TKR Cable Co. v. Cable City Corp. ( 2001 )

Opinions of the United
2001 Decisions States Court of Appeals
for the Third Circuit
10-1-2001
TKR Cable Co v. Cable Cty Corp
Precedential or Non-Precedential:
Docket 98-5341
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Recommended Citation
"TKR Cable Co v. Cable Cty Corp" (2001). 2001 Decisions. Paper 224.
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Filed October 1, 2001
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 98-5341
TKR CABLE COMPANY
v.
CABLE CITY CORPORATION; JAY GRABERT;
CHRIS SCHAD; JOHN DOES 1-10;
JANE DOES, 1-10; UNIDENTIFIED CORPORATIONS 1-10;
UNIDENTIFIED BUSINESS ENTITIES 1-10; MADELAINE
MURPHY; KENNY JOHNSON; ONE STEP AHEAD, INC.,
Cable City, Inc.,
Jay Grabert and Chris Schad,
Appellants
On Appeal from the United States District Court
for the District of New Jersey
District Judge Garrett E. Brown, Jr.
Argued April 17, 2001
Before: ALITO, RENDELL, and FUENTES, Circuit Judges
(Opinion Filed: October 1, 2001)
Eugene P. Franchino (argued)
3 Mills Court
Flemington, New Jersey 08822
Attorney for Appellants
Patrick J. Sullivan (argued)
Daniel J. Lefkowitz
Lefkowitz, Louis and Sullivan
350 Jericho Turnpike, Suite 300
Jericho, New York 11753
Attorneys for Appellee
OPINION OF THE COURT
FUENTES, Circuit Judge.
TKR Cable Company ("TKR") brought this action against
sellers of cable television descramblers, seeking statutory
damages and injunctive relief for alleged violations of 47
U.S.C. SS 553 and 605. On cross-motions for summary
judgment, the District Court determined, among other
things, that (1) the defendants had conducted 16 sales of
cable descramblers in violation of SS 553 and 605, and (2)
through these sales, the defendants had assisted in the
interception of radio communications and therefore were
subject to the more severe statutory penalties ofS 605,
rather than the relatively lenient penalties ofS 553. After an
evidentiary hearing on damages, the court imposed the
minimum damages pursuant to S 605 of $10,000 per
device, for a total of $160,000. The court also awarded
counsel fees and granted injunctive relief.
The issue on appeal is whether S 605, which prohibits the
unauthorized interception of radio communications, applies
to the sale of cable decoding equipment. The defendant
sellers, Cable City Corporation and its officers Jay Grabert
and Chris Schad (collectively "Cable City"), argue that S 553
is the sole statutory remedy for cable piracy of signals sent
over terrestrial cable lines, and that S 605 applies only
against offenders who directly intercept satellite or radio
broadcasts as they pass through open air.
We hold that a cable television descrambler does not
facilitate the interception of "communications by radio" and
therefore the statutory damages available underS 605 do
not apply here. Accordingly, we will vacate the penalties
imposed and remand the case for further proceedings.
2
I
TKR, based in Piscataway, New Jersey, provides cable
television services under the authority of various municipal
franchises it has purchased. These franchises authorize
TKR to construct, operate, and maintain cable television
systems in parts of Middlesex, Monmouth, and Somerset
counties. TKR offers its subscribers programming in
packages, which include Basic and Standard services, as
well as the option to elect premium programming services,
such as Cinemax, Home Box Office ("HBO"), and Showtime,
each at an additional monthly charge. TKR also offers Pay-
Per-View programming, providing subscribers the
opportunity to purchase individual movies, sporting events,
or other entertainment at a per event fee. TKR transmits
the signals for all of its cable television services from its
reception facilities in Piscataway to the homes of
subscribers through a network of cable wiring and
equipment. To prevent subscribers from receiving services
they have not purchased, TKR encodes the signals,
providing paying subscribers with a decoder that deciphers
transmissions for the appropriate channels. Scrambling
constitutes the primary means by which TKR, as well as
most cable service providers, prevent theft of their
transmissions.
In spite of TKR's precautions, the cable theft business
persists. Cable pirates have permeated the marketplace
with unauthorized decoders that render viewable previously
scrambled transmissions. In most cases, TKR cannot detect
or prevent the theft of its programming services without
permission from a subscriber to inspect his or her home.
Cable City conducted a cable piracy operation out of an
office in Matawan, New Jersey. Specifically, Cable City sold
cable television decoders to the public, offering
descrambling services to the region for a profit. Cable City
represented to customers that its descramblers were"bullet
protected" or "bullet proof," meaning that they could
circumvent TKR's electronic security measures designed to
disable pirate decoders. Cable City advertised and marketed
its illicit wares to TKR's subscribers via "Val-Pak" direct
mailings, promoting their descramblers as devices designed
for use on TKR's cable television system.
