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COLUMBIA PICTURES INDUS. v. LIBERTY CABLE

March 18, 1996

COLUMBIA PICTURES INDUSTRIES, INC., TRISTAR PICTURES, INC., PARAMOUNT PICTURES CORP., METRO-GOLDWYN-MAYER, INC., TWENTIETH CENTURY FOX FILM CORP., UNIVERSAL CITY STUDIOS, INC., THE WALT DISNEY COMPANY and WARNER BROS., INC., Plaintiffs,
v.
LIBERTY CABLE, INC., Defendant.



The opinion of the court was delivered by: BAER

 Hon. Harold Baer, Jr., United States District Court Judge

 Plaintiffs Columbia Pictures Industries, Inc., et al. allege that defendant Liberty Cable, Inc. infringed copyrights owned by plaintiffs when defendant failed to file semi-annual statements of account and make royalty fee payments to the Copyright Office as required under 17 U.S.C. § 111(d). Plaintiffs complain that the method defendant employed for filing and calculating royalty payments deprived plaintiffs of substantial royalties to which they are entitled. Defendant maintains that it operates over 100 separate satellite master antenna television systems ("SMATVs") within New York City and that it filed properly separate statements of account for each system and calculated the appropriate royalty fees.

 I heard this bench trial on September 18th and 19th, 1995. Thereafter, both parties submitted post-trial briefs. For the reasons that follow, I find that plaintiffs have carried their burden of proof and demonstrated that defendant engaged in the secondary transmission of plaintiffs copyrighted works and that defendant willfully failed to file statements of account and make royalty fee payments to the Copyright Office as required.

 I. Background

 Plaintiffs are each the owners, co-owners or exclusive licensees of public performance, distribution, display and other copyright rights in original works of authorship which are copyrightable subject to the laws of the United States. Defendant owns and operates satellite master antenna television ("SMATV") systems in New York City and provides cable programming services to paying subscribers. *fn1" Defendant has been in operation since 1986 and is the only meaningful competitor to the traditional franchised cable companies located in New York City. *fn2" Defendant maintains that it operates over 100 separate SMATV systems throughout metropolitan New York City and that it uses satellite receiving antennas, tower antennas and microwave antennas to receive broadcast television signals and transmit programming to its customers.

 Defendant provides services to its customers in a mode reminiscent of the way cable television was first provided in the mid-1970's. Each of defendant's systems includes the following components: (1) processing and amplification equipment to convert the received television signals for retransmission on coaxial cable to subscribers, generally termed the "head end"; *fn3" and (2) a network of coaxial cables from the head end to each individual subscriber. Most Liberty subscribers receive broadcasting from local television stations as well as from four super-stations, *fn4" and the general pay-television programming line-up. *fn5"

 There is no dispute that defendant is a cable system for purposes of the Copyright Act. The parties dispute, however, whether defendant is a cable system as defined by the F.C.C. Plaintiffs allege that the defendant is a cable system within the F.C.C.'s definition and that defendant violated the compulsory licensing plan established by the Copyright Office.

 Pursuant to 17 U.S.C. § 111(d), the Copyright Office established a compulsory licensing plan which compels copyright owners to forego private licensing agreements with cable systems for the system's retransmission of their work in exchange for a requirement that a cable system file semi-annual statements of account and royalty fee payments with the Copyright Office. 17 U.S.C. § 111(d). Plaintiffs claim that defendant neither filed statements of account with the Copyright Office nor made appropriate royalty payments for all building tenants or addresses it serves. Although Liberty has been in operation since 1986, it did not file any statements of account until August of 1994. At that time, the defendant filed statements for the 1992/1, 1992/2, 1993/1, 1993/2 and 1994/1 semi-annual accounting periods. *fn6" Statements for the 1991/2, 1992/1, 1992/2, 1993/1, 1994/1 and 1994/2 were filed in April of 1995. Each statement filed with the Copyright Office reported information for a single building tenant or address served by Liberty Cable in New York, New York. *fn7" Plaintiffs contend that the individual statements filed by defendant are a willful violation of 17 U.S.C. § 111(d) and are based on defendant's artificial fragmentation of its cable system in an attempt to pay reduced royalties.

 II. Discussion

 a. Calculation of Royalty Fees and Definition of a Cable System.

 Pursuant to the cable compulsory licensing plan, 17 U.S.C. § 111(d), cable systems are permitted "to transmit copyrighted television broadcasts so long as they pay royalties and abide by the procedures of the licensing schedule." See Satellite Brdcstg. and Comm. Ass'n. v. Oman, 17 F.3d 344, 346-47, cert. denied, U.S. , 115 S. Ct. 88 (1994). Section 111(d) of the Copyright Act specifically outlines the royalty payment and filing procedures which a cable system is to follow when it engages in the secondary transmission of copyrighted work. This payment plan, as outlined in the statute, requires a cable system to file semiannual statements of account with the Copyright Office and pay royalty fees in accordance with the statutory formula. See 17 U.S.C. §§ 111(d)(1)(A)-(D).

 The statute outlines three royalty fee payment levels. It is the cable system's obligation to determine which of the three levels it fits into on the basis of its semiannual gross receipts. Id. The largest cable systems are known as "Form 3" systems and have gross receipts in excess of $ 292,000. Form 3 systems are required to pay a royalty fee calculated as a percentage of gross receipts based on a portion of distant signals used. *fn8" See generally, 17 U.S.C. § 111(d)(1)(B)(i)-(iv).


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