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11-788-cv
IN THE

United States Court of Appeals

FOR THE SECOND CIRCUIT

WPIX, I NC ., WNET.ORG, A MERICAN B ROADCASTING C OMPANIES , I NC ., DISNEY ENTERPRISES, INC., CBS BROADCASTING INC., CBS STUDIOS, INC., THE CW TELEVISION STATIONS INC., NBC UNIVERSAL, INC., NBC STUDIOS, INC., UNIVERSAL NETWORK TELEVISION, LLC, TELEMUNDO NETWORK GROUP LLC, NBC TELEMUNDO LICENSE COMPANY, OFFICE OF THE COMMISSIONER OF BASEBALL, MLB ADVANCED MEDIA, L.P., COX MEDIA GROUP, INC., FISHER B ROADCASTING S EATTLE TV, L.L.C., T WENTIETH C ENTURY F OX F ILM C ORPORATION , F OX T ELEVISION S TATIONS , I NC ., T RIBUNE T ELEVISION H OLDINGS , I NC ., T RIBUNE T ELEVISION N ORTHWEST, I NC ., U NIVISION TELEVISION GROUP, INC., THE UNIVISION NETWORK LIMITED PARTNERSHIP, TELEFUTURA NETWORK, WGBH EDUCATIONAL FOUNDATION, THIRTEEN, PUBLIC BROADCASTING SERVICE, Plaintiffs-Appellees, against
IVI , I NC .,

d
TODD WEAVER,

Defendants-Appellants.
ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK CIVIL CASE NO. 10-7415, HON. NAOMI REICE BUCHWALD, DISTRICT JUDGE

BRIEF OF PLAINTIFFS-APPELLEES

PETER L. ZIMROTH ARNOLD & PORTER LLP 399 Park Avenue New York, New York 10022 (212) 715-1000 Peter.Zimroth@aporter.com

ROBERT ALAN GARRETT HADRIAN R. KATZ C. SCOTT MORROW R. REEVES ANDERSON ARNOLD & PORTER LLP 555 Twelfth Street, NW Washington, DC 20004 (202) 942-5000

Counsel for Plaintiffs-Appellees

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RULE 26.1 CORPORATE DISCLOSURE STATEMENT WPIX, Inc. is a wholly-owned subsidiary of Tribune Broadcasting Company, which in turn is a wholly-owned subsidiary of Tribune Broadcasting Holdco, LLC, which in turn is a wholly-owned subsidiary of Tribune Company, which is privately held. WNET, formerly WNET.ORG, is a non-profit educational corporation chartered by the Board of Regents of the University of the State of New York, and has no parent corporation, and there is no publicly-held corporation that owns more than 10% of its stock. American Broadcasting Companies, Inc. is an indirect subsidiary of Disney Enterprises, Inc., which is a wholly-owned subsidiary of The Walt Disney Company, a publicly-traded company. Disney Enterprises, Inc. is a wholly-owned subsidiary of The Walt Disney Company, a publicly-traded company. CBS Broadcasting Inc. is an indirect wholly-owned subsidiary of CBS Corporation, a publicly traded company. National Amusements, Inc., a privately held company, beneficially owns the majority of the voting stock of CBS Corporation through a wholly-owned subsidiary. CBS Studios Inc. is an indirect wholly-owned subsidiary of CBS Corporation, a publicly traded company. National Amusements, Inc., a privately

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held company, beneficially owns the majority of the voting stock of CBS Corporation through a wholly-owned subsidiary. The CW Television Stations Inc. is an indirect wholly-owned subsidiary of CBS Corporation, a publicly traded company. National Amusements, Inc., a

privately held company, beneficially owns the majority of the voting stock of CBS Corporation through a wholly-owned subsidiary.
*

NBCUniversal Media, LLC, formerly NBC Universal, Inc., is owned,

through an intermediate entity, NBCUniversal, LLC, by Comcast Corporation and General Electric Company, both of which are publicly-traded companies.
*

NBC Studios LLC, formerly NBC Studios, Inc., is an indirect, wholly-

owned subsidiary of NBCUniversal Media, LLC. Universal Network Television, LLC is an indirect, wholly-owned subsidiary of NBCUniversal Media, LLC. NBC Telemundo License LLC is an indirect, wholly-owned subsidiary of NBCUniversal Media, LLC. Open 4 Business Productions LLC is an indirect, wholly-owned subsidiary of NBCUniversal Media, LLC.

The caption to Defendant-Appellants brief inaccurately includes the former names of these entities. The Amended Complaint (J.A. 879-903) correctly identifies the parties listed in this Corporate Disclosure Statement.

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WNJU Broadcasting LLC is an indirect, wholly-owned subsidiary of NBCUniversal Media, LLC. The Office of the Commissioner of Baseball is an unincorporated association whose members are the 30 Major League Baseball Clubs. No publiclyheld entity owns membership interests of 10% or more in the Office of the Commissioner of Baseball. MLB Advanced Media, L.P. (MLBAM) is a limited partnership organized under the laws of the State of Delaware. Its partners consist of MLB Advanced Media, Inc., and MLB Media Holdings, L.P. (MLBMH). There is no publicly held corporation that owns 10% or more of the stock of MLBAM, MLBMH, or MLB Advanced Media, Inc. Cox Media Group, Inc. is an indirect wholly-owned subsidiary of Cox Enterprises, Inc., and neither Cox Enterprises, Inc., Cox Media Group, Inc., nor any affiliate of Cox Media Group, Inc. has any publicly-traded securities. Fisher Broadcasting-Seattle TV, L.L.C. is an indirect, wholly-owned subsidiary of Fisher Communications, Inc., a publicly-traded company. Fox Television Stations, Inc. is a wholly-owned subsidiary of News Corporation, a publicly traded United States corporation. company owns 10% or more of the stock of News Corporation. No publicly held

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Twentieth Century Fox Film Corporation is a wholly-owned subsidiary of Fox Entertainment Group, Inc. The parent of Fox Entertainment Group, Inc. is News Corporation, a publicly traded United States corporation. No publicly held company owns 10% or more of the stock of News Corporation. Tribune Television Holdings, Inc. is a wholly-owned subsidiary of Tribune Broadcasting Company, which in turn is a wholly-owned subsidiary of Tribune Broadcasting Holdco, LLC, which in turn is a wholly-owned subsidiary of Tribune Company, which is privately held. Tribune Television Northwest, Inc. is a wholly-owned subsidiary of Tribune Broadcasting Company, which in turn is a wholly-owned subsidiary of Tribune Broadcasting Holdco, LLC, which in turn is a wholly-owned subsidiary of Tribune Company, which is privately held. Univision Television Group, Inc. is wholly-owned by PTI Holdings, Inc., which is itself wholly owned by Univision Communications Inc. Univision

Communications Inc. is wholly owned by Broadcast Media Partners Holdings, Inc., which is itself wholly owned by Broadcasting Media Partners, Inc. None of the above entities is publicly traded. The Univision Network Limited Partnership is owned by Univision Communications Inc. and Univision Networks & Studios, Inc., which is wholly owned by Univision Communications Inc. Univision Communications Inc. is

iv

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wholly owned by Broadcast Media Partners Holdings, Inc., which is itself wholly owned by Broadcasting Media Partners, Inc. None of the above entities is publicly traded. Telefutura Network is wholly owned by Univision Networks & Studios, Inc., which is wholly owned by Univision Communications Inc. Univision

Communications Inc. is wholly owned by Broadcast Media Partners Holdings, Inc., which is itself wholly owned by Broadcasting Media Partners, Inc. None of the above entities is publicly traded. WGBH Educational Foundation is a charitable, non-profit Massachusetts corporation with no parent corporation, and there is no publicly held corporation that owns more than 10% of its stock. THIRTEEN (formerly Educational Broadcasting Corporation) is a non-profit educational corporation chartered by the Board of Regents of the University of the State of New York. It is wholly-owned by its parent corporation, WNET, a nonprofit educational corporation chartered by the Board of Regents of the University of the State of New York.

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Public Broadcasting Service is a non-profit District of Columbia corporation with no parent corporation, and there is no publicly held corporation that owns more than 10% of its stock. Dated: September 9, 2011 Respectfully submitted, /s/ Peter L. Zimroth PETER L. ZIMROTH ARNOLD & PORTER LLP 399 Park Avenue New York, NY 10022 (212) 715-1000 Peter.Zimroth@aporter.com Attorney for Plaintiffs-Appellees

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TABLE OF CONTENTS Page RULE 26.1 CORPORATE DISCLOSURE STATEMENT .................................... i TABLE OF AUTHORITIES ................................................................................ ix STATEMENT OF THE ISSUES ............................................................................1 STATEMENT OF THE CASE ...............................................................................2 STATEMENT OF FACTS .....................................................................................4 A. ivis Internet Service ................................................................................4 B. The Section 111 Compulsory License......................................................9 C. The District Court Decision ...................................................................16 STANDARD OF REVIEW ..................................................................................18 SUMMARY OF ARGUMENT ............................................................................19 ARGUMENT .......................................................................................................22 I. THE DISTRICT COURT DID NOT ABUSE ITS DISCRETION IN CONCLUDING THAT IVIS INTERNET SERVICE IS INELIGIBLE FOR THE SECTION 111 DEFENSE TO COPYRIGHT INFRINGEMENT ...............................................................22 A. The Text Of Section 111 And Its Broader Statutory Context Establish That ivis Internet Service Is Not A Cable System And Its Streaming Of Broadcast Programming Is Not Permissible Under FCC Rules...................................................................................24 1. An Internet Service Such As ivis Does Not Satisfy The Section 111(f) Definition Of A Cable System..............................24 2. Section 111 Does Not Encompass Facilities That, Like ivi, Provide Nationwide Rather Than Localized, CommunityBy-Community Service ...............................................................29 3. ivis Streaming Of Broadcast Programming Over The Internet Is Not Permissible Under FCC Rules..............................33
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B. Congress Has Acquiesced To The Copyright Offices Views That Section 111 Does Not Include Internet Services And That A Contrary Interpretation Would Place The United States In Violation Of Its International Treaty Obligations...................................35 C. Deference Is Due To The Copyright Offices Repeated Pronouncements That Internet Services Such As ivis Are Not Cable Systems........................................................................................39 1. Deference To The Copyright Offices Interpretations Is Appropriate Under Skidmore And Furthers The Congressional Policies Underlying Section 111...........................39 2. ivis Arguments For Ignoring The Copyright Offices Views Lack Merit ...................................................................................42 D. Recognition Of ivi As A Cable System Would Frustrate The Congressional Policies Underlying Compulsory Licensing....................48 II. THE DISTRICT COURT DID NOT ABUSE ITS DISCRETION IN CONCLUDING THAT IVIS STREAMING OF THOUSANDS OF COPYRIGHT OWNERS PROGRAMS OVER THE INTERNET WITHOUT CONSENT WOULD IRREPARABLY HARM COPYRIGHT OWNERS............................................................................51 A. Permitting ivi To Continue Infringing Copyright Owners Rights During Pendency Of The Litigation Would Cause Irreparable Injury .....................................................................................................51 B. The Balance Of Hardships Decidedly Favors Copyright Owners...........57 C. The Public Interest Favors Entry Of A Preliminary Injunction...............59 CONCLUSION ....................................................................................................60

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TABLE OF AUTHORITIES Page(s) CASES ACLU v. Reno, 929 F. Supp. 824 (E.D. Pa. 1996)............................................................... 26-27 Bonneville Intl Corp. v. Peters, 347 F.3d 485 (3d Cir. 2003).............................................................................42 Bourne v. Walt Disney Co., 68 F.3d 621 (2d Cir. 1995)...............................................................................28 Cablevision Sys. Dev. Co. v. Motion Picture Assn of Am., Inc., 836 F.2d 599 (D.C. Cir. 1988) ...................................................................39, 41 Cablevision v. FCC, 570 F.3d 83 (2d Cir. 2009).................................................................................7 Cadence Design Sys., Inc. v. Avant! Corp., 125 F.3d 824 (9th Cir. 1997)............................................................................58 Citibank, N.A. v. Citytrust, 756 F.2d 273 (2d Cir. 1985).............................................................................57 Concrete Mach. Co. v. Classic Lawn Ornaments, Inc., 843 F.2d 600 (1st Cir. 1988) ............................................................................58 Dolan v. U.S. Postal Service, 546 U.S. 481 (2006).........................................................................................29 Eastern Microwave, Inc. v. Doubleday Sports Inc., 691 F.2d 125 (2d Cir. 1982).......................................................................23, 24 Fame Pubg Co. v. Alabama Custom Tape, Inc., 507 F.2d 667 (5th Cir. 1975)...................................................................... 22-23 Food & Drug Admin. v. Brown & Williamson Tobacco Corp., 529 U.S. 120 (2000).........................................................................................29

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Page(s) ivi, Inc. v. Fisher Commcns, Inc., No. C10-1512, 2011 WL 197419 (W.D. Wash. Jan. 19, 2011) ...................... 2-3 Mayo Found. for Med. Educ. & Research v. United States, 131 S. Ct. 704 (2011)................................................................................. 46-47 Mullins v. City of New York, 626 F.3d 47 (2d Cir. 2010).........................................................................18, 19 My-T Fine Corp. v. Samuels, 69 F.2d 76 (2d Cir. 1934).................................................................................58 Natl Broad. Co. v. Satellite Broad. Networks, Inc., 940 F.2d 1467 (11th Cir. 1991)............................................................ 34, 41, 47 Natl Football League v. PrimeTime 24 Joint Venture, 131 F. Supp. 2d 458 (S.D.N.Y. 2001) ..............................................................57 Natl Football League v. TVRadioNow Corp., Nos. 00-120, 00-121, 2000 WL 34200602 (W.D. Pa. Feb. 29, 2000).................2 Novartis Consumer Health, Inc. v. Johnson & JohnsonMerck Consumer Pharms. Co., 290 F.3d 578 (3d Cir. 2002) .......................................................59 Omega Importing Corp. v. Petri-Kine Camera Co., 451 F.2d 1190 (2d Cir. 1971)..................................................................... 56-57 Pac. & So. Co. v. Satellite Broad. Networks, Inc., 694 F. Supp. 1565 (N.D. Ga. 1998)..................................................................34 Pavlica v. Behr, 397 F. Supp. 2d 519 (S.D.N.Y. 2005) ..............................................................28 Reno v. ACLU, 521 U.S. 844 (1997).........................................................................................25 Salinger v. Colting, 607 F.3d 68 (2d Cir. 2010)................................................................... 18, 21, 55 Satellite Broad. & Commcns Assn of Am. v. Oman, 17 F.3d 344 (11th Cir. 1994).....................................................................passim

