WPIX, Inc. v. Ivi, Inc.

11-788-cv
WPIX v. ivi
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
August Term 2011
(Argued: May 30, 2012 Decided: August 27, 2012)
Docket No. 11-788-cv
WPIX, INC., WNET.ORG, AMERICAN BROADCASTING COMPANIES, INC.,
DISNEY ENTERPRISES, INC., CBS BROADCASTING INC., CBS STUDIOS,
INC., THE CW TELEVISION STATIONS, INC., NBC UNIVERSAL, INC.,
NBC STUDIOS, INC., UNIVERSAL NETWORK TELEVISION, LLC, TELEMUNDO
NETWORK GROUP, LLC, NBC TELEMUNDO LICENSE COMPANY, OFFICE OF THE
COMMISSIONER OF BASEBALL, MLB ADVANCED MEDIA, L.P., COX MEDIA
GROUP, INC., FISHER BROADCASTING-SEATTLE TV, L.L.C., TWENTIETH
CENTURY FOX FILM CORPORATION, FOX TELEVISION STATIONS, INC.,
TRIBUNE TELEVISION HOLDINGS, INC., TRIBUNE TELEVISION NORTHWEST,
INC., UNIVISION TELEVISION GROUP, INC., THE UNIVISION NETWORK
LIMITED PARTNERSHIP, TELEFUTURA NETWORK, WGBH EDUCATIONAL
FOUNDATION, THIRTEEN, AND PUBLIC BROADCASTING SERVICE,
Plaintiffs-Appellees,
v.
IVI, INC., AND TODD WEAVER,
Defendants-Appellants.
Before:
WINTER, CHIN, and DRONEY, Circuit Judges.
Appeal from a judgment of the United States
District Court for the Southern District of New York
(Buchwald, J.) granting plaintiffs-appellees' motion for a
preliminary injunction and holding that defendant-appellant
ivi, Inc. -- a company that streams television programming
live and over the Internet -– is not a "cable system" under
§ 111 of the Copyright Act of 1976, 17 U.S.C. § 111.
AFFIRMED.
ROBERT ALAN GARRETT (Peter L. Zimroth,
Hadrian R. Katz, Lisa S. Blatt, C.
Scott Morrow, R. Reeves Anderson, on
the brief), Arnold & Porter LLP, New
York, New York, and Washington,
D.C., for Plaintiffs-Appellees.
LAWRENCE D. GRAHAM (Ellen M. Bierman, on the
brief), Black Lowe & Graham PLLC,
Seattle, Washington, for Defendants-
Appellants.
CHIN, Circuit Judge:
In this case, plaintiffs-appellees -- producers
and owners of copyrighted television programming -- sued
defendants-appellants ivi, Inc. ("ivi") and its Chief
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Executive Officer, Todd Weaver, for streaming plaintiffs'
copyrighted television programming over the Internet live
and without their consent. The district court granted a
preliminary injunction for plaintiffs, holding that:
(1) plaintiffs were likely to succeed on the merits of the
case because ivi was not a "cable system" entitled to a
compulsory license under § 111 of the Copyright Act, 17
U.S.C. § 111; (2) plaintiffs would suffer irreparable harm
without injunctive relief; (3) the balance of hardships
favored the grant of a preliminary injunction; and (4) the
issuance of a preliminary injunction did not disserve the
public interest. Defendants appeal. For the reasons that
follow, we affirm.
STATEMENT OF THE CASE
1. The Facts
The following facts are undisputed.
On September 13, 2010, ivi began streaming
plaintiffs' copyrighted programming over the Internet, live,
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for profit, and without plaintiffs' consent.1 ivi began by
retransmitting signals from approximately thirty New York
and Seattle broadcast television stations; by February 2,
2011, ivi was also retransmitting signals from stations in
Chicago and Los Angeles.2 Within five months of its launch,
ivi had offered more than 4,000 of plaintiffs' copyrighted
television programs to its subscribers.
1
"Streaming" generally involves compressing a file to a
size small enough to be transmitted over the Internet and then
allowing the receiving computer to start playing packets of the
file while the remaining packets are being transmitted. Preston
Gralla, How The Internet Works 229-31 (7th ed. 2004). ivi's
technology further "encrypts" the transmitted content -- that is,
ivi encodes the content so that it cannot be viewed as it is
transmitted over the Internet; ivi then "decrypts" or decodes the
content back into a viewable format in small increments or
packets shortly before it appears on a given subscriber's screen.
See id. at 98-99.
ivi can also transmit data "peer-to-peer." "Peer-to-
peer" configurations allow people to share files between
computers over the Internet. Id. at 225. ivi's subscriber
license agreement includes a section permitting ivi to use
subscriber computers and bandwidth to enable peer-to-peer
viewing. According to Weaver, however, ivi has not used a peer-
to-peer configuration as of October, 2010.
2
"Broadcast" television programming generally refers to
programs "originally propagated by traditional over-the-air
television signals for receipt by antenna." Cablevision Sys.
