Source: https://www.jdsupra.com/post/documentViewer.aspx?fid=01a7d85e-2c84-4532-bf7b-e147a50b5ed5
Timestamp: 2018-04-23 17:47:26
Document Index: 721481093

Matched Legal Cases: ['§ 101', '§ 8', '§ 101', '§ 512', '§ 106', '§ 501', '§ 107', '§ 107', '§ 411', '§ 501', '§ 501', '§ 410', '§ 106', '§ 271', '§ 107', '§ 107', '§ 107', '§ 107', '§ 106', '§ 106', '§ 106', '§ 10104', '§ 101', '§ 106', '§ 101', '§ 104', '§ 106', '§ 106', '§ 101', '§ 106', '§ 106', '§ 101', '§ 101', '§ 101', '§ 106', '§ 106', '§ 111', '§ 111', '§ 111', '§ 111', '§ 8', '§ 8', '§ 101', '§ 1003']

CABLEVISION’S REMOTE DV-R SYSTEM AND A SOLUTION FOR THE DIGITAL-RECORDING AGE | The Jacobson Firm, P.C. - JDSupra
CABLEVISION’S REMOTE DV-R SYSTEM AND A SOLUTION FOR THE DIGITAL-RECORDING AGE
by The Jacobson Firm, P.C.
A look at the Cablevision Remote DV-R decision with a possible legislative solution to compensate creators of copyrighted works.
461 CABLEVISION’S REMOTE DV-R SYSTEM AND A SOLUTION FOR THE DIGITAL-RECORDING AGE Justin M. Jacobson* I. INTRODUCTION In early 2006, Cablevision unveiled its plan to release a new Remote Digital Video Recorder System (“RS-DV-R”).1 This RS-DV-R system, provided by Cablevision to its current subscribers for an additional monthly fee, would enable these subscribers to down-load a “simple software upgrade” to add a recording function to their existing cable-boxes.2 This upgrade would permit users to record any live television program transmitted by Cablevision, and store a copy of that transmission on Cablevision’s remote server.3 Because the copy is stored on Cablevision’s remote server, the subscriber would not need to purchase any additional “Set-Top” box Digital Video Recorder equipment (“STS-DV-R”) to make the recording,4 * Juris Doctor Candidate, May 2011, Touro College, Jacob D. Fuchsberg Law Center. Spe-cial thanks to Professor Rena Seplowitz for her valuable assistance and to my father for all his guidance and support throughout my life. 1Twentieth Century Fox Film Corp. v. Cablevision Sys. Corp., 478 F. Supp. 2d 607, 609 (S.D.N.Y. 2007), rev’d sub nom., The Cartoon Network, L.P., L.L.L.P. v. CSC Holdings, Inc., 536 F.3d 121, 124 (2d Cir. 2008), cert. denied, Cable News Network, Inc. v. CSC Holdings, Inc., 129 S. Ct. 2890 (2009). See also Fox, 478 F. Supp. 2d at 610 (stating that Cablevision “own[s] and operate[s] cable television systems”); Tim Arango, Cablevision’s Strategy Includes A Possible Spinoff, N.Y. TIMES, Aug. 6, 2008, at C3 (explaining that Cab-levision is owned by the Dolan family, who also own the New York Knicks, New York Rangers, Madison Square Garden, Radio City Music Hall, Newsday Newspaper, and Cable channels AMC, IMC, and Sundance Channel, and provides cable services to “nearly three million homes in New York, New Jersey, and Connecticut”). 2Brian Stelter, A Ruling May Pave The Way For Broader Use of DVR, N.Y. TIMES, Aug. 5, 2008, at C8. 3Id. 4DVR for iO, CABLEVISION, http://www.optimum.com/io/dvr/index.jsp (last visited Apr. 6, 2010) (explaining that a “Set-Top” box or “STS-DV-R” is a separate recording device that permits a user to record any live television transmission and store a copy of the program on the STS-DV-R’s internal hard-drive). 462 TOURO LAW REVIEW [Vol. 27 uipment. whereas an individual who previously wanted to record live televi-sion was required to purchase additional equipment and store the rec-orded copy on that additional eq5Cablevision is not alone in its plans to release this new tech-nology; other cable service providers such as Comcast, TimeWarner Cable, and possibly Verizon FiOS also plan to introduce RS-DV-R systems similar to Cablevision’s.6 Additionally, STS-DV-R use in the United States has increased dramatically over the past few years.7 The increase in STS-DV-R use, along with the ease of upgrading ex-isting cable-boxes to Cablevision’s new RS-DV-R system, and the intention of many other cable service providers to offer similar re-mote recording systems, pose significant concerns for copyright owners, whose “economic interests . . . depend on [the] . . . ability to monetize their creative works.”8 Attempting to protect their interests, Twentieth Century Fox, Universal, CBS, and other large copyright content owners brought a direct infringement suit to enjoin Cablevi-sion from distributing the new RS-DV-R system without first acquir-ing appropriate licensing.9 The copyright owners contended that Cablevision’s RS-DV-R system directly infringed upon two of the exclusive rights afforded to copyright owners under the 1976 Copy-right Act (“Copyright Act”):10 the right to duplicate and the right to publicly perform their copyrighted works.11 In Cable News Network, Inc. v. CSC Holdings, Inc.,12 the dis-trict court held that Cablevision had violated the copyright owners’ exclusive rights under the Copyright Act and required Cablevision to negotiate compulsory licenses for the release of the new RS-DV-R system.13 On appeal, the Second Circuit reversed the district court’s 5Stelter, supra note 2. 6Marguerite Reardon, Supreme Court Declines To Hear Cable DVR Case, CNET NEWS (Jan. 13, 2009), http://news.cnet.com/8301-1023_3-10141706-93.html. 7Stelter, supra note 2 (noting that initially, in 2006, when suit was originally filed by Fox, STS-DV-Rs were only in “1 out of 14 homes with television in the United States;” however, today in the United States, STS-DV-Rs are “present in one in four homes”). 8Brief for Screen Actors Guild, Inc. & Writers Guild of Am., West, Inc. as Amici Curiae Supporting Petitioners, Cable News Network, Inc. v. CSC Holdings, Inc., 129 S. Ct. 2890 (2008) (No. 08-448), 2008 WL 4843616 at *3 [hereinafter Screen Actors Guild Brief]. 9Fox, 478 F. Supp. 2d at 609. 10U.S. Copyright Act, 17 U.S.C.A. § 101, et. seq. (West 2009). 11Id. at 617. 12Fox, 478 F. Supp. 2d 607. 13Id. at 624. 2011] DIGITAL RECORDING AGE 463 decision14 and the Supreme Court denied certiorari.15 Thus, Cablevi-sion was not required to negotiate a licensing fee for providing its new copying system, and the copyright owners were denied an op-portunity to “monetize their creative works.”16 This Comment examines the evolution of copyright infringe-ment liability for the manufacturing and commercial distribution of potentially infringing technologies from video-cassette recorders to newer technologies such as the RS-DV-R system. Part II analyzes the relevant framework that the courts have articulated when deter-mining a third-party’s direct copyright infringement liability for sell-ing equipment that potentially infringes another’s copyright. Part III examines the district court and Second Circuit decisions regarding Cablevision’s potential direct copyright infringement liability for commercially distributing its new RS-DV-R system without first ac-quiring a license from the copyright owner. Part IV discusses the po-tential for additional advertising revenue Cablevision may obtain based on viewership data stored on its servers, and the potential long-term impact of the Second Circuit’s decision on copyright owners’ finances, especially individuals who invest and create copyrighted works in the entertainment industry, based on a decline in Video On-Demand system (“VOD”) license fees and royalties from DVD sales. Finally, this Comment concludes that the Second Circuit’s blue-print enables both individuals and corporations to avoid paying licensing fees to copyright owners by creating and encouraging new automated copyright distribution systems that conform to the parame-ters articulated by the Second Circuit which require no licensing. Critical of the Second Circuit’s approach, this Comment proposes that either the Copyright Royalty Judges must authorize an increase in the current statutory license fee rates that cable systems currently pay or Congress must establish new statutory fees paid by cable sys-tems which provide recording systems to their subscribers to com-pensate the creators for the losses of revenues from other sources, and to continue to effectively promote and protect the arts.17 14The Cartoon Network, 536 F.3d at 140. 15Cable News Network, Inc., 129 S. Ct. 2890. 16Screen Actors Guild Brief, supra note 8, at *3. 17U.S. CONST. art. I, § 8, cl. 8. 464 TOURO LAW REVIEW [Vol. 27 II. THE EVOLUTION OF TECHNOLOGICAL COPYRIGHT INFRINGEMENT A. Copyright Infringement⎯Direct and Third-Party Liability The 1976 Copyright Act represented the first significant change in United States copyright law in nearly a century.18 The Act has been updated several times, including the Digital Millennium Copyright Act of 1998 (“DMCA”),19 which allowed United States copyright law to adapt to new technologies as they emerged with the expansion of the internet. The Copyright Act grants copyright owners the exclusive right: (1) to reproduce copies of their works; (2) “to prepare deriva-tive works based upon” their original work; (3) to distribute copies of their work publicly; (4) to perform their work publicly; (5) “to dis-play the copyrighted work publicly;” and (6) to perform a digital au-dio-transmission (sound recording) publicly.20 If an individual uses the copyrighted work of another without permission, in any manner, the owner may initiate a suit for infringing upon the owner’s exclu-sive rights in the work, unless the use is exempted by fair use or another defense.21 In the United States, a work must be registered or pre-registered with the United States Copyright Office before a party can institute a claim for copyright infringement.22 Generally, once a work is registered or pre-registered, a plaintiff can bring a claim of direct copyright infringement or claims of vicarious or contributory 18See U.S. Copyright Act, 17 U.S.C.A. § 101, et. seq. 19 Digital Millennium Copyright Act, 17 U.S.C.A § 512(j)(1) (West 2009). 20Id. § 106(1)-(6). 