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Page(s) Sierra Club v. U.S. Army Corps of Engrs, 645 F.3d 978 (8th Cir. 2011)............................................................................59 Skidmore v. Swift & Co., 323 U.S. 134 (1944)..............................................................................20, 39-40 Smith Intl, Inc. v. Hughes Tool Co., 718 F.2d 1573 (Fed. Cir. 1983)........................................................................53 Tasini v. New York Times Co., 206 F.3d 161 (2d Cir. 2000).............................................................................22 Twentieth Century Fox Film Corp. v. iCraveTV, Nos. Civ. A. 00-121, 00-120, 2000 WL 255989 (W.D. Pa. Feb. 8, 2000) ..........2 United States v. Chestman, 947 F.2d 551 (2d Cir. 1991).............................................................................37 United States v. Mead Corp., 533 U.S. 218 (2001)...................................................................................39, 46 United States v. Morton, 467 U.S. 822 (1984).........................................................................................29 Utah v. Evans, 536 U.S. 452 (2002).........................................................................................37 Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer, 515 U.S. 528 (1995).........................................................................................38 WPIX, Inc. v. ivi, Inc., 765 F. Supp. 2d 594 (S.D.N.Y. 2011) ................................................................1 STATUTES AND REGULATIONS Cable Television Consumer Protection and Competition Act of 1992, Pub. L. No. 102-385, 106 Stat. 1460 (1992).......................................................7 Satellite Television Extension and Localism Act of 2010, Pub. L. No. 111-175, 124 Stat. 1218 (2010).....................................................36

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Page(s) 17 U.S.C. 111 .............................................................................................passim 17 U.S.C. 119 .............................................................................................passim 17 U.S.C. 122 ........................................................................................ 13, 33, 50 47 U.S.C. 325 ..................................................................................................6, 7 47 U.S.C. 338(a)(1)............................................................................................50 47 U.S.C. 339(b)................................................................................................51 47 U.S.C. 534 ......................................................................................................7 47 U.S.C. 535 ......................................................................................................7 37 C.F.R. 201.17(c)(2) ................................................................................. 45-46 37 C.F.R. 258.3..................................................................................................50 37 C.F.R. 258.4..................................................................................................50 47 C.F.R. 76.64....................................................................................................6 47 C.F.R. pt. 76, subpt. F ........................................................................................8 OTHER AUTHORITIES 2 Melville B. Nimmer & David Nimmer, Nimmer on Copyright (2011) ...............46 4 William F. Patry, Patry on Copyright ................................................................28 122 Cong. Rec. 3823 (Feb. 19, 1976)....................................................................11 145 Cong. Rec. 30980-82 (Nov. 19, 1999)......................................................35, 36 Cable Compulsory License; Definition of Cable System, 57 Fed. Reg. 3284 (Jan. 29, 1992)..............................................................13, 46 Cable Compulsory License; Definition of Cable Systems, 56 Fed. Reg. 31580 (July 11, 1991) ..........................................................passim

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Page(s) Cable Compulsory Licenses; Definition of Cable Systems, 62 Fed. Reg. 18705 (Apr. 17, 1997).................................................................32 Copyright Office, A Review of the Copyright Licensing Regimes Covering Retransmission of Broadcast Signals (1997)....................................................40 Copyright Office, Satellite Home Viewer Extension and Reauthorization Act: Section 109 Report (2008).................................................................passim Copyright Office, Satellite Television Extension and Localism Act, 302 Report (2011)................................................................................. 14, 15, 37, 40 Copyrighted Webcast Programming on the Internet: Hearing Before the Subcomm. on Courts and Intellectual Property of the House Judiciary Comm., 106th Cong., 2d Sess. 29 (2000) .........................................................49 FCC, Retransmission Consent and Exclusivity Rules: Report to Congress Pursuant to Section 208 of the Satellite Home Viewer Extension and Reauthorization Act of 2004 (2005) ...................................................................8 H.R. Rep. No. 94-1476 (1976) .......................................................................passim H.R. Rep. No. 100-887 (1988) ..............................................................................25 H.R. Rep. No. 108-660 (2004) ..............................................................................36 Hearing Before the Subcomm. on Courts and Intellectual Property of the House Judiciary Comm.: Copyrighted Webcast Programming on the Internet, 106th Cong., 2d Sess. (2000) .............................................................35 Hearings on H.R. 2233 Before the Subcomm. on Courts, Civil Liberties and the Administration of Justice of the House Judiciary Comm., 94th Cong., 1st Sess. (1975)..................................................................11-12, 34 Letter dated Nov. 10, 1999 from Marybeth Peters, Register of Copyrights, to Sen. Orrin G. Hatch, reprinted in 145 Cong. Rec. 30980 (Nov. 19, 1999) .......14 Note, The Charming Betsy Canon, Separation of Powers, and Customary International Law, 121 Harv. L. Rev. 1215 (2008) ..........................................38

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Page(s) Order to Show Cause for a Prelim. Inj. with T.R.O., CBS Broad. Inc. v. FilmOn.com, Inc., No. 10-cv-7532-NRB (S.D.N.Y. Nov. 22, 2010) ................53 Report to Congress, 72 Fed. Reg. 19039 (Apr. 16, 2007)........................................8 Restatement (Third) of the Foreign Relations Law of the United States 114 (1987) ..............................................................................................................38 S. Rep. No. 106-42 (1999) ....................................................................................23 Second Supplementary Report of the Register of Copyrights on the General Revision of the Copyright Law: 1975 Revision Bill (1975) .............................34

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Plaintiffs-Appellees, who are copyright owners of some of the worlds most recognizable and valuable television programming (Copyright Owners), respectfully request that the Court affirm the district courts order preliminarily enjoining Defendants-Appellants (ivi) from streaming that programming over the Internet. WPIX, Inc. v. ivi, Inc., 765 F. Supp. 2d 594 (S.D.N.Y. 2011)

(Buchwald, J.) (J.A. 778-836) (Op.). STATEMENT OF THE ISSUES Whether the district court abused its discretion, in issuing a preliminary injunction, when it concluded that: 1. Consistent with the statutory text, legislative history, longstanding

Copyright Office rulings and pronouncements, case law and Congressional policies, ivis Internet streaming service is not a cable system and, therefore, is not eligible for statutory (compulsory) licenses under Section 111 of the 1976 Copyright Act as a defense to copyright infringement. 2. ivis streaming of thousands of copyrighted television programs over

the Internet, without the consent of any party, would irreparably harm the owners of those programs -- where industry executives submitted sworn declarations detailing that harm; both Congress and the Federal Communications Commission (FCC) have recognized such harm; and ivi does not have the means to pay damages for infringing the copyrights in the programs.

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STATEMENT OF THE CASE On September 13, 2010, ivi began streaming over the Internet, for profit, the signals of approximately thirty New York and Seattle broadcast television stations and the copyrighted programming on those stations -- twenty-four hours per day, seven days per week -- all without the consent of the affected stations or copyright owners. ivi commenced its unauthorized service without any advance public See http://www.thewrap.com/print/20777

notice, expecting legal challenges.

(Sept. 13, 2010 press article quoting ivis CEO Todd Weaver) (last visited Sept. 8, 2011). A federal court had, in fact, enjoined the only service (prior to ivi) that streamed live broadcast television programming over the Internet without authorization. See Twentieth Century Fox Film Corp. v. iCraveTV, Nos. Civ. A. 00-121, 00-120, 2000 WL 255989, at *1 (W.D. Pa. Feb. 8, 2000) (preliminary injunction); Natl Football League v. TVRadioNow Corp., Nos. 00-120, 00-121, 2000 WL 34200602, at *1 (W.D. Pa. Feb. 29, 2000) (permanent injunction). Within days of ivis launch, several affected program owners and broadcast stations sent cease-and-desist letters to ivi. ivi responded by filing an improper anticipatory lawsuit in a Seattle federal court on September 20, 2010 -- one business day after ivi, in that courts words, disingenu[ously] offered to engage in settlement discussions with the program and station owners. ivi, Inc. v. Fisher Commcns, Inc., No. C10-1512, 2011 WL 197419, at *3 (W.D. Wash. Jan. 19,

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2011) (dismissing ivis declaratory action). Copyright Owners initiated the present action in the Southern District of New York on September 28, 2010, and then moved for a preliminary injunction to maintain the status quo ante. While that motion was pending, ivi began streaming over the Internet an additional two dozen broadcast stations (from Chicago and Los Angeles), and it announced plans to deliver stations from additional markets. Op. 3 n.2; J.A. 934. There was no dispute before the district court that Copyright Owners had established a prima facie case of copyright infringement. Op. 10. The only issue was whether ivi had carried its burden of establishing a Section 111 defense to infringement under the Copyright Act, 17 U.S.C. 111. Op. 10-11. Section 111, enacted in 1976, accords a compulsory (statutory) license to certain retransmissions of broadcast programming made by cable systems -- as defined in Section 111(f) -- provided that the cable systems comply with certain statutory conditions. ivi argued that anyone with a computer, an Internet connection and a TV antenna (including any kid in [a] dorm room) can be a cable system eligible for the Section 111 compulsory license. See Op. 45; ivis Reply in Support of Motion to Stay Injunction at 1 (Mar. 22, 2011) (Dist. Ct. Dkt. # 56). In a written opinion issued February 22, 2011, the district court granted Copyright Owners motion for a preliminary injunction. Op. 58-59. The court rejected ivis overbroad interpretation of Section 111 and concluded that ivi is not

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a cable system entitled to the Section 111 license. Id. One week later, ivi appealed to this Court and concurrently moved in the district court for a stay pending appeal, which the district court denied in an opinion dated April 18, 2011 (J.A. 962-73) (Stay Op.). ivi then sought a stay from this Court, submitting a supporting brief that was virtually identical to its opening brief on the merits. Judge Hall referred ivis stay motion to a motions panel on April 29, 2011. Order Referring Motion (C.A.2 Dkt. # 50). On July 28, 2011, this Court (Jacobs, C.J., and Hall, Carney, JJ.) denied ivis stay motion because ivi failed to demonstrate[] a likelihood of success on the merits. Order Denying Stay (C.A.2 Dkt. # 78). STATEMENT OF FACTS A. ivis Internet Service

ivi claims that it is a cable system much like any other cable system. Brief for Defendants-Appellants (ivi Br.) at 3. At the same time, ivi touts that it has developed a revolutionary method to deliver broadcast television over a new medium . . . . Id. at 4. As ivi stated in the press release heralding its Seattle declaratory action, ivi recognize[s] that it is disruptive to existing cable offerings by which broadcast programming currently reaches the public. J.A. 68. Indeed, ivi has boasted that it will be eating the[] lunch of traditional cable operators (e.g., Time Warner Cable and Comcast) and satellite carriers (e.g., DirecTV and

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DISH) (J.A. 60) -- those who, unlike ivi, must comply with various FCC rules and who must develop their own costly infrastructure to deliver programming. Unlike cable systems, ivi distributed broadcast programming via the Internet, a worldwide network of computers developed and controlled by others. ivi extracted the copyrighted audiovisual content on broadcast signals and converted that content into packetized data suitable for delivery over the Internet exclusively to computer systems that meet certain architectural specifications. See ivi, Frequently Asked Questions, and Answers, http://www.ivi.tv/faq#what-do-ineed-to-watch-ivi-tv (last visited Sept. 8, 2011). Those data were accessible only by computer after the subscriber installed an application that converts the Internet data streamed by ivi into an audiovisual performance. See Op. 3. In short, ivis business model is to profit by selling audiovisual content intended for the television market into the computer market. According to ivi, there are many other cable companies that make secondary transmissions in th[e] same manner as ivi by placing this exact same television content on the Internet . . . . ivi Br. 3. But those cable companies do so pursuant to negotiated agreements with program owners, not the Section 111 compulsory license. Likewise, and contrary to ivis claims (id. at 5-6), Internet services such as Hulu and Netflix do not provide programming pursuant to Section 111. They, too, obtain consent from program owners through market-negotiated

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licenses, which typically authorize streaming of broadcast programs only after those programs have aired on broadcast stations. Unlike ivi, cable systems offer localized services in which they provide broadcast and non-broadcast programming to subscribers on a community-bycommunity basis, generally pursuant to local or state franchises. Op. 21, 40 n.30. For example, a Time Warner Cable system serves subscribers in Manhattan while a Comcast system serves subscribers in Washington, D.C. Cable systems do not provide worldwide or nationwide services. ivi, in contrast, offered its service to anyone throughout the United States. Op. 40-41. Initially, ivi marketed its service around the world. J.A. 36. ivi has the technical ability to resume that worldwide service with a flip of a switch. See http://www.ivi.tv/faq#is-ivi-tv-available-

internationally (last visited Sept. 8, 2011). Unlike ivi, cable systems obtain the consent of broadcast stations to retransmit the signals of those stations. Op. 4. Congress has mandated the FCC to adopt rules generally requiring such retransmission consent. See 47 U.S.C. 325(b)(3); 47 C.F.R. 76.64; http://www.fcc.gov/guides/cable-carriagebroadcast-stations (last visited Sept. 8, 2011) (explaining the nature and importance of retransmission consent). The requirement to obtain retransmission consent from broadcast stations is separate and independent of the need to obtain licenses to retransmit the copyrighted programming on those distant signals. See

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47 U.S.C. 325(b)(6). Thus, for instance, the Cablevision cable system serving the New York market must negotiate retransmission consent rights with the FOXowned station WNYW-TV, which the FCC has licensed to serve that market. Absent retransmission consent from FOX, Cablevision may not retransmit the signal of WNYW-TV. ivi, on the other hand, retransmitted fifty-four broadcast signals without obtaining the consent of any station owners (or copyright holders). Op. 4. Cable systems offer subscribers in-market (local) broadcast signals. For example, the Time Warner Cable system serving Manhattan offers broadcast stations licensed by the FCC to serve the New York City market, such as WABCTV and WPIX-TV, while a cable system serving Washington, D.C., provides stations such as the ABC affiliate WJLA-TV, licensed to serve the Washington market. Congress has determined that there is a substantial government interest in ensuring that cable systems carry local signals. See Cable Television Consumer Protection and Competition Act of 1992, Pub. L. No. 102-385, 2(a)(9)-(10), 106 Stat. 1460, 1461 (1992). And Congress has mandated the FCC to adopt rules (the must carry rules) that require cable systems to carry local broadcast signals that do not invoke retransmission consent. 47 U.S.C. 534-35; see generally

Cablevision v. FCC, 570 F.3d 83 (2d Cir. 2009) (discussing importance of the must carry rules). Unlike cable systems, ivi did not offer its subscribers any of their

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local broadcast signals (unless they happened to reside in New York, Chicago, Los Angeles or Seattle). Cable systems typically provide few out-of-market (distant) broadcast signals and many provide none. See Notice of Inquiry; Section 109 Report to Congress, 72 Fed. Reg. 19039, 19043 (Apr. 16, 2007) (cable systems retransmit, on average, fewer than two distant signals). Programming on those distant signals is subject to black-out in geographic areas where a local broadcast station has exclusive rights to exhibit that programming. See 47 C.F.R. pt. 76, subpt. F; FCC, Retransmission Consent and Exclusivity Rules: Report to Congress Pursuant to Section 208 of the Satellite Home Viewer Extension and Reauthorization Act of 2004, at 25-31 (2005) (explaining the nature and importance of the cable blackout rules). For example, a cable system serving Washington, D.C., may be required to black out the ABC programs on WABC-TV from New York (if it carried WABCTV) because ABC provides those programs to WJLA-TV for exclusive exhibition over television in the D.C. market; it also may be required to black out WABC-TV syndicated (off-network or first run) series and movies also licensed for exclusive exhibition over television in the D.C. market. Unlike cable systems, ivi provided each of its subscribers between 40-54 distant signals (with plans to provide an even greater number of signals). And it did not black out any of the programming on those distant signals, regardless of