Dev. Co. v. Motion Picture Ass'n of Am., Inc., 836 F.2d 599, 601
n.1 (D.C. Cir. 1988) ("MPAA"). "Cable" television programming or
"non-broadcast" programming refers to programs "produced solely
for cable systems and disseminated only through them." Id.
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Specifically, ivi captured and retransmitted
plaintiffs' copyrighted television programming live and over
the Internet to paying ivi subscribers who had downloaded
ivi's "TV player" on their computers for a monthly
subscription fee of $4.99 (following a 30-day free trial).
For an additional fee of $0.99 per month, subscribers were
able to record, pause, fast-forward, and rewind ivi's
streams.
Almost immediately after ivi's launch, several
affected program owners and broadcast stations sent cease-
and-desist letters to ivi. ivi responded to these letters
on or about September 17, 2010, purporting to justify its
operations on the ground that it was a cable system entitled
to a compulsory license under § 111 of the Copyright Act, 17
U.S.C. § 111.
2. Proceedings Below
On September 20, 2010, ivi filed a declaratory
action in the United States District Court for the Western
District of Washington. On September 28, 2010, plaintiffs
sued defendants for copyright infringement in the Southern
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District of New York, seeking damages and injunctive relief.
On January 19, 2011, the United States District Court for
the Western District of Washington (Robart, J.) dismissed
ivi's declaratory action as an impermissible anticipatory
filing. See ivi, Inc. v. Fisher Commc'ns, Inc., No. C10-
1512JLR, 2011 WL 197419 (W.D. Wash. Jan. 19, 2011).
On February 22, 2011, in a thorough and carefully-
considered decision, the United States District Court for
the Southern District of New York (Buchwald, J.) granted
plaintiffs' motion for a preliminary injunction. See WPIX,
Inc. v. ivi, Inc., 765 F. Supp. 2d 594, 622 (S.D.N.Y. 2011).
This appeal followed.3
DISCUSSION
We review a district court's grant of a
preliminary injunction for abuse of discretion. Kickham
Hanley P.C. v. Kodak Ret. Income Plan, 558 F.3d 204, 209 (2d
Cir. 2009). A district court abuses its discretion in
3
On April 18, 2011, the district court denied ivi's
motion for a stay pending appeal. On July 28, 2011, this Court
denied ivi's motion for a stay on the ground that ivi had failed
to demonstrate a likelihood of success on the merits.
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granting a preliminary injunction when its decision rests on
an error of law or a clearly erroneous factual finding, or
when its decision cannot be located within the range of
permissible decisions. Id. In a copyright case, a district
court may grant a preliminary injunction when plaintiffs
demonstrate: (1) a likelihood of success on the merits;
(2) irreparable harm in the absence of an injunction; (3) a
balance of the hardships tipping in their favor; and
(4) non-disservice of the public interest by issuance of a
preliminary injunction. Salinger v. Colting, 607 F.3d 68,
79-80 (2d Cir. 2010). We discuss each prong of Salinger in
turn.
I. Likelihood of Success on the Merits
Under the Copyright Act, television broadcasters
"generally [have] 'exclusive rights' . . . to authorize the
public display of [their] copyrighted content, including the
retransmission of [their] broadcast signal[s]." EchoStar
Satellite L.L.C. v. F.C.C., 457 F.3d 31, 33 (D.C. Cir.
2006); see 17 U.S.C. § 106(4)-(5). Congress, however,
codified an exception to this exclusive right in 1976 --
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§ 111 of the Copyright Act -- permitting cable systems to
publicly perform and retransmit signals of copyrighted
television programming to its subscribers, provided they pay
royalties at government-regulated rates and abide by the
statute's procedures. See 17 U.S.C. § 111(c) (exception),
(d) (royalties); U.S. Copyright Office, Satellite Home
Viewer Extension and Reauthorization Act Section 109 Report
1 (2008) ("SHVERA Report").
In this case, it is undisputed that plaintiffs
owned valid copyrights to the television programming that
ivi publicly performed without plaintiffs' consent. See
ivi, 765 F. Supp. 2d at 601. The burden of proof thus falls
on defendants to demonstrate that they have an affirmative
statutory defense to copyright infringement. See Bourne v.
Walt Disney Co., 68 F.3d 621, 631 (2d Cir. 1995) (noting
possession of license by accused infringer is affirmative
defense and burden falls on licensee to prove license's
existence (citing United States v. Larracuente, 952 F.2d
672, 674 (2d Cir. 1992); Melville B. Nimmer & David Nimmer,
Nimmer on Copyright § 13.01)). Indeed, defendants argue
-8-
that ivi is a cable system entitled to a § 111 license under
the Copyright Act.
Thus, the principal issue presented is whether
ivi, a service that streams copyrighted television
programming live and over the Internet, constitutes a cable
system under § 111 of the Copyright Act. If so, ivi has a
statutory defense to plaintiffs' claims of copyright
infringement, and ivi is entitled to a compulsory license to
continue retransmitting plaintiffs' programming. See
Satellite Broad. and Commc'ns Ass'n of Am. v. Oman, 17 F.3d
344, 345-46 (11th Cir. 1994). If not, ivi has no defense to
plaintiffs' claims of infringement. See id. at 346.