3
TKR initially noticed Cable City's activities in or around
April 1996 when some of its employees received these Val-
Pak mailings. The advertisements stated that Cable City
sold cable television decoders, remarking in smaller print,
"Anyone implying theft of cable services will be denied a
sale." The mailings further stated in yet smaller print, "It Is
Not The Intent Of Cable City To Defraud Any Pay Television
Operator And We Will Not Assist Any Company Or
Individual In Doing The Same." In response to these
developments, TKR retained a private investigator who
visited Cable City's office and later purchased a
descrambler based upon the representation of a Cable City
sales agent that the device would "get" all of the premium
and Pay-Per-View channels. During testing at TKR's facility,
the descrambler received and permitted viewing of all of
TKR's scrambled programming services, including premium
and Pay-Per-View programming.
On June 14, 1996, TKR sought and obtained an ex parte
temporary restraining order from the District Court,
enjoining Cable City from further sales of cable television
descramblers. The order further froze the defendants'
business and personal assets and granted expedited
discovery. The order additionally authorized the seizure of
cable television descramblers, business records, and the
proceeds of descrambler sales.
After a hearing on June 27, 1996, the court issued an
order entering a preliminary injunction: (1) enjoining the
continued sale or marketing of decoders; (2) enjoining the
alteration, removal, or destruction of any business records
concerning transactions involving decoders; (3) enjoining
the transfer, withdrawal, or encumbrance of any assets
without a showing that such action would be necessary for
personal expenses or legitimate business expenses; (4)
reaffirming the prior grant of expedited discovery; and (5)
imposing upon the defendants a duty to notify TKR of their
subsequent obtainment of any of the above items (i.e., cable
decoders, business records, illicit proceeds) and to retain
such items pending a further order of the court. See TKR
Cable Co. v. Cable City Corp., No. 96-2877(GEB), 1996 WL
465508, at *12 (D.N.J. July 29, 1996).
4
Following discovery, the parties filed cross-motions for
summary judgment. On January 27, 1998, the District
Court granted TKR's motion for summary judgment as to
all but one defendant, holding Cable City liable under both
47 U.S.C. SS 553 and 605. The District Court also entered
a permanent injunction prohibiting Cable City "from selling
or otherwise distributing any equipment intended for
unauthorized reception of any communication service
offered over [TKR's] cable system." TKR Cable Co. v. Cable
City Corp., No. 96-2877(GEB), slip op. at 11, 13 (D.N.J.
Jan. 27, 1998); see also 47 U.S.C. S 553 (1991 & Supp.
2001); 47 U.S.C. S 605 (1991 & Supp. 2001). The court
denied Cable City's cross-motion for summary judgment.
Id. The District Court determined that S 605(a) applies to
Cable City's conduct, stating that "the prohibition
contained in section 605(a) against the unauthorized
interception of ``radio communications' has also been
interpreted to include cable television transmissions." Id. at
4 (quoting TKR Cable Co. v. Cable City Corp., 1996 WL
465508, at *6). Following a subsequent hearing on
damages, the District Court issued a memorandum
opinion, finding that Cable City had made 16 decoder sales.
See TKR Cable Co. v. Cable City Corp., No. 96-2877(GEB),
slip op. at 5-6 (D.N.J. June 11, 1998). In accordance with
S 605, the court assessed statutory damages of $10,000 per
violation, amounting to a total damage award of $160,000,
plus attorneys' fees and costs of $96,514.33. Id .; see also
TKR Cable Co. v. Cable City Corp., No. 96-2877(GEB), slip
op. at 2 (D.N.J. Jan. 25, 1999). Cable City filed this appeal.
The District Court exercised jurisdiction pursuant to 28
U.S.C. S 1331. We have jurisdiction under 28 U.S.C.
S 1291. With respect to the District Court's decision to
enter a temporary restraining order and a preliminary
injunction freezing the defendants' assets, we review the
District Court's legal conclusions de novo, its factual
findings for clear error, and its ultimate decision to grant
injunctive relief for an abuse of discretion. Maldonado v.
Houstoun, 157 F.3d 179, 183 (3d Cir. 1998). Regarding the
District Court's decision to grant summary judgment to
TKR, our review is plenary. Pennsylvania Ass'n of Edwards
Heirs v. Rightenour, 235 F.3d 839, 841 (3rd Cir. 2000).
Summary judgment is appropriate where the record, viewed
5
in the light most favorable to the non-moving party, shows
that there is no genuine issue of material fact and that the
moving party is entitled to summary judgment as a matter
of law. Stanziale v. Jargowsky, 200 F.3d 101, 105 (3d Cir.