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whether local broadcast stations (those licensed to serve the geographic areas in which ivis subscribers resided) had exclusive rights to televise that programming. Practically, this means, for example, that ivi subscribers on the west coast could view a program like American Idol three hours before the program was scheduled to air in their community because ivi provided them the same program on WNYW-TV from New York. B. 1. The Section 111 Compulsory License Notwithstanding the significant differences between ivi and cable

systems, ivi maintains that its Internet service should be considered a cable system eligible for the Section 111 compulsory license. That license is set forth in Section 111(c)(1) of the Copyright Act. Section 111(c)(1) provides that secondary

transmissions (retransmissions) of broadcast programming are subject to compulsory licensing, under certain conditions, if they are made by cable systems and are permissible under FCC rules: Subject to the provisions of paragraphs (2), (3), and (4) of this subsection and section 114(d), secondary transmissions to the public by a cable system of a performance or display of a work embodied in a primary transmission made by a broadcast station licensed by the Federal Communications Commission or by an appropriate governmental authority of Canada or Mexico shall be subject to statutory licensing upon compliance with the requirements of subsection (d) where the carriage of the signals comprising the secondary transmission is permissible under the rules, regulations,

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or authorizations of the Federal Communications Commission. 17 U.S.C. 111(c)(1). To be eligible for the Section 111 license, cable systems must, among other things, pay royalty fees tied in part to FCC rules. See id. 111(d)(1)(B) & (f); id. 801(b)(2)(B) & (C) (authorizing changes in royalty rates if the FCC changes certain cable rules). Congress directed the Copyright Office, a legislative agency, to collect these royalties for distribution among copyright owners and to adopt rules implementing the Section 111 license. 17 U.S.C. 111(d). Congress also defined the term cable system in Section 111(f) as a facility, located in any State, territory, trust territory, or possession of the United States, that in whole or in part receives signals transmitted or programs broadcast by one or more television broadcast stations licensed by the Federal Communications Commission, and makes secondary transmissions of such signals or programs by wires, cables, microwave, or other communications channels to subscribing members of the public who pay for such service. For purposes of determining the royalty fee under subsection (d)(1), two or more cable systems in contiguous communities under common ownership or control or operating from one headend shall be considered as one system. 17 U.S.C. 111(f)(3). As the Copyright Office has noted, that definition reflected Congress understanding of the cable industry in 1976, which it largely derived from FCC regulatory practices. Cable Compulsory License; Definition of Cable

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Systems, 56 Fed. Reg. 31580, 31593 (July 11, 1991) (J.A. 577-602) (1991 Ruling). 2. Section 111 was part of a compromise to resolve a longstanding

controversy between copyright owners and broadcast stations, on the one hand, and the cable television industry, on the other hand. See H.R. Rep. No. 94-1476, at 8889 (1976) (1976 House Report). The cable industry was (and remains) subject to heavy FCC regulation and has incurred substantial capital costs in providing service on a community-by-community basis. Those facts played a prominent role in the legislative debates over cables copyright liability. Typical of the arguments that cables supporters made during these debates was the following: As with any cable system, it took large sums of money and extensive financing to build these systems and wire the community. In addition, the day-to-day operation of the system is heavily regulated by the Federal Communications Commission, controlling which TV signals may be carried and even those which must be blocked out from time to time. 122 Cong. Rec. 3823 (Feb. 19, 1976) (statement of Sen. Thurmond opposing an amendment that might have increased cables compulsory licensing royalty obligations); see also generally Hearings on H.R. 2233 Before the Subcomm. on Courts, Civil Liberties and the Administration of Justice of the House Judiciary Comm., 94th Cong., 1st Sess. 501-11 (1975) (statement of Rex A. Bradley, Chairman, National Cable Television Association) (urging Congress, in

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determining cables copyright liability, to take account of FCC regulation and the substantial costs incurred in providing a community-by-community service). In the 1976 Copyright Act, Congress determined that retransmissions of broadcast programming should be subject to copyright liability, thereby overruling two Supreme Court decisions that had construed the 1909 Copyright Act in a contrary manner. See Op. 12-13; 1976 House Report at 88-89. Congress,

however, accepted the views of the cable television industry and its supporters that there should be some limitation on that liability to ensure that the entire American public would have access to broadcast programming. Congress determined at that time that it would be impracticable for each of the thousands of local cable operators to negotiate with each copyright owner of programs on broadcast signals and therefore accorded a compulsory license to retransmissions made by cable systems. See 1976 House Report at 89. 3. Since 1976, the Copyright Office -- pursuant to its responsibility to

administer Section 111 licensing -- has assessed the claims of several new broadcast retransmission services that they, too, were cable systems eligible for the Section 111 compulsory license. See generally Op. 17-45. The Copyright Office has concluded that Congress never intended the definition of cable system be applied broadly in the future to include any and all video delivery facilities that

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are analogous to cable systems and could arguably justify a compulsory license for the same policy reasons. 1991 Ruling, 56 Fed. Reg. at 31594. In particular, the Office has determined that the Section 111 license applies only to services that provide a localized (community-by-community), rather than nationwide, service; therefore, services such as satellite carriers that deliver programming via satellite to subscribers throughout the country are not cable systems. See Cable Compulsory License; Definition of Cable System, 57 Fed. Reg. 3284, 3290 (Jan. 29, 1992) (J.A. 603-20) (1992 Ruling). The Office

similarly has determined that the facilities of a satellite carrier . . . which make the secondary transmission[] are not located in any state, as required under Section 111. Id. A federal court of appeals affirmed that ruling by the Copyright Office as a reasonable interpretation of the Copyright Act. Satellite Broad. & Commcns Assn of Am. v. Oman, 17 F.3d 344 (11th Cir. 1994) (SBCA). Congress reacted, not by amending Section 111 to include satellite carriers, but by enacting new, separate compulsory licenses for satellite carriers to reflect the nature of satellite services. See 17 U.S.C. 119 (according satellite carriers a compulsory license under certain conditions to retransmit distant broadcast signals); id. 122 (according satellite carriers a compulsory license under certain conditions to retransmit local broadcast signals). Congress also made clear that satellite carriers are not eligible for the Section 111 license. See 17 U.S.C. 122(i).

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Furthermore, at least as early as November 1999 the Register of Copyrights explained to the Chairman of the Senate Judiciary Committee that the section 111 license does not and should not apply to Internet retransmissions. Letter dated Nov. 10, 1999 from Marybeth Peters, Register of Copyrights, to Sen. Orrin G. Hatch, reprinted in 145 Cong. Rec. 30980 (Nov. 19, 1999); see also id. at 30981 (The Internet is unlike any other medium of communication the world has ever known and it would be inappropriate to bestow the benefits of compulsory licensing on an industry so vastly different from the other retransmission industries now eligible for compulsory licensing under the Copyright Act. (citation and internal formatting omitted)); id. at 30980 (the lack of regulation of the Internet makes the Internet a poor candidate for a compulsory license that depends so heavily on such restrictions). The Copyright Office has adhered to this view and repeatedly advised Congress that Internet services (such as ivis) are ineligible for the Section 111 license. See Op. 18. The Copyright Office also has advised Congress that, for several reasons, it should not create a new compulsory license for Internet retransmissions. For example, last week the Copyright Office issued a report, at Congress request, on market alternatives to compulsory licensing and recommendations for the elimination of compulsory licensing of broadcast programming. Copyright Office, Satellite Television Extension and Localism Act, 302 Report (2011) ( 302

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Report), available at http://www.copyright.gov/reports/section302-report.pdf (last visited Sept. 8, 2011). While the Office agreed with several copyright owners that the issues raised by this appeal were outside the scope of that proceeding, the Office reiterated its view that [T]he Copyright Office is not in favor of a statutory license for the retransmission of broadcast signals over the Internet. First, there are serious questions about broadcast signal security and anti-piracy measures that need to be addressed. Second, the United States has entered into a number of Free Trade Agreements with several international trading partners that include provisions prohibiting statutory licensing for the Internet retransmission of broadcast content. And third, carriage of programming on the Internet has been subject to marketplace negotiations and private licensing with some degree of success. As such, there is no market failure warranting the application of a statutory license in this context. An Internet statutory license, in fact, would likely remove incentives for individuals and companies to develop innovative business models. Id. at 48-49 (quoting Copyright Licensing in a Digital Age: Competition, Compensation and the Need to Update the Cable and Satellite TV Licenses, Hearing before the House Comm. on the Judiciary, 111th Cong. (Feb. 25, 2009) (statement of the Register of Copyrights, Marybeth Peters)). Although Congress has frequently amended the Copyright Act, including Section 111, during the past decade, it has never amended the statute to suggest disagreement with the Registers view on the ineligibility of Internet services for the Section 111 license. 15

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C. 1.

The District Court Decision Based on the statutory text, legislative history and longstanding views

of the Copyright Office, the district court rejected the claim that ivis Internet service is a cable system entitled to the Section 111 license. It further concluded that Copyright Owners had demonstrated a likelihood of success and irreparable harm supporting the entry of a preliminary injunction against ivi. Op. 45-58. The district court observed that Congress did not legislate on a blank slate when it enacted the 1976 Copyright Act but understood that the FCC regulated the cable industry as a highly localized medium of limited availability. Id. at 14-15 (quoting 67 Fed. Reg. at 18707). The court contrasted Congress

understanding of traditional cable systems with ivis architecture [which] bears no resemblance to the cable systems of the 1970s. Id. at 17. The court noted that ivis service retransmits broadcast signals nationwide, rather than to specific local areas, and rejected ivis argument that Congress intended to sanction the use of a compulsory license by a company so vastly different from those to which the license originally applied. Id. The district court similarly rejected ivis skewed interpretation of the statutory text that would permit anyone with a computer, Internet connection, and TV antenna [to] become a cable system for purposes of Section 111. Id. at 11, 45. The court explained that ivis proposed statutory regime would stretch the

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compulsory license far beyond the boundaries that the enacting or any later Congress could have ever imagined. Id. at 46. The court noted that ivi had focused its statutory language argument solely on the first sentence of the definition of cable system, ignoring the remainder of the definitions references to concepts that have no relevance to a worldwide, decentralized platform like the Internet. Even so, the court found, it is far from clear that ivi fits neatly within the first sentence of the definition because ivi failed to show that ivi is a facility which both receives signals and makes secondary transmissions, as required by that definition; indeed, the FCC authority upon which ivi had relied suggested the contrary. Id. at 45 (emphasis in original). After reviewing the administrative history of Section 111, the district court also credited the unwavering opinion of the Copyright Office that a distributor of broadcast programming over the Internet does not qualify for a compulsory license as a cable system under Section 111. Id. at 18. The district court accorded deference to the Offices thoroughly reasoned and extremely persuasive position statements over the past decade, which, the court found, have unambiguously reject[ed] the claim that a[n] [Internet] service such as ivis could be a cable system, and [have] essentially view[ed] the matter as settled law. Id. at 17-18. Thus, the court determined, Copyright Owners had demonstrated a likelihood of success on the merits. Id. at 46.

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2.

The court recognized that, under this Courts decision in Salinger v.

Colting, 607 F.3d 68 (2d Cir. 2010), Copyright Owners were required to demonstrate that, on the facts of their specific case, the absence of a preliminary injunction would actually cause irreparable harm. Op. 46. The district court identified six specific claims of irreparable harm articulated by Copyright Owners, including the destruction in value of licensed programming, disruption of advertising models and loss of revenue, and interference with distribution agreements [between Copyright Owners and] broadcasters that limit times, geographical areas, and mode of permitted distribution, among other harms. Id. at 46-47. The district court further credited the uncontested declarations submitted by Copyright Owners in support of irremediable harm and found that ivis continued infringement would destroy the value of their programming and result in lost profits notoriously difficult to prove and nearly impossible to quantify. Id. at 49 (quoting Salinger, 607 F.3d at 82). After concluding that the balance of

hardships and public interest weighed in favor of Copyright Owners, the district court entered the preliminary injunction. Id. at 55-59. This appeal followed. STANDARD OF REVIEW This Court reviews a district courts entry of a preliminary injunction for abuse of discretion. Mullins v. City of New York, 626 F.3d 47, 51 (2d Cir. 2010).

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A preliminary injunction will be upheld unless the district courts decision rests on an error of law . . . or a clearly erroneous factual finding, or the injunction is beyond the range of permissible decisions. Id. (citation omitted). SUMMARY OF ARGUMENT 1. The language and legislative history of Section 111, the rulings and

pronouncements of the Copyright Office, the judicial and Congressional responses to the Offices determinations, sound policy considerations and common sense support the district courts conclusion that ivis Internet service is not a cable system eligible for the Section 111 compulsory license. By definition, a cable system is a facility, located in any State, territory, trust territory, or possession of the United States, that makes simultaneous retransmissions of broadcast signals to subscribers by wires, cables, microwave, or other communications channels. 17 U.S.C. 111(f)(3). ivi meets none of these textual requirements. Nor does ivis nationwide (and sometimes worldwide) service fit within the broader structure of Section 111 -- in which Congress provided a compulsory license for localized retransmission services subject to FCC regulation, not services that distribute programming to subscribers located throughout the United States. Consistent with that textual analysis, the Copyright Office repeatedly has advised Congress that Internet services like ivi do not qualify for a Section 111

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license. It also has ruled that nationwide services, such as satellite carriers, are not cable systems and that only retransmission systems providing localized, community-by-community services fit within Section 111. A federal court of appeals has affirmed that ruling. And Congress has amended the Copyright Act on multiple occasions against that backdrop without questioning the Offices views on Internet services or nationwide services. Indeed, Congress has adopted separate compulsory licenses for satellite carriers, explaining that it is necessary to tailor separate compulsory licenses for nationwide and localized services. The Copyright Offices long-standing and consistent pronouncements concerning Internet services and nationwide services -- which make clear that ivis service is not entitled to the Section 111 license -- are entitled to at least Skidmore deference. Moreover, under ivis novel view of Section 111, anyone with a computer, an Internet connection and a TV antenna would be a cable system entitled to a cable compulsory license. Op. 45. Anyone may sell for profit over the Internet to subscribers nationwide (if not worldwide) access to multiple broadcast television stations and hundreds of copyrighted television programs on those stations each and every day -- without obtaining any authorization to do so and without being subject to any regulation of any sort by any governmental body. All that is necessary, in ivis view, is the payment of $100 annually to the Copyright Office. Op. 6-7.