As discussed below, the Copyright Office -- the
federal agency charged with overseeing § 111 -- has spoken
on the issue of whether § 111's compulsory licenses extend
to Internet retransmissions. Accordingly, we utilize the
two-step process outlined in Chevron U.S.A., Inc. v. Natural
Res. Def. Council, Inc., 467 U.S. 837 (1984). At Chevron
step one, we consider whether Congress has clearly spoken on
the issue of Internet retransmissions in § 111. See id. at
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842-43; Cohen v. JP Morgan Chase & Co., 498 F.3d 111, 116
(2d Cir. 2007). If the intent of Congress is clear, that is
the end of the matter; courts "must give effect to the
unambiguously expressed intent of Congress." Chevron, 467
U.S. at 842-43. If we determine that Congress has not
directly addressed the precise question at issue, we proceed
to Chevron step two, "which instructs us to defer to an
agency's interpretation of the statute, so long as it is
'reasonable.'" Cohen, 498 F.3d at 116 (quoting Chevron, 467
U.S. at 843-44).
A. Chevron Step One
To ascertain Congress's intent at Chevron step
one, we begin with the statutory text; if its language is
unambiguous, no further inquiry is necessary. Cohen, 498
F.3d at 116 (citing Zuni Pub. Sch. Dist. v. Dep't of Educ.,
550 U.S. 81, 93-94 (2007); Robinson v. Shell Oil Co., 519
U.S. 337, 340 (1997); Daniel v. Am. Bd. of Emergency Med.,
428 F.3d 408, 423 (2d Cir. 2005)). If the statutory
language is ambiguous, we look to the canons of statutory
construction, and then to the legislative history to see
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whether any "'interpretive clues' permit us to identify
Congress's clear intent." Cohen, 498 F.3d at 116 (citing
Gen. Dynamics Land Sys., Inc. v. Cline, 540 U.S. 581, 586
(2004); accord Daniel, 428 F.3d at 423).
1. The Statutory Text
Section 111(c)(1) of the Copyright Act provides:
[S]econdary transmissions to the public
by a cable system of a performance or
display of a work embodied in a primary
transmission made by a broadcast station
licensed by the Federal Communications
Commission . . . shall be subject to
statutory licensing upon compliance with
the requirements of subsection (d) where
the carriage of the signals comprising
the secondary transmission is permissible
under the rules, regulations, or
authorizations of the Federal
Communications Commission.
17 U.S.C. § 111(c)(1).4 A "cable system" is defined as:
a facility, located in any State,
territory, trust territory, or possession
of the United States, that in whole or in
part receives signals transmitted or
programs broadcast by one or more
television broadcast stations licensed by
the Federal Communications Commission,
4
A "secondary transmission" is defined as "the further
transmitting of a primary transmission simultaneously with the
primary transmission." 17 U.S.C. § 111(f)(2).
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and makes secondary transmissions of such
signals or programs by wires, cables,
microwave, or other communications
channels to subscribing members of the
public who pay for such service. For
purposes of determining the royalty fee
under subsection (d)(1), two or more
cable systems in contiguous communities
under common ownership or control or
operating from one headend shall be
considered as one system.
17 U.S.C. § 111(f)(3).5
Based on the statutory text alone, it is simply
not clear whether a service that retransmits television
programming live and over the Internet constitutes a cable
system under § 111. That is, it is unclear whether such a
service (1) is or utilizes a "facility" (2) that receives
and retransmits signals (3) through wires, cables,
microwave, or other communication channels. See 17 U.S.C.
§ 111(f).6
5
"A cable system's 'headend' is its control center, from
which a cable company receives signals and then transmits them,
by coaxial cable, to the company's subscribers." Oman, 17 F.3d
at 347 n.5 (citing, inter alia, E. Microwave, Inc. v. Doubleday
Sports, Inc., 691 F.2d 125, 128 (2d Cir. 1982)).
6
ivi argues that it "plainly has a 'facility' as
required" by § 111. Reply Br. of Defs.-Appellants at 2. ivi
explains that the Internet is not "the only equipment at issue
here." Id. at 3. Rather, "the primary transmissions are
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Among other things, it is certainly unclear
whether the Internet itself is a facility, as it is neither
a physical nor a tangible entity; rather, it is "a global
network of millions of interconnected computers." 1-800
Contacts, Inc. v. WhenU.Com, Inc., 414 F.3d 400, 403 (2d
Cir. 2005) (internal quotation marks omitted); see also
Akamai Techs., Inc. v. Cable & Wireless Internet Servs.,
Inc., 344 F.3d 1186, 1188-89 (Fed. Cir. 2003); ACLU v. Reno,
929 F. Supp. 824, 830, 832 (E.D. Pa. 1996) ("[The Internet]
exists and functions [because] hundreds of thousands of
separate operators of computers and computer networks
independently decided to use common data transfer protocols
to exchange communications and information with other
computers. . . . There is no centralized storage location,
control point, or communications channel for the Internet
. . . ."), aff'd, Reno v. ACLU, 521 U.S. 844 (1997). When
content is viewed over the Internet, the viewing computer
received by physical encoder hardware, located in a state, then
retransmitted from a headend also located in a state." Id. ivi,
however, has not identified the location or nature of its
facility.
