In this latest chapter of the ongoing “AutoHop” litigation between television broadcast networks ABC and CBS, and DISH Network, the court ruled on two motions: 1) ABC’s motion for a preliminary injunction seeking to prevent DISH from offering its PrimeTime Anytime (“PTAT”) and AutoHop services, pending a final ruling on the merits; and 2) DISH’s motion to dismiss CBS’s fraudulent concealment claim related to alleged fraudulent concealment of DISH’s new services during contract negotiations with CBS. The court denied both motions, concluding that ABC was unlikely to prevail on the merits and failed to show irreparable harm, and that CBS’s fraudulent concealment allegations were sufficient to survive a motion to dismiss, even under Rule 9(b)’s heightened pleading standard.
The court first found that ABC was unlikely to succeed on the merits of any of its claims. The court concluded that DISH was unlikely to be found liable for direct infringement, given that DISH’s subscribers, rather than DISH itself, actually initiated the copying of ABC’s television programs. Although DISH’s technology enabled the copying, the district court considered it settled law that “a person or entity cannot be found directly liable for copyright infringement without proof of some volitional act by the person that constitutes or causes the infringement.” As to vicarious infringement, the court found that, although DISH offers the relevant copying technology, it “has no control over whether its subscribers will enable that technology or what they will choose to copy.” The court also determined that the DISH subscribers’ copying for private, noncommercial home viewing constituted fair use. The court also examined the parties’ 2005 contract and concluded that the challenged PTAT and AutoHop features were more akin to digital video recorders (DVRs), which the relevant contract expressly permitted, rather than a video-on-demand (VOD) service.
The court next examined the issue of irreparable harm. ABC argued that AutoHop’s efficient commercial-skipping feature would deprive ABC of advertising revenues and harm ABC’s relationships and negotiations with authorized licensees. The court found, however, that ABC had not proffered any evidence of actual and imminent injury, treating as speculative the argument that DISH’s services adversely affect ABC’s Nielson ratings. The court noted in particular that Nielsen’s C3 rating system does not distinguish between commercial-skipping using AutoHop and other pre-existing DVR technologies. Finding the first two factors lacking, the court denied ABC’s motion for preliminary injunction.
Finally, the court considered DISH’s motion to dismiss a fraudulent concealment counterclaim asserted by CBS. CBS alleged that during its negotiations with DISH leading up to a 2012 Retransmission Agreement defining the scope (and price) of DISH’s transmission of CBS programming, DISH deliberately concealed the full scope of its forthcoming PTAT and AutoHop services. CBS took the position that DISH held superior information, which CBS had no ability to discover, and that DISH failed to disclose that superior information – related to the imminent AutoHop launch – during the contract negotiations. Although the court noted that the pleading was subject to the heightened pleading standard imposed by Rule 9(b), since it alleged fraud by omission, the court concluded that CBS had satisfied its burden and pled sufficient facts that could plausibly support a claim for fraudulent concealment.
Westlaw decisions are reprinted with permission of Thomson/West. If you wish to check the currency of these cases, you may do so using KeyCite on Westlaw by visiting http://www.westlaw.com/.
Circular 230 Disclosure: To assure compliance with Treasury Department rules governing tax practice, we inform you that any advice (including in any attachment) (1) was not written and is not intended to be used, and cannot be used, for the purpose of avoiding any federal tax penalty that may be imposed on the taxpayer, and (2) may not be used in connection with promoting, marketing or recommending to another person any transaction or matter addressed herein.