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As the district court correctly concluded, Congress did not authorize such a sweeping and radical restructuring of copyright rights. Congress established a narrow compulsory license for a highly regulated and localized cable industry that, at great costs, has developed its own infrastructure to deliver programming on a community-by-community basis. Extending a compulsory license to ivi (and anyone else that wishes to deliver broadcast programming over the Internet), without being subject to any FCC rules whatsoever, would vest Internet services with an enormous competitive advantage over the cable industry. And it would subject any programming that program owners placed on broadcast stations (rather than non-broadcast cable networks such as the USA Network, TNT or ESPN) to wholly uncontrolled dissemination across the country and beyond. Congress never intended such a result, which, among other adverse consequences, would place the United States in violation of its obligations under various international treaties. 2. In issuing the preliminary injunction, the district court faithfully

applied the factors set forth by this Court in Salinger. The court concluded that Copyright Owners would suffer irreparable harm if ivi were allowed, during the pendency of this case, to stream thousands of copyrighted programs over the Internet without consent. The court properly relied on the record before it,

including several uncontested declarations submitted by Copyright Owners. The particularized harms identified in those declarations, and accepted by the district

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court, include the same types of injuries that Congress and the FCC have sought to avoid when they imposed restrictions on the ability of cable systems, satellite carriers and others that retransmit broadcast programming -- restrictions with which ivi does not comply. Irreparable harm also exists where, as here, the defendant would not be able to pay for the enormous damages arising from its infringement. While ivi

complains that the preliminary injunction threatens to shut down its business, any harm that ivi suffers is self-inflicted. ivi commenced its service built upon massive infringement, knowing full well that copyright owners would challenge that service. Such conduct should not be rewarded by allowing ivi to continue in operation pending a final resolution of this case. ARGUMENT I. THE DISTRICT COURT DID NOT ABUSE ITS DISCRETION IN CONCLUDING THAT IVIS INTERNET SERVICE IS INELIGIBLE FOR THE SECTION 111 DEFENSE TO COPYRIGHT INFRINGEMENT Because Section 111 is a limitation on the exclusive statutory rights of copyright owners, it should be construed narrowly. See Tasini v. New York Times Co., 206 F.3d 161, 168 (2d Cir. 2000) (Where the Copyright Act sets forth exceptions to a general rule, we generally construe the exceptions narrowly in order to preserve the primary operation of the [provision]. (citation omitted)); Fame Pubg Co. v. Alabama Custom Tape, Inc., 507 F.2d 667, 670 (5th Cir. 1975)

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(Another statutory copyright license, Section 115, is a limited exception to the copyright holders exclusive right to decide who shall make use of his composition . . . [and] must be construed narrowly, lest the exception destroy, rather than prove, the rule.). As the Senate Judiciary Committee noted in connection with the Section 119 satellite carrier license: [T]he Committee is aware that in creating compulsory licenses, it is acting in derogation of the exclusive property rights granted by the Copyright Act to copyright holders, and that it therefore needs to act as narrowly as possible to minimize the effects of the Governments intrusion on the broader market in which the affected property rights and industries operate. S. Rep. No. 106-42, at 10 (1999). A proper interpretation of Section 111 also must occur in the real world of telecommunications, not in a vacuum or in historical isolation. Eastern

Microwave, Inc. v. Doubleday Sports Inc., 691 F.2d 125, 128, 132 (2d Cir. 1982), cert. denied, 459 U.S. 1226 (1983). In Eastern Microwave, this Court addressed a separate provision of Section 111 that -- like the provisions at issue here -- required the interpretation and application of [a] statute[] enacted before adoption of the involved communications arrangements. Id. at 127. This Court noted that [w]e begin, as we must, with the statute, (id. at 129), but also explained that when [c]onfronted with the need to divine and apply the intent of Congress, and with a statute enacted in the technological milieu of an earlier time, we look to the common sense of the statute . . ., to its purpose, [and] to 23

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the practical consequences of the suggested interpretations . . . for what light each inquiry might shed. Id. at 127 (citation omitted). That approach leads inescapably to the conclusion that ivi is not a cable system eligible for the Section 111 license. A. The Text Of Section 111 And Its Broader Statutory Context Establish That ivis Internet Service Is Not A Cable System And Its Streaming Of Broadcast Programming Is Not Permissible Under FCC Rules

As explained above, Section 111(c)(1) and Section 111(f) provide that secondary transmissions of broadcast signals are subject to compulsory licensing only if made by the type of facility described in Section 111(f)(3) and only if those transmissions are permissible under FCC rules. ivi does not use such a facility and ivi does not make secondary transmissions that are permissible under FCC rules. 1. 1. An Internet Service Such As ivis Does Not Satisfy The Section 111(f) Definition Of A Cable System

The statutory definition of cable system provides that the facility

which makes the secondary transmissions to the subscribers must be located in any State, territory, trust territory, or possession of the United States. 17 U.S.C. 111(f)(3). ivi has never identified the location or nature of the facility that supposedly meets that definition. There is no reference to any facility in the record evidence submitted by ivi to describe its service. See Declaration of Todd Weaver (Weaver Decl.) (J.A. 543-47). ivi claims on appeal, without any record 24

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citation, only that it is a facility located within the U.S. (ivi Br. 10) and that it has a terrestrial facility. Id. at 12. ivis reluctance to identify the nature and location of its facility is not surprising. Just as satellite carriers use satellite facilities to make secondary transmissions of broadcast programming to subscribers, ivi uses Internet facilities to deliver programming to its subscribers. And just as satellites are not located in any State (SBCA, 17 F.3d at 346), the Internet by its nature is not located in any State. The Internet, which is an international network of

interconnected computers (Reno v. Am. Civil Liberties Union, 521 U.S. 844, 849 (1997)), is located worldwide. When Congress extended compulsory licensing to secondary transmissions made over a facility located in any State, it did not intend to license secondary transmissions made over networks of computer facilities located throughout the world. See H.R. Rep. No. 100-887 (Part 1), at 21 (1988) (recognizing that Section 111 does not permit secondary transmissions outside the United States). Because ivi has no control over any of the thousands of diverse routers and switches that comprise the Internet, its streaming content might be routed anywhere around the globe. Moreover ivi initially marketed its service worldwide, promising potential subscribers that they could watch local content anywhere in the world, such as viewing New York City broadcast channels anywhere from

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Paris to Perth to Peru. J.A. 54. ivi says it discontinued its worldwide service in favor of a nationwide service, but ivi has the technical ability to resume that worldwide service at any time. See supra page 6. ivis services thus are inherently global; the facility that ivi uses to deliver programming, the Internet, is located throughout the world and not in any State, as required by Section 111(f). 2. Furthermore, a facility is not a cable system under Section 111(f)

unless it makes secondary transmissions to subscribers by wires, cables, microwave, or other communications channels. 17 U.S.C. 111(f)(3). ivi claims that this language is broad[] and encompass[es] all communications media. ivi Br. 12. To the contrary, it is language of limitation. Without these words, Section 111 would have extended to secondary transmissions by any means. Congress established limits as to the platforms over which secondary transmissions could travel. The terms wires, cables, microwave, or other communications channels aptly describe the manner in which cable systems deliver programming -- through a fixed transmission path. Congress contemplated in Section 111 retransmission services that delivered programming over such channels of communication. The Internet, however, cannot be characterized as a channel. Information moves over the Internet in all directions without any fixed paths. See ACLU v. Reno, 929 F. Supp. 824, 831 (E.D. Pa. 1996) (A communication sent over this redundant series

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of linked computers [the Internet] could travel any of a number of routes to its destination.). The Internet is typically represented in diagrams by a cloud exactly because there is no specific route connecting any two points. The Internet involves

breaking an online providers video stream into packets, each of which may travel by diverse routes over fiber, switches, routers, telephone networks, and other modes (through any number of countries) controlled by myriad parties entirely unaffiliated with the provider -- all before the video is reassembled at the subscribers computer. This kind of packetized scattering and reassembly is not a channel and is not what Congress had in mind when it accorded compulsory licensing to facilities that make secondary transmissions over channels. 3. The statutory definition of cable system requires that the 17 U.S.C. 111(f)(3).

transmitting facility make secondary transmissions.

Section 111(f)(2) defines the term secondary transmission to mean the further transmitting of a primary transmission simultaneously with the primary transmission, or nonsimultaneously only in the case of off-shore cable systems. Id. 111(f)(2) (emphasis added). Nothing in the record below supports ivis assertion that it retransmits broadcast programs simultaneously with the original transmissions of those programs. ivi Br. 3. In fact, ivis CEO Todd Weaver publicly stated otherwise,

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acknowledging the 90-second delay between the original broadcast and ivis streaming of that broadcast. See J.A. 927 (Clearly were not a candidate for realtime betting on horse races, and football fans might get a text message about a touchdown before our subscribers see it.). In a reply brief supporting its motion for stay before this Court, ivi claimed that the record below does establish that ivi satisfied the simultaneity requirement. ivi Stay Reply at 4 (C.A.2 Dkt. # 52). However, the only support ivi offered for that claim was a reference to an unsupported statement made in one of its own briefs before the district court. Such a statement does not substitute for the

requisite record evidence. ivi had the burden to demonstrate that it meets every requirement of Section 111(f). See Bourne v. Walt Disney Co., 68 F.3d 621, 631 (2d Cir. 1995) ([T]he possession of a license by an accused infringer traditionally has been characterized as a matter of affirmative defense.); Pavlica v. Behr, 397 F. Supp. 2d 519, 526 (S.D.N.Y. 2005) (As the alleged licensees, defendants bear the burden of proving the existence of a license.); 4 William F. Patry, Patry on Copyright 10:9.50 (citing Gonzales v. O Centro Espirita Beneficente Uniao de Vegetal, 546 U.S. 418, 429-30 (2006)); Op. 10-11. ivis failure to present any record evidence that it meets the simultaneity requirement is, by itself, sufficient reason to deny its appeal of the preliminary injunction.

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2.

Section 111 Does Not Encompass Facilities That, Like ivi, Provide Nationwide Rather Than Localized, CommunityBy-Community Service

1.

ivi focuses on the first sentence of the definition of cable system in

Section 111(f)(3); it ignores the broader indicia of Congress intent, reflected in the statute read as a whole, that limits the type of facility that qualifies as a cable system. ivis approach thus disregards a fundamental rule of statutory construction that courts do not construe statutory phrases in isolation; we read statutes as a whole. United States v. Morton, 467 U.S. 822, 828 (1984). Interpretation of a word or phrase depends upon reading the whole statutory text, considering the purpose and context of the statute, and consulting any precedents or authorities that inform the analysis. Dolan v. U.S. Postal Service, 546 U.S. 481, 486 (2006); see also Food & Drug Admin. v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 132 (2000) ([A] reviewing court should not confine itself to examining a particular statutory provision in isolation. The meaning -- or ambiguity -- of certain words or phrases may only become evident when placed in context.). Section 111s broader statutory context shows that the cable compulsory license extends only to retransmission systems that provide service on a localized, community-by-community basis -- and not nationwide services like ivis that deliver programming to subscribers throughout the United States. Section 111 includes several references to the localized nature of cable systems.

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For example, in the statutory definition of cable system in Section 111(f), Congress specifically referred to cable systems in contiguous communities. 17 U.S.C. 111(f)(3). Section 111(c)(4) likewise refers to the community of the cable system; Section 111(d)(1)(C)(iii) refers to the transmission of a primary transmitter to some but not all communities; and Section 111(e)(1)(E) refers to the community where the transmission is made and the community where such system maintains an office. The multiple references in Section 111 to the cable systems community mean that Congress contemplated a facility that serves individual communities (including contiguous communities) -- not a network of computers that ivi uses to deliver content nationwide and worldwide. The statutory definition in Section 111(f)(3) also refers to cable systems . . . operating from one headend. The term headend has no meaning when applied to the Internet, which has no headend. As the Copyright Office noted in the satellite carrier litigation before the Eleventh Circuit, the statutory definition describes what two or more cable systems must do in a way that explains the physical features of the cable system Congress had in mind, something that has a headend and that is capable of serving contiguous communities with other cable systems in some instances, but not in others. Reply Brief for Appellants at 12, SBCA v. Oman, 17 F.3d 344 (11th Cir. 1994) (No. 93-8395). The Internet that ivi uses to deliver programming is not such a facility.

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The same conclusion follows from the repeated references in Section 111 to the FCC rules. Section 111 includes more than a dozen separate references to the rules, regulations, or authorizations of the Federal Communications Sections

Commission.

See Statutory Addendum (highlighting references).

801(b)(2)(B) & (C) of the Act contain additional references to certain FCC rules and authorize changes in the cable royalty rates if there are changes in those rules. The legislative history of Section 111 reflects the close relationship between the cable license and cable regulation: After extensive consideration of the Senate bill, the arguments made during and after the hearings, and of the issues involved, this Committee has also concluded that there is no simple answer to the cable-copyright controversy. In particular, any statutory scheme that imposes copyright liability on cable television systems must take account of the intricate and complicated rules and regulations adopted by the Federal Communications Commission to govern the cable television industry. 1976 House Report at 89 (emphasis added). By repeatedly referring to the FCC rules in Section 111 and its legislative history, Congress expressed its intent to accord compulsory licensing to those same types of services then regulated by the FCC as cable systems. 1991 Ruling, 56 Fed. Reg. at 31593. Congress understood that those cable systems provided a localized service, with each system in 1976 reaching, on average, only two or three communities. See 1976 House Report at 88 (noting that there are about 3,450

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operating systems, servicing 7,700 communities). Cable systems did not, and do not, provide nationwide services: [A]t the time Congress created the cable compulsory license, the FCC regulated the cable industry as a highly localized medium of limited availability, suggesting that Congress, cognizant of the FCCs regulations and the market realities, fashioned a compulsory license with a local rather than a national scope. This being so, the Office retains the position that a provider of broadcast signals be an inherently localized transmission media of limited availability to qualify as a cable system. Cable Compulsory Licenses; Definition of Cable Systems, 62 Fed. Reg. 18705, 18706 (Apr. 17, 1997) (citing 1991 Ruling, 56 Fed. Reg. at 31594). 3. ivi argues that Section 111 is not limited to localized services -- and

that nationwide services can be cable systems -- because Section 111 does not impose any limit on the distance that broadcast signals may be retransmitted. ivi Br. 14, 24-25. That argument, however, confuses the distinct concepts of local versus distant signals, on the one hand, with localized versus nationwide services, on the other hand. See Op. 40-42. Nothing in the district courts opinion suggests that cable systems may not retransmit distant signals. But, as the district court correctly concluded, a nationwide service is not a cable system and ivis Internet service is a nationwide (if not worldwide) service. ivi also argues that this Court should modify the preliminary injunction to permit localized transmissions, claiming it was legal error to preclude ivi from

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making any transmissions regardless of distance.

ivi Br. 25; see id. at 39

(requesting modification of the injunction to allow ivi to make local transmissions). That argument again confuses the separate concepts of local versus distant signals, on the one hand, with localized versus nationwide services, on the other hand. ivi is not a localized service any more than is a satellite carrier -- notwithstanding that satellite carriers provide both local and distant signals to their subscribers. It is notable that Congress adopted a separate compulsory license for satellite carriers once they began offering their subscribers local signals; it did not shoehorn the transmissions of local signals by a nationwide service into the Section 111 (or the Section 119) license. See 17 U.S.C. 122. 3. ivis Streaming Of Broadcast Programming Over The Internet Is Not Permissible Under FCC Rules

Even if ivis Internet service met the definitional requirement of a cable system -- and it does not -- ivi would still not qualify for the Section 111 license. Section 111(c)(1) affords the compulsory license only for transmissions that are permissible under the rules, regulations, or authorizations of the Federal Communications Commission. 17 U.S.C. 111(c)(1). ivi fails to satisfy the permissibility condition in Section 111. Congress did not define the term permissible in Section 111, and the district court below did not address the meaning of that term. Op. 42-43; Stay Op. 8. The courts in the satellite carrier litigation reached conflicting 33

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interpretations. Compare Pac. & So. Co. v. Satellite Broad. Networks, Inc., 694 F. Supp. 1565, 1571 (N.D. Ga. 1998) (SBN I) (plain meaning of the term permissible, as reflected in dictionary definitions, is that carriage must be authorized by the FCC) with Natl Broad. Co. v. Satellite Broad. Networks, Inc., 940 F.2d 1467, 1471 (11th Cir. 1991) (SBN II) (reversing SBN I and concluding that permissible means no rule or regulation forbade it without citing any support). The legislative history of Section 111 favors the SBN I reading; it demonstrates that Congress intended Section 111 to extend only to retransmissions authorized by FCC rules. 1976 House Report at 89; accord Hearings on H.R. 2223 Before the House Subcomm. on Courts, Civil Liberties and the Admin. of Justice of the House Judiciary Comm., 94th Cong., 1st Sess. 1821 (1975) (testimony of Barbara Ringer, Register of Copyrights) (cable systems may only retransmit signals pursuant to Section 111 as authorized by the FCC); Second Supplementary Report of the Register of Copyrights on the General Revision of the Copyright Law: 1975 Revision Bill at 27 (1975) (same). ivis streaming of broadcast signals over the Internet is not authorized by the FCC and thus not permissible under Section 111. See Op. 6 (ivi acknowledge[s] that [it] does not comply with the rules, regulations, or authorizations of the Federal Communications Commission. (emphasis added)).

