.; CBS Broadcasting Companies, Inc.; and NBC Studios, Inc. (collectively, "plaintiffs"). Plaintiffs own the copyrights to numerous copyrighted entertainment programs, including movies, television series, news and sports shows, and cartoons, which are shown on television and also used (or licensed for use) in other media, including the Internet, DVDs, and cellular phone technology. Defendants, counter-claim plaintiffs, and third-party plaintiffs are Cablevision and CSC ("defendants"). They own and operate cable television systems, primarily in the New York City metropolitan area. Cablevision provides its customers with a wide variety of programs, including programs owned by plaintiffs, pursuant to negotiated and statutory (i.e., required by law) licenses or "affiliation agreements." (See, e.g., Turner Exs. 25, 26).

None of the licenses between plaintiffs and Cablevision authorizes Cablevision to transmit or reproduce plaintiffs' copyrighted programming through the RS-DVR. (Tr. 199-201).

2.Cable Television

Television involves the transmission of audio and video signals—"a moving picture, plus sound." (Horowitz Report ¶ 16). "Broadcast television" is transmitted over public airwaves and can be received with only a television set and an antenna. (Id. ¶ 30). "Cable television" is transmitted via a coaxial cable that is connected to a television set, usually through a "set-top box" provided by a cable company. (Id. ¶ 31). Cable companies offer customers, for a fee, a number of programming channels, including basic cable (e.g., TNT and Disney Channel) and premium cable (e.g., HBO and Showtime) channels. (Id. ¶ 32 Fox Statement of Facts ("Fox SOF") ¶¶ 2-4). Basic and premium cable channels, along with broadcast television stations, are linear channels, meaning that they televise programs sequentially at specified times of the day. (Id. ¶ 4).

i. Delivery of Cable Programming

Traditionally, television signals were transmitted in analog form. (Horowitz Report ¶ 19). In other words, the signals were transmitted as a series of continuous waves. (Id.). Today, television signals are increasingly delivered in digital form. (See id. ¶ 35). Digital signals are transmitted as compressed data in the form of binary digits, or "bits." (Id. ¶¶ 19-20, 38). The number of bits that can be sent in a second is known as the "bitrate." (Id. ¶ 41). Digital signals allow for a greater variety in television programming — because more signals can be transmitted in the same space — as well as interactive services and, often, better audio and image quality than analog television. (Id. ¶¶ 39-42). The RS-DVR would be offered as part of Cablevision's digital cable service.

Digital cable delivery starts with programming owners sending feeds of their content to the cable company, which collects the feeds at a "head-end," a central facility that houses much of the software and hardware necessary to operate a cable system. (Hartson Report ¶ 18; Mitchko Decl. ¶ 12; Tr. 18). For linear channels, the cable company collects all of the feeds into an "aggregated programming stream" ("APS"). (Tr. 18). The APS is composed of packets of data, each 188 bytes in size.² (Id.; Horowitz Report ¶ 46). Each packet is tagged with a "program identifier" ("PID") indicating the program to which it belongs. (Horowitz Report ¶ 47).

The APS is sent from the head-end to customers' homes through a process known as Quadrature Amplitude Modulation ("QAM"); the devices used to accomplish this process are called QAM modulators. (Hartson Report ¶ 29). QAM converts the digital signals into radio frequency ("RF") signals, which are more robust and better suited for transmission along a cable system's coaxial cable lines. (Tr. 19-20). The RF signals are sent over the coaxial network (the "RF Distribution Network"), which routes the signals to the various "nodes" or service groups — smaller cable systems connecting a group of homes — comprising the cable system. (Hartson Report ¶ 31). Each node is serviced by a particular QAM modulator. (Tr. 19-21). The RF signals are typically then routed to the customer's digital set-top box. (Hartson Report ¶ 32). The packets of the APS are filtered according to their PIDs and reassembled into a single program transport stream to be decrypted, decoded,³ and displayed. (Horowitz Report ¶ 47). To limit access to certain programming such as premium channels, the cable company encrypts the packets in the APS. (Id. ¶ 56). The set-top box has decryption hardware that "unlocks" the encrypted packets. (Id.).

ii. Video-on-Demand

Cable companies also provide certain services on an individual customer basis. Video-on-Demand (NOD") is one such service. VOD allows a customer, using an on-screen menu and the remote control, to view at any time programming selected by the cable company. (Hartson Report ¶ 39; Horowitz Report ¶¶ 57-58, 60). Pursuant to licenses negotiated with the programming owners, the cable company receives programming for VOD exhibition at its head-end, where the content is stored on computers. (Hartson Report ¶ 39). The cable company delivers the VOD content on extra channel frequencies that are not being used for linear programming. (Horowitz Report ¶ 59).

VOD also requires a "reverse" channel for each customer, so that the customer can communicate with the cable company to select the desired programming and control the playback (i.e. rewind, fast-forward, and pause). (Id. ¶ 60). These playback control functions are known as "trick modes." (Gilmer Report at 10). Cablevision offers VOD to its digital cable customers, pursuant to licensing agreements it has with the programming owners. (Turner Statement of Facts ("Turner SOF") ¶¶ 24-25, 38).

3. Recording Television Programming: VCRs and DVRs

VCRs, introduced for home use more than 25 years ago, provided the first practical means for television viewers to record programming. (Hartson Report ¶ 33; see Tr. 122-23)....