2000) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322-23
(1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-
50 (1986)).
II
Cable City's principal argument is that the District Court
erred in subjecting it to the exacting liability provisions of
S 605, rather than assessing liability under the milder
provisions of S 553.1 Section 605 subjects Cable City to a
_________________________________________________________________
1. Section 605 provides in relevant part:
(a) . . . No person not being authorized by the sender shall intercept
any radio communication and divulge or publish the existence, contents,
substance, purport, effect, or meaning of such intercepted
communication to any person. No person not being entitled thereto shall
receive or assist in receiving any interstate or foreign communication by
radio and use such communication (or any information therein
contained) for his own benefit or for the benefit of another not entitled
thereto. . . .
(e)(3)(C)(i)(II) [T]he party aggrieved may recover an award of statutory
damages . . . for each violation of paragraph (4) of this subsection
involved in the action an aggrieved party may recover statutory damages
in a sum not less than $10,000, or more than $100,000, as the court
considers just.
(e)(4) Any person who manufactures, assembles, modifies, imports,
exports, sells, or distributes any electronic, mechanical, or other device
or equipment, knowing or having reason to know that the device or
equipment is primarily of assistance in the unauthorized decryption of
satellite cable programming, or direct-to-home satellite services, or is
intended for any other activity prohibited by subsection (a) of this
section, shall be fined not more than $500,000 for each violation, or
imprisoned for not more than 5 years for each violation, or both. . . .
Section 553 provides in relevant part:
(a)(1) No person shall intercept or receive or assist in intercepting or
receiving any communications service offered over a cable system, unless
specifically authorized to do so by a cable operator or as may otherwise
be specifically authorized by law.
6
minimum liability of $10,000 in damages for each of its
sixteen decoder box sales, amounting to damages of no less
than $160,000. Section 553, by contrast, provides a
statutory damages range of $250 to $10,000 and increases
the range by an additional $50,000 for violations committed
"willfully and for purposes of commercial advantage or
private financial gain." Cable City maintains that Congress
provided liability in S 605 for cable pirates who directly
intercept airborne transmissions but not for offenders like
Cable City who sell decoder boxes that intercept cable
transmissions. TKR contends that S 605 applies because
Cable City's actions constitute interception or unauthorized
reception of radio communications. We agree with Cable
City.
A
We begin by recounting the historical background
underlying S 605. Although S 605 originally addressed wire
communications, such as those with which Cable City
interfered, Congress subsequently revised the section in
1968, confining its scope nearly exclusively to radio
transmissions. This statutory alteration proves critical to
our analysis.
Section 605 has its genesis in the beginning of the
twentieth century with the enactment, in 1912, of the "Act
to Regulate Radio Communication." Act of Aug. 13, 1912,
_________________________________________________________________
(2) For the purpose of this section, the term "assist in intercepting or
receiving" shall include the manufacture or distribution of equipment
intended by the manufacturer or distributor (as the case may be) for
unauthorized reception of any communications service offered over a
cable system in violation of subparagraph (1).
(c)(3)(A)(ii) [T]he party aggrieved may recover an award of statutory
damages for all violations involved in this action, in a sum of not less
than $250 or more than $10,000 as the court considers just.
(B) In any case in which the court finds that the violation was
committed willfully and for purposes of commercial advantage or private
financial gain, the court in its discretion may increase the award of
damages . . . by an amount of not more than $50,000.
7
ch. 287, 37 Stat. 302. This act, originally intended to
protect the confidentiality of wireless ship-to-shore
communications, defined "radio communications" as "any
system of electrical communication by telegraphy or
telephony without the aid of any wire connecting the points
from and at which the . . . signals . . . are sent or received."
Id. S 6, 37 Stat. at 308 (emphasis added). Congress
replaced the 1912 Act with the Radio Act of 1927. Radio
Act of 1927, ch. 169, 44 Stat. 1162. This measure included
a definition of radio communication as being "any. . .
communication of any nature transferred by electrical
energy from one point to another without the aid of any
wire connecting the points from and at which the electrical
energy is sent or received . . . ." Id.S 31, 44 Stat. at 1173
(emphasis added). These definitions clearly show Congress'
desire, from the beginning of the twentieth century, to
distinguish between radio communications and
communications transmitted over wire.
