Dish Wins Another Battle In War Over Ad-Skipping Hopper DVR

 

Posted By: Ross Arkin

 

dish-hopper-kangarooStay tuned for more after these messages. No, seriously, stay tuned. Please. I asked nicely. You better watch these ads or else.

With more and more consumers finding more and more ways to avoid watching commercials, it’s not surprising that this seems to be the tone that broadcasters are taking. Specifically in this case, CBS, FOX and NBC are demanding that a line must be drawn to stop technology from circumventing their ad revenue model. Where should the line be drawn? Fox and co plaintiffs answer that query with this: the Hopper.

 

Hopper is a new piece of DVR (digital video recording) hardware produced by the satellite television provider, Dish Network. Hopper is very similar to previous DVR models in its function. It has three tuners, a two terabyte hard drive and can record live shows automatically. However, what makes Hopper unique – and what’s causing all the controversy – is “AutoHop.” AutoHop is a service which cuts the commercials out of a recorded program automatically. Before Hopper (and AutoHop) consumers would have to manually fast forward past commercials when they watched a program recorded on their DVRs. Considering the fact that DVRs essentially serve two main functions – time shifting saving and skipping past commercials – can the networks really be surprised about this technology? It really is just the next logical step in the quest to provide consumers with exactly what they want: television with no advertisements.

Since the advent of devices which could record live T.V., broadcasters have been fighting against technological progress. Starting with the Betamax case – where broadcasters brought claims of contributory infringement against the manufacturer of the device – networks have stood against the prospect of consumers being able to use technology to control their viewing experience. Understandably, networks need to ensure that their commercials will be viewed so that they can keep their advertising time valuable. Commercial air time is only as valuable as advertisers perceive it to be. For networks who provide free content over the airwaves, advertising revenue is their bread and butter. If advertisers determine that no one is watching commercials anymore, under the current business model, broadcasters’ life lines will be lost.

While this tension between networks, viewers, and hardware producers is decades old, the legal arguments were revived because of the novel feature of AutoHop. The reason no argument was made that Sony was liable for direct infringement was because it was not the Sony Corporation that was committing the act in question but the consumers of the product sold by Sony. And the reason Sony was not liable for contributory infringement, according to the U.S. Supreme Court, was that the video tape recorder was capable of “substantial noninfringing uses.” In other words, most owners of the Sony device would not have been using it for objectionable purposes so drawing a direct connection between the maker of the device and the rare bad faith user would be too attenuated. The court also focused on the fact that plaintiffs did not demonstrate that the value of their works would be affected simply by consumers recording broadcasts and watching them at later times.

It bears reminding that the Betamax case was decided in 1984. In terms of technology, thirty years ago was an entirely different world. It can be argued that the Hopper is an entirely different animal than a video tape recorder which required expensive video tapes and had no Autohop feature. Moreover, as the technology to record live video has become altogether ubiquitous, judges are more readily equipped to understand a more accurate picture of how such technology works. Also, in the nearly three decades since the decision, there may be a better understanding of how much “time-shifting” technology can affect the value of copyrighted works and the revenue structure for ad supported broadcasts.

The most recent decision on this issue, however, seems to follow the same legal analysis that was espoused in the Betamax case. The Ninth Circuit announced that they would affirm the district court’s decision to deny preliminary injunction against Dish Network. The court stated that there was no likelihood of success on a claim of direct infringement because Dish was not the party responsible for the act of copying. In regards to secondary infringement, there was no likelihood of success because the copying by consumers constitutes a “fair use.” Finally, similar to the Betamax case, the Ninth Circuit found no showing by plaintiffs of “irreparable harm” as a result of the ad-skipping technology. Although this automatic skipping may have made a difference when the Betamax case was decided, the current environment is different. Today there are alternate channels of broadcast for these copyrighted works and their commercials. Content providing websites such as Hulu are immune to the effects of ad skipping DVR sets which are only accessories for television. While a consumer may not see the commercials during the television broadcast, if the program is viewed on Hulu, the consumer will see the advertisements and thus Fox’s market harm argument is severely weakened.

Some important details which lead the court to this decision may be the fact that the AutoHop feature is only available as an option the morning after the live broadcast and the feature is set to “off” by default. This means that if the viewer wants to see the program less than half a day after initial broadcast, they will have to manually skip the commercials just as with any current recording device. And of course if the viewer wants to watch the broadcast live, they will have to wait through the advertisements. Also, with the default setting leaving AutoHop off, it is the consumer that makes the decision to turn the feature on and therefore Dish is not the party doing the copying. Using Betamax as guidance, the court here stated that since the recording of the program for time shifting purposes constitutes a fair use, skipping over part of that copied material “cannot transform the recording into a copyright violation.” (Fox Broadcasting v. Dish Network) The district court also found that plaintiffs’ copyright interests were not at issue here because Fox, as plaintiff, does not own the rights to the commercials which air between its copyrighted properties.

 

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