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B.

Congress Has Acquiesced To The Copyright Offices Views That Section 111 Does Not Include Internet Services And That A Contrary Interpretation Would Place The United States In Violation Of Its International Treaty Obligations For more than a decade, the Copyright Office has expressly advised

1.

Congress that Section 111 does not apply to Internet services such as ivis. See Op. 29-39; supra pages 12-15. Even the chairman of the International Webcasting Association, the members of which included Internet streaming media companies such as Microsoft, Apple and RealNetworks, agreed with the Offices view and testified before Congress that: Internet webcasters, however, are not specifically covered by a compulsory licensing arrangement. Instead, they are required to negotiate with each individual copyright holder before retransmitting a television broadcast signal over the Internet. Hearing Before the Subcomm. on Courts and Intellectual Property of the House Judiciary Comm.: Copyrighted Webcast Programming on the Internet, 106th Cong., 2d Sess. 88 (2000) (statement of Peggy Miles); accord 145 Cong. Rec. 30981 (letter dated November 15, 1999 from Professor Arthur Miller to Sens. Hatch and Hyde, stating that digital online communications services are not entitled to the statutory license under either Section 111 or Section 119 of the Copyright Act). The Chairman and Ranking Member of the Senate Judiciary Committee, with jurisdiction over the Copyright Act, have acknowledged and expressed 35

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agreement with the Offices view that Section 111 is inapplicable to the Internet. See 145 Cong. Rec. 30980-82 (Nov. 19, 1999) (statements of Sens. Hatch and Leahy). Congress also has repeatedly reenacted Section 111 without making any change that would reject or alter the Copyright Offices interpretation; it did so again as late as last year. See Satellite Television Extension and Localism Act of 2010, Pub. L. No. 111-175, 124 Stat. 1218 (2010). Congress likewise ratified the Offices conclusion that nationwide services such as satellite carriers are not cable systems entitled to the Section 111 license. It enacted separate licenses for satellite carriers and made clear that satellite carriers are not eligible for Section 111. See supra page 13. The legislative history of the satellite carrier licenses reflects that: In enacting each license, Congress has traditionally considered the unique historical, technological, and regulatory circumstances that affect each industry. Among other differences, the local character of cable systems and the national business model of DBS [Direct Broadcast Satellite] have resulted in differential public service, carriage, and taxation obligations that ought to be objectively reviewed before Congress enacts sweeping changes. H.R. Rep. No. 108-660, at 9 (2004). Under these circumstances, the district court properly concluded that Congress agrees with and has ratified the position that Internet services and nationwide services, such as ivi, are not entitled to the Section 111 license. Op.

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43-44; see also United States v. Chestman, 947 F.2d 551, 560 (2d Cir. 1991) ([O]nce an agencys statutory construction has been fully brought to the attention of the public and the Congress, and the latter has not sought to alter that interpretation although it has amended the statute in other respects, then presumably the legislative intent has been correctly discerned.) (quoting United States v. Rutherford, 442 U.S. 544, 554 n.10 (1979)); Utah v. Evans, 536 U.S. 452, 472 (2002) (according deference to an administrative agencys interpretation of a statute where Congress was aware of that interpretation and reenacted the statute without change). 2. Furthermore, as the district court and the Copyright Office noted,

accepting ivis interpretation of Section 111 would place the United States in violation of its obligations under international treaties. Op. 36-37; Copyright

Office, Satellite Home Viewer Extension and Reauthorization Act: Section 109 Report 188 (2008) (J.A. 281) (SHVERA Report); 302 Report at 49. The United States has entered into several free trade agreements that preclude the United States from according compulsory licenses to retransmissions of programming over the Internet. See, e.g., U.S.-Australia Free Trade Agreement, art. 17.4.10(b) ([N]either Party may permit the retransmission of television signals (whether terrestrial, cable, or satellite) on the Internet without the authorisation of

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the right holder or right holders, if any, of the content of the signal and of the signal.). Accordingly, this Court should reject ivis reading of Section 111 and, instead, interpret Section 111 in a manner that does not conflict with U.S. obligations under international treaties. If the United States is to be able to gain the benefits of international accords and have a role as a trusted partner in multilateral endeavors, its courts should be most cautious before interpreting its domestic legislation in such manner as to violate international agreements. Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer, 515 U.S. 528, 539 (1995); see Restatement (Third) of the Foreign Relations Law of the United States 114 (1987) (Where fairly possible, a United States statute is to be constructed so as not to conflict with international law or with an international agreement of the United States.); Note, The Charming Betsy Canon, Separation of Powers, and Customary International Law, 121 Harv. L. Rev. 1215, 1215 (2008) (discussing the doctrine, deeply embedded in American jurisprudence, that courts should construe a statute, if at all possible, so that it does not violate the treaty obligations of the United States).

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C.

Deference Is Due To The Copyright Offices Repeated Pronouncements That Internet Services Such As ivis Are Not Cable Systems

For more than a decade the Copyright Office has expressly advised Congress that Section 111 does not apply to Internet services such as ivis. The Copyright Office also has maintained consistently that Section 111 does not apply to nationwide retransmission services like satellite carriers and Internet streaming services. The district court properly deferred to the Offices views when

interpreting the scope of Section 111. 1. Deference To The Copyright Offices Interpretations Is Appropriate Under Skidmore And Furthers The Congressional Policies Underlying Section 111

The Copyright Office is the legislative agency that Congress entrusted with administering and interpreting Section 111. See SBCA, 17 F.3d at 347;

Cablevision Sys. Dev. Co. v. Motion Picture Assn of Am., Inc., 836 F.2d 599, 608 (D.C. Cir. 1988), cert. denied, 487 U.S. 1235 (1988) (Cablevision v. MPAA). Under Skidmore v. Swift & Co., 323 U.S. 134 (1944), courts determine the measure of deference to an agency administering its own statute by look[ing] to the degree of the agencys care, its consistency, formality, and relative expertness, and to the persuasiveness of the agencys position. United States v. Mead Corp., 533 U.S. 218, 228 (2001); accord Skidmore, 323 U.S. at 140 (Deference in a particular case will depend upon the thoroughness evident in [the agencys]

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consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade.). The Copyright Offices pronouncements merit considerable deference under these factors. See Op. 19-21. The Office was intimately involved in the decade long effort to resolve the cable copyright controversy. Pursuant to Section 111(d), the Copyright Office has administered the Section 111 licensing regime for 35 years, and over that period it has developed significant expertise in this technical area of law. Congress

repeatedly has requested the Office to submit reports and to testify concerning the implementation of Section 111. E.g., Copyright Office, A Review of the Copyright Licensing Regimes Covering Retransmission of Broadcast Signals (1997) (J.A. 346-502); SHVERA Report (2008); 302 Report (2011); see supra page 13 (describing Congressional testimony concerning Section 111). The views of the Office concerning the types of retransmission services that are eligible for Section 111 have been remarkably consistent. Op. 20. The Offices pronouncements also are consistent with the statutory text of Section 111 and its legislative history, which supports the persuasiveness of its reasoning. Id. Moreover, as the Court of Appeals for the D.C. Circuit has explained, according deference to the Offices reasonable interpretations of Section 111 helps

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effectuate congressional policies underlying that provision, i.e., the minimization of transaction costs for all affected parties: We have emphasized that the compulsory licensing scheme was a break from the traditional copyright regime of individual contracts enforced in individual lawsuits. If we agreed that the Copyright Office had no power to interpret the statute, every dispute over the meaning of the statute could give rise to an infringement action where, as this case suggests, enormous damage claims are commonplace. If, on the other hand, reasonable interpretations of the statute by the Copyright Office are due judicial deference, a copyright holders incentive to bring infringement actions that are based on interpretations other than those of the Copyright Office would be reduced. Since Congress consciously rejected traditional, contract-based implementation as unworkable, a holding that forced resolution of every dispute in an infringement or declaratory judgment action would be unfaithful to this policy choice and antithetical to Congress central concern of providing a low cost transfer of copyrighted materials. Cablevision v. MPAA, 836 F.2d at 608 (footnotes omitted and emphasis added). Therefore, deference to the Copyright Office is particularly compelling when the Office interprets Section 111. See id. at 609-11 (distinguishing cases, not

involving Section 111, where courts declined to accord the Register deference). In SBCA, the Eleventh Circuit Court of Appeals deferred to the Offices interpretation of Section 111, even though the court had reached a contrary interpretation only two years earlier in SBN II. See SBCA, 17 F.3d at 347-48. As that court explained, not according deference to the Office would create a rush to

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the courthouse among parties wishing to litigate a statutes meaning before an agency has exercised its broad knowledge respecting the matters subjected to agency regulations. Id. at 348 (citations omitted). See also Bonneville Intl Corp. v. Peters, 347 F.3d 485, 490 n.9 (3d Cir. 2003) (deferring to the Copyright Offices interpretation of the Section 114 compulsory license). 2. 1. ivis Arguments For Ignoring The Copyright Offices Views Lack Merit

ivi claims that the Copyright Office has never really said that Internet

services such as ivis are ineligible for the Section 111 license. ivi Br. 15-19. That contention is baseless and misleading. pronouncements). First, ivi suggests that the Office said in the 2008 SHVERA Report that [i]t is premature to decide whether Internet programming fits within Section 111. ivi Br. 18 (citing J.A. 279). Although ivi does not say so, the Office made that statement eleven years earlier in 1997 before the Internet streaming service iCraveTV (see supra page 2) had commenced operation; the 2008 SHVERA Report simply refers to the statement in its historical context. In 1999 and again in 2000, after iCraveTV launched, the Register of Copyrights testified before Congress that Section 111 does not apply to Internet services such as ivi. Op. 2932. The 2008 SHVERA Report does not suggest that the Office thought it was See Op. 18-42 (discussing Offices

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premature in 2008 to express a view that it had already advanced before Congress at least as early as 1999. Second, ivi cites the SHVERA Report as stating that: It would be patently unfair to deny Section 111 coverage to new technologies such as those using Internet Protocols. ivi Br. 18. ivi refuses to acknowledge the distinction between the Internet, on the one hand, and use of Internet Protocol (IP) to deliver video programming (IPTV), on the other hand. See Op. 34 n.24, 39 n.28. The Internet is a global system of millions of interconnected private, public, academic, business and government computer networks, to which content providers and endusers connect using their own respective Internet Service Providers (ISPs). Id. at 34 n.24. IPTV is a term for a transmission protocol or format in which video is delivered in large digital packets that include an IP address header. Id. Despite the inclusion of the word Internet in the term, IPTV-formatted video is typically delivered through a closed end-to-end system in which the distributor owns and/or controls the wires and routers in the entire delivery network at every point, including the last mile to the subscribers television set. Services that deliver IPTV-formatted video do not relinquish control over the content and distribution path, unlike ivi, which uses the Internet. Id. The Office in the SHVERA Report recognized these important distinctions. The Office concluded that the retransmission of programming using IP technology,

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a new and competitive technology, does not in and of itself make a service ineligible for the Section 111 license. See SHVERA Report at xi-xii & 194-200 (J.A. 90-91, 286-92). However, a service such as ivis that chooses to stream programming over the Internet (regardless of whether it uses IPTV or some other format) is not eligible for the Section 111 license. See id. at xii & 181-89 (J.A. 91, 274-81).* As the Office explained in the SHVERA Report, use of IPTV as a new distribution technology does not raise any issues that would have concerned Congress in enacting Section 111. But the use of the Internet to distribute

programming is quite different because, as the Office noted, the Internet is wholly unregulated, poses serious questions about signal security, reflects none of the market failures that justified the original Section 111 compulsory license and is the subject of separate international treaty obligations that prohibit the adoption of compulsory licenses that permit unauthorized retransmissions of broadcast programming over the Internet. See id. at 187-189 (J.A. 280-81).* Third, ivi claims that its service is structurally the same as the AT&T U-Verse system and, therefore, by expressing approval of the U-Verse system, the Copyright Office necessarily blessed ivis system. ivi Br. 27. Again, ivi confuses the terms Internet and Internet Protocol TV. AT&T retransmits programming
*

Page 189 of the SHVERA Report was inadvertently omitted from the Joint Appendix. The complete report is available at http://www.copyright.gov/reports/ section109-final-report.pdf (last visited September 8, 2011).

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to subscribers over its own closed, managed network, on a community-bycommunity basis. It uses the IPTV protocol but, unlike ivi, it does not use the Internet. See Op. 38-39. As both the court below and the Copyright Office have recognized, ivi operates in a manner quite different from AT&T. Id. at 39 n.28. ivi suggests that the only distinguishing characteristic between ivi and AT&T identified by the district court was AT&Ts control of its transmission wires. ivi Br. 19. That, too, is incorrect. The district court distinguished AT&Ts service in multiple ways: [u]nlike ivi, AT&T does not use the Internet to deliver its programming and does not provide a nationwide service, Op. 39 n.28; AT&T offers its cable service to individual communities and only retransmits the signals intended for those communities, id.; AT&T has been complying with the [FCC] rules and regulations applicable to cable systems, id.; and [m]ost notably, [AT&T] obtains retransmission consent as required by the Communications Act and FCC rules. Id. Finally, ivi suggests that because the Copyright Office has accepted payment from ivi, the Office has somehow acquiesced in ivis entitlement to a Section 111 license. ivi Br. 29. However, the Copyright Office regulation

establishes precisely the opposite: [C]ompletion by the Copyright Office of the final processing of a Statement of Account and royalty fee deposit shall establish only the fact of such completion and the date or dates of receipt shown in the official 45

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record. It shall in no case be considered a determination that the Statement of Account was, in fact, properly prepared and accurate . . . or that any other requirements to qualify for a compulsory license have been satisfied. 37 C.F.R. 201.17(c)(2). 2. ivi contends that the Offices views on the ineligibility of Internet

services for Section 111 compulsory licensing should be disregarded because those views are not set forth in a formal rule. However, the Office repeatedly has concluded in formal rulemakings and reports to Congress, after receiving public comment, that nationwide services such as satellite carriers are not cable systems within the meaning of Section 111. 1992 Ruling, 57 Fed. Reg. at 3290, 3292 (emphasis added); 1991 Ruling, 56 Fed. Reg. at 31589; see also 2 Melville B. Nimmer & David Nimmer, Nimmer on Copyright 8.18[E][1] (2011) (agreeing with the view that satellite carriers do not qualify for the Section 111 license). Those views, which were published after notice-and-comment rulemaking, affirmed by a federal court of appeals, and ratified by Congress, are entitled to Chevron deference. Mead, 533 U.S. at 227. 3. ivi urges the Court to ignore the Offices rulings and pronouncements

because, ivi says, the language of the cable system definition is clear and unambiguous. ivi Br. 10, 11. To be clear and unambiguous, the statute must speak[] with the precision necessary to say definitively whether the statute applies. Mayo Found. for Med. Educ. & Research v. United States, 131 S. Ct.