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typically receives information from several different
servers. See Akamai, 344 F.3d at 1189. Additionally, the
growth of "cloud-based systems," or virtual platforms where
content resides remotely on a distant server, further
highlights the uncertainty as to whether an Internet
retransmission service is or utilizes a facility that
receives and retransmits television signals. See Elec.
Privacy Info. Ctr. v. Nat'l Sec. Agency, 678 F.3d 926, 929
n.1 (D.C. Cir. 2012).
As Congress's intent is not apparent from the
statutory text, we turn to § 111's legislative history to
see if any "interpretive clues permit us to identify
Congress's clear intent" as to whether ivi constitutes a
cable system under § 111. See Cohen, 498 F.3d at 116
(internal quotations marks ommitted).
2. Legislative History
Cable systems were built in the late 1940s to
bring television programming to remote or mountainous
communities and households that could not receive over-the-
air broadcast television signals because of their geographic
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location. Turner Broad. Sys., Inc. v. FCC, 512 U.S. 622,
627 (1994) (citing United States v. Sw. Cable Co., 392 U.S.
157, 161-64 (1968); D. Brenner, M. Price & M. Meyerson,
Cable Television and Other Nonbroadcast Video § 1.02 (1992);
M. Hamburg, All About Cable, Ch. 1 (1979)); see SHVERA
Report, supra, at 2.
In 1968 and 1974, before Congress passed the
Copyright Act of 1976, the Supreme Court held that
retransmissions of broadcast programming by cable systems
did not constitute copyright infringement under the
Copyright Act of 1909 because such retransmissions were not
performances. See Teleprompter Corp. v. Columbia Broad.
Sys., Inc., 415 U.S. 394 (1974), superceded by 17 U.S.C.
§ 111, as recognized in Capital Cities Cable, Inc. v. Crisp,
467 U.S. 691, 709-10 (1984); Fortnightly Corp. v. United
Artists Television, 392 U.S. 390 (1968) (same). As a
result, cable systems were able to retransmit broadcast
television programming without obtaining licenses or
incurring any fees. The Teleprompter Court, however,
concluded that "if the Copyright Act of 1909 was inadequate
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to govern the commercial relationships that had emerged in
the interim, it was for Congress to create a substitute."
MPAA, 836 F.2d at 602 (citing Teleprompter, 415 U.S. at
414).
In 1976, Congress responded to the Supreme Court's
decisions by enacting § 111. Balancing two societal
benefits, Congress enacted § 111 to enable cable systems to
continue providing greater geographical access to television
programming while offering some protection to broadcasters
to incentivize the continued creation of broadcast
television programming. SHVERA Report, supra, at 4; see
Crisp, 467 U.S. at 710-11 ("Compulsory licensing not only
protects the commercial value of copyrighted works but also
enhances the ability of cable systems to retransmit such
programs . . . thereby allowing the public to benefit by the
wider dissemination of works carried on television broadcast
signals."); E. Microwave, 691 F.2d at 132; MPAA, 836 F.2d at
602. Section 111's compulsory license thus enabled cable
systems to bypass the transaction costs and impracticalities
of negotiating individual licenses with dozens of copyright
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owners, while simultaneously ensuring that copyright owners
were compensated. See Crisp, 467 U.S. at 711 & n.15; SHVERA
Report, supra, at 3-4.
In 1991, the Eleventh Circuit held that a
satellite carrier was a cable system covered by § 111's
compulsory licensing scheme. See Nat'l Broad. Co., Inc., v.
Satellite Broad. Networks, Inc., 940 F.2d 1467, 1471 (11th
Cir. 1991), superceded by 17 U.S.C. § 119, as recognized in
Oman, 17 F.3d 344; see also EchoStar, 457 F.3d at 33-34. In
1998, rather than incorporate satellite technology as a
communications channel under § 111, Congress responded to
the Eleventh Circuit's decision by codifying a separate
statutory license for satellite carriers under § 119 of the
Copyright Act. See 17 U.S.C. § 119 (the Satellite Home
Viewer Act of 1988 ("SHVA")). In 1999, Congress noted that
in "creating compulsory licenses, it is acting in derogation
of the exclusive property rights granted by the Copyright
Act to copyright holders, and that it therefore needs to act
as narrowly as possible to minimize the effects of the
government's intrusion on the broader market in which the
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affected property rights and industries operate." S. Rep.
No. 106-42, at 10 (1999); cf. Tasini v. N.Y. Times Co., 206
F.3d 161, 168 (2d Cir. 2000) (Where the Copyright Act "sets
forth exceptions to a general rule, we generally construe
the exceptions 'narrowly in order to preserve the primary
operation of the provision.'" (alterations omitted) (quoting
Commissioner v. Clark, 489 U.S. 726, 739 (1989))).
