Video Pipeline v. Buena Vista Home Entertainment

• Decision Date: 28 March 2002
• Docket Number: Civil No. 00-5236 (JBS).
• Citation: Video Pipeline v. Buena Vista Home Entertainment, 192 F.Supp.2d 321 (D. N.J. 2002)
• Parties: VIDEO PIPELINE, INC., Plaintiff, v. BUENA VISTA HOME ENTERTAINMENT, INC., Defendant. Buena Vista Home Entertainment, Inc., and Miramax Film Corp., Counterclaim-Plaintiffs, v. Video Pipeline, Inc., Counterclaim-Defendant.
• Court: U.S. District Court — District of New Jersey

Page 321

192 F.Supp.2d 321

VIDEO PIPELINE, INC., Plaintiff, v.BUENA VISTA HOME ENTERTAINMENT, INC., Defendant.

Buena Vista Home Entertainment, Inc., and Miramax Film Corp., Counterclaim-Plaintiffs, v.Video Pipeline, Inc., Counterclaim-Defendant.

Civil No. 00-5236 (JBS).

United States District Court, D. New Jersey.

March 28, 2002.

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Gary D. Fry, Paul R. Fitzmaurice, Pelino & Lentz, P.C., Philadelphia, PA, Attorneys for PlaintiffVideo Pipeline, Inc.

Gary A. Rosen, Patrick M. Madamba, Jr., Akin, Gump, Strauss, Hauer & Feld, LLP, Philadelphia, PA, Attorneys for DefendantBuena Vista Home Entertainment, Inc.

Douglas J. Katich, Katich, Werse & Petillo, Fair Haven, NJ, and John T. Mitchell, Alan R. Malasky, Seyfarth Shaw, Washington, DC, Attorneys for Amici Curiae Video Software Dealers Association and National Association of Recording Merchandisers, Inc.

Jon A. Baumgarten, Marvin M. Goldstein, Proskauer Rose, LLP, Newark, NJ, Attorneys for Amicus Curiae Motion Picture Association of America, Inc.

OPINION

SIMANDLE, District Judge.

This case involves the intersection of the motion picture and video retailing industries, and the emerging commercial enterprise of Internet sales.Motion pictures have traditionally been promoted through the use of "trailers," which are short previews of the movies, usually created by the film studios.The same is true of the promotion of home videos of such motion pictures.The motion pictures and the home videos enjoy generous protection under the copyright law.The rise of the Internet as an online location for market transactions has changed the traditional scheme of these exchanges and provides the backdrop for this case.

In the multi-billion dollar home video industry, an increasing amount of sales takes place over the Internet.This case examines the copyright issues that arise when an entity uses the copyrighted motion pictures to make short trailers, which are then made available for money to the entity's clients, which are video retailers, for the viewing by retail customers on the retailers' Internet websites, for the purpose of promoting sales of the copyrighted videos.In this case, the copyright owners seek a preliminary injunction against the entity which creates and sells the unauthorized trailers for their copyrighted home videos.

This matter comes before the Court upon motion by defendantBuena Vista Home Entertainment, Inc.(formerly known as Buena Vista Home Video), and counterclaim-plaintiffMiramax Film Corp.(hereinafter collectively "BVHE" or "defendants") for a preliminary injunction upon their amended counterclaim against plaintiff/counterclaim-defendantVideo Pipeline, Inc.Plaintiff Video Pipeline originally brought suit against defendantBuena Vista Home Entertainment, Inc., for a declaratory judgment that plaintiff's use of trailers provided by BVHE in creating its own video clips to be commercially used by Internet video retailers does not constitute copyright infringement under the Copyright Act.

Defendant BVHE, a company that manufactures, distributes, and sells home video versions of copyrighted motion pictures, is the exclusive licensee of Walt Disney Pictures and Television ("Disney") in the home video market, and is the exclusive distributor for counterclaim-plaintiffMiramax Film Corp., in the home video market.Plaintiff Video Pipeline compiles, organizes, and provides previews of home video products to home video wholesalers and retailers.A Master Clip License Agreement entered into between Video Pipeline and BVHE as of November 7, 1988, granted license to Video Pipeline to exhibit certain videos provided by BVHE.After filing the above suit for a declaratory judgment, and after BVHE demanded return for its promotional materials, Video Pipeline began creating previews from movies owned by its customer retailers.Defendant BVHE moved for a preliminary injunction to enjoin Video Pipeline from continuing to create and distribute its own video clips of BVHE's movies.

After BVHE filed this motion for preliminary injunction, a voluntary injunction was put into place until resolution of this motion.This Court granted Video Software Dealers Association, the National Association of Recording Merchandisers, Inc., and the Motion Picture Association of America, Inc., leave to participate and submit briefs in this motion as amici curiae.A lengthy hearing was held, receiving evidence and arguments of counsel.For the reasons now discussed, the Court will grant defendant BVHE's motion for a preliminary injunction, pursuant to the following findings of fact and conclusions of law entered under Rules 52(a)and65(d), Fed. R.Civ.P.

