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PRIMETIME 24 JOINT VENTURE v. NBC

September 28, 1998

PRIMETIME 24 JOINT VENTURE, Plaintiff, against NATIONAL BROADCASTING COMPANY, INC., ABC, INC., CBS INC., FOX BROADCASTING COMPANY, NATIONAL ASSOCIATION OF BROADCASTERS, NBC TELEVISION AFFILIATES, ABC TELEVISION AFFILIATES ASSOCIATION, CBS TELEVISION NETWORK AFFILIATES ASSOCIATION, KPAX COMMUNICATIONS, INC., BENEDEK BROADCASTING CORPORATION, Defendants.


The opinion of the court was delivered by: MCKENNA

MEMORANDUM AND ORDER

 MCKENNA, D.J.,

 In this action, plaintiff PrimeTime 24 Joint Venture, a satellite operator supplying network television programming to satellite dish users in the United States, alleges that defendants, who include the major television networks, their affiliates, and certain television trade organizations, have engaged in concerted action to restrict the availability of network programming to direct-to-home satellite subscribers, in violation of federal and state antitrust and common law. Defendants have moved this Court for an order pursuant to Rule 12(b)(6) dismissing the Complaint for failure to state a claim upon which relief can be granted, or in the alternative, staying the action until the underlying copyright infringement litigation pending in the Southern District of Florida is resolved.

 For the reasons stated below, the Court grants the defendants' motion to dismiss the Complaint in its entirety.

 I. BACKGROUND

 The facts underlying the Complaint, when construed in the light most favorable to the plaintiff, are as follows.

 A. The Parties

 Plaintiff PrimeTime 24 Joint Venture ("PT24") is the leading provider of network television programming to satellite dish owners in the United States. (Compl. P 6). PT24 is a satellite operator; it uplinks the programming of various broadcast networks and retransmits such programming either directly to consumers or to direct-to-home satellite distributors, who then sell packages of channels to satellite dish owners. (Compl. PP 6, 30).

 Defendants include: the major network companies, ABC, Inc. ("ABC"), CBS, Inc. ("CBS"), the National Broadcasting Company ("NBC"), and the Fox Broadcasting Company ("Fox"); the National Association of Broadcasters ("NAB"), a trade association comprising the networks and television stations affiliated with each network; several affiliates' associations; as well as several corporations which own and/or operate individual stations affiliated with the major networks. (Compl. PP 13-22).

 The network defendants -- ABC, NBC, CBS, and Fox -- both supply and distribute network television programming. (Compl. P 26). They supply network programming to affiliate stations in over 100 localities and distribute their programming through "owned and operated" stations in cities throughout the United States. (Id.). Collectively, the defendants "own, control, or have the capability of securing the right to broadcast" the programming at issue in this case. (Id.).

 B. The Television Industry

 Until the introduction of cable and satellite television, television programming was transmitted solely through over-the-air broadcasts. By nature, the reception of over-the-air programming may be limited by "the power of the broadcast transmitter, terrain, and various sorts of interference." (Compl. P 27). Accordingly, rural and other isolated households are often unable to receive an over-the-air signal of a certain minimum strength. This geographic limitation, combined with the relatively small number of available broadcast frequencies, has limited the number of channels in a given area and kept local stations protected to a large extent from competition from distant stations. (Id. P 27). Unlike cable and satellite television, however, broadcast television signals are available free of charge to anyone who has a television set and an antenna. Over-the-air broadcast stations and networks rely upon advertising revenues to pay for their programming. (Defs.' Mem. of Law at 4-5).

 Satellite delivery differs from conventional, over-the-air television broadcasting in several respects. Satellite operators such as PT24 charge their customers a fee for the provision of programming. (Compl. P 33). However, because it is not limited by geography or by the limited number of broadcast frequencies, satellite delivery enables customers to view network stations other than their own local station. (Compl. PP 27, 29). Although subscribers must pay for the satellite's imported network programming (which they would otherwise get for free over-the-air), viewers may choose to subscribe to a satellite operator in order to "time shift" programming, to see sports or other programming not available locally, or to avoid maintaining their overhead antennas. (Compl. P 29; Defs.' Mem. of Law at 8).

 Satellite operators such as PT24 find it crucial to their economic viability to be able to include network programs as part of the package of programming services delivered to their customers. (Compl. P 31). Because of the market power of the television networks, direct-to-home satellite systems are at a competitive disadvantage if they cannot include network programming in the package of channels provided to their customers. (Compl. PP 4, 31).

 Broadcast television programming, however, both local and network, is copyrighted. As a result, absent the copyright owner's permission or license, neither PT24 nor any satellite provider could legally retransmit copyrighted network programming to its satellite customers. Recognizing the inherent conflict between the intellectual property rights of the television networks and the desire to ensure the efficient, widespread delivery of programming via satellite, Congress passed the Satellite Home Viewer Act ("SHVA") in 1988 to provide for a limited, statutory compulsory license permitting satellite carriers to retransmit network programming to certain households. (See 17 U.S.C. § 119; Compl. P 34). The purpose of the Act was to provide network programming to those isolated areas not served by a local network affiliate, while maintaining the existing national network/local affiliate distribution system by protecting the local affiliate's right to broadcast network programs within its local market. See H.R. Rep. 100-887(1), at 8 (1988).

 C. The SHVA

 The SHVA permits the retransmission of network programming in certain limited circumstances in exchange for a statutory royalty fee paid to the copyright owners. (See 17 U.S.C. § 119; Compl. P 34). Specifically, the SHVA provides satellite carriers such as PT24 with a limited compulsory license to retransmit network programming via satellite only to "unserved households." The SHVA defines "unserved households" as those which can meet a two-part test: first, the household must be incapable of receiving an over-the-air signal of "Grade B intensity" (as defined by the FCC); second, the household must not have received a signal of the relevant network by cable within the 90 days before the satellite carrier initiated service to that household. (17 U.S.C. § 119(d)(10); Compl. P 36). Accordingly, under the SHVA, PT24 must pay a statutorily-determined royalty fee to the networks in exchange for a statutory license to retransmit network television programming to satellite subscribers in "unserved households" as defined by the SHVA. (Compl. P 34). *fn1"

 In addition to creating this limited compulsory license, the SHVA sets forth a system of ensuring compliance with and enforcement of its terms. For example, the SHVA requires satellite carriers such as PT24 to provide each network with a list of new subscribers each month in order to enable the networks and local stations to evaluate the subscribers' eligibility. (See 17 U.S.C. § 119(a)(2)). The Act also provides for a system by which the network stations may challenge a satellite carrier's transmission to a household that is believed to fall outside the statutory definition of "unserved household." When such a challenge is made, the SHVA requires the satellite carrier either to terminate service to that household within thirty days of the challenge, or to conduct a measurement of the signal intensity of the household to determine whether it is in fact "unserved." (See 17 U.S.C. § 119(a)(8)). If, after the signal strength has been tested, the household is determined not to be "unserved," the satellite carrier must terminate service within sixty days. Alternatively, if the household is found to be unserved, the ...


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