USCA 2nd Circuit, August 27, 2012

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  • Second Circuit upholds preliminary injunction enjoining defendant from streaming television programs live over the Internet, holding that defendant is not a “cable system” under §111 of the Copyright Act and not entitled to a compulsory license to stream plaintiffs’ copyrighted programming.

Plaintiffs, television stations and owners of copyrighted programming, brought suit for copyright infringement against defendants, ivi, Inc. and its chief executive officer, asserting that defendants’ live streaming of copyrighted programming over the Internet infringed plaintiffs’ rights to the public display of copyrighted content under the Copyright Act. Defendants captured broadcast signals from stations in New York City, Seattle, Chicago, and Los Angeles, and retransmitted the copyrighted television programming live and over the Internet to paying subscribers who had downloaded ivi’s “TV player” on their computers for a monthly fee. Shortly after ivi launched its service, plaintiffs sent cease-and-desist letters, and defendants responded by asserting that ivi was a cable system entitled to a compulsory license under §111 of the Copyright Act. The district court granted plaintiffs’ motion for a preliminary injunction enjoining ivi from streaming the copyrighted programs pending the outcome of the lawsuit. On appeal, the Second Circuit affirmed, holding that the district court did not abuse its discretion in granting the preliminary injunction.

The circuit court agreed with the district court’s determination that plaintiffs had established a likelihood of success on their copyright claims. The Copyright Act grants television broadcasters the exclusive rights to authorize the public display of copyrighted programming, including the retransmission of broadcast signals, subject to an express exception under §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 act’s procedures. Defendants argued that ivi was a “cable system” under the Copyright Act and therefore entitled to a compulsory license to stream plaintiffs’ copyrighted programming.

The Second Circuit rejected defendants’ argument. Looking first to the text of the statute, the court concluded that, based on the statutory language alone, “It is simply not clear whether a service that retransmits television programming live and over the Internet constitutes a cable system under §111.” This ambiguity required the court to examine other indicia of congressional intent, including the legislative history of the act. Noting that Congress has neither specifically included an express statutory exclusion for Internet retransmissions, as it had for satellite carriers in 1988, nor included the Internet as an “acceptable communication channel” under §111, as it had for microwave retransmissions in 1994, the court concluded that Congress did not intend for the compulsory license provisions to apply 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.”

The Second Circuit also found that the fact that the U.S. Copyright Office – the administrative agency charged with overseeing §111’s compulsory licensing scheme – had consistently and repeatedly concluded that Internet retransmission services do not constitute “cable systems” and therefore do not qualify for §111 compulsory licenses entirely eliminated any further doubt.

The appeals court also held that the district court did not err in finding that plaintiffs would suffer irreparable harm in the absence of a preliminary injunction, including the diminution of the value of their programming and advertising revenue. In fact, according to the court, “ivi’s actions – streaming copyrighted works without permission – would drastically change the industry, to plaintiffs’ detriment.” In addition, not only would the loss to plaintiffs be difficult to measure, and monetary damages would be insufficient to remedy the damage, because it affects the operation and stability of the entire industry, but ivi had acknowledged that it would be unable to pay any substantial award of damages if plaintiffs prevailed. Finally, the court concluded that the balance of hardships weighed heavily in favor of granting the preliminary injunction, and that preliminary injunction did not disserve the public interest.