Capital Currents: The Dish “Hopper” Case
On July 24, 2013, the United States Court of Appeals for the Ninth Circuit released its decision in the copyright infringement case where Fox Broadcasting is suing Dish Network. I wrote about this dispute a year ago, in the column entitled “Skipping Commercials”.  This Circuit Court decision denied Fox’s request for a preliminary injunction to force Dish to stop offering its PrimeTime Anytime (PTAT) offering. The Circuit Court upheld a District Court decision from November 2012 that also denied the request for an injunction.
If a Dish subscriber enables PTAT, the Hopper set top box records all the prime time programs from the four commercial TV networks. Then, starting at 3:00 AM the next morning, the subscriber can play back any of those programs and can set the Hopper box to skip commercials.
In my column last year, I speculated about how this might be accomplished. I said, “It must be that Dish downloads a file that contains the start and stop time of each prime time commercial aired by the four networks.” That turns out to be correct. Then I speculated how “Dish generates the file of commercial start/stop times, it uses some version of automatic content recognition….” That turns out to be wrong.
The Circuit Court decision reveals for the first time the method that Dish uses to create the file.
To create the AutoHop functionality, Dish technicians in Cheyenne, Wyoming manually view Fox’s primetime programming each night and technologically mark the beginning and end of each commercial. The program content is not altered in any way. The electronically marked files are then uplinked in Wyo., and eventually transmitted to subscribers in an “announcement” file that Dish makes available to subscribers after the show has aired I said in my column, “One of my colleagues suggested ‘give a minimum wage intern a watch & a pad of paper to record start/stop times.’ But that’s sooo analog.” I was sooo wrong!!! In fact, they do manually note the start and stop times.
Both the District Court and the Circuit Court ruled that PTAT is not a copyright infringement. It’s like a DVR capability, which was found to be a non-infringing “fair use” by the Supreme Court’s 1984 Sony Betamax decision. And the key point is that the subscriber decides whether to make copies, as in the case of the Cablevision network DVR, not Dish. And anyway, Fox owns the copyrights to the programs, but not to the commercials.
On one aspect, Dish was found to be infringing. For awhile, it made copies of the prime time programs in order test the quality of the ad-skipping. It stopped making those quality- assurance copies after the District Court decision came out.
There is another element that is still in dispute. The contract between Fox and Dish prohibited Dish from offering Fox network programs to its subscribers as a video-ondemand (VOD) service. The District Court judge said that PTAT was a hybrid between a DVR service and a VOD service, but was more like a DVR service. The Circuit Court said that this was a close decision, but was not unreasonable. The District Court judge was not “clearly erroneous” in making her decision, and it was not an “abuse of discretion.”
This issue is still in play.
The standard for a preliminary injunction is to show “irreparable harm,” but contract disputes can usually be resolved by awarding monetary damages. So even if there is a later court decision that Dish breached the contract, any harm that Fox suffered would not be “irreparable harm,” and Fox could be compensated with monetary damages.
The District Court did conclude that Fox was economically harmed by PTAT. Fox licenses its programs to Hulu, Netflix, iTunes and Amazon, who might deliver programs to their customers without commercials. So Dish competes with those distributors, and PTAT makes the Fox programming less valuable to those competitors—they might pay Fox less than they would pay in the absence of PTAT. But whether that economic harm is caused by a breach of contract is yet to be decided. It’s not caused by copyright infringement, since PTAT is not a copyright infringement.
These decisions were only the initial phase of this dispute. They conclude that PTAT does not infringe the copyrights of Fox Broadcasting, but the quality assurance copies, which Dish has stopped making, did infringe the copyrights. And the breach of contract question is very much up in the air. So this case will go to trial, I expect sometime next year, and you’ll be reading more about it.
And if it were up to me, Dish would be using automatic content recognition.