Recently, a Ninth Circuit panel unanimously affirmed the district court’s denial of a preliminary injunction in Fox’s copyright and contractual challenge to Dish’s Hopper set-top boxes and related AutoHop feature.  The Ninth Circuit emphasized that it applied a “limited and deferential review” that does not “determin[e] the ultimate merits of the case.”  In particular, the Court suggested that Fox’s contract claims presented “much closer” questions than the infringement claim, and on one of those claims expressly stated it was not deciding the issue on the merits at this stage.

As background, in 2012, Dish started offering “Hopper” set-top boxes with a feature called PrimeTime Anytime (PTAT), allowing subscribers to record all primetime programming on the four major broadcast networks every night of the week.  By default, PTAT records primetime shows on all four networks each night of the week and saves recordings for eight days.  Dish also offers AutoHop, a feature that allows users to skip commercials automatically in programs recorded via PTAT.  To administer AutoHop, Dish employees manually watch network programming each night and mark commercials to be skipped.

Fox sought a preliminary injunction on the basis of direct and indirect copyright infringement and breach of contract.  The Ninth Circuit rejected these claims.  First, the Court held that the district court did not abuse its discretion in concluding that Dish does not directly infringe Fox’s right of reproduction because consumers, not Dish, cause the copies to be made.   The Court was not persuaded by Fox’s argument that Dish decides how long copies are available, modifies the start and end times of the primetime block, and prevents a user from stopping a recording.

As to secondary infringement based on the consumer’s copies, the Court upheld the district court’s finding that Dish met its burden to show that it would be likely to prevail in a fair use defense.  Significantly, the Court rejected Fox’s attempt to distinguish AutoHop’s ad-skipping feature from the “time-shifting” upheld by the Supreme Court in Sony (the Betamax case), reasoning that Fox does not own copyrights to the ads.  The Court therefore held that commercial skipping does not implicate Fox’s copyright interest, and refused to consider the market harm from ad-skipping as part of the fair use analysis.

Finally, the Ninth Circuit agreed with the district court that while the “quality assurance” copies that Dish made to test the AutoHop function violated both Fox’s copyrights and the parties’ contracts, Fox had failed to demonstrate a likelihood of irreparable harm and thus was not entitled to a preliminary injunction.

On the contractual questions, the Court viewed the case as “much closer” and affirmed the district court in view of its “very deferential standard of review.”  It found the closest issue to be the contractual limitation on “distribut[ing]” Fox programming “on an interactive, time-delayed, video-on-demand or similar basis.”  The district court had interpreted “distribute” narrowly as having the same meaning it has in the Copyright Act.  The Court found the word ambiguous and deemed the district court’s interpretation “plausible,” but also found “plausible” Fox’s broader interpretation, and made clear that it was expressing no view on how the contract should be interpreted on a full record.   The Court found Dish’s position that PTAT is not “similar” to video on demand (VOD) under that contractual provision “dubious.”

However, as to a separate contractual claim, the Court found that the district court did not commit clear error in finding that PTAT is “more akin” to a DVR than VOD and thus did not fall within a prohibition on enabling fast-forwarding commercials during VOD.  The Court also concluded that given that Dish “did not directly infringe Fox’s copyrights,” the district court properly concluded that Fox is unlikely to succeed on its claim that Dish is in violation of a contractual limitation on making a “record, copy, [or] duplicate.”