Ninth Circuit affirms denial of preliminary injunction based on district court’s finding that Fox was unlikely to succeed on copyright infringement and breach of contract claims and could not show irreparable harm from Dish’s video-recording and commercial-skipping features.
Plaintiffs Fox Broadcasting Company, Twentieth Century Fox Film Corp., and Fox Television Holdings, Inc. (collectively, Fox) license Dish Network, a pay television service provider, to retransmit Fox’s broadcast television programming. The parties’ 2002 license agreement prevents Dish from distributing Fox programming “on an interactive, time-delayed, video-on-demand or similar basis,” but a 2010 letter agreement allows Dish to provide Fox programs through video on demand, provided Dish disables fast-forward functionality during all commercials.
Fox sued Dish for copyright infringement and breach of contract based on Dish’s PrimeTime Anytime feature, which allows subscribers to record the major broadcast networks’ primetime programming (including Fox’s) and on Dish’s AutoHop feature, which allows users to automatically skip commercials while re-playing recorded primetime programing. To facilitate the AutoHop feature, Dish technicians manually view Fox’s primetime programming each night and mark the beginning and end of each commercial. Dish also makes “quality assurance” copies of Fox’s primetime programming in order to test its AutoHop feature.
The district court denied Fox’s motion for a preliminary injunction, finding that Fox had not demonstrated a likelihood of success on either its copyright or breach of contract claims, except as to the “quality assurance” copies. Any damage caused by the “quality assurance” copies was compensable by money damages, however, and therefore could not support a preliminary injunction.
Applying a deferential standard of review, the Ninth Circuit upheld the district court’s finding that Fox was unlikely to succeed on its claims of direct copyright infringement, because the subscriber, not Dish, makes the copy by activating the PrimeTime Anytime feature, and thus Dish did not infringe Fox’s exclusive right to reproduce its copyrighted works. The Ninth Circuit reasoned that “operating a system used to make copies at the user’s command does not mean that the system operator, rather than the user, caused copies to be made.”
The Court of Appeals also affirmed the district court’s ruling that, even assuming Dish’s “quality assurance” copies violated Fox’s copyrights, Fox did not suffer irreparable harm. Although Fox demonstrated that it suffered loss of control over its copyrighted works and loss of advertising revenue, the court found that this harm was caused by the AutoHop feature itself. The “quality assurance” copies were made through a separate process and were not “integral” to AutoHop’s functioning. As a result, the court concluded that Fox’s losses were compensable by monetary damages.
The Ninth Circuit affirmed the district court’s ruling that Fox was unlikely to succeed on its claims of secondary copyright infringement related to PrimeTime Anytime, because subscribers’ noncommercial recording for “time-shifting” purposes was protected “fair use” under the U.S. Supreme Court’s 1984 decision in Sony Corp. of Am. v. Universal City Studios, Inc. Fox was also unlikely to succeed on its secondary infringement claims related to AutoHop, because Fox does not own the copyright to the commercials that were being skipped, and thus Fox’s copyright interests were not implicated.
Fox’s breach of contract claim presented a “much closer” question, and the Ninth Circuit was “dubious” of Dish’s argument that PrimeTime Anytime was not “similar” to “interactive, time-delayed [or] video-on-demand,” which would have violated the parties’ contract. Nevertheless, applying a “very deferential” standard of review, the Court of Appeals found that the district court’s interpretation of the parties’ contracts was not clearly erroneous. In particular, the Court of Appeals deferred to the district court’s finding that PrimeTime Anytime was not a “video-on-demand service,” and thus the 2010 agreement did not require Dish to disable fast-forwarding functionality.