Finally, in 1994, Congress expressly included
"microwave" as an acceptable communications channel for
retransmissions. See 17 U.S.C. § 111(f)(3). Congress has
not codified a statutory provision for Internet
retransmissions, nor has it included the "Internet" as an
acceptable communication channel under § 111.7
7
Toward the end of Congress's last session in 2000, an
amendment was proposed to clarify that § 111 does not apply to
broadcast retransmissions over the Internet. Copyrighted
Broadcast Programming on the Internet: Hearings Before the
Subcomm. on Courts and Intellectual Prop. of the House Comm. on
the Judiciary, 106th Cong. (2000) (statement of Marybeth Peters,
Register of Copyrights). For indiscernible reasons, the
amendment was ultimately removed from the legislation. See id.
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3. Legislative Intent
The legislative history indicates that Congress
enacted § 111 with the intent to address the issue of poor
television reception, or, more specifically, to mitigate the
difficulties that certain communities and households faced
in receiving over-the-air broadcast signals by enabling the
expansion of cable systems. See Turner, 512 U.S. at 627;
Crisp, 467 U.S. at 710-11; E. Microwave, 691 F.2d at 132;
MPAA, 836 F.2d at 602; SHVERA Report, supra, at 1, 3.
Through § 111's compulsory license scheme,
Congress intended to support localized -- rather than
nationwide -- systems that use cable or optical fibers to
transmit signals through "a physical, point-to-point
connection between a transmission facility and the
television sets of individual subscribers." Turner, 512
U.S. at 627-28 (citing Cmty. Commc'ns Co. v. Boulder, 600
F.2d 1370, 1377-78 (10th Cir. 1981)).8
8
The statute's reference to "contiguous communities,"
and a "headend" in defining a cable system also indicates that
Congress intended to direct § 111's license at localized --
rather than national -- retransmission services. See 17 U.S.C.
§ 111(f).
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Congress did not, however, intend for § 111's
compulsory license to extend to Internet transmissions.
Indeed, the legislative history indicates that if Congress
had intended to extend § 111's compulsory license to
Internet retransmissions, it would have done so expressly --
either through the language of § 111 as it did for microwave
retransmissions or by codifying a separate statutory
provision as it did for satellite carriers. See 17 U.S.C.
§§ 111, 119.
Extending § 111's compulsory license to Internet
retransmissions, moreover, would not fulfill or further
Congress's statutory purpose. Internet retransmission
services are not seeking to address issues of reception and
remote access to over-the-air television signals. They
provide not a local but a nationwide (arguably
international) service.
Accordingly, we conclude that Congress did not
intend for § 111's compulsory license to extend to Internet
retransmissions. To the extent that there is any doubt as
to Congress's intent, however, we proceed to Chevron step
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two, and we conclude that the position of the Copyright
Office eliminates such doubt in its entirety.
B. Chevron Step Two
The Copyright Office is the administrative agency
charged with overseeing § 111's compulsory licensing scheme.
See 17 U.S.C. § 111(d); Oman, 17 F.3d at 347; MPAA, 836 F.2d
at 608. Although Congress has not expressly delegated
authority to the Copyright Office to make rules carrying the
force of law, "agencies charged with applying a statute
. . . certainly may influence courts facing questions the
agencies have already answered." United States v. Mead
Corp., 533 U.S. 218, 227 (2001). To determine the
appropriate amount of deference to an agency administering a
statute, "courts have looked to the degree of the agency's
care, its consistency, formality, and relative expertness,
and to the persuasiveness of the agency's position." Id. at
228 (citing Skidmore v. Swift & Co., 323 U.S. 134, 139-140
(1944)). The weight accorded to the Copyright Office's
interpretations "'depend[s] upon the thoroughness evident in
its consideration, the validity of its reasoning, its
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consistency with earlier and later pronouncements, and all
those factors which give it power to persuade.'" Id. at 228
(quoting Skidmore, 323 U.S. at 140); see also Morris v. Bus.
Concepts, Inc., 283 F.3d 502, 505-06 (2d Cir. 2002); Oman,
17 F.3d at 345.
The Copyright Office has consistently concluded
that Internet retransmission services are not cable systems
and do not qualify for § 111 compulsory licenses. In 1997,
the Copyright Office concluded that Internet retransmission
services, "so vastly different from other retransmission
industries now eligible for compulsory licensing[,]" were
not entitled to a § 111 compulsory license. U.S. Copyright
Office, A Review of the Copyright Licensing Regimes Covering
Retransmission of Broadcast Signals 97 (1997). In 2000, the
Register of Copyrights (the "Register") asserted that "the
section 111 license does not and should not apply to
Internet retransmissions." Copyright Broadcast Programming
on the Internet: Hearing Before the Subcomm. on Courts and
Intellectual Property of the Comm. on the Judiciary, 106th
Cong. 25-26 (2000) (statement of Marybeth Peters, The
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Register of Copyrights) (quoting Letter of Marybeth Peters,
Register of Copyrights, to the Honorable Howard Coble (Nov.
10, 1999)). The Register further concluded that "if there
were to be a compulsory license covering such
retransmissions, it would have to come from newly-enacted
legislation and not existing law." Id.
