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March 22, 1979

PAY TV OF GREATER NEW YORK, INC., Defendant, v. TIME, INCORPORATED, Time Television and Communications, Inc., American Television Communications Corporation, Inc., Microband National Systems, Inc. and Microband Corporation of America, Additional Defendants on Counterclaim

The opinion of the court was delivered by: NICKERSON

Plaintiff, a wholly owned subsidiary of Time Incorporated, moves for a temporary injunction in this action brought to recover damages and to restrain defendant permanently from "pirating" plaintiff's television program service and from infringing plaintiff's copyrights. Viewing the facts stated in the affidavits in the light most favorable to defendant, the court concludes that a preliminary injunction should issue.

Plaintiff is in the business of licensing a subscription television program service comprised of plaintiff's copyrighted or licensed motion pictures, sporting events and other special programs. Licensed affiliates in various parts of the country in turn deliver the service to subscribers for viewing on their television sets. The license agreements with plaintiff require the affiliates to maintain appropriate equipment and customer services and to engage in certain promotional efforts.

In the New York City area plaintiff's service is transmitted to some affiliates by a so-called multipoint distribution service consisting of an omnidirectional terrestrial microwave signal. This high frequency signal is transmitted from the Empire State Building and received by the affiliates at authorized points where it is converted into a lower frequency suitable for reception by individual television sets. A receiver and modulator is installed at each apartment building serviced by the affiliate. After modulation the program is then retransmitted by cable or wire to each subscriber, generally by a master antenna. The signal emitted from the Empire State Building, although not receivable by the general public, can be intercepted by appropriately placed special receivers within an approximate 35-mile radius.

 During 1974 and 1975 plaintiff authorized Microband National Systems, Inc. ("Microband"), to distribute the service to such locations in the New York City area as plaintiff might approve. Microband in turn entered into subcontracts to make the actual distribution. Defendant became one of the subcontractors, signing an agreement with Microband dated October 21, 1975. That agreement provided that defendant would have certain "non-exclusive" rights in Queens County but no rights elsewhere and that the term would be for "so long" as Microband's contract with plaintiff "shall remain in effect." Defendant claims that at that time both plaintiff and Microband "caused" defendant to believe that it "would eventually be substituted" for Microband as the wholesale distributor.

 Defendant says that it soon became dissatisfied with plaintiff's denials of approval for new locations obtained by defendant after considerable expenditure of money and effort. Nevertheless in December 1975, according to defendant, it had discussions with plaintiff looking toward plaintiff's grant of exclusive rights in Kings and Bronx Counties. Evidently Microband had made it known that it would terminate its agreement with plaintiff as of May 1976.

 On March 1, 1976 Microband wrote plaintiff confirming earlier statements and terminating the agreement with plaintiff effective May 7, 1976. The letter stated that Microband's motive in entering into the agreement had been to assist plaintiff in getting master antenna operators into the business and that Microband wished to give plaintiff "sufficient time to finalize arrangements between itself and the operators."

 On March 8, 1976 plaintiff sent to defendant a so-called "working draft" of an affiliation agreement to provide the program service in Kings and Bronx Counties. The draft provided that the agreement was to be for five years and that defendant would have certain exclusive rights in the two counties, provided that plaintiff could terminate the exclusive rights in either county on sixty days notice if any other person obtained a cable franchise in that county. An agreement was never signed, and at that time defendant continued to retransmit the service without plaintiff's objection.

 Negotiations between the parties continued, and defendant claims that at a meeting on July 19, 1976 defendant's representatives offered to sign an affiliation agreement if it contained the exclusive rights set forth in the March 8, 1976 draft, but that plaintiff then refused to grant those rights. In any event no agreement was reached. Defendant further claims that some time in July of 1976 the parties discussed the possibility of plaintiff's buying out defendant but again came to no agreement.

 Sometime around July 20, 1976 plaintiff learned that defendant had expanded its distribution into locations not earlier approved by plaintiff under defendant's subcontract with Microband. Plaintiff protested this expansion but at that time plaintiff acquiesced in defendant's continued distribution at the previously approved locations. Plaintiff says it did so because it still hoped to conclude an acceptable agreement.

 By early 1977 no such agreement had been consummated, and on February 17, 1977 plaintiff demanded in writing that defendant cease transmission of the service. Plaintiff did not commence litigation, assertedly because it thought it might yet negotiate an agreement, and defendant continued as before. In the end no agreement was reached, and on August 18, 1978 plaintiff's counsel wrote to defendant advising that its provision of the service without authorization was illegal and an infringement of plaintiff's rights and that legal proceedings would follow if defendant did not cease. This action was brought on December 14, 1978.

 Defendant is continuing to retransmit plaintiff's service to some 8000 customers and has been receiving approximately $ 75,000 a month in subscription fees, none of which has been paid to plaintiff. Defendant says it will pay plaintiff but only if granted exclusive rights in Kings and Bronx Counties.

 Defendant claims that from the first, although plaintiff encouraged defendant to make expenditures for equipment and manpower, plaintiff's true intent was to use defendant merely as an inexpensive way of testing the market until plaintiff could bring a subsidiary into the business, and that plaintiff in violation of the Sherman Act conspired with the counterclaim defendants to that end.

 In moving for a temporary injunction plaintiff asserts rights under Section 605 of the Communications Act of 1934, the copyright laws, Section 165.15(4) of the New York Penal Law, and the New York common law of unfair competition.

┬áSection 605, 47 U.S.C. ┬ž 605, prohibits any person not entitled to intercept or receive radio communications from doing so and from using "such communication (or any information therein contained) for his own benefit or for the benefit of another not entitled thereto." By its terms the section does not apply to the receiving and using of the contents of any communication which is broadcast "for the use of the general public." "Radio communication" is ...

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