Dish Network offers its customers the “Hopper”—a set-top box that combines video on demand (VOD) and digital video recorder (DVR) functionality.  The Hopper uses “PrimeTime Anytime” and “AutoHop” to automatically record TV shows and skip commercials in those shows.  Fox sued Dish, claiming these services infringed Fox’s copyrights, and moved for a preliminary injunction.  The Central District of California denied the injunction, and the Ninth Circuit affirmed, ruling Fox was unlikely to succeed in proving copyright infringement.

PrimeTime Anytime automatically records primetime TV shows on the four major broadcasting networks once a user activates the service so the user can watch them later (“time-shifting”).  Dish controls the start and end times and decides how long the recorded shows are available to view.  Once activated by a user, AutoHop automatically skips commercials in shows recorded using PrimeTime Anytime.  The commercials are not deleted from the recording.

Putting this technology in its historical legal context, in 1984 the Supreme Court ruled Sony’s Betamax recorder that allowed users to time-shift was fair use so Sony was not liable for indirect infringement.  Sony Corp. of Am. v. Universal City Studios, 464 U.S. 417 (1984).  Then in 2005 the Supreme Court held Grokster was liable for indirect infringement because its peer-to-peer file sharing network had “a purpose to cause and profit from third-party acts of copyright infringement.”  Metro-Goldwyn-Mayer Studios v. Grokster, 545 U.S. 913 (2005).  Now the issues of DVR time-shifting and commercial skipping are working through the courts.

Direct Infringement.  At this preliminary stage where Fox has the high burden to show it is likely to succeed, the Court ruled that PrimeTime Anytime does not directly infringe Fox’s copyrights because the users, not Dish, make the copies.  “[O]perating 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 recognized the degree of Dish’s control over the copying process might be relevant to—and thus leaves open—Dish’s direct liability, citing Cartoon Network LP v CSC Holdings, 536 F.3d 121 (2d Cir. 2008) (reserving the question “whether one’s contribution to the creation of an infringing copy may be so great that it warrants holding that party directly liable”).  But at this stage, the facts did not warrant a preliminary injunction.

Secondary Infringement.  Fox owned the copyrights in the TV shows at issue and Dish’s users copied them, so Fox showed prima facie infringement.  But the Court held Dish is likely to succeed in proving its users’ fair use.  The Supreme Court’s Betamax decision found noncommercial time-shifting was fair use, but did not expressly decide whether commercial-skipping also was fair.  Here, Fox does not own the copyrights in the commercials, so skipping them cannot make the users into infringers:  “If recording an entire copyrighted program is a fair use, the fact that viewers do not watch the ads not copyrighted by Fox cannot transform the recording into a copyright violation.”

Fox and other broadcasters continue to explore new ways to earn advertising revenue as technologies such as Dish’s lessen the value of network commercial advertising.  And this was the harm Fox argued, unsuccessfully, weighed in favor of a preliminary injunction:  “The market harm that Fox and its amici allege results from the automatic commercial skipping, not the recording of programs through PrimeTime anytime.”  As entertainment funding and delivery evolve, so will efforts to protect copyright and defend its fair use.