In 2008, the Copyright Office stated:
The Office continues to oppose an
Internet statutory license that would
permit any website on the Internet to
retransmit television programming without
the consent of the copyright owner. Such
a measure, if enacted, would effectively
wrest control away from program producers
who make significant investments in
content and who power the creative engine
in the U.S. economy. In addition, a
government-mandated Internet license
would likely undercut private
negotiations leaving content owners with
relatively little bargaining power in the
distribution of broadcast programming.
SHVERA Report at 188. It continued to hold this position in
2011. See U.S. Copyright Office, Satellite Television
Extension and Localism Act § 302 Report 48 (Aug. 29, 2011);
2 Melville B. Nimmer & David Nimmer, Nimmer on Copyright
§ 8.18[E][1] n.129.25 (Matthew Bender rev. ed. 2012) (1963).
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More broadly, the Copyright Office has maintained
that § 111's compulsory license for cable systems is
intended for localized retransmission services; under this
interpretation, Internet retransmission services are not
entitled to a § 111 license. See 57 Fed. Reg. 3284 (Jan.
29, 1992) (codified at 37 C.F.R. § 201.17); see also Oman,
17 F.3d at 346. With respect to satellite carriers, the
Copyright Office has stated: "Examination of the overall
operation of section 111 proves that the compulsory license
applies only to localized retransmission services regulated
as cable systems by the FCC." 57 Fed. Reg. 3284, 3292 (Jan.
29, 1992); see also 62 Fed. Reg. 187-05, 18707 (Apr. 17,
1997) ("[T]he Office retains the position that a provider of
broadcast signals be an inherently localized transmission
media of limited availability to qualify as a cable system."
(citing 56 Fed. Reg. 31595 (July 11, 1991)).
To reach this conclusion, the Copyright Office has
explained that § 111(f) refers to "headends" and "contiguous
communities," which are inapplicable to nationwide
retransmission service. 57 Fed. Reg. 3284, 3290. The
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Copyright Office also noted that § 111 defines a "'distant
signal equivalent' with reference to television stations
'within whose local service area the cable system is
located.'" Id.9 Because satellite carriers provide
nationwide retransmission service and because they are not
located in their local service area, the Copyright Office
concluded that satellite carriers were not cable systems
under § 111. Id. Under this interpretation, Internet
retransmission services cannot constitute cable systems
under § 111 because they provide nationwide -- and arguably
global -- services.
Finally, the Copyright Office has consistently
recognized that § 111's reference to "other communications
channels" should not be read broadly to include "future
unknown services," such as satellite, multipoint
distribution ("MMDS"), and satellite master antenna
television ("SMATV") transmissions. Id. at 3293-96 & n.5.
9
A "'distant signal equivalent' is a figure used to
calculate the percentage of gross receipts owed by a cable system
to the copyright holders of programs broadcast." Oman, 17 F.3d
at 347 n.6 (citing sources).
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In 1992, in response to whether "future unknown services"
could qualify for compulsory licenses, the Copyright Office
concluded that because "the 1976 Act did not consider the
public policy implications of extending a compulsory license
to these non-cable services, the Copyright Office should not
assert the authority to interpret the Copyright act in this
way. Id. at 3293, n.5.
In light of the Copyright Office's expertise, the
validity of its reasoning, the consistency of its earlier
and later pronouncements, and the consistency of its
opinions with Congress's purpose in enacting § 111, we
conclude that the Copyright Office's position is reasonable
and persuasive. See Mead, 533 U.S. at 227-28.
Accordingly, applying Chevron, we hold that:
(1) the statutory text is ambiguous as to whether ivi, a
service that retransmits television programming over the
Internet, is entitled to a compulsory license under § 111;
(2) the statute's legislative history, development, and
purpose indicate that Congress did not intend for § 111
licenses to extend to Internet retransmissions; (3) the
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Copyright Office's interpretation of § 111 -- that Internet
retransmission services do not constitute cable systems
under § 111 -- aligns with Congress's intent and is
reasonable; and (4) accordingly, the district court did not
abuse its discretion in finding that plaintiffs were likely
to succeed on the merits of the case.
II. Irreparable Injury
We next turn to whether the district court abused
its discretion in finding that plaintiffs would suffer
irreparable harm in the absence of a preliminary injunction
-- that is, harm to the plaintiff's legal interests that
could not be remedied after a final adjudication. See
Kickham, 558 F.3d at 209 (abuse of discretion); Salinger,
607 F.3d at 82 (irreparable harm). Harm may be irreparable
where the loss is difficult to replace or measure, or where
plaintiffs should not be expected to suffer the loss.
Salinger, 607 F.3d at 81. Under Salinger, courts may no
longer simply presume irreparable harm; rather, plaintiffs
must demonstrate that, on the facts of the case, the failure
to issue an injunction would actually cause irreparable
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harm. Id. at 82 (citing eBay, Inc. v. MercExchange, L.L.C.,
547 U.S. 388, 393 (2006)). Courts must pay "particular
attention to whether the 'remedies available at law, such as
monetary damages, are inadequate to compensate for [the]
injury.'" Id. at 80 (quoting eBay, 547 U.S. at 391).