21Id. § 501(b); id. § 107 (creating a fair use exemption from copyright infringement liabil-ity permitting an individual to use and reproduce another’s copyrighted work without per-mission for limited purposes including “criticism, comment, news reporting, teaching, . . . scholarship, or research”). The court considers the potential user’s fair use based on: (1) [T]he purpose and character of the use, including whether [the] use is . . . commercial . . . or is for [a] nonprofit educational purpose[]; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for or value of the copy-righted work. 17 U.S.C.A. § 107. 22Id. § 411(a). 2011] DIGITAL RECORDING AGE 465 infringement.23 Direct infringement is established by showing of va-lid ownership of a copyright and a violation of one of the exclusive rights afforded to the copyright owner.24 For a work that is registered within five years of publication, the Copyright Act mandates that possession of a valid United States Copyright Office registration cer-tificate shall constitute prima facie evidence for establishing valid ownership of a copyrighted work.25 Deciding whether the owner’s exclusive right to reproduce a copy has been infringed requires proof that the original work’s copy-rightable expression was taken.26 To make this determination, the court looks at any substantial similarities existing between the works,27 and whether the alleged infringer had access to the disputed copyrighted work.28 If the works’ protected expressions are substan-tially similar and there is evidence of the alleged infringer’s access to the original work, infringement may be found.29 Even when no proof of access to the original work exists, infringement may be found if the works are so strikingly similar as to rule out the possibility of in-dependent creation.30 Once valid ownership and copying are established, the court then decides whether the copy is an infringing one based on what a lay observer would believe.31 If the subsequent work is found to be infringing, the work’s creator may be liable for direct copyright in-fringement.32 A copyright owner may also institute a claim against a third-23Id. § 501(b). 24Feist Publ’ns, Inc. v. Rural Tel. Serv. Co., Inc., 499 U.S. 340, 361 (1991); 17 U.S.C.A. § 501(b). 2517 U.S.C.A. § 410(c) (West 2009). See also Corbis Corp. v. Amazon.com, Inc., 351 F. Supp. 2d 1090, 1113 (W.D. Wash. 2004) (stating that the “[e]xistence of a certificate of reg-istration from the United States Copyright Office . . . is prima facie evidence of a valid copy-right”). 26Hoehling v. Universal City Studios, Inc., 618 F.2d 972, 977 (2d Cir. 1980) (citing Arnstein v. Porter, 154 F.2d 464, 468 (2d Cir. 1946)). 27Id. at 977 (citing Nichols v. Universal Pictures Corp., 45 F.2d 119, 121 (2d Cir. 1930)) (stating that generally, “wrongful appropriation is shown by proving a ‘substantial similarity’ of copyrightable expression”). 28Arnstein, 154 F.2d at 468. 29Id. 30Id. 31Id. 32Id. at 468-69. 466 TOURO LAW REVIEW [Vol. 27 , Inc.39 party based on vicarious or contributory liability.33 A third-party in-fringes “vicariously by profiting from [the] direct infringement [of another] while declining to exercise a right to stop or limit” the in-fringing conduct.34 A third-party may be contributorily liable for the direct infringement of another if the third-party has “knowledge of the infringing activity, [and] induces, causes or materially contributes to the infringing conduct [by] another.”35 A third-party may also be liable for contributory copyright infringement if it provides or distri-butes “machinery or goods that facilitate . . . infringement”36 and have no “commercially significant noninfringing uses.”37 B. Sony Corp.—Videocassette Recorders (“VCRs”) As technologies evolve, so do new issues with respect to cop-yright infringement liability. A new problem arose with the advent of home video recording. Home video recording occurs when an indi-vidual utilizes a VCR machine to record and create a personal copy of a copyrighted program transmitted on public television.38 This exploitation of copyrighted works set the stage for the Supreme Court’s landmark decision in Sony Corp. of America v. Universal City StudiosIn Sony Corp., the copyright owners of television programs broadcasted on public television airwaves brought a contributory in-fringement suit against Sony for manufacturing and commercially distributing millions of Sony Betamax videocassette recorders.40 The Sony Betamax VCR permitted an individual to watch live television 33Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 545 U.S. 913, 929-30 (2005). 34Id. at 930 (citing Shapiro, Bernstein & Co., Inc. v. H.L. Green Co., Inc., 316 F.2d 304, 308 (2d Cir. 1963)) (holding a third-party vicariously liable for the “bootleg[ged]” records sold by a record store that the third-party had received “10% or 12%” of every sale from every record from the store, including a percentage of both legal and bootlegged records sold by the store). 35Gershwin Publ’g Corp. v. Columbia Artists Mgmt., Inc., 443 F.2d 1159, 1162 (2d Cir. 1971). See also Grokster, Ltd., 545 U.S. at 937-38 (finding Grokster liable for contributory infringement due to the Grokster software developers’ targeting, advertising, and encourag-ing former Napster users to use Grokster’s new software to directly infringe on others’ copy-righted works). 36Matthew Bender & Co., Inc. v. West Publ’g Co., 158 F.3d 693, 706 (2d Cir. 1998). 37Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417, 442 (1984). 38Id. at 419-20. 39464 U.S. 417. 40Id. at 419-20. 2011] DIGITAL RECORDING AGE 467 . .” while simultaneously recording another program for subsequent viewing.41 The actual video cassettes that contained the recorded co-pyrighted programs could be erased and reused.42 The Sony Beta-max VCR also allowed the user to fast-forward through the pro-grams, “enabling a viewer to omit a commercial advertisement from the recording . . 43The copyright owners claimed that numerous individuals in the general public who purchased VCRs used them to record and produce their own copies of copyrighted televised works without permission and in violation of the copyright owners’ exclusive rights.44 The copyright owners brought their contributory infringe-ment claim against Sony, but did not attempt to directly sue any indi-vidual Betamax users.45 These copyright owners argued that Sony was liable for contributory infringement because Sony was “supply-ing the ‘means’ to accomplish an infringing activity and encouraging that activity through [its] advertisement[s].”46 The Court held that since Sony only supplied the means to make the copies, it was not li-able for contributory infringement because the copyright owners were the ones who actually supplied the “Betamax consumers with [the] works” by broadcasting them on free public television airwaves.47 Secondly, the copyright owners argued that Sony was liable for contributory copyright infringement due to an “ongoing relation-ship between the direct infringer [consumer] and the contributory in-fringer [Sony] at the time the infringing conduct occurred.”48 The Court also rejected this argument stating that contributory liability is only permissible when “the ‘contributory’ infringer was in a position to control the use of copyrighted works by others and [the infringer] had authorized the [infringing] use without permission from the cop-yright owner.”49 The Court ruled that this theory was inapplicable 41Id. at 422. 42Id. 43Id. at 423. 44Sony Corp., 464 U.S. at 419-20; 17 U.S.C.A. § 106(1). 45Compare Sony Corp., 464 U.S. at 434, with Sony Music Entm’t, Inc. v. Does 1-40, 326 F. Supp. 2d 556, 558 (S.D.N.Y. 2004) (arguing that “each of the forty Doe defendants” who used a “ ‘peer-to-peer’ . . . file copying network—to download, distribute to the public, or make available for distribution” Sony’s copyrighted works—should be liable to Sony). 46Sony Corp., 464 U.S. at 436. 47Id. 48Id. at 437. 49Compare id., with Gershwin Publ’g Corp., 443 F.2d at 1162-63 (finding Gershwin lia-468 TOURO LAW REVIEW [Vol. 27 ng uses.57 because “[t]he only contact between Sony and the users of the Beta-max . . . [had] occurred at the moment of [the] sale” of the VCR and Sony was not in a position to control the VCR purchaser’s future ac-tions.50 The Court also stated that Sony was not liable for contributo-ry infringement because no volitional conduct on the part of any So-ny employee had a “direct involvement [or impact on] the alleged[] infringing activity” done by a VCR purchaser.51 Finally, the copyright owners argued that Sony was liable for contributory infringement for selling the “equipment with construc-tive knowledge of the fact that their customers may use that equip-ment [VCR] to make unauthorized copies of copyrighted material.”52 The Court again rejected the owners’ argument because “no precedent in the law of copyright [exists] for the imposition of vica-rious liability on such a theory.”53 Ultimately, the Supreme Court’s decision on Sony’s contribu-tory infringement liability depended on whether the Betamax VCR was capable of any “commercially significant noninfringing uses.”54 The Court relied on patent law’s “staple article or commodity of commerce”55 doctrine and ruled that the “sale of [a] copying [ma-chine] . . . does not constitute contributory infringement if the product is widely used for legitimate, unobjectionable purposes.”56 The Court emphasized that it “need not explore all the different potential uses of the machine” when determining potential infringing uses, but only whether the technology had a “significant number” of non-infringiThe Court determined that time-shifting58 was the “primary ble for contributory infringement because Gershwin had “actual knowledge” that the artists it was managing were performing copyrighted works without appropriate licensing, “was in a position to police the infringing conduct of its artists,” and “derived substantial benefit [booking fee] from the actions of the primary infringers [the artists]”). 