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Judge: Dish May Have Breached Fox Contract

PASADENA, CALIF. — Fox has more of a chance demonstrating that Dish breached its contract rather than violated copyright law with the Hopper, according to a court opinion released today.

“The question of whether Dish has breached its contract with Fox is much closer,” wrote Judge Sidney R. Thomas of the U.S. Court of Appeals for the Ninth Circuit. Thomas rendered the opinion of a three-judge panel that denied Fox’s appeal to make Dish disable the ad-skipping function of its Hopper set-top box.

Judge Thomas notes that in 2010, Dish and Fox amended their 2002 carriage contract such that Dish could offer Fox content on-demand on the condition that it “disable fast-forward functionality during all advertisements.” It also forbid both parties from attempting to “frustrate or circumvent” the contract.

Dish released the Hopper in March of 2012. The set-top can be programmed to skip over the commercials in automatically recorded primetime programming. This “PrimeTime Anywhere” feature is limited to broadcast networks only.

“We are… dubious of Dish’s position that PrimeTime Anywhere is not ‘similar’ to ‘interactive time-delayed or video-on-demand’ programming, the distribution of which is expressly prohibited by the 2002 contract,” Thomas wrote. “Dish has convinced us that PrimeTime Anytime is not identical to video-on-demand, but is at a loss to explain why it is not similar.

“When pressed, Dish could not provide even a single example of what would be considered similar under the contract if not this.”

Judge Dolly Gee of the U.S. District Court for the Central District of California, first denied the injunction last November, but held that Dish breached contract if PrimeTime Anywhere was indeed video-on-demand. She determined, however, that it was “more akin” to a digital video recorder than VOD because the feature has to be enabled by subscribers. DVRs constitute fair use under Cablevision.

The appeals panel was not likewise convinced.

“The fact that a Dish attorney referred to PrimeTime Anytime as a ‘video-on-demand service’ in a trademark application supports Fox’s claim that the parties would have understood PrimeTime Anytime to be akin to video-on-demand,” Judge Thomas wrote.

The Ninth Circuit nonetheless denied the injunction out of “limited and deferential” review of the lower court’s decision.

Judge Thomas opened his opinion by observing that “Dish Network offers two marsupial-inspired products: the ‘Hopper,’ which ‘hops’ over commercials, and a companion box known as a ‘Joey.’”

Fox, as well as NBC and CBS, are suing Dish over the marsupial-inspired products. The ad-skipping function—“AutoHop”—works through a sort of watermarking.

“Dish technicians in Cheyenne, Wyo., manually view Fox’s primetime programming each night and technologically mark the beginning and end of each commercial,” the judge wrote. “The program content is not altered in any way.

“The electronically marked files are then uplinked in Wyoming and eventually transmitted to subscribers in the ‘announcement’ file that Dish makes available… after the show has aired. Simultaneously, with the uplink, three ‘beta Hoppers’ record the Fox primetime block for transmissions in Kentucky, Pennsylvania and Florida to test the marketing announcement.

“These copies remain at the uplink facility and are used to make sure the commercials have been accurately marked and that no portion of the program has been cut off.”

The lower court ruled that “Dish likely breached its contract” in making the copies. However, Fox ultimately lost because it could not demonstrate “irreparable harm” as a result of the copies—a criterion for obtaining an injunction.

Judge Thomas also observed that ad-skipping does not interfere with Fox’s copyright in that it owns the copyrights to the TV programs, but not the ads. (Several media attorneys noted that Fox may indeed hold the copyright to at least some of the affected ads.)

“If recording an entire copyrighted program is fair use, the fact that viewers do not watch the ads not copyrighted by Fox cannot transform the recording into a copyright violation,” Judge Thomas wrote.

He further asserted that “any analysis of the market harm should exclude consideration of AutoHop because ad-skipping does not implicate Fox’s copyright interests.”

Fox’s lawyers also failed to establish a case for secondary infringement—i.e., that Dish was compelling its subscribers to infringe—because Dish managed to demonstrate its customers would be exercising “fair use,” the judge wrote. He further said Fox failed to “demonstrate a likelihood of irreparable harm.”

A virtual buffet of attorneys worked the case. Fox brought in five hired guns from Jenner & Block LLP, while Dish had eight attorneys from Orrick, Herrington & Sutcliffe, LLP and Durie Tangri LLP. Paul Smith argued for Fox before the three-judge panel; E. Joshua Rosenkranz of Orrick, et al, argued for Dish. ABC TV stations, Cablevision, the National Association of Broadcasters, Paramount Pictures, the Computer & Communications Industry Association, and the Electronic Frontier Foundation were represented in amicus curiae filings.

November 12, 2012:
“Fox Appeals to Stop the Hop”
Fox’s legal team wasted no time in appealing a federal judge’s decision last week to let Dish keep on skipping broadcast TV commercials.

November 8, 2012:Judge Lets Dish Keep On Hopping
In May, as the networks prepared to sue, news of those impending lawsuits leaked. Within 24 hours, Bloomberg said Dish countersued in U.S. District Court in Manhattan, where the company figured it had a better shot based on the court’s 2008 ruling that Cablevision’s DVR did not violate copyright. But Dish countered too swiftly to suit Judge Laura Taylor Swain, who found it “improperly anticipatory,” and ruled that the copyright complaints could be heard in the California court, where Fox, NBC and CBS had filed.