We hold that the district court did not abuse its
discretion in finding that plaintiffs would suffer
irreparable harm without a preliminary injunction. First,
ivi's live retransmissions of plaintiffs' copyrighted
programming over the Internet would substantially diminish
the value of the programming. Second, plaintiffs' losses
would be difficult to measure and monetary damages would be
insufficient to remedy the harms. Third, ivi would be
unable to pay damages should plaintiffs prevail.
First, ivi's actions harm plaintiffs'
retransmission and advertising revenues by substantially
diminishing the value of their copyrighted programming.
Retransmission consent is a substantial and growing revenue
source for the television programming industry. Plaintiffs
obtain retransmission revenue by licensing the right to
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retransmit their copyrighted television programming to
cable, satellite, and telecommunications providers. See
ivi, 765 F. Supp. 2d at 618-19. Plaintiffs broadcast their
copyrighted programming to various communities at different
scheduled times, for example, based on time zone or local
network provider. For this reason, negotiated Internet
retransmissions -- for example, on Hulu.com -- typically
delay Internet broadcasts as not to disrupt plaintiffs'
broadcast distribution models, reduce the live broadcast
audience, or divert the live broadcast audience to the
Internet.
If ivi were allowed to continue retransmitting
plaintiffs' programming live, nationally (and arguably,
internationally), over the Internet, and without plaintiffs'
consent, ivi could make plaintiffs' programming available
earlier in certain time zones than scheduled by the
programs' copyright holders or paying retransmission rights
holders. ivi's retransmissions of plaintiffs' copyrighted
programming without their consent thus would devalue the
programming by reducing its "live" value and undermining
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existing and prospective retransmission fees, negotiations,
and agreements. ivi's retransmissions would dilute
plaintiffs' programming and their control over their
product.
The value of plaintiffs' programming would also be
harmed by the impact on advertising revenue. Broadcast
television stations and networks earn most of their revenues
from advertising. Plaintiffs argue –- persuasively -- that
advertisers pay substantial fees to target specific
audiences; such fees are often determined by the number of
viewers and their demographic profiles. ivi's
retransmissions of plaintiffs' copyrighted programming over
the Internet increases the number of Internet viewers and
reduces, "fragments," and diverts the number of "local
viewers." See Lisa Lapan, Network Television and the
Digital Threat, 16 UCLA Ent. L. Rev. 343, 354, 357, 385
(2009); see also Michelle R. Hull, Sports Leagues' New
Social Media Policies: Enforcement Under Copyright Law and
State Law, 34 Colum. J.L. & Arts 457, 487-88 (2011). As a
result, ivi's retransmissions weaken plaintiffs' negotiating
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position with advertisers and reduce the value of its local
advertisements. See e.g., MPAA, 836 F.2d at 603 ("Local
advertisers will not pay extra to reach viewers who cannot
reasonably be expected to patronize their businesses, so the
revenue base from which to compensate the owners understates
the value of the use of the materials, and the copyright
holders would . . . be undercompensated." (citing sources)).
Indeed, ivi's actions -- streaming copyrighted
works without permission -- would drastically change the
industry, to plaintiffs' detriment. See e.g., Adam B.
Vanwagner, Seeking a Clearer Picture: Assessing the
Appropriate Regulatory Framework for Broadband Video
Distribution, 79 Fordham L. Rev. 2909, 2912 (2011); Lisa
Lapan, supra, at 344-45, 350-58; Howard M. Frumes, Susan
Cleary, and Lorin Brennan, Developing an Internet and
Wireless License Agreement for Motion Pictures and
Television Programming, 1 J. Int'l Media & Ent. L. 283, 284-
85 (2007). The absence of a preliminary injunction would
encourage current and prospective retransmission rights
holders, as well as other Internet services, to follow ivi's
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lead in retransmitting plaintiffs' copyrighted programming
without their consent. The strength of plaintiffs'
negotiating platform and business model would decline. The
quantity and quality of efforts put into creating television
programming, retransmission and advertising revenues,
distribution models and schedules –- all would be adversely
affected. These harms would extend to other copyright
holders of television programming. Continued live
retransmissions of copyrighted television programming over
the Internet without consent would thus threaten to
destabilize the entire industry.
Second, plaintiffs' losses would be difficult to
measure and monetary damages would be insufficient to remedy
the harms. See eBay, 547 U.S. at 391; Salinger, 607 F.3d at
80; Tom Doherty Assoc., Inc. v. Sabin Entm't, Inc., 60 F.3d
27, 38 (2d Cir. 1995) (holding injunctive relief appropriate
"to avoid the unfairness of denying an injunction to a
plaintiff on the ground that money damages are available,
only to confront the plaintiff at a trial on the merits with
the rule that [the quantification of] damages must be based
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on more than speculation."). In this case, there is no
assurance that damages could be reasonably calculated at
trial. Indeed, even ivi "appreciates that the magnitude of
the harm . . . may be difficult or impossible to quantify."