50Sony Corp., 464 U.S. at 437-38. 51Id. at 438 (quoting Universal City Studios, Inc. v. Sony Corp. of Am., 480 F. Supp. 429, 460 (C.D. Cal. 1979)). 52Id. at 439. 53Id. 54Id. at 442. 55Sony Corp., 464 U.S. at 440 (quoting 35 U.S.C.A. § 271(c) (West 2009)). 56Id. at 442. 57Id. (emphasis in original). 58Id. at 423 (stating that “[t]ime-shifting enables viewers to see programs they otherwise would miss because they are not at home, are occupied with other tasks, or are viewing a program on another station at the time of a broadcast that they desire to watch”). 2011] DIGITAL RECORDING AGE 469 use of the machine.”59 The Court ruled that “time-shifting is fair use;” thus, exempting any direct copyright infringement liability for an individual who copied works from the public airwaves using a VCR without consent from the copyright proprietor.60 Sony demon-strated that “substantial numbers of copyright holders who license their works for broadcast on free television would not object to hav-ing their broadcasts time-shifted by private viewers”61 and that “time-shifting would cause . . . []minimal harm to the potential market . . . value of . . . copyrighted works.”62 Sony was not held liable for con-tributory infringement because the VCR was “capable of substantial noninfringing uses” since the underlying and dominant use—time-shifting by the VCR user—was not considered an infringement.63 The Court denied a rehearing on this issue, laying the foundation for subsequent infringement cases based on a third-party providing tech-nology capable of substantial infringing use.64 C. Basic Books, Inc. and Princeton University Press—Photocopy Machines The courts subsequently decided two cases regarding technol-ogical copyright infringement liability as a result of the photocopier, a technology capable of reproducing exact duplicates of any material placed in its copier bed: Basic Books, Inc. v. Kinko’s Graphics Corp.65 and Princeton University Press v. Michigan Documents Ser-vices, Inc.66 In Basic Books, Inc., copyright owners filed a direct infringe-59Id. (acknowledging that before the Supreme Court decision, both parties conducted sev-eral hundred surveys of VCR owners in order to determine what the users’ “primary use of the machine” was and each party’s survey reached nearly the same result, which was that most VCR owners predominantly utilized the machine for the purpose of “time-shifting” ra-ther than creating libraries of infringing copies). 60Sony Corp., 464 U.S. at 454-55. See 17 U.S.C.A. § 107. 61Sony Corp., 464 U.S. at 456. 62Id. 63Id. 64Sony Corp., 465 U.S. 1112 (1984) (denying the petition for re-hearing); see also Peter S. Menell & David Nimmer, Legal Realism In Action: Indirect Copyright Liability’s Contin-uing Tort Framework and Sony’s De Facto Demise, 55 UCLA L. REV. 143, 149 (2007) (dis-cussing Sony Corp., as well as possible alternative tort theories to help decide further tech-nological infringement cases). 65 Basic Books, Inc. v. Kinko’s Graphics Corp., 758 F. Supp. 1522 (S.D.N.Y. 1991). 66Princeton Univ. Press v. Mich. Documents Servs., Inc., 99 F.3d 1381 (6th Cir. 1996). 470 TOURO LAW REVIEW [Vol. 27 ment claim against Kinko’s for compiling and selling several student course-packets made from photocopies of textbooks without paying a licensing fee to the textbook copyright owners.67 These course-packets consisted of unauthorized materials duplicated by Kinko’s employees utilizing Kinko’s photocopy machines from the copyright owners’ textbooks.68 These copies were sold to students, eliminating the students’ need to purchase the entire textbook.69 The district court focused on the commercial nature of the works reproduced by Kinko’s in addition to its volitional conduct re-garding the actual copying of the course-packets.70 The court ana-lyzed the volitional conduct of Kinko’s and its employees of offering nation-wide discounts to the local professors to “provide[] incentives to professors for choosing their copy center over others.”71 Kinko’s representatives also visited professors and distributed brochures dis-cussing Kinko’s photocopying services.72 Kinko’s employees active-ly solicited course information and textbook listings from these pro-fessors in order to obtain and photocopy the necessary materials to compile the course-packets for sale directly to the students.73 Kinko’s argued that it was excused from direct infringement liability due to the fair use defense allowing the reproduction of ma-terials for educational purposes.74 The court rejected the fair use ar-gument and found Kinko’s liable for direct infringement.75 The court emphasized that Kinko’s profited from selling copies of the copy-righted material without paying the copyright owners for these repro-ductions.76 The court also stressed that Kinko’s copies were com-mercially harmful, as the unauthorized copies “compete[d] in the same market as the copyrighted works” and replaced the need for 67Basic Books, Inc., 758 F. Supp. at 1526. 68Id. (explaining that the copying varied from “14 to 110 pages” from each textbook and the student course-packets were compiled by Kinko’s employees into “five numbered pack-ets”). 69Id. at 1534. 70Id. at 1529, 1532. 71Id. at 1532. 72Basic Books, Inc., 758 F. Supp. at 1529. 73Id. 74Id. at 1531. See also 17 U.S.C.A. § 107(1). 75Basic Books, Inc., 758 F. Supp. at 1547. 76Id. at 1532 (citing Harper & Row Publishers, Inc. v. Nation Enters., 471 U.S. 539, 562 (1985)); id. at 1529 (explaining that in 1988, Kinko’s revenue was $42 million, and in 1989, Kinko’s revenue was $54 million).2011] DIGITAL RECORDING AGE 471 bility. students to purchase expensive copyrighted textbooks.77 In Princeton University Press, copyright owners filed a direct infringement claim against Michigan Document Services for the compiling and selling of student course-packets made from photoco-pied pages of textbooks without paying a royalty fee to the copyright owners.78 The Sixth Circuit focused on the volitional conduct of the copy-center and its employees when holding Michigan Document Services liable as direct infringers of the textbook owners’ copy-righted works.79 The volitional conduct of the copy-center included contacting the university professors to obtain the necessary copy-righted materials for the packets.80 The copy-center also instructed its employees to photocopy, bind, and “[a]dd[] a cover page [or] a ta-ble of contents,” in order to sell the finished product to students with-out paying a licensing fee to the copyright owner.81 Similar to the copy-center in Basic Books, Inc., Michigan Document Services claimed a fair use exemption for the educational purpose of reproducing the work for student course-packets.82 Like the court in Basic Books, this court also rejected the fair use defense due to the commercial nature of the infringement.83 The Sixth Cir-cuit emphasized that any volitional conduct by an individual that causes a violation of a copyright owner’s exclusive rights can result in direct infringement lia84III. THE CARTOON NETWORK CASE ANALYSIS A. Cablevision’s Remote Digital Video Recorders System (“RS-DV-R”) Technology has evolved at a rapid pace, eventually leading to the replacement of most VCRs with new STS DV-Rs.85 These STS DV-Rs are capable of recording a live television program and storing 77Id. at 1532, 1534. 78Princeton Univ. Press, 99 F.3d at 1384. 79Id. 80Id. 81Id. 82Id. at 1383; 17 U.S.C.A. § 107(1). 83Princeton Univ. Press, 99 F.3d at 1387. 84Id. at 1384, 1392. 85 Mark McGuire, Rise of DVR Likely to Pull Plug on VCR, CHI. TRIB., Feb. 20, 2003. 472 TOURO LAW REVIEW [Vol. 27 g. a digital copy of this program on the hard-drive within the machine at the end-user’s location without the creation of any videocassette or hard copy.86 The next technological advance after the STS-DV-R was Cablevision’s new RS-DV-R system.87 In March 2006, Cablevision announced the pending release of a new RS-DV-R system, which would allow any Cablevision sub-scribers who did not own an STS DV-R system to record live televi-sion programs (for an extra fee) without purchasing or renting the STS-DV-R recording equipment by simply downloading a software upgrade to their existing cable-box.88 The program copy created by the RS-DV-R system would be stored on Cablevision’s own servers for the subscriber to view at a later point or until the user erased the copy.89 Cablevision, which already pays licenses to copyright own-ers for the VOD system, did not obtain an additional license for this new RS-DV-R on-demand viewing system.90 This led the copyright owners of televised works to institute a suit against Cablevision to enjoin the distribution of the new RS-DV-R system without appropri-ate licensin91B. District Court Decision The Twentieth Century Fox Film Corp. v. Cablevision Sys-tems Corp.92 suit for direct copyright infringement was originally brought in federal district court by Fox against Cablevision.93 Fox specifically did not include a claim for contributory infringement against Cablevision94 because it was “unwilling to challenge the con-sumer’s right to record television programs for later viewing” (time-shifting)95 and Cablevision affirmatively waived its fair use de-86Fox, 478 F. Supp. 2d at 611-12. 87Id. at 612. 88Id. at 609. 89Id. at 612. 90Id. at 609-11. 91Fox, 478 F. Supp. 2d at 609-10. 92 478 F. Supp. 2d 607. 93Id. at 616. 94Id. Based on the Supreme Court’s decision in Sony Corp., a contributory infringement claim by Fox against Cablevision would have probably failed because the RS-DV-R users’ main reason for recording the copyrighted programs was for “time-shifting” purposes, which the Court has explicitly found to be fair use and not an infringement. Id. at 618. 