Seven years later, Congress repealed the Radio Act of
1927 when it passed the Communications Act of 1934 (the
"Communications Act" or the "1934 Act"), now codified in
relevant part at 47 U.S.C. S 605(a). Communications Act of
1934, ch. 652, 48 Stat. 1064. This act established the
Federal Communications Commission and granted it
jurisdiction over the regulation of radio and wire
transmissions. Id. The Communications Act originally
provided for the maintenance of privacy through four
clauses that prohibited: (1) the unauthorized divulgence or
publishing of wire or radio communications by the
operators responsible for receiving such communication; (2)
the unauthorized interception and divulgence of wire or
radio communications; (3) the unauthorized receipt and use
of wire or radio communications for the benefit of the
unauthorized receiver or someone else not entitled to the
communication; and (4) the divulgence, publication, or use
of unlawfully intercepted information by anyone knowing
that the information was wrongfully obtained. See id. at
1103-04 (codified as amended at 47 U.S.C. S 605(a)). The
1934 Act further provided definitions of wire and radio
communication that are still in use today and are codified
at 47 U.S.C. S 153. Specifically, S 153 defines radio and
wire communication as follows:
8
(33) The term radio communication or
"communication by radio" means the transmission by
radio of writing, signs, signals, pictures, and sounds of
all kinds, including all instrumentalities, facilities,
apparatus, and services (among other things, the
receipt, forwarding, and delivery of communications)
incidental to such transmission. . . .
(52) The term "wire communication" or
"communication by wire" means the transmission of
writing, signs, signals, pictures, and sounds of all kinds
by aid of wire, cable, or other like connection between
the points of origin and reception of such transmission,
including all instrumentalities, facilities, apparatus,
and services (among other things, the receipt,
forwarding, and delivery of communications) incidental
to such transmission.
47 U.S.C. S 153(33), (52) (2001). Accordingly, in both the
principal provisions of the Communications Act, now
codified at 47 U.S.C. S 605, and the definitional provisions
now codified at S 153(52) and S 153(33), Congress clearly
defined wire and radio communications as concepts
involving distinct types of transmissions.
Thirty-four years after passage of the Communications
Act, Congress restructured the regulatory framework
governing the interception of radio and wire
communications when it passed the Omnibus Crime
Control and Safe Streets Act of 1968. See Pub. L. No. 90-
351, 82 Stat. 197 (the "Crime Control Act" or the "1968
Act"). Seeking to combat a contemporary surge in crime,
particularly in organized activity, Congress greatly
expanded the authority of law enforcement officials to
monitor the communications of suspected offenders. To
ensure autonomy and coherence in the novel framework of
the 1968 Act, Congress amended S 605 from the
Communications Act to remove references to wire
communications from all but the first clause ofS 605(a),
which banned the divulgence of wire and radio
transmissions by communications personnel. See 1968 Act,
82 Stat. at 223. The legislative history of the 1968 Act
states that, while the act removed prohibitions on
interference with, and monitoring of, wire communication
9
from the purview of section 605 of the Communications
Act, Congress introduced comprehensive provisions
regulating the interception of wire and oral
communications, now codified at 18 U.S.C. S 2510 et seq.
See S. Rep. No. 1097 (1968), reprinted in 1968 U.S.C.C.A.N.
2112, 2196-97. Congress also explained why it removed the
reference to wire communication in S 605:
This section amends section 605 of the
Communications Act of 1934 (48 Stat. 1103, 47 U.S.C.
sec. 605 (1958)). This section is not intended merely to
be a reenactment of section 605. The new provision is
intended as a substitute. The regulation of the
interception of wire or oral communications in the future
is to be governed by proposed new chapter 119 of title
18, United States Code.
Id. (emphasis added) Thus, through the Crime Control Act,
Congress removed from S 605 of the Communications Act
the principal share of its authority over wire
communications, leaving S 605 primarily with radio
communications. In short, although S 605, as originally
drafted in 1934, would have reached the cable decoder box
piracy perpetrated by Cable City, the 1968 Act removed the
critical language granting S 605 authority over such conduct.2
TKR contends nonetheless that, in spite of the Crime
Control Act, S 605 continues to cover cable transmissions.
TKR asserts that, although the 1968 Act removed key
references to "wire communications" from S 605, the
remaining references to "radio communication" in the Act
suffice to encompass the acts of Cable City in the instant
case. In particular, TKR argues that the definition of
"[r]adio communication" in S 153(33) supports a
_________________________________________________________________
2. It is undisputed that the Crime Control Act itself does not cover Cable
City's actions. Congress, in 18 U.S.C. S 2510(1), restricted the scope of
wire communications to those aural communications transmitted via
wire or cable operated by a common carrier. Because, in 1968, the
Supreme Court determined that cable television distributors do not
qualify as common carriers, 18 U.S.C. S 2510(1) does not reach cable
television transmissions. See United States v. Southwestern Cable Co.,
392 U.S. 157, 169 n.29 (1968). The 1968 Act therefore does not address
the defendants' conduct.