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704, 711 (2011) (internal formatting and quotation marks omitted). Section 111(f) cannot be read to say definitively (as ivi argues) that anyone with Internet access is a cable system. To the contrary, the statutory text supports the opposite

conclusion. See supra pages 24-28. More than two decades ago, the Eleventh Circuit rejected the same argument made by satellite carriers -- that the Copyright Offices view should be ignored due to the unambiguous text of Section 111. See, e.g., Brief for Appellees at 33-34, SBCA (No. 93-8395) (Because satellite carriers are within the scope of the plain and unambiguous congressional definition of the phrase cable system, that is the end of the matter.) (citation omitted). In rejecting that argument, the court explained: [Section] 111(f) is far from explicit as to the inclusion of satellite carriers. For this reason, we rested our decision in SBN [II] not upon the statutes clear meaning, but rather upon inferences drawn from the statutory scheme and upon our policy determination that satellite carriers should be included for the benefit of their rural customers. SBCA, 17 F.3d at 348 (deferring to the Copyright Offices view on Section 111, and superseding SBN II). [T]he contention that Congress has provided a clear command on the question before us, and that this command confirms defendants view, cannot be taken seriously. Op. 19 n.11.

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D. 1.

Recognition Of ivi As A Cable System Would Frustrate The Congressional Policies Underlying Compulsory Licensing An interpretation of Section 111 that excludes ivi furthers legislative

policies central to the Section 111 statutory license. The principal reason that Congress in 1976 decided to grant cable systems a compulsory license was a concern that, absent compulsory licensing, the market would not make broadcast programming available to many Americans. See 1976 House Report at 89. The Copyright Office correctly observed that there is no such market failure respecting the Internet. To the contrary, the lack of a statutory license [for the Internet] provides an incentive for parties to find new ways to bring broadcast programming to the marketplace and that market, by all accounts, continues to grow. SHVERA Report at 188 (J.A. 281). The existence of licensed services such as Hulu, iTunes, ABC.com, mlb.com, and other similar sites and services demonstrates that there is a robust, functioning market for making broadcast programming available over the Internet to computers. Even ivi admits that Copyright Owners already place the same broadcast content on the Internet and readily make it available for anyone . . . . ivi Br. 5-6. What ivi fails to mention, however, is that copyright owners do so pursuant to marketplace-negotiated licenses with these services, not compulsory licenses.

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Stated otherwise, there is no need for extending the statute to give ivi a compulsory license to stream broadcast programming over the Internet because that programming already is broadly available legitimately via the Internet and elsewhere. Cable access in 1976 was an entirely different matter because it

required a huge infrastructure that would have been a barrier to robust accessibility absent congressional intervention. See Copyrighted Webcast Programming on the Internet: Hearing Before the Subcomm. on Courts and Intellectual Property of the House Judiciary Comm., 106th Cong., 2d Sess. 29 (2000) (statement of Marybeth Peters, Register of Copyrights) (whereas cable and satellite transmissions require multi-billion dollar delivery systems built by others, [c]opyright owners of broadcast programming do not need to turn to someone else to place their content on the Internet; they can do it themselves because the technology is readily available and is not particularly expensive). 2. In crafting the new compulsory licenses tailored to the nationwide

service that satellite carriers provide, Congress made several important policy choices that depart from those made in Section 111 for localized services. For example: x Section 119 does not permit satellite carriers to retransmit a distant signal affiliated with a network (e.g., ABC) to any subscriber that can receive a local signal affiliated with that network. See 17 U.S.C. 119(a)(2)(B). ivi, however, streamed distant network signals to anyone who would pay for them, no matter where located.

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x Section 119 restricts to two the number of distant signals affiliated with the same network that a carrier may retransmit to a subscriber. See id. ivi, however, streamed double that number of distant network signals to each subscriber, and planned to offer even more before it was enjoined. x Section 119 requires a satellite carrier to pay a monthly royalty of 25 cents per subscriber per signal. See 17 U.S.C. 119(b)(1)(B) & (c)(1)(A); 37 C.F.R. 258.3 & 258.4. If ivi had to pay the same royalties as a satellite carrier, it would owe approximately $14 per subscriber per month -- or nearly three times the monthly subscription fee ivi charged its customers. x Section 122 authorizes satellite carriers to carry local signals. See 17 U.S.C. 122. However, if a satellite carrier chooses to retransmit one local signal from a market, it must retransmit all local signals from that same market. 47 U.S.C. 338(a)(1). The carrier cannot cherrypick the local signals that it offers. Extending Section 111 to ivi (and others that use the Internet) would be inconsistent with the policy choices that Congress made for other nationwide broadcast retransmission services in Sections 119 and 122. 3. Congress has rejected ivis view that the unregulated and unrestricted

availability of broadcast programming serves the public interest. Had Congress thought otherwise, it would have accorded the Section 111 compulsory license to anyone who wanted to retransmit broadcast signals -- not only to cable systems that make secondary transmissions that are permissible under FCC rules. Likewise, Congress would not have restricted the ability of satellite carriers to retransmit distant network stations only to unserved households. 17 U.S.C. 119(a)(2)(B). Nor would Congress have directed the FCC to apply to satellite 50

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carriers the same types of blackout rules that the FCC applies to cable operators. See 47 U.S.C. 339(b). II. THE DISTRICT COURT DID NOT ABUSE ITS DISCRETION IN CONCLUDING THAT IVIS STREAMING OF THOUSANDS OF COPYRIGHT OWNERS PROGRAMS OVER THE INTERNET WITHOUT CONSENT WOULD IRREPARABLY HARM COPYRIGHT OWNERS The district court concluded that Copyright Owners would suffer irreparable harm if ivi were allowed, during the pendency of this case, to resume streaming copyrighted programs over the Internet without Copyright Owners consent. And it concluded that the balance of hardships tipped decidedly in favor of Copyright Owners, and that the public interest favored entry of a preliminary injunction. These conclusions are supported by substantial evidence presented by Copyright Owners, and reflect a proper exercise of the district courts discretion. A. Permitting ivi To Continue Infringing Copyright Owners Rights During Pendency Of The Litigation Would Cause Irreparable Injury

The Copyright Owners submitted to the district court seven sworn declarations by industry executives detailing the injury caused by ivis continuing infringement of thousands of copyrights. See J.A. 503-42 (declarations); Op. 4748. ivi did not controvert that evidence with any evidence of its own. The court thus correctly concluded that those declarations establish that ivis continued infringement would cause Copyright Owners irreparable harm in several

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significant respects relating to advertising rates, negotiations with legitimate cable systems, development of new media, and other key areas. See Op. 46-55. The district court identified six specific claims of irreparable harm articulated by Copyright Owners, including the destruction in value of licensed programming, disruption of advertising models and loss of revenue, and interference with distribution agreements [between Copyright Owners and] broadcasters that limit the times, geographical areas, and mode of permitted distribution, among other harms. Id. at 47-48. As the district court found, [i]f ivi continues its infringement, viewers will be able to obtain [Copyright Owners] programming from unsanctioned sources, and thus the ability of [Copyright Owners] to profit from sanctioned sources would inevitably drop. Id. at 48-49. Additionally, the court noted, because viewers will be able to watch stations outside of their geographic area, the amount that local advertisers would be willing to pay to advertise during [the] broadcasts would fall, thus weakening [Copyright Owners] negotiating position with advertisers. Id. at 49, 53. ivis characterization of the articulated harms as utterly speculative, ivi Br. 37, ignores the substantial evidence accepted by the district court. ivi argues on appeal that because it is a very small player, and Copyright Owners are big companies, the resulting harm from ivis infringement is miniscule. ivi Br. 36. But no court has ever granted a free pass for start-up

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infringement, and the district court properly rejected ivis argument. Op. 51-52. Moreover, in the absence of a preliminary injunction, other prospective Internet operators -- large and small -- would undoubtedly feel encouraged to engage in similar infringement. See Smith Intl, Inc. v. Hughes Tool Co., 718 F.2d 1573, 1581 (Fed. Cir. 1983) (to permit infringement during pendency of suit would . . . encourage others to infringe as well (citation omitted)). The recent restraining order entered against FilmOn.com -- an Internet streaming company launched on the heels of ivi -- demonstrates the immediate threat of copycat infringers. See Order to Show Cause for a Prelim. Inj. with T.R.O., CBS Broad. Inc. v. FilmOn.com, Inc., No. 10-cv-7532-NRB (S.D.N.Y. Nov. 22, 2010) (ECF 8) (issuing temporary restraining order, which remains in effect, against another Internet service that sought to rely upon Section 111). ivi also argues that Copyright Owners giv[e] away [their content] for free, and accordingly cannot be harmed by illegal retransmission of that same content. ivi Br. 35. Indeed, ivi goes so far as to suggest that Copyright Owners somehow benefit from ivis unauthorized distribution of their content through channels beyond Copyright Owners control. Id. That argument ignores the salient facts -most notably that Copyright Owners have invested millions of dollars to create and distribute the media content exploited by ivi, and that the ability to manage and

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control distribution of that content is critical to Copyright Owners exploitation of their works in the marketplace. Legitimate distributors, such as cable operators, satellite providers and local station affiliates pay tens or hundreds of millions of dollars to license this socalled free content, often with the expectation of exclusive or restricted redistribution. J.A. 505 (Declaration of Benjamin N. Pyne 8 (President-Global Distribution of Disney Media Networks)) (Pyne Decl.); see also J.A. 538-39 (Declaration of Eric Meyrowitz 4 (Vice President and General Manager of WPIX, Inc.)) (Meyrowitz Decl.). Those distributors (unlike ivi) either comply with FCC regulations or contractually agree to specific restrictions for the right to retransmit programming through market-negotiated contracts. ivis infringement threatens Copyright Owners relationships with these distributors. See J.A. 514, 515, 519 (Declaration of Martin D. Franks 11, 14, 29 (Executive Vice President for Planning, Policy and Government Relations at CBS Corporation)) (Franks Decl.); J.A. 505 (Pyne Decl. 7); J.A. 526-27 (Declaration of Eric Brass 10 (Corporate Counsel and Associate Clerk of the WGBH Educational Foundation)); J.A. 535 (Declaration of Jaime Rodriguez 9 (Vice President, Affiliate Relations Business Affairs for Univision Communications Inc.)) (Rodriguez Decl.); J.A. 539 (Meyrowitz Decl. 6).

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Moreover, advertisers pay substantial fees for the right to target specific -usually local -- audiences in connection with copyrighted programming. See, e.g., J.A. 515-16 (Franks Decl. 15-17). Those targeted advertising agreements are disrupted by ivis unauthorized, nationwide retransmissions. J.A. 506 (Pyne Decl. 10); J.A. 535 (Rodriguez Decl. 13). Accordingly, the district court correctly concluded that [i]t is absurd to suggest that since plaintiffs copyrighted works are made available in a variety of legal ways, adding an illegal method does not cause them harm. Stay Op. 9; see also Op. 51 (Defendants cannot seriously argue that the existence of thousands of companies who legitimately use plaintiffs programming and pay full freight means that ivis illegal and uncompensated use does not irreparably harm plaintiffs. (emphasis in original)). ivi also contends that Copyright Owners failed to quantify with precision the specific harm resulting from ivis infringement. In the same breath, however, ivi concedes that the magnitude of the harm (assuming there is any at all) may be difficult or impossible to quantify. ivi Br. 36. As this Court has noted, the notorious[] difficult[y] of quantifying losses due to infringement is part of the irreparable character of a copyright owners harm. Salinger, 607 F.3d at 81 (citing Omega Importing Corp. v. Petri-Kine Camera Co., 451 F.2d 1190, 1195 (2d Cir. 1971)). Harm might be irremediable, or irreparable, for many reasons, including that a loss is difficult to replace or difficult to measure. Id.; see also Op. 55

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(Defendants contend that because plaintiffs cannot specify the harm, it must be speculative. In contrast, we find that it is because the harms are unquantifiable, and thus irreparable.). Both Congress and the FCC repeatedly have recognized that the unrestrained retransmission of broadcast programming content to subscribers in any location at any time -- ivis business model -- causes injury to program owners and is contrary to the public interest. For those reasons, both Congress and the FCC have adopted rules governing the circumstances under which retransmissions may be made, including rules regarding exclusivity arrangements and programming blackouts. See supra pages 6-8, 49-50. In contrast, ivi streamed the content of thousands of programs each day in complete disregard of exclusivity arrangements, program blackouts, and Copyright Owners rights to present their content over the Internet to computer users on their own terms. These harms, highlighted in the declarations filed below, are the particular injuries that Congress sought to avoid when granting statutory licenses to other retransmission services. Finally, ivi has provided no evidence that it would be financially able to pay even a fraction of the substantial damages to which Copyright Owners would be entitled after a final judgment in their favor. That, too, supports a finding that ivis continued infringement would not only injure, but irreparably injure, Copyright Owners. See Omega Importing, 451 F.2d at 1195 (the unlikelihood that

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defendant . . . would, in any event, be able to satisfy a substantial damage award supports a finding of irreparable harm); accord Citibank, N.A. v. Citytrust, 756 F.2d 273, 276 (2d Cir. 1985). Indeed, statutory damages for the infringement of thousands of copyrighted programs would be substantial. See Natl Football

League v. PrimeTime 24 Joint Venture, 131 F. Supp. 2d 458, 482 (S.D.N.Y. 2001) (awarding statutory damages ranging between $2,500 and $100,000 per telecast for secondary transmissions of broadcast programming outside the Section 119 compulsory license). Copyright Owners submitted uncontested declarations in the district court establishing that during the first five months of operation, ivis service offered more than 4,000 individual programs owned by Copyright Owners. See Dist. Ct. Dkt. # 48-53 (Declarations of Martin P. Messinger, Marsha L. Reed, Jaime Rodriguez, Carly Seabrook, Stephen Segaller, and Jane Sunderland). B. The Balance Of Hardships Decidedly Favors Copyright Owners

The district court properly concluded that the balance of hardships tilts in favor of Copyright Owners. Op. 55-56. Copyright Owners will suffer immediate, irreparable harm due to the destruction in value of their licensed programming, disruption in advertising models, and loss of revenue (among other harms) absent an injunction. ivi, on the other hand, will no longer be permitted to engage in illegal rebroadcasting of copyrighted content if this Court upholds the preliminary injunction.

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Without the unfettered ability to retransmit Copyright Owners content without their consent, ivi might well lose customers. But even if the preliminary injunction effectively put ivi out of business, the district court properly concluded that ivis hardship . . . is not a legally recognized harm. Op. 55.

[A]n infringer of copyright cannot complain about the loss of ability to offer its infringing product. Id. It is settled that advantages built upon a deliberate[] wrongdoing do not give the borrower any standing to complain that his vested interests will be disturbed. My-T Fine Corp. v. Samuels, 69 F.2d 76, 78 (2d Cir. 1934) (trademark infringement); see also Cadence Design Sys., Inc. v. Avant! Corp., 125 F.3d 824, 829 (9th Cir. 1997) (In this circuit, as well as in other circuits, a defendant who knowingly infringes anothers copyright cannot complain of the harm that will befall it when properly forced to desist from its infringing activities. (internal quotation marks omitted)). Where the only hardship that the defendant will suffer is lost profits from an activity which has been shown likely to be infringing, such an argument in defense merits little equitable consideration. Concrete Mach. Co. v. Classic Lawn Ornaments, Inc., 843 F.2d 600, 612 (1st Cir. 1988) (quoting Helene Curtis Indus., Inc. v. Church & Dwight Co., 560 F.2d 1325, 1333 (7th Cir. 1977)). Furthermore, any injury that ivi incurs by not being able to resume the unauthorized exploitation of Copyright Owners programming is self-inflicted. ivi

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launched its service a year ago admittedly expecting legal challenges.