95Brief for Defendants-Counterclaimants-Appellants, The Cartoon Network LP, L.L.L.P. 2011] DIGITAL RECORDING AGE 473 fense.96 work stored o by violating one of Fox claimed that Cablevision, through its RS-DV-R system, directly violated two of Fox’s exclusive rights in its copyrighted ma-terials.97 Fox asserted that Cablevision engaged in the unauthorized reproduction of Fox’s copyrighted work through its RS-DV-R system by creating copies of Fox’s protected work98 and that Cablevision vi-olated Fox’s exclusive right to perform its work publicly due to the RS-DV-R system’s subsequent playback of the copyrighted n Cablevision’s remote servers to the RS-DV-R user.99 Fox claimed that Cablevision violated its exclusive right to reproduce its copyrighted works in two ways.100 Fox claimed that Cablevision had violated this right with the complete copy of Fox’s work stored indefinitely on Cablevision’s remote server and with the buffer portions of Fox’s copyrighted programming stored in the RS-DV-R system’s RAM memory during the RS-DV-R recording process.101 The first requirement for a copyright infringement claim due to Cablevision’s unauthorized reproduction of Fox’s program-ming was satisfied as it was undisputed that Fox “own[ed] valid cop-yrights for the television programming at issue.”102 The issue re-maining for the district court to address was whether Cablevision was copying or otherwise misappropriating Fox’s work, thereFox’s exclusive rights in the copyrighted work.103 Cablevision claimed that it was not liable for direct infringe-ment because it was “passive in the . . . recording process.”104 It ar-gued the RS-DV-R user, not Cablevision, was doing the copying when the user initiated the recording process with an RS-DV-R re-mote.105 Cablevision also contended that it could not be held directly liable for infringement “for merely providing [its] customers with the v. CSC Holdings, Inc, 536 F.3d 121 (2d Cir. 2007) (Nos. 07-1480-cv(L v(CON)), 2007 WL 6101594 [hereinafter Cablevision’s Second96Fox, 478 F. Supp. 2d at 618. See also 17 U.S.C.A. § 107. 97Fox, 478 F. Supp. 2d at 617. See also 17 U.S.C.A. § 106. 98Fox, 478 F. Supp. 2d at 617. See also 17 U.S.C.A. § 106(1). 99Fox, 478 F. Supp. 2d at 617. See also 17 U.S.C.A. § 106(4). 100Fox, 478 F. Supp. 2d at 617. 101Fox102Id. 103Id. See also 17 U.S.C.A. § 10104Fox105Id.474 TOURO LAW REVIEW [Vol. 27 uing and active involvement of Cablevision” and its employ machinery to make copies.”106 The trial court rejected Cablevision’s argument and ruled that Cablevision had made unauthorized copies of Fox’s copyrighted works107 because the RS-DV-R system “re-quire[d] continees.108 In holding Cablevision liable for making the recordings using the RS-DV-R system, the court distinguished the RS-DV-R system manufactured by Cablevision from the VCR in Sony Corp.109 The district court in Fox highlighted the “multitude of devices and processes” necessary to create a recording within Cablevision’s RS-DV-R system.110 To use the RS-DV-R, a consumer who clicks the record button on the RS-DV-R remote sends a request to Cablevi-sion’s remote server to start the recording process.111 However, with a VCR, a “simple push of a button” produces a recording without any interaction with the supplier of the copying technology.112 Addition-ally, a monthly subscription is required for this RS-DV-R service to function, while the stand-alone transportable VCR technology in So-ny Corp. was purchased and owned outright by the consumer, with-out any outside interactions or additional periodic subscriptions to commence a recording within the system.113 The court also found the RS-DV-R system differed from the VCR in Sony Corp. because of the RS-DV-R system’s “complex computer network.”114 This system required “constant monitoring by Cablevision personnel” and con-stant interaction between the user’s set-top box and Cablevision’s remote servers in the playing or creating of a recording.115 In Sony Corp., “the only contact between [the parties] occurred at the moment of the sale.”116 Furthermore, in Sony Corp., Sony merely manufac-tured and sold the equipment to the end-user, while in Cablevision’s RS-DV-R system, Cablevision “suppl[ied] a set-top box to the cus-107Id. at 621. 108Id. at 618. 109 Fox, 478 F. Supp. 2d at 618. 110Id. 111Id. 112Id. 113Id. 114Fox, 478 F. Supp. 2d. at 619. 115Id. 116Id. at 618-19 (quoting Sony Corp., 464 U.S. at 438) (internal quotation marks omitted). 2011] DIGITAL RECORDING AGE 475 , and “determine[d] how much memor mitted work could be directly recorded onto the STS-D for an additional on-demand viewing tomer[,] . . . maintain[ed and serviced] the rest of the equipment that makes the RS-DV-R’s recording process possible,” “decide[d] what content to make available” to the usersy to allot to each customer,” including the possibility of pur-chasing additional storage capacity.117 Cablevision argued unsuccessfully that because the RS-DV-R was similar to the currently unlicensed STS-DV-Rs, the RS-DV-R was also exempted from liability.118 Because no copyright holder had sued Cablevision for providing its STS-DV-R service, it con-tended, the same should be true for the RS-DV-R.119 The court re-jected this argument because different processes were necessary to create the recordings within each of these systems.120 With Cablevi-sion’s new RS-DV-R system, a recording can only be enabled by a complex interaction and data transmission between Cablevision’s remote server and the RS-DV-R user’s cable-box.121 In the STS-DV-R system, any transV-R’s internal hard-drive without any required external inte-ractions with a service provider.122 The court compared the new RS-DV-R’s “architecture and delivery method” to the Video-on-Demand (“VOD”) service, which Cablevision already provided to its subscribers “pursuant to licenses negotiated with” these same copyright owners.123 Here, the court ruled that since the new RS-DV-R system was “more akin to VOD than to a VCR,” additional licensing was needed because in both sys-tems, VOD and RS-DV-R, “Cablevision decides what content to make available to [the] customers” window and both services are based on the same technologi-cal configurations and necessities.124 117Fox, 478 F. Supp. 2d at 619. 118Id. 119Id. 120Id. 121Fox, 478 F. Supp. 2d at 619. 122Id. 123Id. (explaining that VOD is a “pay-per-view” automated system that allows an individ-ual to select and purchase a copyrighted work from a pre-selected programming list and watch this chosen program at that instant for one-time viewing). 124Id. (describing that an “RS-DVR is based on a modified VOD platform” and both the VOD service and the RS-DV-R system utilize a “session resource manager” to create tempo-rary encrypted pathways that transmit on-demand programming data from Cablevision’s servers to the user’s cable-box). 476 TOURO LAW REVIEW [Vol. 27 xtbooks) and the machinery (photoc vision differed from the ISP in Netcom because t on its remote servers. The court then continued its analysis regarding Cablevision’s liability as a direct infringer by comparing its volitional conduct and active role in the recording process to the role of the copy-center em-ployees in Basic Books, Inc. and Princeton University Press.125 The court notes that the volitional conduct by Cablevision, even at a pay-ing customer’s request, is analogous to the conduct by the copy cen-ters that were held liable for photocopying and selling course-packets at a customer’s request.126 Finally, the court held Cablevision direct-ly liable because it “provide[d] the content being copied” (television programs) and the duplication machinery (RS-DV-R server) for a profit.127 This was similar to the infringing copy-centers that had provided both the copyrighted content (teopier) used for the unauthorized reproduction and commercial distribution of student course-packets.128 The court also rejected Cablevision’s contention that it was exempt from liability because of its similarity to an Internet Service Provider (“ISP”).129 In Religious Technology Center v. Netcom On-line Communications Services, Inc.,130 the ISP was not held “liable for direct infringement” because the court determined it would be “virtually impossible for an ISP” such as Netcom to filter out all the infringing data on its server.131 The district court in Fox distin-guished Cablevision from the ISP in Netcom and held that Cablevi-sion was not exempt from liability because “Cablevision ha[d] unfet-tered discretion in selecting” and monitoring the RS-DV-R data on its remote servers.132 Cablehe latter could not practically monitor all the infringing data 133125Basic Books, Inc., 758 F. Supp. 1522; Princeton Univ. Press, 99 F.3d 1381. 126Fox, 478 F. Supp. 2d at 620. 127Id. See also RCA Records, A Div. of RCA Corp. v. All-Fast Sys., Inc., 594 F. Supp. 335, 337 (S.D.N.Y. 1984) (holding a store liable for direct infringement when its employees operated a s nd sold unauthorized copies of copustomer)128Fox, 478 F. Supp. 2d at 620. 129Id. 130907131Fox132Id. 133Id.2011] DIGITAL RECORDING AGE 477 n if the data were coFox further claimed that the temporary “buffer copies”134 which Cablevision’s RS-DV-R system stored in its RAM memory during the recording process constituted “copies”135 that violated Fox’s exclusive right to reproduce copies of its works.136 Fox argued that the buffer copies constituted an impermissible infringing copy because portions of its copyrighted programs were stored in the serv-er’s buffer memory and could be “used to make permanent copies of entire programs.”137 Cablevision argued that the buffer copies were not copies because they were not “fixed,”138 as required by the Copy-right Act.139 Alternatively, Cablevision argued that evensidered a copy, the use was only de minimis.140 The court disposed of Cablevision’s de minimis use claim by stating that these “buffer copies, in the aggregate, comprise[d] the whole” of Fox’s copyrighted work; thus, “[t]he aggregate effect of the buffering that takes place in the . . . RS-DV-R system can hardly be called de minimis.”141 Additionally, the court rejected Cablevi-sion’s claim that the buffer copies were not copies by relying on prior court decisions142 and on Senate Committee Reports regarding the implementation of the Digital Millennium Copyright Act (“DMCA”).143 Court decisions and the DMCA legislative history 134 then “used to make permanent copies of [the] entire program” for storage on Cablevision’s remote servers). 