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EchoStar Ordered to Stop Retransmitting Distant Network Signals

October 24, 2006

In the latest chapter in a long-running copyright infringement action arising under the Satellite Home Viewer Improvement Act ("SHVIA"), the United States District Court for the Southern District of Florida has issued an order directing EchoStar to cease all retransmissions of distant broadcast signals affiliated with the "big four" networks (ABC, CBS, NBC, and Fox), effective December 1, 2006. The court's action comes despite a settlement agreement between EchoStar and three of the four networks (ABC, CBC, and NBC) that would have permitted EchoStar to continue to provide a limited number of its subscribers with distant network signals.

Background. The litigation between EchoStar and the broadcast networks began nearly eight years and arises out of claims that EchoStar was delivering distant network signals to subscribers who were not eligible to receive such signals under SHVIA. (Under SHVIA, DBS providers such as EchoStar may deliver distant network signals only to subscribers who cannot receive the over-the-air signal of a local affiliate (i.e., "unserved" households). In May 2006, the United States Court of Appeals for the Eleventh Circuit upheld the district court's determination that EchoStar had engaged in a "pattern or practice" of violating the unserved household limitation and found that, as a matter of law, it was required to impose on EchoStar the statutory "death penalty" -the issuance of a permanent injunction barring EchoStar from delivering distant network signals to any subscribers (served or unserved) pursuant to the SHVIA compulsory license. The appellate court's decision specifically directed the district court to issue the required injunction.

In August, 2006, after its efforts to appeal the Eleventh Circuit's ruling were rejected (but before the district court had implemented the appellate court's order), EchoStar entered into a $100 million post-judgment settlement agreement with the affiliates of ABC, NBC, and CBS under which EchoStar would, notwithstanding the appellate court's decision, be permitted to continue to provide distant network affiliates to legitimately "unserved" customers. However, Fox (whose sister company DirecTV stands to benefit from the implementation of the injunction against EchoStar) did not join in the settlement and filed a motion with the district court demanding that it reject the settlement and implement the "death penalty" injunction as directed by the Court of Appeals.

Decision. The district court agreed with Fox and rejected the post-judgment settlement. The court stated that it was bound by the Eleventh Circuit's decision and lacked the discretion to alter that court's clear and unambiguous mandate. The court emphasized the fact that, as the Eleventh Circuit found, SHVIA requires the issuance of a permanent nationwide injunction where it has been determined that a DBS provider engaged in a "pattern or practice" of SHVIA violations. The court also rejected EchoStar's claim that the issuance of a permanent nationwide injunction preventing from delivering distant affiliates of any of the big four networks, even to households that could not receive an over-the-air network signal, would "work a manifest injustice" on consumers. According to the court, Congress made the determination in SHVIA that a permanent injunction is the appropriate remedy for the illegal acts committed by EchoStar.

Next Steps. EchoStar (along with ABC, CBS, and NBC) almost certainly will file a new appeal with the Eleventh Circuit, although their chances of succeeding appear to be slim. Assuming they do not obtain relief from the court, it is expected that they will ask Congress to intervene to overturn the injunction. Congress is expected to return to work after the November elections and it is possible that a provision aiding EchoStar could be inserted in an appropriations bill enacted before the December 1 deadline. However, the issue is controversial and it is unclear whether such a provision could be enacted over the objections of Fox and without the agreement of the congressional committees with jurisdiction over copyright issues. EchoStar's best hope is for the district court to extend the December 1 shut-off deadline, which would give EchoStar more time to obtain relief from Congress.

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