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Court Holds That Deployment of Cablevision's "Network DVR" Would Violate Copyright Law

March 23, 2007

A federal district court in New York has enjoined Cablevision Systems Corporation ("Cablevision") from deploying its proposed "network DVR" service without first obtaining licenses from content owners allowing Cablevision to operate the service. In essence, the court found that operation of the network DVR service was indistinguishable from an unlicensed video-on-demand service and, absent appropriate licenses from content owners, would subject Cablevision to copyright infringement liability for unauthorized copying and performance of programs transmitted over its cable systems.

Background. In March 2006, Cablevision announced its intent to offer a new "remote storage" digital video recording system, also referred to as a "network DVR" service. The proposed service would allow customers to record programs onto dedicated hard drives maintained at Cablevision's headend, rather than on hard drives contained in set-top boxes located at the subscriber's premises. Recording and playback would be controlled by the customer through the use of signals sent to the headend via remote control aimed at the customer's non-DVR set-top box.

Before it was able to launch the network DVR service, Cablevision was sued by several motion picture studios (including Twentieth Century Fox, Paramount, Disney, and Universal), broadcast networks (including CBS and NBC), and cable networks (including Cartoon Network and several Turner-related entities). The plaintiffs' sought a declaratory ruling that the deployment and operation of Cablevision's network DVR service would infringe their copyrights and an injunction against the launch of the service. In response, Cablevision filed its own lawsuit, seeking a declaratory judgment holding that the network DVR service would not expose it to copyright infringement because its network DVR service was indistinguishable from other recording devices, such as VCRs or set-top DVRs.

The Decision. The parties did not dispute that copies of copyrighted works are made in the operation of the network DVR. Rather, the question, as the court put it, was "who makes the copies." Cablevision argued that it was the customer that made the copies and that Cablevision's role in the process was entirely passive. Cablevision relied primarily on the Sony Betamax case, arguing that it cannot be liable for copyright infringement simply for providing its customers with the machinery that they use to make copies. The plaintiff copyright owners, on the other hand, argued that the network DVR was more than a "machine" -it was a "service" that required the continuing and active involvement of Cablevision and, therefore, that Cablevision should be deemed to be "doing" the copying (albeit at the request of the customer).

More than half of the court's opinion is devoted to a detailed technical description of the operation of the network DVR. In particular, the court reviewed two different forms of copying: the "server" copies that were recorded at the request of the customer on the dedicated hard drives maintained for each customer at Cablevision's headend and the "buffer" or temporary copies that were automatically made of each program in order to facilitate the recording of the server copies. With respect to the server copies, the court rejected Cablevision's claim that these copies were no different than copies made by a consumer on a traditional VCR, noting that, apart from their time-shifting functions, the network DVR and VCR have little in common. In short, the court found that the network DVR service was more analogous to VOD service than to a home recording device (and, indeed, was "based on a modified VOD platform" as a technical matter).

In reaching this conclusion, the court found that the network DVR differs from a VCR in that it is not a stand-alone copying device owned and operated by the consumer; rather, according to the court, it is a complex system that involves a continuing relationship between Cablevision and the user, payment of monthly fees, and the use of numerous computers owned by Cablevision, located in Cablevision's private facilities, and maintained on an ongoing basis by Cablevision personnel. The court also found that Cablevision's involvement in the recording process differentiated the network DVR from a set-top DVR (such as that provided on a standalone basis by Tivo or incorporated directly into a set-top box leased by a cable operator). Without discussing the fact that customers have an "ongoing" relationship with the providers of set-top DVR service, the court held that set-top DVRs "record directly" to the hard drive and do not need the "complex computer network and constant monitoring by Cablevision personnel" necessary for operation of the network DVR. The court further noted that merely because copyright owners have not challenged the legality-of set-top DVRs, that does not insulate the network DVR service from challenge.

In addition to finding that Cablevision was responsible (and thus liable) for the unauthorized creation of the server copies "recorded" for use by its customers, the court concluded that Cablevision also would be liable for the temporary "buffer" copies made as part of the operation of the network DVR. The court, citing previous cases and statements by the Copyright Office, held that buffer copies, despite their transitory and ephemeral nature, are nonetheless "copies" for purposes of the Copyright Act.

Finally, the court ruled that the playback of a program recorded using the network DVR system would constitute an unauthorized, and thus infringing, "public performance" of the program by Cablevision. For the same reasons that it found that Cablevision was not merely a passive participant in the recording process, the court rejected Cablevision's contention that it was the customer, not Cablevision, that "performed" the work. In addition, the court concluded that the concept of when a performance is "public" has been defined broadly for purposes of the Copyright Act and encompasses transmissions to members of the public that occur at separate places and separate times, particularly where the relationship between the transmitting party and the receiving party is commercial in nature.

Cablevision has indicated that it is considering an appeal of the district court's ruling. In the meantime, we would be happy to answer any questions you may have regarding this matter.

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