13517 U.S.C.A. § 101. This statute defines a “copy” as any “material object” in which “a work is fixed by any method now known or later developed, and from which the work can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a ma-chine or device. Id. Material objects include expressive forms of media such as paper, pho-norecord, photograph, or canvas. Id. 136Fox, 478 F. Supp. 2d at 621-22. See also 17 U.S.C.A. § 106(1). 137Fox, 478 F. Supp. 2d at 621. 13817 U.S.C.A. § 101 (defining a work as being “fixed” when it is “in a tangible medium of expression” that “is sufficiently permanent or stable to permit it to be perceived, repro-duced, or otherwise communicated for a period of more than transitory duration”). 139Fox, 478 F. Supp. 2d at 621. 140Id. 141Id. 142See Stenograph L.L.C. v. Bossard Assocs., Inc., 144 F.3d 96, 100 (D.C. Cir. 1998); Triad Sys. Corp. v. Se. Express Co., 64 F.3d 1330, 1335 (9th Cir. 1995); MAI Sys. Corp. v. Peak Computer, Inc., 991 F.2d 511, 518 (9th Cir. 1993). 143See U.S. COPYRIGHT OFFICE, A REPORT OF THE REGISTER OF COPYRIGHTS PURSUANT TO § 104 OF THE DIGITAL MILLENNIUM COPYRIGHT ACT 50-51 (2001), available at http://www.copyright.gov/reports/studies/dmca/dmca_ study.html. 478 TOURO LAW REVIEW [Vol. 27 vision’s server, constitute a copy as defined b ablevision had violated Fox’s exclusive right to perform a work p e inserted a copyrighted videocassette into a VCR player, pressed booths. performance was nsupport the notion that temporary copies, such as those stored in the buffer RAM memory in Cabley the Copyright Act, and that these RS-DV-R buffer copies were “within the scope of [works protected under] the copyright owner’s [exclusive] right.”144 The court also ruled in favor of Fox on their second claim by finding C145ublicly by transmitting copies of Fox’s copyrighted programs stored on Cablevision’s servers to the RS-DV-R user without permis-sion.146The district court rejected Cablevision’s argument that the subscriber, rather than Cablevision, performed the recording when the user pressed the record and play buttons.147 The trial court fo-cused on Cablevision’s requisite active participation in the playback process that caused the RS-DV-R system to reproduce the copy-righted works in the private RS-DV-R user’s home.148 The court dis-tinguished Cablevision’s active participation that triggered the RS-DV-R playback sequence, including the maintenance of the remote computer servers that retrieved and streamed the stored copyrighted programming from Cablevision’s remote servers to the user’s cable-box, from the active participation of the employees in the video store in Columbia Pictures Industries, Inc. v. Redd Horne, Inc.149 The vid-eo store in Redd Horne, Inc. was found to have performed work when an employe play, and the playback sequence displayed a copyrighted work to a limited number of paying customers in private viewing 150Furthermore, Cablevision argued that theot “public,”151 but rather, a private one because each RS-DV-R 144Fox, 478 F. Supp. 2d at 621. See also 17 U.S.C.A. § 106(1). 14517 U yrighted work], either directly or by means of any device or process”). 146Fox, 478 F. Supp. 2d at 624. See also 17 U.S.C.A. § 106(4). 147Fox, 478 F. Supp. 2d at 622. 148Id. 49Id. (citing Columbia Pictures Indus., Inc. v. Redd Horne, Inc., 749 F.2d 154, 157 (3d Cir. 1984)). 50Redd Horne, Inc., 749 F.2d at 157, 162. 51See 17 U.S.C.A. § 101. To perform or display [the copyrighted] work . . . at a place open to the public or at any place where a substantial number of persons outside of a normal circle of a family and its2011] DIGITAL RECORDING AGE 479 transmission emanated from a single private copy of the copyrighted work stored on Cablevision’s server which was associated with a sin-gle RS-DV-R user’s box and was “intended for [the] customer’s ex-clusive viewing.”152 However, the trial court found Cablevision lia-ble for engaging in the unauthorized public performance of Fox’s copyrighted works.153 The court emphasized the commercial rela-tionship that existed between Cablevision and the potential RS-DV-R customers, stating that any commercial “transmission is one made ‘to the public,’ ”154 and such RS-DV-R on-demand subsequent public transmissions would constitute a violation of Fox’s exclusive rights under the Copyright Act even if the transmission was to a single viewer watching the stream in his or her private home.155 The court compared the commercial relationship existing be-tween Cablevision and the RS-DV-R customer to the commercial re-lationship presented in On Command Video Corp. v. Columbia Pic-tures Industries.156 In On Command Video Corp., a hotel that maintained and ran an automated on-demand movie-rental system was found to have publicly performed a work, even though the indi-viduals watched the movies in their private hotel rooms.157 The court ruled that these individuals in their own hotel rooms were “nonethe-less members of ‘the public’ ” and emphasized the commercial nature whether the members of the puceive it in the same place or in s. 152Fox, 478 F.153Id. at 624. 154Id. at 623. 155Id. at 624. See also 17 U.S.C.A. § 106(4). 156Fox, 478 F. Supp. 2d at 623 (citing On Command Video Corp. v. Columbia Pictures Indus., 777 F. Supp. 787, 790 (N.D. Cal. 1991). 157Compare On Command Video Corp., 777 F. Supp. at 790 (finding that although the hotel guests were not watching the movies in a public place, they were still members of the public), with Columbia Pictures Indus., Inc., v. Prof’l Real Estate Investors, Inc., 866 F.2d 278, 282 (9th Cir. 1989) (finding that the defendant which owned a hotel did not perform a work “publicly” when it rented videodiscs to hotel guests who used the rented discs in hotel-provided video viewing equipment). See id., 866 F.2d at 280-81 (rejecting plaintiff’s argu-ment that the hotel room was “open to the public” because a room could be rented by mem-bers of the public and ruling that once the room was rented it no longer was “open to the public”); id. at 281 (statinotel . . . rooms used for large gatherings [, rather t]he movies are viewed exclusively in [privat480 TOURO LAW REVIEW [Vol. 27 te hotel room or viewing booth] for . . . excl district court’s rulings, setting the stage for the Second Circuit’s decision in Cartoon Network, L.P., L.L.L.P CSC ved Cablevision of the existing relationship between the hotel and the private view-er.158 The district court ruled that because a commercial relationship also existed between the RS-DV-R user, who pays a subscription fee to Cablevision for the RS-DV-R recording service, and Cablevision, the RS-DV-R transmissions constituted an unauthorized public per-formance of Fox’s copyrighted work.159 Additionally, the court stated that Cablevision’s RS-DV-R service was similar to the “on-demand” systems in Redd Horne, Inc. and On Command Video Corp. because in each case these parties had provided commercial on-demand video playback services.160 Cablevision, like the parties in Redd Horne, Inc. and On Command Video Corp., decided what con-tent to make available and allowed customers to select the program-ming they wished to view.161 Additionally, Cablevision supplied the same content for a fee “from one location [master server or VCR ma-chine] to another location [privausive viewing,” and the same content is provided to different customers at different times.162 Ultimately, the district court enjoined Cablevision from re-leasing the RS-DV-R system without appropriate licensing because the system “infring[ed on Fox’s] exclusive rights under the Copyright Act.”163 Cablevision appealed the. v. Holdings, Inc.164 C. Second Circuit Decision The Second Circuit entertained Cablevision’s challenge to the lower court’s decision finding Cablevision directly liable for infring-ing Fox’s copyrighted works through its RS-DV-R system.165 The Second Circuit reversed the district court’s rulings and absol of direct copyright infringement liability for the marketing 159Fox, 478 F.160Id. at 624. 161Id. at 623-2162Id. a163Id. 164536 F.3d 121. 165Fox, 478 F. Supp. 2d at 624. 2011] DIGITAL RECORDING AGE 481 sed on the buffer data stored on Cablevision’s server.167 The da emain . . . embodied ‘for a period of more than tra and commercial distribution of the RS-DV-R technology.166 The Second Circuit initially addressed Cablevision’s direct liability for the unauthorized creation of a copy of Fox’s copyrighted works bata were transmitted “one small piece at a time” to Cablevi-sion’s remote servers creating a complete copy of the originally transmitted work.168 The circuit court reversed the district court’s interpretation of the Copyright Act’s definition of what constitutes fixation of a copy.169 The circuit court articulated the two requirements necessary for a work to constitute a fixed copy.170 The first criterion is an “em-bodiment” requirement, which mandates that the work be embodied in a tangible medium of expression that “can be perceived [or] repro-duced.”171 The second criterion is the “duration” requirement, which requires that the work “rnsitory duration.’ ”172 If “both requirements are [not] met, the work is not ‘fixed’ ” and does not constitute a fixed copy of an origi-nal copyrighted work.173 The Second Circuit overturned the district court’s determina-tion that the buffer copy constituted a fixed copy because the lower court only focused on the embodiment requirement without analyzing the minimal duration requirement.174 The court analyzed whether the buffer copy created by the RS-DV-R system satisfied both require-ments for a copy of a work to be deemed fixed.175 It was undisputed that the embodiment requirement was satisfied as the buffer data were embodied in the RS-DV-R system’s RAM memory and later “reformatted and transmitted to other components of the RS-DVR system” to be reproduced into a full version of the original work that 166The Cartoon Network, 536 F.3d at 140. 