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IP/Entertainment Case Law Updates

segOne, Inc. v. Fox Broadcasting Company, USDC E.D. Virginia

This case is the second involving a device that allows the user to replace commercials in cable and television programming with other content, including other advertising. Here, the district court granted the defendant’s motion to dismiss for lack of subject matter jurisdiction because there was no actual controversy, because the court lacked the ability to provide redress for purported injuries to plaintiff and because the court did not want to encourage the plaintiff, who failed to intervene in a related suit, to try to litigate its claims twice.

segOne, Inc. produces and licenses a device that allows a licensee to replace commercials in a cable or television broadcast with other content. segOne’s product was the focus of a prior lawsuit brought by several media companies against one of segOne’s licensees, Flying J, but segOne was not a party in that case and did not intervene in the case. Flying J owned a chain of truck stops and had an agreement with Echo Star Communications to display Echo Star programming in its drivers’ lounges. Flying J licensed the commercial replacement device from segOne and charged third-party companies substantial advertising fees to show their commercials in its drivers’ lounges during the commercial breaks in Echo Star’s programming. A federal district court in New York denied the defendant’s motion to dismiss, finding that the media companies stated a valid claim for copyright infringement (for allegedly violating the broadcasters’ right of public performance) against Flying J for using segOne’s device to replace commercials. American Broadcasting Company v. Flying J, Inc., 2007 WL 583176 (S.D.N.Y. Feb. 22, 2007). [A copy of this decision is posted on this Web page.] The parties later settled out of court.

A day after the settlement, segOne filed a declaratory action against Fox Broadcasting, asking the court to declare that its device does not infringe Fox’s copyrights in its television programming. segOne claimed that the earlier lawsuit against Flying J, in which Fox was one of the plaintiffs, reduced the demand for its products and forced it to stop licensing it. However, the court found that there was no actual controversy between the parties warranting an exercise of the federal court’s jurisdiction in the lawsuit. Specifically, the court found that there was no evidence that an action against one of segOne’s customers coerced segOne to comply with demands by Fox where Fox did not force segOne to stop licensing its product, Fox did not sue or threaten to sue segOne, and there was no business relationship between the parties. The court also found that it lacked the ability to redress any injuries to segOne because a declaratory judgment against Fox would not protect segOne or its customers from suits by other media companies. In declining to exercise jurisdiction, the district court emphasized the fact that segOne did not intervene in the earlier case to protect its interests, stating that “segOne’s decision not to intervene strikes the Court as a way to get two chances to litigate its claim, a strategy that the court wishes to discourage.” Based on these findings, the court granted the defendant’s motion to dismiss for lack of subject matter jurisdiction.

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