In-Network digital video recorders do not violate copyright rights according to the U.S. Court of Appeals for the Second Circuit. The court vacated an injunction against Cablevision’s deploying of the in-network DVR function. The Cartoon Network LP v. CSC Holdings, Inc., —F.3d—, 2008 WL 2952614 (2nd Cir. Aug. 4, 2008). The decision establishes three important copyright principles that are likely to have significant ramifications beyond the in-network DVR issue. 

First, the court held that transitory buffers used in digital transmission are not “fixed” for a sufficient period of time to implicate the copyright owners’ reproduction right. In reaching this conclusion, the court rejected a contrary view expressed by the Copyright Office that the law only required that the buffer be fixed long enough for the work to be perceived or further transmitted. The decision has immediate implications for the Copyright Office’s proposed rule regarding server copies and buffers used in digital streaming. (See the upcoming Fall 2008 issue of Intellectual Property Insights).

The court also agreed with an earlier decision by the U.S. Court of Appeals for the Fourth Circuit, CoStar v. LoopNet, which had held that to be directly liable for copyright infringement, a defendant needs itself to engage in a volitional act constituting infringement—simply setting up a system to be used by others may give rise to secondary liability, but it will not give rise to direct liability. The court held that the copies made in the Cablevision DVR system were made by Cablevision’s subscribers, not by Cablevision. This conclusion should provide comfort to online service providers, video hosting sites and others who offer consumers access to technology.

Finally, the court held that the streaming of an individual’s own copy (on Cablevision’s servers) to that individual was not a public performance, but was a private performance, not subject to control by the copyright owner. This aspect of the decision could have significant effects for services such as digital music lockers and private online storage facilities.

In addition to the legal ramifications of the decision, several possible business effects bear watching. Will the case affect the ongoing competition between cable and similar systems, which can provide in-network DVR functionality, and satellite television systems, which cannot provide the functionality? Will in-network DVRs replace in-home DVRs and devices such as TiVo? Will the availability of in-network DVRs expand the use of DVR functionality?