167Id. at 127. See also 17 U.S.C.A. § 106(1 168The Cartoon Network, 536 F.3d at 127. 169Id. See also 17 U.S.C.A. § 101. 170The Cartoon Network, 536 F.3d at 127. See also 17 U.S.C.A. § 101. 171The Cartoon Network, 536 F.3d at 127. See alsIMMER, 172Id. 173The174Id. 175Id.482 TOURO LAW REVIEW [Vol. 27 fer RAM memory for a transitory period177 of less than “1 that “loading a program into a computer’s RAM can result in copy succeeds,” but if the copy was made by the RS-DV-R user, then Fox’s direct liability is then stored on Cablevision’s servers.176 However, the court of ap-peals ruled that the duration requirement for a work to be fixed was not satisfied because the copy of the work was only embodied in the RS-DV-R’s buf.2 seconds,”178 and then the buffer data were “rapidly and au-tomatically overwritten” when the automated system processed the information.179 The Second Circuit compared this length of time to the dura-tion of time that the RAM lasted in MAI Systems Corp. v. Peak Com-puter, Inc.180 In MAI Systems Corp., the duration requirement for a copy to be fixed was satisfied because the copyrighted data had “re-mained embodied in the computer’s RAM memory until the user turned the computer off.”181 The court considered this as a period of time that was more than transitory in duration.182 However, the Second Circuit interpreted the MAI court’s ruling not to mean that “loading a program into a form of RAM always result[s] in copying,” but rathering,” and thus the RAM stored in the RS-DV-R memory clearly did not result in a fixed copy due to the data’s transitory exis-tence.183The Second Circuit then addressed Cablevision’s direct copy-right infringement liability for the unauthorized complete copy of Fox’s copyrighted work stored on Cablevision’s remote servers.184 The circuit court’s analysis turned on who actually made the copy, Cablevision or the RS-DV-R user.185 If the copy was made by Cab-levision, then Fox’s “theory of direct infringement 176Id. at 129. See also 17 U.S.C.A. § 101. 177The Cartoo 178Id. at 129. 179Id. at 130. 180Id. at 127-28 (citing MAI Systems Corp., 991 F.2d at 513, 5181Id. at 128-30 (citing MAI Systems Corp., 991 F.2d at 518). 182MAI Systems Corp., 999 F.2d at 518; see also Advanced Computer Servs. of Mich., Inc., v. MAI Sys. Corp., 845 F. Supp. 356, 363 (E.D. Va. 1994) (finding that a copyrighted program that was loaded into a computer’s RAM and stored there atisfied both requirements for a copy of a work to be “ ‘fixed’ ”). 183The Cart. at 128-30. 184Id. a185Id.2011] DIGITAL RECORDING AGE 483 fails an tual infringi work. The court then analyzed ed “Cablevision would . . . face, at most, secondary liability,” a theory that Fox had already expressly disavowed.186 Citing CoStar Group, Inc. v. LoopNet, Inc.,187 the Second Circuit explained that for a direct copyright infringement claim to succeed, “something more . . . than mere ownership of a machine used by others to make illegal copies” must exist.188 For direct copy-right infringement liability for distributing copying technology, a suf-ficiently close relationship between the illegal copying and the acng conduct must exist to “conclude that the machine owner himself trespassed” on the copyright owner’s exclusive rights.189 For direct infringement liability, some volitional or causation-al conduct190 on the part of the machine owner must “cause[] the copy to be made.”191 The Second Circuit identified two instances of volitional conduct by Cablevision: (1) Cablevision’s conduct “in de-signing, housing, and maintaining a system that exists only to pro-duce a copy;” and (2) the RS-DV-R user’s ordering the RS-DV-R system to record a specific protected 192ach instance of volitional conduct and in both instances found Cablevision not to be liable as a direct infringer.193 Regarding Cablevision’s volitional conduct in maintaining 187373 F.3d 544 (4th Cir. 2004). CoStar, owner of copyrighted real estate photographs, brought a direct infringement suit against LoopNet, an ISP that ran an online real-estate list-ing where CoStar’s customers had posted its copyrighted photographs after “each customer agree[d] not to post” copyrighted materials. Id. at 546-47. Before an image was posted on the LoopNet site, “[a] LoopNet employee . . . review[ed] the photograph (1) to determine whether the photograph . . . depict[ed] . . . real estate, and (2) to identify any obvious evi-dence . . . that the photograph [might] have been copyrighted by another.” Id. at 547. The Fourth Circuit found in favor of LoopNet, stating that “ISPs, when passively storing material at the direction of users in order to make that material available to other users upon their re-quest, do not ‘copy’ the material in direct violation of . . . the Copyright Act.” Id. at 555. Although the court noted that an ISP may be found indirectly liable if it violated the Act con-tributorily or vicariously, “LoopNet’s perfunctory gatekeeping process . . . d[id] not amount to direct infringement.” Id. at 555-56. 188The Cartoon Network, 536 F.3d at 130 (quoting CoStar Group, Inc., 373 F.3d at 550) (internal quotation marks omitted). 189Id. (quoting CoStar Group, Inc., 373 F.3d at 550) (internal quotation marks omitted). 190CoStar Group, Inc., 373 F.3d at 550-51 (citing Netcom, 907 F. Supp. at 1370 (stating that “there should still be some element of volition or causation . . . where a defendant’s sys-tem is . . . used to create a copy by a third party”)). 191The Cartoon Network, 536 F.3d at 131 (citing Netcom, 907 F. Supp. 1361). 192Id. 193Id. at 132-33. 484 TOURO LAW REVIEW [Vol. 27 reasoned that Cablevision, analogous to a copycenter -erated [ and designing the RS-DV-R system, the Second Circuit compared Cablevision to a copy-center store proprietor who charges an individ-ual to use “a system that automatically produces copies on command” in response to a customer’s request without the employees making the actual copy.194 The court reversed the trial court’s decision find-ing Cablevision liable for making the copies in the RS-DV-R sys-tem.195 The court proprietor, does not “ ‘make[]’ any copies,” but, instead the paying customer actually operates the machine and orders the crea-tion of the copy.196 The Second Circuit focused on the volitional conduct of the party “who actually ‘makes’ [the] copy” in the RS-DV-R system.197 The court’s evaluation of Cablevision’s role in the copying process was similar to that of the copy-centers in Basic Books, Inc. and Prin-ceton University Press, that were held liable for direct copyright in-fringement for the unauthorized duplication and commercial distribu-tion of student course-packets.198 The court focused on the lack of volitional conduct on the part of Cablevision and its employees in causing a copy of the original work to be created with the RS-DV-R system. It highlighted the difference between “making a request to a human employee, who then volitionally operates the copying system to make the copy,” like the copy-centers’ employees in Basic Books, Inc. and Princeton Publishing Press, with that of Cablevision’s RS-DV-R system, which automatically responds to any command issued by the RS-DV-R user.199 Thus, the RS-DV-R’s copy of the copy-righted work was distinguished from the copy-centers’ unauthorized course-packets because the copy-centers’ employees physically “opthe] copying device and sold the product they made using that device.”200 In the RS-DV-R system, no action on the part of Cablevi-sion or its employees caused an unauthorized copy to be created.201 The Second Circuit also ruled that the RS-DV-R user and a 194Id. at 132. 195Id. at 133. 196The Cartoon Network, 536 F.3d at 132. 197Id. at 131. 198Basic Books, Inc., 758 F. Supp. at 1542; Princeton Univ. Press, 99 F.3d 1381. 199The Cartoon Network, 536 F.3d at 131-32 (citing Princeton Univ. Press, 99 F.3d at 1383). 200Id. at 132 (citing Princeton Univ. Pres, 99 F.3d at 1383). 201Id.2011] DIGITAL RECORDING AGE 485 t infringement liability for the unauthorized reproduction of Fox’s c -R playback was considered VCR user were not “sufficiently distinguishable . . . [as] to impose [direct] liability” on the manufacturer and owner of the machine, be-cause the copies of the copyrighted works were “made automatically upon [the] customer’s command” without any volitional conduct on Cablevision’s behalf.202 The court disagreed with the district court’s interpretation of Sony Corp.,203 and ruled that the RS-DV-R user, like a VCR user in Sony Corp., “supplies the necessary element of voli-tion” by using the RS-DV-R system’s remote control to select a spe-cific copyrighted program and by pressing the record button to create a copy of this program.204 The court absolved Cablevision of direct copyrighopyrighted works because the actual RS-DV-R user, not Cab-levision or its employees, made the copy with the RS-DV-R sys-tem.205 The Second Circuit then addressed the lower court’s ruling that imposed direct copyright infringement liability on Cablevision for the unauthorized public performance of Fox’s copyrighted work.206 The dispositive question was whether the transmission of the performance was public.207 If the RS-DVa public performance, Cablevision would be liable for in-fringement.208 However, Cablevision would not be held liable if the performance was determined to be private.209 The Second Circuit stated that the Copyright Act directs a court to “examine who precisely is ‘capable of receiving’ a particular transmission of a performance,” and rejected the lower court’s deter-mination that the RS-DV-R transmission was public.210 The lower court focused on who potentially was “capable of receiving” the orig-inal transmission instead of “the potential audience of [the particular subsequent RS-DV-R] transmission.”211 Consequently, the court of 202Id. at 131. 