10
determination that all wire communications, be they of
wire, radio, or satellite origin, fall under S 605. TKR notes
that the provision defining "[r]adio communication" in
S 153(33) includes within its scope "the transmission by
radio of [communication] of all kinds, including all
instrumentalities, facilities, apparatus and services (among
other things, the receipt, forwarding, and delivery of
communications) incidental to such transmission." 47
U.S.C. S 153(33). TKR thereby suggests that all wire
retransmissions after the receipt of a radio transmission
necessarily fall within the definition of S 153(33) because
they entail the conveyance of a radio signal via
"instrumentalities [or] facilities . . . incidental to such
communication." Id.
We reject TKR's interpretation of S 153(33) because, as
the Seventh Circuit noted in United States v. Norris, "if the
. . . argument is taken to its full conclusion, it .. .
unacceptably blurs the line between radio and wire
communications." United States v. Norris, 88 F.3d 462, 467
(7th Cir. 1996). We believe that such an expansive
construction of "radio communication" would place an
unacceptably broad range of transmissions within the
purview of S 605, effectively ignoring the significance of
Congress' excision of "wire communication" from S 605. As
the Norris court noted, this reading of"radio
communication" would place cordless telephone
conversations within the ambit of S 605 because they
commence with a brief radio communication, followed by
an extensive wire transmission. Moreover, TKR's reading of
S 153(33) demands undue contortion of the phrase
"instrumentalities [or] facilities . . . incidental to such
transmission." Suggesting that an entire cable
infrastructure constitutes a mere instrumentality incidental
to the transmission of a satellite broadcast ignores the scale
of effort entailed in delivering this transmission to a given
residence. The wires that connect a home satellite dish to
the living room television arguably constitute facilities
incidental to the transmission. However, the entire cable
transmission infrastructure of a city or suburban area, a
structure that provides a foundation for a significant
business, such as that of TKR, or any other major cable
service provider, cannot be considered a mere
11
instrumentality to transmission. The plain language of
S 153(33), read in the context of the Crime Control Act,
therefore precludes an interpretation of "radio
communication" in S 153(33) that would include terrestrial
cable transmissions such as those in the instant case.
In sum, by transferring authority over wire
communications to the province of the Crime Control Act,
Congress removed coverage of wire communications from
S 605, and thereby excluded activities such as Cable City's
from that provision's scope. Moreover, contrary to TKR's
argument, because TKR's cable transmissions are not
"incidental" to the transmission of radio communications,
the S 153(33) definition of radio communications that
accompanies S 605 does not apply here. We believe,
therefore, that S 605 does not reach Cable City's conduct.
B
Even if there were any doubt as to the facial applicability
of S 605, the history of both SS 605 and 553 and Congress'
express intent demonstrates that only S 553, and not S 605,
applies to Cable City's conduct. Two principal reasons, both
particularly informed by a historical perspective,
demonstrate why only S 553, rather than S 605, reaches
Cable City's conduct: (1) in 1984, Congress enactedS 553
to combat the novel phenomenon of cable piracy, a crime
that acquired significance only with the recent expansion of
the cable industry in the 1970s; and (2) an interpretation of
S 605 that reaches Cable City's conduct would effectively
render S 553 superfluous because it would deprive S 553 of
any substantial activity that it could uniquely address.
We begin by setting S 553 within the context of cable
industry history. In the years following the passage of the
1968 Omnibus Crime Control Act, the cable television
industry witnessed a period of widespread and
unprecedented expansion. Although cable television, which
found "its beginnings as a means of providing the residents
of rural areas with better reception of over-the-air television
broadcast signals," spread from its inception quickly
beyond its non-commercial roots in 1949 Oregon, it had
still, by the mid-1970s, reached "no more than 12 to 15
12
percent of American homes." H.R. Rep. No. 98-934, at 20-
21 (1984), reprinted in 1984 U.S.C.C.A.N. 4655, at 4657-58.
The year 1975, however, brought significant change,
particularly through the introduction of satellite technology,
which Congress, in its legislative history to 47 U.S.C. S 553,
later documented:
The cable industry has changed dramatically since its
beginnings . . . .
In 1975, Home Box Office (HBO), a Time, Inc.
subsidiary, revolutionized the cable industry by
launching the satellite delivery of its programming
service. This development made it possible to
economically deliver to local cable systems by satellite
a vast array of national programming services. These
new services provided movies, sports, news, and
specialized programming directed to a number of
individual segments of the national audience such as
children, minorities and senior citizens. With the
availability of these new services, the cable television
industry experienced a new round of growth and
expansion, moving into still larger cities with systems
that promised over 100 channels to every home.
