Cablevision has won an appeals court decision that its network digital video recorder (nDVR) scheme is legal, in as thorough a legal reversal as Cablevision could have hoped for after last year’s lower court ruling that the plan was completely illegal.

Cablevision will still have to wait a bit before implementing the service, however, as the appeals court has sent the case back to the original lower court for a final decision.

And though the case was a clear victory for Cablevision, the appeals court left the door ajar for possible further adjudication, should the studios that sued Cablevision decide to push the legal questions to their full limit.

If they don’t, and the ruling stands, the ultimate significance of the case is that any service provider could forgo the expense of storage integrated into set-top boxes distributed to subscribers, and instead use lower-cost storage servers housed in company facilities.

The networked storage approach, from a customer’s standpoint, would function exactly as a DVR does. The key difference would be that content would be held not in storage integrated with set-top boxes, but on storage servers housed in the provider’s facilities.

Several film studios and other content producers sued, saying the approach constituted copyright infringement. The lower court ruling made in March 2007 was in their favor, and the court issued an injunction prohibiting Cablevision from implementing what has variously been referred to as a network DVR (nDVR), or a remote storage DVR (RS-DVR).

The original lower court decision against Cablevision in March 2007 hinged on three findings:

  1. In order for the nDVR to work, Cablevision must buffer incoming content in a router (supplied by BigBand Networks); the act of buffering is making a copy, and the act of making that copy is a copyright infringement.
  2. If any subscriber decides to store a copy of a program, a copy of that program must be moved from the buffer to a storage server (supplied by Arroyo, now part of Cisco); copying to the Arroyo server is another infringement.
  3. Playback constitutes a public performance, and as such would be yet another copyright infringement.

The U.S. Court of Appeals for the Second Circuit in New York ruled that the act of buffering is transitory, which by statute is allowable.

Liability in the second issue rests squarely on the question of who makes the copy on the Arroyo server. If it’s Cablevision, it would constitute direct infringement; if it’s the subscriber, it would not. The appeals court ruled that the copy can only be made by the subscriber, and this is allowable.

On the third point, the appeals court ruled that the transmission of a copy to a specific subscriber who recorded it does not constitute a transmission to the public.

The appeals court ruling rejected all of the studios’ arguments, but the results were not completely unalloyed.

According to the text of the ruling, “We do not address whether such a network operator would be able to escape any other form of copyright liability, such as liability for unauthorized reproductions or liability for contributory infringement.”

In other words, if Cablevision were making the decision to make a copy, that would be direct infringement – and the appeals court absolved Cablevision of direct infringement because it is a Cablevision subscriber who is making the decision to make a copy of a piece of content.

“Contributory infringement” is a separate legal matter, the appeals court noted. So the plaintiffs in the case – the studios – could presumably still go after Cablevision, arguing that Cablevision is guilty of that.

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