BACKGROUND

In this preliminary injunction motion, Buena Vista Home Entertainment, Inc.("BVHE") seeks to enjoin Video Pipeline from streaming video previews it created out of motion pictures upon which BVHE owns the copyright.BVHE is a wholly-owned, indirect subsidiary of The Walt Disney Company, in the business of manufacturing, distributing, and selling home video versions of copyrighted motion pictures and other entertainment content.(McQueenCert. ¶ 1.)Since 1987, BVHE has been the exclusive licensee of Walt Disney Pictures and Television for the distribution of its products in the home video market.(McQueenCert. ¶ 2.)In addition, BVHE is the exclusive distributor for Miramax, also a wholly-owned, indirect subsidiary of The Walt Disney Company, in the home video market.(McQueenCert. ¶ 3.)Video Pipeline is a company founded in 1985 that compiles and organizes promotional previews from entertainment companies into promotional videos which retailers display in their stores to promote retail sales and rentals.(HorovitzAff. ¶ 5.)Since 1985, Video Pipeline had provided promotional videos to retailers for instore use, at times editing the material sent by the movie studios, either because it contained sales and marketing information not intended for customer viewing or because Video Pipeline's retailer clients complained about certain inappropriate previews supplied by studios.(HorovitzAff. ¶ 5, 6.)

BVHE and Video Pipeline entered into a Master Clip Agreement dated November 7, 1988, by which BVHE granted Video Pipeline permission to use certain videotape promotional previews ("trailers") in compilations to be exhibited in video stores to promote home video sales and rentals.(McQueenCert. ¶ 4.)Beginning in 1995, home video retailers began using the Internet as a means of marketing home video products.(HorovitzAff. ¶ 17.)In 1997, Video Pipeline began making the promotional previews available to home video retailers' Internet websites by means of an Internet service comprised of "Video-Pipeline.net" to promote sales and rentals of the home video products.(HorovitzAff. ¶ 17;McQueenCert. ¶ 4.)Video Pipeline.net is not a website, but is the network through which retailers' customers can access and stream the previews.(HorovitzAff. ¶ 18.)These previews can be viewed but cannot be downloaded by Internet users.(HorovitzAff. ¶ 22.)

In general, retail customers can view the previews while on the retailers' websites by clicking on the "preview" buttons for a particular motion picture, which links them immediately to VideoPipeline.net, which then "streams" the video to the customer.(Hearing Tr.at 102.)"Video Pipeline.com" is Video Pipeline's corporate website that provides information about Video Pipeline's online promotional services for retailers, and no previews are actually shown via that site itself.(HorovitzAff. 19.)"VideoDetective.com" is another website that uses VideoPipeline.net to allow Internet users to access previews and to link to retail websites by means of a "Shop Now" button.(HorovitzAff. ¶ 20.)Video Pipeline has approximately 25 agreements with certain retailers, including Yahoo!Shopping, Netflix, TLA, and IMDB/Amazon to provide these services.(HorovitzAff. ¶ 23.)In providing these services to Internetbased retailers, Video Pipeline charges the retailers "per Mega Byte actually shown to consumers."(HorovitzAff. ¶ 26.)Thus, Video Pipeline receives its income for this service from the retailers it serves, based upon the units of time that a retailer's customer is viewing the Video Pipeline previews.

On September 13, 2000, BVHE advised Video Pipeline that it did not have permission to use the studio-supplied trailers on the Internet, nor were they cleared for online use, and requested that the previews of BVHE's motion pictures be removed from the website immediately.(McQueenCert. ¶ 5.)On October 24, 2000, Video Pipeline filed suit in this Court against BVHE, seeking a declaratory judgment that its use of promotional materials provided by BVHE to Video Pipeline did not violate any of BVHE's rights under federal copyright law or any other law.(McQueenCert. ¶ 6;Original Compl.at 1.)BVHE subsequently terminated the Master Clip License Agreement and demanded return of all trailers previously provided to Video Pipeline.(McQueenCert. ¶ 6.)On December 21, 2000, Video Pipeline returned to BVHE 80 promotional previews subject to the Master Clip License Agreement.(HorovitzAff. ¶ 29;McQueenCert. ¶ 6.)

Video Pipeline removed the previews subject to the agreement from the Internet at BVHE's request, but continued to make its own previews (hereinafter "clip previews") from copies of videos of BVHE's copyrighted motion pictures owned by its retailer clients, with the exception of one clip preview of the Belgian movie "Everybody Famous," which was made from material provided directly by BVHE.(HorovitzAff. ¶ 30.)Each clip preview created by Video Pipeline is approximately 120 seconds in length and consist of an opening display of the Disney or Miramax trademark, the title of the motion picture being distributed by BVHE, then two or more scenes from the motion...