Id. Addressing this sudden growth of the cable industry
and its accompanying consequences, Congress in 1984
promulgated the Cable Communications Policy Act, a new
regulatory framework for the field of cable television. See
Cable Communications Policy Act of 1984, Pub. L. No. 98-
549, 98 Stat. 2779 (codified in relevant part at 47 U.S.C.
S 553) ("Cable Act" or "1984 Act").
As part of the 1984 Act, Congress passed what is now 47
U.S.C. S 553(a), which provides, among other things:
(1) No person shall intercept or receive or assist in
intercepting or receiving any communications
service offered over a cable system, unless
specifically authorized to do so by a cable operator
or as may otherwise be specifically authorized by
law.
(2) For purposes of this section, the term "assist in
intercepting or receiving" shall include the
13
manufacture or distribution of equipment intended
by the manufacturer or distributor (as the case
may be) for unauthorized reception of any
communications service offered over a cable
system in violation of subparagraph (1).
47 U.S.C. S 553(a). Through these provisions of the Cable
Act, Congress acknowledged the novel expansion of the
cable television industry, and created strict new penalties
to deter cable pirates who would otherwise exploit this
phenomenon.
As we noted above, Congress enacted S 553 specifically to
combat the novel phenomenon of cable piracy, a crime that
emerged in abundance only with the cable industry
developments of the 1970s. The legislative history to the
Cable Act supports this interpretation. Congress therein
expressly identified the threat to the rapidly changing cable
industry that the newly enacted S 553 would address:
The Committee is extremely concerned with a
problem which is increasingly plaguing the cable
industry--the theft of cable service. This problem has
taken on many forms from the manufacture and sale of
equipment intended to permit reception of cable
services without paying for it, to apartment building
dwellers "tapping" into cable system wire in a building's
hallway that is used for providing service to a
neighbor's apartment unit, to the sale by building
superintendents of cable converters left behind by
previous tenants to new tenants. Such practices not
only often permit one to obtain cable service without
paying the installation and hook-up costs, but also, for
instance, involve individuals gaining access to premium
movie and sports channels without paying for the
receipt of those services.
Theft of service is depriving the cable industry of
millions of dollars of revenue each year which it should
otherwise be receiving. The Committee believes that
theft of cable service poses a major threat to the
economic viability of cable operators and cable
programmers, and creates unfair burdens on cable
subscribers who are forced to subsidize the benefits
14
that other individuals are getting by receiving cable
service without paying for it.
H.R. Rep. No. 98-934, at 83, reprinted in 1984 U.S.C.C.A.N.
at 4720. It is clear, from the language of the statement
above, that Congress sought primarily to address the
phenomena associated with the recent accelerated growth
of the cable industry, fueled by the "satellite delivery of . . .
programming service." Id. at 4658. Without this
"development [which] made it possible to economically
deliver to local cable systems by satellite a vast array of
national programming services," there would have been
neither a greatly expanded cable industry, the greatly
expanded cable piracy that accompanied it, nor the
necessity to pass legislation regulating either the former or
the latter. Id. These concerns all strongly suggest that, in
enacting S 553 as part of the Cable Communications Policy
Act, Congress wished to address cable piracy in the most
thriving and vital sector of the industry. That is, Congress
intended to regulate the sector wherein cable networks
"economically deliver to local cable systems by satellite a
vast array of national programming services"-- the sector
that had driven the unprecedented growth of the prior
decade. Id.
TKR argues, however, that S 605 already addressed this
growing field of cable piracy. We reject TKR's interpretation,
not only because the legislative history accompanying S 553
demonstrates that Congress drafted the provision to deter
the newly emergent and previously unaddressed cable
piracy, but also because TKR's reading of S 605 would
effectively render S 553 superfluous.
To avoid suggesting that S 553 is redundant, TKR
contends that Congress actually drafted S 553 to provide
liability for interception of communications directed from a
point of origin to a particular destination solely by wire
transmissions, a form of transmission that S 605
undisputedly has not addressed since the passage of the
1968 Act. Both history and the plain language of the
statutes, however, expose the flaws in this conception of
the regulatory framework. By suggesting that Congress
drafted S 553 because it was primarily concerned with
purely wire-bound cable transmissions, TKR proposes that
15
Congress conceived S 553 to address only local cable
programming, a relatively minor segment of the industry.
This argument ignores Congress' acknowledgment,
recounted above, that the satellite technology and market
forces reshaping the cable industry motivated its passage of
the Cable Act. See, H.R. Rep. No. 98-934, at 19, reprinted
in 1984 U.S.C.C.A.N. at 4656 (explaining that new
legislation was necessary since "[t]he Communications Act
of 1934 . . . was enacted well before the advent of cable
television").
