The opinion of the court was delivered by: RAYMOND J. DEARIE
Plaintiffs Cablevision Systems Corporation, et al., (hereinafter "Cablevision") brought this action alleging that defendants engaged in illegal sales of cable television equipment in violation of sections 553 and 605 of Title 47 of the United States Code. Chief Magistrate Judge Chrein conducted a three-day evidentiary hearing on Cablevision's application for a preliminary injunction and related relief. The Court subsequently adopted the recommendation of the Magistrate Judge and preliminarily enjoined the defendants from further sales and related activities by order dated February 6, 1991. Thereafter, on April 26, 1991, Cablevision moved for summary judgment with respect to 2,609 sales.
This memorandum addresses two issues. First, the Court must determine to what extent Cablevision has established as a matter of law that defendants made illegal sales of cable equipment entitling Cablevision to summary judgment. Secondly, the Court must decide whether section 605, with its harsher statutory penalties, prohibits such sales.
Defendants concede 17 illegal sales that were the subject of testimony before the Magistrate Judge. The Court now concludes that defendants have failed to identify a genuine issue of material fact with respect to the legality of 373 additional sales and that plaintiff is therefore entitled to partial summary judgment with respect to 390 sales. The Court concludes after weighing all the relevant circumstances that the sum of $ 10,000 per sale is an appropriate measure of damages in this case.
Cablevision is licensed by various programming originators and distributors to receive television programming for distribution to its subscribers through a cable system. The programming originators transmit the programming via satellite to an earth station. The signals are then sent to Cablevision's "head-end", where they are converted into a form that can be transmitted through the cable system itself. Finally, the signals are relayed through the cable system to subscribers' homes.
Cablevision charges a monthly fee for its basic cable service and additional fees for access to premium channels such as HBO and the Disney Channel. Subscribers can also order "Pay-Per-View" services for individual events. All of the programming signals available on Cablevision's system are delivered to each household, regardless of the extent of the individual subscriber's service. Once the signals reach the subscriber's home, a converter modifies them into a form that can be viewed on a television set. To prevent subscribers from receiving cable programming for which they have not paid, Cablevision scrambles the signals for certain types of programming -- generally, premium and "Pay-Per-View" channels. Cablevision provides subscribers with a decoder which is adjusted to descramble only the signals for which a subscriber has paid. The decoder is either attached to the converter or incorporated into the converter as a combination unit.
Unscrupulous cable customers are able to gain access to programming they have not paid for by purchasing pirate decoders, combination units, or converters that have been illicitly modified to descramble signals. The sale of such equipment is illegal if the seller knows the equipment is to be used to access scrambled programming without payment.
On August 24, 1990, plaintiffs began this action and by Order to Show Cause sought a preliminary injunction against defendants' continued sale of devices used to descramble Cablevision's cable signals without payment, claiming that defendants' conduct violated sections 553 and 605 of Title 47 of the United States Code. Plaintiffs seek permanent injunctive and monetary relief.
On September 27, 1990, Chief Magistrate Judge Chrein issued a Report and Recommendation, finding that there was "ample evidence to establish that both defendants [Jon Neyir and Rita DeGirmenci] knowingly and willfully sold devices to persons who sought to use those devices and who announced their intention to use these devices to circumvent the blocking that was done by the cable companies to prevent the receipt of unpaid for services." (Tr., 9/27/90 at 214). The Magistrate Judge recommended that this Court authorize the seizure of any decoder or other device that had been adapted to descramble signals, enjoin the sale of the same, and enjoin the modification of any converter that would render it capable of descrambling. On October 4, 1990, the Court authorized the seizure of defendants' stockpiles of decoding equipment, pending further consideration of Chief Magistrate Judge Chrein's Report and Recommendation. The Court adopted the Magistrate Judge's Report and Recommendation and granted the preliminary injunction by order dated February 6, 1991.
Plaintiffs moved for summary judgment on April 26, 1991. On June 21, 1991, the Court heard arguments on the summary judgment motion and indicated that it would grant summary judgment with respect to an undetermined number of sales. The Court invited further submissions regarding liability and reserved decision on the issue of damages.