203464 U.S. 417; The Cartoon Network, 536 F.3d at 132-33. 204The Cartoon Network, 536 F.3d at 131; See also id. at 132-33 (citing Sony Corp., 464 U.S. 417). 205Id. at 133. 206Id. at 134. 207Id. (quoting 17 U.S.C.A. § 106(4)). 208The Cartoon Network, 536 F.3d at 134 (citing 17 U.S.C.A. § 106(4)). 209Id. at 134. 210Id. at 135. 211Id. at 135-36. 486 TOURO LAW REVIEW [Vol. 27 copyrighted . . . work is the general public. the tran ublic, performThe court focused on Professor Nimmer’s definition of what appeals disregarded the lower court’s interpretation because it ex-panded liability for “any transmission of . . . copyrighted work” since the “potential audience for every ”212 The district court’s interpretation also denied “any possi-bility of a purely private transmission,” which was inconsistent with the current statutory language.213 The circuit court, relying on its decision in National Football League v. PrimeTime 24 Joint Venture,214 reiterated that any public performance includes each step in the chain that causes any copy-righted work to make its way to the public.215 Therefore, the court stated that when determining whether a link in a chain constitutes a public transmission, the court must look downstream at every link in smission chain and decide who was “capable of receiving” the subsequent transmission,216 rather than looking “upstream or lateral-ly” at who the potential recipients of the initial transmissions were.217 The Second Circuit stated that Cablevision’s RS-DV-R transmission was distinguishable from the unlicensed satellite trans-mission of copyrighted NFL games to Canadian subscribers because the final link of the NFL transmission was “undisputedly a public performance,” while the audience for the subsequent RS-DV-R transmission was only the individual DV-R subscriber using a self-made copy.218 Therefore, the court held that the RS-DV-R system’s playback of the recorded works stored on Cablevision’s remote serv-er to the individual RS-DV-R subscriber was a private, not pance because the only individual capable of receiving the par-ticular RS-DV-R transmission was the one “subscriber whose self-made copy is used to create that [subsequent] transmission.”219 212Id. 213The Cartoon Network, 536 F.3d at 135-36. 214211 F.3d 10 (2d Cir. 2000). PrimeTime was found liable for the unauthorized public performance of NFL games after “uplinking” copyrighted NFL games to satellites where they co t 13 215The Cartoon Network, 536 F.3d at 136-37 (citing NFL, 211 F.3d at 13). See also NFL, 211 F.3d at 13 (quo.D.N.Y. 1988)). 216The Cartoo217Id. a218Id. 219Id.2011] DIGITAL RECORDING AGE 487 on was made t system, th constituted a public performance.220 A public performance, accord-ing to Professor Nimmer, can exist “if the same copy . . . of a given work is repeatedly played . . . by different members of the public, [even] at different times.”221 The court then distinguished the unique copy of the work created by the RS-DV-R system from the single copy that was re-used by the infringing video store in Redd Horne, Inc. and the infringing hotel movie rental service in On-Command Video Corp.222 The court found that “use of a unique copy” of a work, such as that created by the RS-DV-R, “may limit the potential audience of a transmission.”223 Thus, the RS-DV-R transmission would not be considered public because the latter transmissio a single user using a unique copy, which could only be played on the specific cable-box that created the recording.224 Additionally, the court distinguished the Cablevision’s RS-DV-R system from the infringing video store owner in Redd Horne, Inc. and the infringing hotel movie rental service in On-Command Video Corp. by noting that both the hotel and video store had used a single copy of the work so that every hotel guest or video store patron “was capable of receiving a transmission” of the same, single copy by paying an appropriate rental fee.225 However, in the RS-DV-R e only individual capable of receiving the RS-DV-R playback transmission was the individual who created that unique copy.226 The Second Circuit also rejected the district court’s ruling based on On Command Video Corp., stating that “any commercial transmission is a transmission ‘to the public.’ ”227 The court re-marked that such a bright-line rule would “completely rewrite[] the language of the statutory definition.”228 Fox also unsuccessfully ar-gued that the operation by this single RS-DV-R user would constitute 220Id. at 138. 221The Cartoon Network, 536 .14[C][3]) (emphasis omitted). 222Id. at 138-39 (citing Redd Horne, Inc, 749 F.2d 154 (holding that loading a copy of a movie into a bank of VCRs at the front of a store for viewing constituted a public perfor-mance); On Command Video Corp., 777 F. Supp. 787 (holding that transmission of mov hotel room tele223Id. at 138. 224Id. at 138-3225Id. at 139. 226The Cartoon Network, 536 F.3d at 133. 227Id. at 139 (q228Id. at 139. 488 TOURO LAW REVIEW [Vol. 27 ion of Cablevision’s RS-DV-R system without a compulsory license. te performan ote ser-a public performance based on Ford Motor Co. v. Summit Motor Products, Inc.229 The Third Circuit, in Ford Motor Co., stated that “even one person can be the public” when determining whether a per-formance is a public or private one.230 The Second Circuit rejected this argument stating that such an interpretation, which would wipe “the phrase ‘to the public’ out of existence” is inappropriate.231 Thus, the circuit court reversed the district court’s rulings and allowed the distribut232 Fox’s petition for certiorari to the Supreme Court was de-nied.233Overall, the Second Circuit’s ruling, which vacated the dis-trict court’s judgment, seems to be consistent with established law regarding direct copyright infringement liability. The court correctly expressed the requirements for a work to be fixed by articulating the two requirements supported by the language of the Copyright Act as well as by Professor Nimmer’s interpretation.234 Additionally, the Second Circuit adequately described what constituted a direct in-fringement violation by focusing on what volitional conduct by the actor caused the creation of an unauthorized copy.235 The court also accurately described the difference between a public and privace by focusing on the recipient of the particular transmission instead of the particular audience of the initial transmission.236 Thus, the Second Circuit, based on existing statutory lan-guage, adequately disposed of the issues presented for adjudication. Yet, in order to ensure the continued prosperity and expansion of the creative arts in the United States, new legislation is needed to ensure adequate compensation to the copyright owners for the loss of reve-nue due to the new unlicensed RS-DV-R service. This rem 1991)). 230Ford Motor Co., 930 F.2d at 299. Summit was found liable for direct infringement for distributing automobile parts bags with “printed red and black speed cars practically identic-al” to the automobile parts bags copyrighted and distributed by Ford. Id. Summit unsuc-cessfully argued that a “one-time gift to [one] person” of the automobile parts bag was not considered public. Id. 231The Cartoon Network, 536 F.3d at 139. 232Id. at 140. 233Cable News Network, Inc., 129 S. Ct. 2890. 234The Cartoon Network, 536 F.3d at 127. 235Id. at 131. 236Id. at 134. 2011] DIGITAL RECORDING AGE 489 rnationally with dangerous implications for a copyright owner. IV. ontent distribution systems to avoid licensing fees and provides further economic incentives to se i ed, rather than human run, copyright distribution systems. vice has the potential to expand rapidly, both nationally and inteTHE CARTOON NETWORK’S EFFECT ON THE COPYRIGHT WORLD Numerous interested parties submitted amicus curiae briefs in support of Fox’s certiorari petition,237 including Major League Base-ball,238 the Screen Actors Guild,239 American Society of Composers, Authors, and Publishers (“ASCAP”) and Broadcast Music, Inc. (“BMI”),240 Photographers’ Unions,241 Major United States Record-ing Labels,242 and the Copyright Alliance.243 The briefs elaborate on the industry-wide effect the Second Circuit decision had on advertis-ing revenues and its potential impact on the currently licensed auto-mated copyright distribution systems.244 The court’s decision also articulates a blue-print that instructs individuals and companies on how to alter their existing automated copyrighted c thendividuals by advocating the use of computeriz245237Petition for Writ of Certiorari, Cable News Network, Inc., 129 S. Ct. 2890 (2009) (No. 08-448), 2008 WL 4484597 [hereinafter Fox’s Petition]. 238Brief for Major League Baseball et al. as Amici Curiae Supporting Petitioners, Cable News Network, Inc., 129 S. Ct. 2890 (2009) (No. 08-448), 2008 WL 4819897 [hereinafter MLB Brief]. 239Screen Actors Guild Brief, supra note 8. 240Brief for Broadcast Music, Inc. & Am. Soc’y of Composers, Authors, & Publishers as Amici Curiae Supporting Petitioners, Cable News Network, Inc., 129 S. Ct. 2890 (2009) (No. 08-448), 2008 WL 4843617 [hereinafter ASCAP Brief]. 241Brief for The Picture Archive Council of Am., Inc. et al. as Amici Curiae Supporting Petitioners, Cable News Network, Inc., 129 S. Ct. 2890 (2009) (No. 08-448), 2008 WL 4843619 [hereinafter Photographers’ Brief]. 242Brief for Sony BMG Music Entm’t et al. as Amici Curiae Supporting Petitioners, Ca-ble News Network, Inc., 129 S. Ct. 2890 (2009) (No. 08-448), 2008 WL 4843620 [hereinaf-ter Record Label Brief]. 243Brief for Copyright Alliance as Amici Curiae Supporting Petitioners, Cable News Net-work, Inc., 129 S. Ct. 2890 (2008) (No. 08-448), 2008 WL 4887717 [hereinafter Copyright Alliance Brief]. The Copyright Alliance consists of “over forty institutional members” in-cluding entertainment giants “NBC Universal; . . .Viacom; . . . [and] The Walt Disney Com-pany.” See id. at *2-3. 