The legislative history to S 553 shows that Congress
specifically designed the provision to combat decoder box
piracy of satellite-delivered cable services. In describing the
ills of decoder boxes, Congress explained that "[s]uch [cable
piracy] practices not only often permit one to obtain cable
service without paying the installation and hook-up costs,
but also, for instance, involve individuals gaining access to
premium movie and sports channels without paying for the
receipt of those services." H.R. Rep. No. 98-934, at 83,
reprinted in 1984 U.S.C.C.A.N. at 4720. This access to
"premium movie and sports channels" that Congress
described necessarily entails satellite transmitted
broadcasts, as such access was a largely novel
phenomenon that arrived only with the advent of HBO.
Indeed, Congress specifically ascribed to HBO's delivery "by
satellite [of] a vast array of national programming services"
the emergence of "new services [that] provided movies,
sports, news, and specialized programming directed to a
number of individual segments of the national audience."
H.R. Rep. No. 98-934, at 21, reprinted in 1984 U.S.C.C.A.N.
at 4658. In light of the legislative history and the
substantial changes in the landscape of the cable industry
that shortly preceded and certainly motivated the passage
of the Cable Act, it is clear that Congress enactedS 553
primarily to address the vast array of satellite-initiated
cable transmissions, rather than the obscure realm of
ground-initiated transmissions.
Yet, TKR suggests that the latter interpretation ofS 553
is the one that we should adopt. TKR's reading ofS 553
must be correct or else its interpretation of S 605 renders
S 553 unacceptably redundant. TKR maintains that S 605
16
prohibits any interception of a cable television transmission
where that transmission can claim some satellite origin,
regardless of whether the interception occurred only after
the signal had proceeded long past the satellite
transmission phase and deep into the cable system
retransmission phase. This broad reading of S 605 would
encompass all possible interceptions prohibited byS 553,
except for interceptions of purely wire-bound, ground-
initiated cable transmissions. To avoid castingS 553 as
redundant, TKR suggests that Congress enacted S 553 with
the primary purpose of filling this obscure niche of
potential cable piracy prohibitions. Because it renders S 553
superfluous and runs contrary both to history and to
Congress' express intent, we reject TKR's interpretation.
We believe that Congress clearly enacted S 553 with the
primary purpose of addressing satellite-initiated cable
transmissions. Congress created S 553 to address an
enforcement gap created by the 1968 modification ofS 605,
which rendered S 605 applicable only to satellite
transmissions insofar as they are actual airborne
transmissions. As this gap had been of minimal significance
until the cable industry expansion, Congress could afford to
overlook it during much of the interval leading up to the
1984 Act. By 1984, however, Congress decided that the
need to deter decoder box piracy of satellite-initiated cable
television transmissions had become sufficiently pressing to
merit legislation. In sum, we believe that both the historical
context of these statutes and the expressed intent of
Congress support our reading of S 553 as the exclusive
means of addressing the defendants' conduct.
C
Finally, TKR maintains that we sho uld follow
International Cablevision, Inc. v. Sykes, 75 F.3d 123 (2d Cir.
1996), in which the Second Circuit read S 605 broadly to
encompass all satellite-originated transmissions. In
contrast to the Second Circuit, the Seventh Circuit, in
Norris, adhered to an analysis resembling more closely the
one we adopt here, concluding that "cable television
programming transmitted over a cable network is not a
``radio communication' as defined in S 153(b), and thus its
17
unlawful interception must be prosecuted under S 553(a)
and not S 605."3 Norris, 88 F.3d at 469.
In Sykes, the Second Circuit emphasized a section of the
committee report accompanying S 605, which stated as
follows:
Existing section 605 of the Communications Act of
1934 includes a prohibition against the unauthorized
reception of communications services. Nothing in
[S 553] is intended to affect the applicability of existing
Section 605 to theft of cable service, or any other
remedies available under existing law for theft of
service.
H.R. Rep. No. 98-934, at 83, reprinted in 1984 U.S.C.C.A.N.
at 4720. In analyzing this passage in the legislative history,
the Sykes court stated, "Although the issue is not entirely
free from doubt, the more likely reading of this legislative
history is that in view of the uniform prior judicial
interpretation of S 605 as applicable to the theft of cable
service, the . . . passage in the above quotation was
intended to make clear that S 605 would continue to be so
applicable." Sykes, 75 F.3d at 132.
We disagree with the Sykes panel's conclusion because
we believe it overlooked a key congressional distinction
concerning the point of unauthorized reception. The
legislative history nowhere suggests that Congress
considered S 605 as applying after 1968 to wire
retransmissions of radio communications. The same
passage of the committee report in fact demonstrates that,
when Congress passed the Cable Act, it viewed S 605 as a
provision applicable only to radio transmissions, and not to
the subsequent retransmission along cable lines:
The Committee intends the phrase "service offered over
a cable system" to limit the applicability of[S 553] to
theft of a service from the point at which it is actually
being distributed over a cable system. Thus, situations
arising with respect to the reception of services which
_________________________________________________________________
3. In 1996, Congress reorganized S 153. Sections 153(a) and (b) became,
respectively, SS 153(52) and (33). See Telecommunications Act of 1996,
Pub. L. No. 104-104, 110 Stat. 56, 61.