See

http://www.thewrap.com/print/20777 (quoting ivis CEO Todd Weaver) (last visited Sept. 8, 2011). When several of the Copyright Owners demanded that ivi cease infringement, ivi bought more time to expand its infringing service by filing an improper anticipatory action in a Seattle federal court. When Copyright Owners sought a preliminary injunction, ivi doubled the number of broadcast stations it was streaming and announced plans to add even more stations to its lineup. At each stage, ivi has sought to entrench itself further into its unauthorized business with the apparent objective of trying to bolster a claim of hardship from injunctive relief. That sort of conduct should not be rewarded. See Sierra Club v. U.S. Army Corps of Engrs, 645 F.3d 978, 997 (8th Cir. 2011) (affirming preliminary injunction and holding that balance of harms favored the plaintiff particularly because any injury to [defendant] was largely self inflicted); Novartis Consumer Health, Inc. v. Johnson & JohnsonMerck Consumer Pharms. Co., 290 F.3d 578, 596 (3d Cir. 2002) (same). C. The Public Interest Favors Entry Of A Preliminary Injunction

The district court concluded that a preliminary injunction would serve the public interest by protecting the valuable incentives to continue to create programming. Op. 57. ivi does not dispute that conclusion on appeal.

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CONCLUSION For the reasons set forth above and in the opinion of the district court, the Court should affirm the preliminary injunction as entered by the district court. Respectfully submitted, /s/ Peter L. Zimroth PETER L. ZIMROTH ARNOLD & PORTER LLP 399 Park Avenue New York, NY 10022 (212) 715-1000 Peter.Zimroth@aporter.com ROBERT ALAN GARRETT HADRIAN R. KATZ LISA S. BLATT C. SCOTT MORROW R. REEVES ANDERSON ARNOLD & PORTER LLP 555 Twelfth Street, NW Washington, DC 20004 (202) 942-5000 Dated: September 9, 2011

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CERTIFICATE OF COMPLIANCE 1. The foregoing Brief of Plaintiffs-Appellees complies with the type-

volume limitation of Fed. R. App. P. 32(a)(7)(B) because this brief contains 13,681 words, excluding the parts of the brief exempted by Fed. R. App. P. 32(a)(7)(B)(iii). 2. This brief also complies with the typeface requirements of Fed. R. App. P. 32(a)(5) and the type-style requirements of Fed. R. App. P. 32(a)(6) because this brief has been prepared in a proportionally spaced typeface using Microsoft Word 2007 in Times New Roman 14-point font.

Dated: September 9, 2011 Respectfully submitted, /s/ Peter L. Zimroth PETER L. ZIMROTH ARNOLD & PORTER LLP 399 Park Avenue New York, NY 10022 (212) 715-1000 Peter.Zimroth@aporter.com Attorney for Plaintiffs-Appellees

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CERTIFICATE OF SERVICE I hereby certify that, on September 9, 2011, I electronically filed the foregoing Brief of Plaintiffs-Appellees with the Clerk of the Court by using the Courts CM/ECF system. Participants in this case who are registered CM/ECF users will be served by the Courts CM/ECF system. Additionally, six paper copies were filed with the Court via hand delivery and two paper copies were sent via Federal Express Priority Overnight to the following counsel: Lawrence D. Graham Ellen M. Bierman BLACK LOWE & GRAHAM PLLC 701 Fifth Avenue, Suite 4800 Seattle, WA 98104 Dated: September 9, 2011 Respectfully submitted, /s/ Peter L. Zimroth PETER L. ZIMROTH ARNOLD & PORTER LLP 399 Park Avenue New York, NY 10022 (212) 715-1000 Peter.Zimroth@aporter.com Attorney for Plaintiffs-Appellees

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ADDENDUM

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STATUTORY ADDENDUM 17 U.S.C. 111: Limitations on exclusive rights: Secondary transmissions of broadcast programming by cable (a) Certain secondary transmissions exempted.--The secondary transmission of a performance or display of a work embodied in a primary transmission is not an infringement of copyright if-(1) the secondary transmission is not made by a cable system, and consists entirely of the relaying, by the management of a hotel, apartment house, or similar establishment, of signals transmitted by a broadcast station licensed by the Federal Communications Commission, within the local service area of such station, to the private lodgings of guests or residents of such establishment, and no direct charge is made to see or hear the secondary transmission; or (2) the secondary transmission is made solely for the purpose and under the conditions specified by paragraph (2) of section 110; or (3) the secondary transmission is made by any carrier who has no direct or indirect control over the content or selection of the primary transmission or over the particular recipients of the secondary transmission, and whose activities with respect to the secondary transmission consist solely of providing wires, cables, or other communications channels for the use of others: Provided, That the provisions of this paragraph extend only to the activities of said carrier with respect to secondary transmissions and do not exempt from liability the activities of others with respect to their own primary or secondary transmissions; (4) the secondary transmission is made by a satellite carrier pursuant to a statutory license under section 119 or section 122; (5) the secondary transmission is not made by a cable system but is made by a governmental body, or other nonprofit organization, without any purpose of direct or indirect commercial advantage, and without charge to the recipients of the secondary transmission other than assessments necessary to defray the actual and reasonable costs of maintaining and operating the secondary transmission service.

SA 1

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(b) Secondary transmission of primary transmission to controlled group.-Notwithstanding the provisions of subsections (a) and (c), the secondary transmission to the public of a performance or display of a work embodied in a primary transmission is actionable as an act of infringement under section 501, and is fully subject to the remedies provided by sections 502 through 506, if the primary transmission is not made for reception by the public at large but is controlled and limited to reception by particular members of the public: Provided, however, That such secondary transmission is not actionable as an act of infringement if-(1) the primary transmission is made by a broadcast station licensed by the Federal Communications Commission; and (2) the carriage of the signals comprising the secondary transmission is required under the rules, regulations, or authorizations of the Federal Communications Commission; and (3) the signal of the primary transmitter is not altered or changed in any way by the secondary transmitter. (c) Secondary transmissions by cable systems.-(1) Subject to the provisions of paragraphs (2), (3), and (4) of this subsection and section 114(d), secondary transmissions to the public by a cable system of a performance or display of a work embodied in a primary transmission made by a broadcast station licensed by the Federal Communications Commission or by an appropriate governmental authority of Canada or Mexico shall be subject to statutory licensing upon compliance with the requirements of subsection (d) where the carriage of the signals comprising the secondary transmission is permissible under the rules, regulations, or authorizations of the Federal Communications Commission. (2) Notwithstanding the provisions of paragraph (1) of this subsection, the willful or repeated secondary transmission to the public by a cable system of a primary transmission made by a broadcast station licensed by the Federal Communications Commission or by an appropriate governmental authority of Canada or Mexico and embodying a performance or display of a work is actionable as an act of infringement under section 501, and is fully subject to the remedies provided by sections 502 through 506, in the following cases:

SA 2

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(A) where the carriage of the signals comprising the secondary transmission is not permissible under the rules, regulations, or authorizations of the Federal Communications Commission; or (B) where the cable system has not deposited the statement of account and royalty fee required by subsection (d). (3) Notwithstanding the provisions of paragraph (1) of this subsection and subject to the provisions of subsection (e) of this section, the secondary transmission to the public by a cable system of a performance or display of a work embodied in a primary transmission made by a broadcast station licensed by the Federal Communications Commission or by an appropriate governmental authority of Canada or Mexico is actionable as an act of infringement under section 501, and is fully subject to the remedies provided by sections 502 through 506 and section 510, if the content of the particular program in which the performance or display is embodied, or any commercial advertising or station announcements transmitted by the primary transmitter during, or immediately before or after, the transmission of such program, is in any way willfully altered by the cable system through changes, deletions, or additions, except for the alteration, deletion, or substitution of commercial advertisements performed by those engaged in television commercial advertising market research: Provided, That the research company has obtained the prior consent of the advertiser who has purchased the original commercial advertisement, the television station broadcasting that commercial advertisement, and the cable system performing the secondary transmission: And provided further, That such commercial alteration, deletion, or substitution is not performed for the purpose of deriving income from the sale of that commercial time. (4) Notwithstanding the provisions of paragraph (1) of this subsection, the secondary transmission to the public by a cable system of a performance or display of a work embodied in a primary transmission made by a broadcast station licensed by an appropriate governmental authority of Canada or Mexico is actionable as an act of infringement under section 501, and is fully subject to the remedies provided by sections 502 through 506, if (A) with respect to Canadian signals, the community of the cable system is located more than 150 miles from the United States--Canadian border and is also located south of the forty-second parallel of latitude, or (B) with respect to Mexican signals, the secondary transmission is made by a cable system which received the primary transmission by means other than direct SA 3

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interception of a free space radio wave emitted by such broadcast television station, unless prior to April 15, 1976, such cable system was actually carrying, or was specifically authorized to carry, the signal of such foreign station on the system pursuant to the rules, regulations, or authorizations of the Federal Communications Commission. (d) Statutory license for secondary transmissions by cable systems.-(1) Statement of account and royalty fees.--Subject to paragraph (5), a cable system whose secondary transmissions have been subject to statutory licensing under subsection (c) shall, on a semiannual basis, deposit with the Register of Copyrights, in accordance with requirements that the Register shall prescribe by regulation the following: (A) A statement of account, covering the six months next preceding, specifying the number of channels on which the cable system made secondary transmissions to its subscribers, the names and locations of all primary transmitters whose transmissions were further transmitted by the cable system, the total number of subscribers, the gross amounts paid to the cable system for the basic service of providing secondary transmissions of primary broadcast transmitters, and such other data as the Register of Copyrights may from time to time prescribe by regulation. In determining the total number of subscribers and the gross amounts paid to the cable system for the basic service of providing secondary transmissions of primary broadcast transmitters, the system shall not include subscribers and amounts collected from subscribers receiving secondary transmissions pursuant to section 119. Such statement shall also include a special statement of account covering any non-network television programming that was carried by the cable system in whole or in part beyond the local service area of the primary transmitter, under rules, regulations, or authorizations of the Federal Communications Commission permitting the substitution or addition of signals under certain circumstances, together with logs showing the times, dates, stations, and programs involved in such substituted or added carriage. (B) Except in the case of a cable system whose royalty fee is specified in subparagraph (E) or (F), a total royalty fee payable to copyright owners pursuant to paragraph (3) for the period covered by the statement, computed on the basis of specified percentages of the gross SA 4

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receipts from subscribers to the cable service during such period for the basic service of providing secondary transmissions of primary broadcast transmitters, as follows: (i) 1.064 percent of such gross receipts for the privilege of further transmitting, beyond the local service area of such primary transmitter, any non-network programming of a primary transmitter in whole or in part, such amount to be applied against the fee, if any, payable pursuant to clauses (ii) through (iv); (ii) 1.064 percent of such gross receipts for the first distant signal equivalent; (iii) 0.701 percent of such gross receipts for each of the second, third, and fourth distant signal equivalents; and (iv) 0.330 percent of such gross receipts for the fifth distant signal equivalent and each distant signal equivalent thereafter. (C) In computing amounts under clauses (ii) through (iv) of subparagraph (B)-(i) any fraction of a distant signal equivalent shall be computed at its fractional value; (ii) in the case of any cable system located partly within and partly outside of the local service area of a primary transmitter, gross receipts shall be limited to those gross receipts derived from subscribers located outside of the local service area of such primary transmitter; and (iii) if a cable system provides a secondary transmission of a primary transmitter to some but not all communities served by that cable system-(I) the gross receipts and the distant signal equivalent values for such secondary transmission shall be derived solely on the basis of the subscribers in those

SA 5

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communities where the cable system provides such secondary transmission; and (II) the total royalty fee for the period paid by such system shall not be less than the royalty fee calculated under subparagraph (B)(i) multiplied by the gross receipts from all subscribers to the system. (D) A cable system that, on a statement submitted before the date of the enactment of the Satellite Television Extension and Localism Act of 2010, computed its royalty fee consistent with the methodology under subparagraph (C)(iii), or that amends a statement filed before such date of enactment to compute the royalty fee due using such methodology, shall not be subject to an action for infringement, or eligible for any royalty refund or offset, arising out of its use of such methodology on such statement. (E) If the actual gross receipts paid by subscribers to a cable system for the period covered by the statement for the basic service of providing secondary transmissions of primary broadcast transmitters are $263,800 or less-(i) gross receipts of the cable system for the purpose of this paragraph shall be computed by subtracting from such actual gross receipts the amount by which $263,800 exceeds such actual gross receipts, except that in no case shall a cable systems gross receipts be reduced to less than $10,400; and (ii) the royalty fee payable under this paragraph to copyright owners pursuant to paragraph (3) shall be 0.5 percent, regardless of the number of distant signal equivalents, if any. (F) If the actual gross receipts paid by subscribers to a cable system for the period covered by the statement for the basic service of providing secondary transmissions of primary broadcast transmitters are more than $263,800 but less than $527,600, the royalty fee payable under this paragraph to copyright owners pursuant to paragraph (3) shall be--

SA 6

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(i) 0.5 percent of any gross receipts up to $263,800, regardless of the number of distant signal equivalents, if any; and (ii) 1 percent of any gross receipts in excess of $263,800, but less than $527,600, regardless of the number of distant signal equivalents, if any. (G) A filing fee, as determined by the Register of Copyrights pursuant to section 708(a). (2) Handling of fees.--The Register of Copyrights shall receive all fees (including the filing fee specified in paragraph (1)(G)) deposited under this section and, after deducting the reasonable costs incurred by the Copyright Office under this section, shall deposit the balance in the Treasury of the United States, in such manner as the Secretary of the Treasury directs. All funds held by the Secretary of the Treasury shall be invested in interestbearing United States securities for later distribution with interest by the Librarian of Congress upon authorization by the Copyright Royalty Judges. (3) Distribution of royalty fees to copyright owners.--The royalty fees thus deposited shall, in accordance with the procedures provided by clause1 (4), be distributed to those among the following copyright owners who claim that their works were the subject of secondary transmissions by cable systems during the relevant semiannual period: (A) Any such owner whose work was included in a secondary transmission made by a cable system of a non-network television program in whole or in part beyond the local service area of the primary transmitter. (B) Any such owner whose work was included in a secondary transmission identified in a special statement of account deposited under clause1 (1)(A). (C) Any such owner whose work was included in non-network programming consisting exclusively of aural signals carried by a cable system in whole or in part beyond the local service area of the primary transmitter of such programs.

