IP Law Daily Sanctions upheld against Internet TV provider FilmOn for violating injunction
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Tuesday, February 16, 2016

Sanctions upheld against Internet TV provider FilmOn for violating injunction

By Thomas Long, J.D.

Internet streaming television service FilmOn.com, Inc. and its Chief Executive Officer (Alkiviades David) were properly ordered to pay a sanction of $90,000, plus attorney fees, to broadcast television networks for continuing to operate an antennae-based streaming service known as “Teleporter” in violation of a permanent injunction, the U.S. Court of Appeals in New York City has held (CBS Broadcasting Inc. v. FilmOn.com, Inc., February 16, 2016, Hall, P.). The federal district court in New York City did not abuse its discretion in holding both FilmOn.com and David in contempt, sanctioning FilmOn.com, and awarding attorney fees.

Original copyright dispute and injunction. In October 2010, the networks sued FilmOn.com and Alkiviades David, alleging infringement of their copyrights in various television programs. When the suit began, the principal way in which FilmOn subscribers viewed the plaintiffs’ copyrighted programming was by downloading and installing an application from FilmOn’s website. In July 2012, the parties settled the case, and consent order of judgment and permanent injunction was entered August 8, 2012.

“Teleporter” service and contempt order. After the issuance of the injunction, FilmOn launched a video on demand (“VOD”) service, which provided subscribers with access to an archive of previously televised programs for streaming “on demand.” In a September 2013 Memorandum and Order, the district court held that FilmOn was in contempt of the injunction. In the meantime, FilmOn changed its system to offer streaming services via antenna-based technology. FilmOn’s “Teleporter” service relied on mini-antennas to allow users to “virtually view broadcast content from a distant location that is not necessarily within the local broadcast geographic area.”

On June 15, 2014, the U.S. Supreme Court held that Aereo, Inc. violated television broadcasters’ public performance rights by streaming broadcast television programs to Internet subscribers using a system of mini-antennas. American Broadcasting Cos., Inc. v. Aereo, Inc., 134 S. Ct. 2498 (“Aereo”). The High Court reversed a contrary decision of the U.S. Court of Appeals in New York City.

Shortly after the Aereo decision, the broadcasters applied for an order to show cause why the court should not hold FilmOn in contempt for violating the injunction by operating “its ‘Teleporter’ service and any other device or process by which it publicly performs plaintiffs’ copyrighted programming.”

The district court found that FilmOn had violated the injunction and held both FilmOn and David in civil contempt, sanctioned FilmOn $90,000, and awarded the plaintiffs attorney fees. FilmOn and David appealed.

Arguments on appeal. FilmOn and David argued that the district court abused its discretion when it held them in contempt because the injunction was not clear and unambiguous, and they diligently attempted to comply with the injunction in a reasonable manner. They further contended that the district court abused its discretion by imposing criminal sanctions and by awarding attorney fees.

Contempt order. FilmOn contended that Aereo destroyed the state of clarity surrounding the plaintiffs’ copyrights and created confusion as to whether the Teleporter system now qualified for a cable TV retransmission license under Section 111 of the Copyright Act. Because Aereo’s technology and FilmOn’s technology were nearly identical, FilmOn argued that dicta in Aereo comparing Aereo to a cable company cast doubt on whether the current regulatory regime is properly classifying FilmOn’s technology. The appellate court was not persuaded. At no time had FilmOn obtained a Section 111 license, and under the current law of the Second Circuit, Internet retransmission services did not constitute cable systems under Section 111. Moreover, the holding in Aereo“slammed shut” the possibility that FilmOn’s Transporter service could be operated legally in the Second Circuit, the court said.

The district court did not err when it determined that the proof of FilmOn’s noncompliance was supported by clear and convincing evidence. Aereo made it clear that deploying the Teleporter system within the Second Circuit would violate the plaintiffs’ copyright, according to the court. FilmOn admitted that it deployed its Teleporter system in the Second Circuit between June 28, 2014 and July 7, 2014.

Nor was it error to determine that FilmOn failed to diligently attempt to comply with the injunction. FilmOn did not act reasonably in taking it upon itself to interpret the plaintiffs’ copyrights when it launched Teleporter, and by determining on its own that it was entitled to treatment as a Section 111 license-holder, despite the fact that it had never received such a license and had not even applied for one. Accordingly, the district court did not abuse its discretion by holding FilmOn in civil contempt, the appellate court concluded.

The Second Circuit also affirmed the contempt finding against David individually. David both had the power to force FilmOn to comply with the injunction and failed to take appropriate action within his power to prevent FilmOn from violating it.

Sanctions. The district court’s sanctions were civil in nature because the purpose of the sanctions was to coerce FilmOn into future compliance, the appellate court said. The sanction amount was calculated by using the $10,000 per day fee schedule from the 2013 contempt judgment and by fining FilmOn for every day that it had deployed the Teleporter System after Aereo Inc. had ceased deploying its analogous technology. The sanctions were issued in response to FilmOn’s repeated violation of the Injunction and similar injunctions throughout the country. The district court did not abuse its discretion, in the Second Circuit’s view.

Attorney fees. Additionally, the appellate court found no abuse of discretion in the district court’s award of attorney fees. In the 2012 settlement agreement, the parties agreed that in the event of a dispute arising out of or relating to the agreement or the injunction, the prevailing party would be entitled to recover its reasonable attorney fees and costs. This matter was related to the terms of the injunction, so the fee award was warranted under the agreement’s plain terms.

The case is No. 14-3123-cv.

Attorneys: Ryan G. Baker (Baker Marquart LLP) for FilmOn.com Inc. Alkiviades David. Robert Alan Garrett and Peter L. Zimroth (Arnold & Porter LLP) for CBS Broadcasting Inc., NBC Studios, Inc., Universal Network Television, LLC, NBC Subsidiary (KNBCTV), Inc., ABC Holding Company, Inc., Disney Enterprises, Inc., NBC Studios LLC, NBC Subsidiary (KNBCTV) LLC, American Broadcasting Companies, Inc., Big Ticket Television, Inc., CBS Studios Inc., and Open 4 Business Productions LLC. Julie A. Shepard and Paul M. Smith (Jenner & Block LLP) for Twentieth Century Fox Film Corporation and Fox Television Stations, Inc.

Companies: FilmOn.com Inc.; CBS Broadcasting Inc.; NBC Studios, Inc.; Universal Network Television, LLC; NBC Subsidiary (KNBCTV), Inc.; Twentieth Century Fox Film Corporation; Fox Television Stations, Inc.; ABC Holding Company, Inc.; Disney Enterprises, Inc.; NBC Studios LLC; NBC Subsidiary (KNBCTV) LLC; American Broadcasting Companies, Inc.; Big Ticket Television, Inc.; CBS Studios Inc.; Open 4 Business Productions LLC

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