18
are transmitted over-the-air (or through another
technology), but which are also distributed over a cable
system, continue to be subject to resolution under
section 605 to the extent reception or interception
occurs prior to or not in connection with, distribution
of the service over a cable system.
H.R. Rep. No. 98-934 at 83, reprinted in 1984 U.S.C.C.A.N.
at 4720. This language makes clear Congress' view that
S 605 is directed solely at radio transmissions "to the extent
reception or interception occurs prior to or not in
connection with" cable distribution, and thatS 553 applies
to theft of all signals being transmitted over a cable system.
The Sykes court, however, suggests that this passage
should be interpreted as "establishing S 605's exclusive
jurisdiction over the transmission of a television signal by
radio prior to the transmission of that same signal by cable,
rather than as barring the application of S 605 to the
subsequent cable transmission of the signal." Sykes, 75
F.3d at 132.
As the Norris court noted, had Congress truly meant to
apply S 605 both to airborne and cable transmissions, it
could have included a sentence stating that
communications initiated by air transmission, but which
are subsequently distributed over a cable system, continue
to be regulated under S 605. See Norris , 88 F.3d at 469.
Because Congress did not implement such language and
instead used the "to the extent" phrasing quoted above, the
legislative history "cannot be reconciled with the conclusion
that S 605 applies to the unlawful interception of cable
television programming transmitted over a cable network."
Id. The committee report therefore substantiates the view
that S 605 does not render S 553 superfluous because S 605
does not create liability for the interception of cable system
transmissions.
The Second Circuit in Sykes nevertheless suggested an
answer to the redundancy concerns, stating:
We note that this result does not lead to a complete
overlap between the coverage of SS 605 and 553.
Section 605 applies to a considerable body of radio
transmissions to which S 553 is inapplicable, while
19
S 553 applies to any transmissions via cable, whether
or not they originate as radio transmissions.
Sykes, 75 F.3d at 133. The Sykes court accordingly
concluded that S 553 avoids a "complete overlap" by
applying to ground-initiated cable transmissions. As we
explained, however, a thorough analysis of the
circumstances surrounding the passage of the Cable Act
and its legislative history shows that Congress could not
have enacted S 553 with the primary purpose of filling an
obscure niche in cable piracy enforcement. Congress'
language clearly demonstrates that it created S 553 to
combat significant, novel, and previously unaddressed
threats to the continued growth of the cable industry. We
cannot believe that Congress invoked the imagery of a
criminal activity "increasingly plaguing the cable industry
. . . that poses a major threat to the economic viability of
cable operators and cable programmers" only then to enact
an inconsequential gap filler for an area of law enforcement
already well fortified.
We therefore conclude that S 605 encompasses the
interception of satellite transmissions "to the extent
reception or interception occurs prior to or not in
connection with, distribution of the service over a cable
system," and no more. H.R. Rep. No. 98-934, at 83,
reprinted in 1984 U.S.C.C.A.N. at 4720. Once a satellite
transmission reaches a cable system's wire distribution
phase, it is subject to S 553 and is no longer within the
purview of S 605. Cable City therefore is subject to the
statutory damages set forth in S 553(c), rather than the
damages imposed under S 605(e).
III
For the foregoing reasons, we will vacate the award of
damages under 47 U.S.C. S 605, and we will remand the
case for further proceedings consistent with this opinion.
We will affirm the District Court's imposition of the
injunction.4
_________________________________________________________________
4. We affirm the decision of the District Court with regard to the
freezing
of Cable City's assets. This Court has held that an asset freeze or
similar
20
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
_________________________________________________________________
injunctive relief is appropriate where it will assist the District Court
in
preventing defendants from committing further violations of the
Communications Act. See General Instrument Corp. of Del. v. Nu-Tek
Elecs. & Mfg., Inc., 197 F.3d 83 (3d Cir. 1999). We stated in that case
that defendant's business " ``essentially facilitated cable theft in
violation
of S 553. To stop such an operation is a primary purpose of the
injunction. . . . Likewise, . . . [ the defendant ] should not be allowed
to
use its remaining assets, which in all likelihood can serve only to
further
other cable theft enterprises.' . . . We see no abuse of discretion here.
. . ." Id. at 90-91 (quoting district court opinion with approval).
Similarly,
in this case, we find no abuse of discretion.
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