Br. of Defs.-Appellants at 36. Additionally, because the
harms affect the operation and stability of the entire
industry, monetary damages could not adequately remedy
plaintiffs' injuries.
Third, as defendants have acknowledged, ivi would
be unable to pay any substantial damages award should
plaintiffs prevail. See Br. of Defs.-Appellants at 38
("[T]he injunction has effectively shut down the majority of
ivi's business, foreclosing any meaningful ability to
generate any revenue during the pendency of the
litigation."). The "unlikelihood that defendant[s] . . .
would, in any event, be able to satisfy a substantial damage
award" further supports a finding of irreparable harm.
Omega Importing Corp. v. Petri-Kine Camera Co., 451 F.2d
1190, 1195 (2d Cir. 1971).
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Accordingly, we conclude that the district court
did not abuse its discretion in finding that plaintiffs
would suffer irreparable harm without a preliminary
injunction.
III. Balance of Hardships
We next turn to whether the district court abused
its discretion in finding that the balance of hardships
weighed in favor of granting a preliminary injunction. See
Kickham, 558 F.3d at 209 (abuse of discretion); Salinger,
607 F.3d at 82 (balance of hardships).
We conclude that it did not, for plaintiffs
demonstrated that the balance of hardships weighed heavily
in favor of granting a preliminary injunction. As discussed
above, plaintiffs established both a likelihood of success
on the merits and irreparable harm -- the absence of an
injunction would result in the continued infringement of
their property interests in the copyrighted material. As
for defendants, as the district court noted, "[i]t is
axiomatic that an infringer of copyright cannot complain
about the loss of ability to offer its infringing product."
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ivi, 765 F. Supp. 2d at 621 (citing sources). ivi cannot be
"legally harmed by the fact that it cannot continue
streaming plaintiffs' programming, even if this ultimately
puts ivi out of business." Id. The balance of hardships,
therefore, clearly tips in plaintiffs' favor.
IV. Public Interest
Finally, we assess whether the district court
abused its discretion in finding that the public interest
would not be disserved by the grant of a preliminary
injunction. See Kickham, 558 F.3d at 209 (abuse of
discretion); see also eBay, 547 U.S. at 391 (public
interest); Salinger, 607 F.3d at 82-83 (same).
Copyright law inherently balances the two
competing public interests presented in this case: the
rights of users and the public interest in the broad
accessibility of creative works, and the rights of copyright
owners and the public interest in rewarding and
incentivizing creative efforts (the "owner-user balance").
See Crisp, 467 U.S. at 710.
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Here, streaming television programming live and
over the Internet would allow the public -- or some portions
of the public -- to more conveniently access television
programming. See Lisa Lapan, supra, at 361 (discussing
choice and convenience in "TV/Internet" convergence); see
Tim Wu, Intellectual Property, Innovation, and Decentralized
Decisions, 92 Va. L. Rev. 123, 139 (2006) (discussing
balancing of interests and noting historic problem where
"holders of copyright block or slow the dissemination of
technologies of potentially broad social value that threaten
an existing market position").
On the other hand, the public has a compelling
interest in protecting copyright owners' marketable rights
to their work and the economic incentive to continue
creating television programming. See Golan v. Holder, 132
S. Ct. 873, 890 (2012) (citing Eldred v. Ashcroft, 537 U.S.
186, 219 (2003); Harper & Row Publishers, Inc. v. Nation
Enters., 471 U.S. 539, 558 (1985)). Inadequate protections
for copyright owners can threaten the very store of
knowledge to be accessed; encouraging the production of
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creative work thus ultimately serves the public's interest
in promoting the accessibility of such works. See Metro-
Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913,
961 (2005) (quoting Twentieth Century Music Corp. v. Aiken,
422 U.S. 151, 156 (1975)).
Plaintiffs are copyright owners of some of the
world's most recognized and valuable television programming.
Plaintiffs' television programming provides a valuable
service to the public, including, inter alia, educational,
historic, and cultural programming, entertainment, an
important source of local news critical for an informed
electorate, and exposure to the arts. See Turner, 512 U.S.
at 648. Plaintiffs' desire to create original television
programming surely would be dampened if their creative works
could be copied and streamed over the Internet in derogation
of their exclusive property rights.
Further, there is a delicate distinction between
enabling broad public access and enabling ease of access to
copyrighted works. The service provided by ivi is targeted
more toward convenience than access, and the public will
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still be able to access plaintiffs' programs through means
other than ivi's Internet service, including cable
television. Preliminarily enjoining defendants' streaming
of plaintiffs' television programming over the Internet,
live, for profit, and without plaintiffs' consent does not
inhibit the public's ability to access the programs. A
preliminary injunction, moreover, does not affect services
that have obtained plaintiffs' consent to retransmit their
copyrighted television programming over the Internet.
Accordingly, we conclude the district court did
not abuse its discretion in finding that a preliminary
injunction would not disserve the public interest.
CONCLUSION
We have considered defendants' remaining arguments
and conclude that they are without merit. For the reasons
set forth above, we hold that the district court did not
abuse its discretion in granting a preliminary injunction to
plaintiffs, and the judgment of the district court is
AFFIRMED.
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