SA 7

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(4) Procedures for royalty fee distribution.--The royalty fees thus deposited shall be distributed in accordance with the following procedures: (A) During the month of July in each year, every person claiming to be entitled to statutory license fees for secondary transmissions shall file a claim with the Copyright Royalty Judges, in accordance with requirements that the Copyright Royalty Judges shall prescribe by regulation. Notwithstanding any provisions of the antitrust laws, for purposes of this clause any claimants may agree among themselves as to the proportionate division of statutory licensing fees among them, may lump their claims together and file them jointly or as a single claim, or may designate a common agent to receive payment on their behalf. (B) After the first day of August of each year, the Copyright Royalty Judges shall determine whether there exists a controversy concerning the distribution of royalty fees. If the Copyright Royalty Judges determine that no such controversy exists, the Copyright Royalty Judges shall authorize the Librarian of Congress to proceed to distribute such fees to the copyright owners entitled to receive them, or to their designated agents, subject to the deduction of reasonable administrative costs under this section. If the Copyright Royalty Judges find the existence of a controversy, the Copyright Royalty Judges shall, pursuant to chapter 8 of this title, conduct a proceeding to determine the distribution of royalty fees. (C) During the pendency of any proceeding under this subsection, the Copyright Royalty Judges shall have the discretion to authorize the Librarian of Congress to proceed to distribute any amounts that are not in controversy. (5) 3.75 percent rate and syndicated exclusivity surcharge not applicable to multicast streams.--The royalty rates specified in sections 256. 2(c) and 256.2(d) of title 37, Code of Federal Regulations (commonly referred to as the 3.75 percent rate and the syndicated exclusivity surcharge, respectively), as in effect on the date of the enactment of the Satellite Television Extension and Localism Act of 2010, as such rates may be adjusted, or such sections redesignated, thereafter by the Copyright Royalty Judges, shall not apply to the secondary transmission of a multicast stream.

SA 8

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(6) Verification of accounts and fee payments.--The Register of Copyrights shall issue regulations to provide for the confidential verification by copyright owners whose works were embodied in the secondary transmissions of primary transmissions pursuant to this section of the information reported on the semiannual statements of account filed under this subsection for accounting periods beginning on or after January 1, 2010, in order that the auditor designated under subparagraph (A) is able to confirm the correctness of the calculations and royalty payments reported therein. The regulations shall-(A) establish procedures for the designation of a qualified independent auditor-(i) with exclusive authority to request verification of such a statement of account on behalf of all copyright owners whose works were the subject of secondary transmissions of primary transmissions by the cable system (that deposited the statement) during the accounting period covered by the statement; and (ii) who is not an officer, employee, or agent of any such copyright owner for any purpose other than such audit; (B) establish procedures for safeguarding all non-public financial and business information provided under this paragraph; (C)(i) require a consultation period for the independent auditor to review its conclusions with a designee of the cable system; (ii) establish a mechanism for the cable system to remedy any errors identified in the auditors report and to cure any underpayment identified; and (iii) provide an opportunity to remedy any disputed facts or conclusions; (D) limit the frequency of requests for verification for a particular cable system and the number of audits that a multiple system operator can be required to undergo in a single year; and

SA 9

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(E) permit requests for verification of a statement of account to be made only within 3 years after the last day of the year in which the statement of account is filed. (7) Acceptance of additional deposits.--Any royalty fee payments received by the Copyright Office from cable systems for the secondary transmission of primary transmissions that are in addition to the payments calculated and deposited in accordance with this subsection shall be deemed to have been deposited for the particular accounting period for which they are received and shall be distributed as specified under this subsection. (e) Nonsimultaneous secondary transmissions by cable systems.-(1) Notwithstanding those provisions of the subsection (f)(2) relating to nonsimultaneous secondary transmissions by a cable system, any such transmissions are actionable as an act of infringement under section 501, and are fully subject to the remedies provided by sections 502 through 506 and section 510, unless-(A) the program on the videotape is transmitted no more than one time to the cable systems subscribers; (B) the copyrighted program, episode, or motion picture videotape, including the commercials contained within such program, episode, or picture, is transmitted without deletion or editing; (C) an owner or officer of the cable system (i) prevents the duplication of the videotape while in the possession of the system, (ii) prevents unauthorized duplication while in the possession of the facility making the videotape for the system if the system owns or controls the facility, or takes reasonable precautions to prevent such duplication if it does not own or control the facility, (iii) takes adequate precautions to prevent duplication while the tape is being transported, and (iv) subject to paragraph (2), erases or destroys, or causes the erasure or destruction of, the videotape; (D) within forty-five days after the end of each calendar quarter, an owner or officer of the cable system executes an affidavit attesting (i) to the steps and precautions taken to prevent duplication of the

SA 10

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videotape, and (ii) subject to paragraph (2), to the erasure or destruction of all videotapes made or used during such quarter; (E) such owner or officer places or causes each such affidavit, and affidavits received pursuant to paragraph (2)(C), to be placed in a file, open to public inspection, at such systems main office in the community where the transmission is made or in the nearest community where such system maintains an office; and (F) the nonsimultaneous transmission is one that the cable system would be authorized to transmit under the rules, regulations, and authorizations of the Federal Communications Commission in effect at the time of the nonsimultaneous transmission if the transmission had been made simultaneously, except that this subparagraph shall not apply to inadvertent or accidental transmissions. (2) If a cable system transfers to any person a videotape of a program nonsimultaneously transmitted by it, such transfer is actionable as an act of infringement under section 501, and is fully subject to the remedies provided by sections 502 through 506, except that, pursuant to a written, nonprofit contract providing for the equitable sharing of the costs of such videotape and its transfer, a videotape nonsimultaneously transmitted by it, in accordance with paragraph (1), may be transferred by one cable system in Alaska to another system in Alaska, by one cable system in Hawaii permitted to make such nonsimultaneous transmissions to another such cable system in Hawaii, or by one cable system in Guam, the Northern Mariana Islands, the Federated States of Micronesia, the Republic of Palau, or the Republic of the Marshall Islands, to another cable system in any of those five entities, if-(A) each such contract is available for public inspection in the offices of the cable systems involved, and a copy of such contract is filed, within thirty days after such contract is entered into, with the Copyright Office (which Office shall make each such contract available for public inspection); (B) the cable system to which the videotape is transferred complies with paragraph (1)(A), (B), (C)(i), (iii), and (iv), and (D) through (F); and

SA 11

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(C) such system provides a copy of the affidavit required to be made in accordance with paragraph (1)(D) to each cable system making a previous nonsimultaneous transmission of the same videotape. (3) This subsection shall not be construed to supersede the exclusivity protection provisions of any existing agreement, or any such agreement hereafter entered into, between a cable system and a television broadcast station in the area in which the cable system is located, or a network with which such station is affiliated. (4) As used in this subsection, the term videotape means the reproduction of the images and sounds of a program or programs broadcast by a television broadcast station licensed by the Federal Communications Commission, regardless of the nature of the material objects, such as tapes or films, in which the reproduction is embodied. (f) Definitions.--As used in this section, the following terms mean the following: (1) Primary transmission.--A primary transmission is a transmission made to the public by a transmitting facility whose signals are being received and further transmitted by a secondary transmission service, regardless of where or when the performance or display was first transmitted. In the case of a television broadcast station, the primary stream and any multicast streams transmitted by the station constitute primary transmissions. (2) Secondary transmission.--A secondary transmission is the further transmitting of a primary transmission simultaneously with the primary transmission, or nonsimultaneously with the primary transmission if by a cable system not located in whole or in part within the boundary of the fortyeight contiguous States, Hawaii, or Puerto Rico: Provided, however, That a nonsimultaneous further transmission by a cable system located in Hawaii of a primary transmission shall be deemed to be a secondary transmission if the carriage of the television broadcast signal comprising such further transmission is permissible under the rules, regulations, or authorizations of the Federal Communications Commission. (3) Cable system.--A cable system is a facility, located in any State, territory, trust territory, or possession of the United States, that in whole or in part receives signals transmitted or programs broadcast by one or more television broadcast stations licensed by the Federal Communications SA 12

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Commission, and makes secondary transmissions of such signals or programs by wires, cables, microwave, or other communications channels to subscribing members of the public who pay for such service. For purposes of determining the royalty fee under subsection (d)(1), two or more cable systems in contiguous communities under common ownership or control or operating from one headend shall be considered as one system. (4) Local service area of a primary transmitter.--The local service area of a primary transmitter, in the case of both the primary stream and any multicast streams transmitted by a primary transmitter that is a television broadcast station, comprises the area where such primary transmitter could have insisted upon its signal being retransmitted by a cable system pursuant to the rules, regulations, and authorizations of the Federal Communications Commission in effect on April 15, 1976, or such stations television market as defined in section 76.55(e) of title 47, Code of Federal Regulations (as in effect on September 18, 1993), or any modifications to such television market made, on or after September 18, 1993, pursuant to section 76.55(e) or 76.59 of title 47, Code of Federal Regulations, or within the noise-limited contour as defined in 73.622(e)(1) of title 47, Code of Federal Regulations, or in the case of a television broadcast station licensed by an appropriate governmental authority of Canada or Mexico, the area in which it would be entitled to insist upon its signal being retransmitted if it were a television broadcast station subject to such rules, regulations, and authorizations. In the case of a low power television station, the local service area of a primary transmitter comprises the area within 35 miles of the transmitter site, except that in the case of such a station located in a standard metropolitan statistical area which has one of the 50 largest populations of all standard metropolitan statistical areas (based on the 1980 decennial census of population taken by the Secretary of Commerce), the number of miles shall be 20 miles. The local service area of a primary transmitter, in the case of a radio broadcast station, comprises the primary service area of such station, pursuant to the rules and regulations of the Federal Communications Commission. (5) Distant signal equivalent.-(A) In general.--Except as provided under subparagraph (B), a distant signal equivalent-(i) is the value assigned to the secondary transmission of any non-network television programming carried by a cable system SA 13

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in whole or in part beyond the local service area of the primary transmitter of such programming; and (ii) is computed by assigning a value of one to each primary stream and to each multicast stream (other than a simulcast) that is an independent station, and by assigning a value of onequarter to each primary stream and to each multicast stream (other than a simulcast) that is a network station or a noncommercial educational station. (B) Exceptions.--The values for independent, network, and noncommercial educational stations specified in subparagraph (A) are subject to the following: (i) Where the rules and regulations of the Federal Communications Commission require a cable system to omit the further transmission of a particular program and such rules and regulations also permit the substitution of another program embodying a performance or display of a work in place of the omitted transmission, or where such rules and regulations in effect on the date of the enactment of the Copyright Act of 1976 permit a cable system, at its election, to effect such omission and substitution of a nonlive program or to carry additional programs not transmitted by primary transmitters within whose local service area the cable system is located, no value shall be assigned for the substituted or additional program. (ii) Where the rules, regulations, or authorizations of the Federal Communications Commission in effect on the date of the enactment of the Copyright Act of 1976 permit a cable system, at its election, to omit the further transmission of a particular program and such rules, regulations, or authorizations also permit the substitution of another program embodying a performance or display of a work in place of the omitted transmission, the value assigned for the substituted or additional program shall be, in the case of a live program, the value of one full distant signal equivalent multiplied by a fraction that has as its numerator the number of days in the year in which such substitution occurs and as its denominator the number of days in the year. SA 14

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(iii) In the case of the secondary transmission of a primary transmitter that is a television broadcast station pursuant to the late-night or specialty programming rules of the Federal Communications Commission, or the secondary transmission of a primary transmitter that is a television broadcast station on a part-time basis where full-time carriage is not possible because the cable system lacks the activated channel capacity to retransmit on a full-time basis all signals that it is authorized to carry, the values for independent, network, and noncommercial educational stations set forth in subparagraph (A), as the case may be, shall be multiplied by a fraction that is equal to the ratio of the broadcast hours of such primary transmitter retransmitted by the cable system to the total broadcast hours of the primary transmitter. (iv) No value shall be assigned for the secondary transmission of the primary stream or any multicast streams of a primary transmitter that is a television broadcast station in any community that is within the local service area of the primary transmitter. (6) Network station.-(A) Treatment of primary stream.--The term network station shall be applied to a primary stream of a television broadcast station that is owned or operated by, or affiliated with, one or more of the television networks in the United States providing nationwide transmissions, and that transmits a substantial part of the programming supplied by such networks for a substantial part of the primary streams typical broadcast day. (B) Treatment of multicast streams.--The term network station shall be applied to a multicast stream on which a television broadcast station transmits all or substantially all of the programming of an interconnected program service that-(i) is owned or operated by, or affiliated with, one or more of the television networks described in subparagraph (A); and

SA 15

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(ii) offers programming on a regular basis for 15 or more hours per week to at least 25 of the affiliated television licensees of the interconnected program service in 10 or more States. (7) Independent station.--The term independent station shall be applied to the primary stream or a multicast stream of a television broadcast station that is not a network station or a noncommercial educational station. (8) Noncommercial educational station.--The term noncommercial educational station shall be applied to the primary stream or a multicast stream of a television broadcast station that is a noncommercial educational broadcast station as defined in section 397 of the Communications Act of 1934, as in effect on the date of the enactment of the Satellite Television Extension and Localism Act of 2010. (9) Primary stream.--A primary stream is-(A) the single digital stream of programming that, before June 12, 2009, was substantially duplicating the programming transmitted by the television broadcast station as an analog signal; or (B) if there is no stream described in subparagraph (A), then the single digital stream of programming transmitted by the television broadcast station for the longest period of time. (10) Primary transmitter.--A primary transmitter is a television or radio broadcast station licensed by the Federal Communications Commission, or by an appropriate governmental authority of Canada or Mexico, that makes primary transmissions to the public. (11) Multicast stream.--A multicast stream is a digital stream of programming that is transmitted by a television broadcast station and is not the stations primary stream. (12) Simulcast.--A simulcast is a multicast stream of a television broadcast station that duplicates the programming transmitted by the primary stream or another multicast stream of such station.

SA 16

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(13) Subscriber; subscribe.-(A) Subscriber.--The term subscriber means a person or entity that receives a secondary transmission service from a cable system and pays a fee for the service, directly or indirectly, to the cable system. (B) Subscribe.--The term subscribe means to elect to become a subscriber.

SA 17

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17 U.S.C. 801(b)(2)(B)-(C) (B) In the event that the rules and regulations of the Federal Communications Commission are amended at any time after April 15, 1976, to permit the carriage by cable systems of additional television broadcast signals beyond the local service area of the primary transmitters of such signals, the royalty rates established by section 111(d)(1)(B) may be adjusted to ensure that the rates for the additional distant signal equivalents resulting from such carriage are reasonable in the light of the changes effected by the amendment to such rules and regulations. In determining the reasonableness of rates proposed following an amendment of Federal Communications Commission rules and regulations, the Copyright Royalty Judges shall consider, among other factors, the economic impact on copyright owners and users; except that no adjustment in royalty rates shall be made under this subparagraph with respect to any distant signal equivalent or fraction thereof represented by-(i) carriage of any signal permitted under the rules and regulations of the Federal Communications Commission in effect on April 15, 1976, or the carriage of a signal of the same type (that is, independent, network, or noncommercial educational) substituted for such permitted signal; or (ii) a television broadcast signal first carried after April 15, 1976, pursuant to an individual waiver of the rules and regulations of the Federal Communications Commission, as such rules and regulations were in effect on April 15, 1976. (C) In the event of any change in the rules and regulations of the Federal Communications Commission with respect to syndicated and sports program exclusivity after April 15, 1976, the rates established by section 111(d)(1)(B) may be adjusted to assure that such rates are reasonable in light of the changes to such rules and regulations, but any such adjustment shall apply only to the affected television broadcast signals carried on those systems affected by the change.

SA 18