Second Circuit affirms district court order finding Internet-based television provider FilmOn violated consent order and permanent injunction by distributing plaintiff television networks’ copyrighted content without permission, holding FilmOn in contempt and imposing $90,000 in sanctions.
This appeal of a contempt order is the latest installment in the ongoing litigation over Internet-based television provider FilmOn.com Inc.’s distribution of copyrighted content owned by broadcast television networks. Plaintiffs, a group of major television networks, sued FilmOn.com Inc. for copyright infringement, alleging that FilmOn retransmitted the networks’ copyrighted content without authorization. The parties reached a settlement in 2012, later entered as a consent order and permanent injunction by the district court, which barred FilmOn and its affiliates from infringing the exclusive rights of the television networks under Section 106(1)-106(5) of the Copyright Act. FilmOn subsequently began offering a video-on-demand service allowing users to stream archived content belonging to the television networks. In 2013, the district court found FilmOn in contempt of the 2012 injunction and entered judgment prohibiting further use of the VOD service. It also imposed a $10,000-per-day fee schedule for any further infringing conduct. Thereafter, FilmOn’s sister company FilmOn X deployed a new “Teleporter” system (similar to a remote storage DVR system) that permitted near-simultaneous viewing of content from the television networks. FilmOn maintained the Teleporter was specifically designed to comply with the 2012 injunction and Second Circuit precedent.
FilmOn’s fellow Internet television provider Aereo Inc. began employing similar viewing technology, prompting television networks to challenge Aereo’s conduct in several federal jurisdictions and, ultimately, in the U.S. Supreme Court. In its 2014 decision in American Broadcasting Companies, Inc. v. Aereo, Inc., the Supreme Court held that the Copyright Act prohibited Aereo’s technology. While Aereo discontinued using its technology following the decision, FilmOn continued to operate its Teleporter system throughout the Second Circuit for nine additional days, eventually canceling operations after the television networks filed an order to show cause in the district court. Agreeing with the television networks, the district court found that FilmOn violated the 2012 injunction; held FilmOn and its CEO, Alki David, in civil contempt; sanctioned FilmOn $90,000 ($10,000 for each day of operations following Aereo’s discontinuance of its analogous service); and awarded the television networks attorneys’ fees. (Read our summary of the district court’s decision, here.) FilmOn appealed, and the Second Circuit affirmed in all respects.
Considering first the finding of contempt, the Second Circuit held that the 2012 injunction was “clear and unambiguous” and that FilmOn effectively conceded noncompliance by admitting that it deployed its Teleporter system following the Aereo decision. The Second Circuit rejected FilmOn’s argument that Aereo created confusion as to whether its Teleporter system qualified for a Section 111 compulsory license under the Copyright Act by comparing Aereo to a cable company.Aereo, the Second Circuit stated, foreclosed use of Teleporter and similar systems within the Second Circuit and, in any event, FilmOn never obtained a Section 111 license. The district court also did not err in finding FilmOn failed to diligently attempt to comply with the 2012 injunction. FilmOn could have petitioned the district court for clarification of the injunction and its impact on the Teleporter system, but instead opted to interpret for itself the television networks’ rights under Aereo. FilmOn also decided that its Teleporter service was permissible and continued operations — what the Second Circuit called “cavalierly doubl[ing] down.” That FilmOn applied for a Section 111 license after the television networks filed their order to show cause was not evidence of diligence. Because David had the power to force FilmOn to comply with the 2012 injunction and failed to do so, the court agreed that the CEO was subject to contempt as well.
FilmOn also argued that the monetary sanctions improperly transformed the civil contempt into criminal contempt, the imposition of which would have necessitated a jury trial. The Second Circuit rejected this argument, holding that the monetary sanctions were civil in nature because the fee schedule in the 2013 contempt judgment was a proper coercive tool to maintain FilmOn’s compliance with the 2012 injunction. According to the Second Circuit, the sanction’s coercive purpose and effect were highlighted by “FilmOn’s history of aggressively pushing the bounds of the Injunction and of repeatedly neglecting to petition the district court for clarifications.” That the sanctions were issued after FilmOn stopped violating the 2012 injunction did not render them retrospective punitive penalties, the Second Circuit explained, because FilmOn had the opportunity to “purge” its infringing conduct following theAereo decision but chose not to do so. Finally, the Second Circuit held that the district court did not abuse its discretion in awarding attorneys’ fees because the 2012 injunction expressly provided for such fees in the event of a dispute.