The Court now addresses the issues of summary judgment and damages and the related question of statutory interpretation.
Defendants concede their liability for 17 illegal sales of decoders (Tr., 6/21/91 at 2; Defendants' Memorandum in Opposition to Summary Judgment at 2). Cablevision, however, seeks summary judgment and statutory damages with respect to an additional 2,609 mail order sales of cable equipment by defendants during the two year period August 1988 to August 1990.
Cablevision has tendered persuasive evidence that there is no legitimate retail market for decoders or combination units since these units are provided by cable companies as part of the cable service. Accordingly, Cablevision claims that all retail sales of such devices must be illegal. Cablevision insists that the inference of illegality is inescapable given the defendants' very incriminating admissions to undercover agents and operatives concerning illegal sales, evidenced during the preliminary injunction hearing, as well as the defendants' utter failure to proffer any evidence of legitimate sales at any time in opposition to the summary judgment motion.
Most telling is the defendants' failure to challenge plaintiff by introducing any evidence suggesting certain sales were legal -- not one invoice, not one purchaser, not one affidavit, not one record of any kind establishing legitimate sales to an authorized distributor, or anyone. And when plaintiffs turned to the defendants Neyir and DeGirmenci for their explanations, these defendants invoked their fifth amendment privilege against self-incrimination.
Essentially, the issues are as follows: whether uncontested evidence of fraudulent intent with respect to at least 17 sales by defendants Stargaze and Video-Link over a limited period of time is sufficient to support an inference that extensive sales of decoders or combination units were made with similar intent, and if so, whether such an inference is so compelling that the Court can conclude that no genuine issue of material fact exists and plaintiff is entitled to judgment as a matter of law.
In Anderson v. Liberty Lobby, Inc., the Supreme Court emphasized that, once the moving party has properly supported its motion for summary judgment, Rule 56(e) requires the nonmoving party to proffer evidence to establish that a reasonable jury could rule in his favor: "The movant has the burden of showing that there is no genuine issue of fact, but the [nonmovant] is not thereby relieved of his own burden of producing in turn evidence that would support a jury verdict." 106 S. Ct. 2505, 2514 (1986). See also, Adickes v. S.H. Kress & Co., 398 U.S. 144, 90 S. Ct. 1598, 26 L. Ed. 2d 142 (1970); First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 88 S. Ct. 1575, 1592, 20 L. Ed. 2d 569 (1968). The nonmovant may not rest solely on the allegations or denials in his pleading; he must present specific facts showing that there is a genuine issue of material fact for trial. Fed.R.Civ.P. 56(e). Anderson, 106 S. Ct. at 2514.
The defendants have simply not produced any evidence of legitimate sales of decoders or combination units. Their failure to present any evidence of legitimacy, in the face of Cablevision's convincing presentation, including evidence that there is no legitimate retail market for the decoders and combination units, leads the Court to conclude that there is no genuine issue of fact with respect to the legitimacy of sales of single decoders or combination units to individuals.
Admittedly, the Court's decision to limit summary judgment to sales of single devices may appear somewhat arbitrary, particularly in the face of such evidence and the defendants' telling demurrer. Nevertheless, the Court is aware of the drastic nature of summary judgment and must at the same time acknowledge the possibility, however improbable, that certain sales of more than single devices may have been accomplished under circumstances that leave the intent of the sellers somewhat in doubt.
With counsel's assistance, the court has identified 373 sales of single decoders or combination units to purchasers residing within Cablevision's authorized franchise areas, in addition to the 17 sales that defendants concede were illegal. With respect to these 390 sales, the Court concludes that defendants have failed to demonstrate any genuine issue of material fact regarding their legitimacy and that Cablevision is entitled to judgment thereon.
III. Applicability of Section 605
Section 605(e)(4) makes it illegal for any person to sell or distribute:
any electronic, mechanical, or other device or equipment, knowing or having reason to know that the device or equipment is primarily of assistance in the unauthorized decryption of satellite cable programming, or is intended for any ...