244See supra notes 240, 241. 245See generally The Cartoon Network, 536 F.3d 121. 490 TOURO LAW REVIEW [Vol. 27 ld normally receive if the original commercial advertisement t Cablevision’s RS-DV-R system also enables Cablevision to “ A. Detrimental Effect on Advertising Revenues The Copyright Act imposes mandatory statutory licensing for a cable system such as Cablevision.246 The Copyright Act mandates licenses for any secondary transmission247 made to the public by a cable system, which includes mandatory licensing for Cablevision.248 This compulsory license requires that a cable system must keep intact any commercial advertisements transmitted in the primary transmis-sion intact.249 Congress specifically prohibited the manipulation of any advertisement by a secondary transmitter such as Cablevision, in order “to protect ‘copyright owners whose compensation . . . is di-rectly related to the size of the audience that the advertiser’s message is calculated to reach,’ ” which is based on the number of viewers of a specific copyrighted work.250 However, Cablevision’s new “RS-DV-R system appears not to include any commercial advertising . . . [that existed] immediately before or after the program being record-ed” and that were originally transmitted in the primary transmission by the original transmitter.251 Therefore, Cablevision is depriving the copyright owners of the commercial and publicity benefits that the owners wouhat was associated with the specific copyrighted program transmission was correctly displayed to a target audience at a particu-lar time.252 24617 U.S.C.A. § 111(f)(3) (West 2009) (defining a “cable system” as a “facility . . . that . . . transmit[s] . . . programs broadcast[ed] by . . . [a] television broadcast station[] licensed by the [F.C.C.], and makes [a] secondary transmission[] of such signals . . . by wires, cables, microwave, or o uch service”). 247Id. § 111(c)(1). 248Id. § 111(f)(2) (stating that a “secondary transmission” done by a “cable system” is a broadcast that “further transmit[s] . . . a primary transmission simultaneously with the prima-ry transion”). 249Id. § 111(c)(3). 250MLB Brie251Id. 252Michael Lewis, Boom Box, N.Y. TIMES, Aug. 13, 2000, at 636. The article explains how new DV-R systems cause the value of “prime time [to] vanish[]” along with the “spe-cial market value of prime time” commercial airings. Id. It has been shown that “[eighty-eight] percent of advertisements in TV programs [saved] by viewers on [the current STS-DV-R systems] went unwatommercial television. Id.2011] DIGITAL RECORDING AGE 491 haring any of these additional revenues with those who created marketing and advertising company which bases its commercial ad-‘refresh’ the [original] advertising that is associated with each show” by editing the content saved on its servers.253 Thus, Cablevision can receive additional advertising revenues from companies to replace the existing advertisements on the older, recorded program stored on Cablevision’s servers with any new advertisements of Cablevision’s choosing.254 For example, Cablevision may have the ability to re-fresh the commercial for an already released movie and receive addi-tional payments to insert a new advertisement in the stored copy for an upcoming movie release, so this new advertisement is displayed when the RS-DV-R user’s subsequent playback is initiated, rather than the out-dated, original movie advertisement that was part of the initial transmission.255 Thus, Cablevision would be “unjustly enriched . . . at the expense of the copyright owners . . . [and] the ac-tors and writers who created the content” from its receipt of addition-al advertising payments and subscription fees for the new RS-DV-R without s the works and whose livelihood depends on such advertising funds.256 The RS-DV-R system may also allow “Cablevision [to] insert ads dynamically,” by permitting it to “customiz[e] and updat[e] commercial [advertisements targeted at] different consumers . . . at different times.”257 Such additional capabilities by Cablevision’s RS-DV-R enables Cablevision to further increase its advertising revenue by targeting specific RS-DV-R users with particular advertisements based on the genre and type of content stored on Cablevision’s server by that user.258 The additional viewership information, compiled by Cablevision based on the copyrighted programs stored on its servers and monitored by its personnel, is commercially valuable for every 253Screen Actors Guild Brief, supra note 8, at *14-1 254Stelter, supra note 2. 255Id. 256Screen Actors Guild Brief, supra note 8, at *12. 257Stelter, supra note 2. 258Matthew W. Bowertroucing TiVo to Fair Use, 20 CARDOZO ARTS & ENT. L.J. 417, 453 (2002) (stating that the data compiled by the RS-DV-R system give “studios and advertisers [… the] ability to insert ads to be aired to different viewers at the same time . . . based on an incredibly detailed profile of each viewer”). 492 TOURO LAW REVIEW [Vol. 27 s] money for itself rather than compensating copyright owners.”260 B. Licensing and Royalties from DVD Sales vertisements for specific products on an individual’s preferences.259 Cablevision can provide such companies, for an additional fee, with the accurate user information they desire, including when and how often a certain demographic watches a certain type of program and Cablevision then “keep[s all thiDetrimental Effect on VODAssuming such a distinction between the VOD and RS-DV-R systems exists,261 the widespread use of this new recording equip-ment may undermine the currently licensed VOD system and cause possible further detriment to the sales of DVDs, which reduces the amount of royalties the copyright owners will receive. The new RS-DV-R system would give every Cablevision subscriber, or any other cable provider which may provide similar recording systems, the op-tion to pay an additional monthly fee and download an upgrade to their existing cable-box to record any copyrighted work transmitted by their cable providers for an indefinite period without the cable provider paying additional royalties to the copyright owner of the re-produced work. Thus, any of 170 channels that Cablevision makes available to its subscribers could be recorded for free and stored inde-finitely, as opposed to a subscriber’s paying for an individual VOD transmission of a work that could only be viewed once or a subscrib-er’s paying for monthly access to a limited VOD-library that only Vivian I. Kim, Note, The Public Performance Right in The Digital Age: Cartoon ser, giving advertisers the ‘Holy Grail’ of market rese260Copyright Alliance Brief, supra note 243, at *9. 261Brief in Opposition, Cable News Network, Inc., 129 S. Ct. 2890 (2008) (No. 08-448), 2008 WL 4887717 [hereinafter Cablevision’s Opposition]. Cablevision argued that the VOD system is properly licensed and no licensing was required for the RS-DV-R system as the VOD library’s transmissions are public because the copyrighted content is “ ‘available . . . to anyone willing to pay’ ” at that immediate time and “ ‘any member of the public willing to pay is ‘capable of receiving’ [the] transmission of [the] performance from the [specific] provider[’s] copy.’ ” Id. at *27-28. While in the RS-DV-R system, “ ‘the universe of people capable of receiving [the subsequent] RS-DV-R transmission is the single subscriber whose self-made copy is used to create that transmission;’ ” thus, the performance is not a licensa-ble public performance, rather a private one. Id..3d at 137) (internal quotation marks om2011] DIGITAL RECORDING AGE 493 w RS-DV contains certain specified titles, where a proportion of these VOD sales goes to the copyright owner pursuant to already existing li-censes.262 Consequently, individuals may begin to only purchase the RS-DV-R upgrade to record and view any previously transmitted program at their leisure as opposed to purchasing a limited VOD transmission service. As a result, Cablevision may reduce the licens-ing fees it currently pays or altogether eliminate the entire VOD ser-vice to avoid any licensing fees to the copyright owner. A Cablevi-sion subscriber would much rather pay a monthly RS-DV-R fee and purchase additional space on Cablevision’s servers to have unlimited recording capabilities than pay for a single transmission of a work from a limited content list that can only be viewed once. Therefore, due to the possible overwhelming use by the subscribers of the ne-R system that requires no licensing rather than the licensed VOD system, Cablevision could eliminate the licensed VOD system and promote this new, unlicensed recording system to its current sub-scribers so Cablevision receives the entire subscription fee income. The new RS-DV-R system may also have a negative effect on DVD sales by significantly reducing the amount of royalties a copy-right owner would receive, which is based on the number of copies of the work sold.263 An individual who purchases the RS-DV-R system would have the possibility to purchase additional server space,264 giv-ing the subscriber the ability to purchase as much server space as needed to record as many copyrighted works as one wished for an in-definite period of time.265 Usually, subscribers only desire the indi-vidual work until they have watched it. Therefore, the potentially li-mitless amount of server space available for purchase would allow a user to record an entire season or “marathon” of a particular show in-stead of watching the show when it was originally aired. This would replace the need to purchase an “on-demand” copy from a VOD li-brary or to purchase or rent the DVD versions of the show from a re-tail distributor. Thus, Cablevision’s system may potentially have an 2632 NIMMER & NIMMER, supra note 171, § 8.04[H][1] (describing a typical “royalty” scheme imposed on a licensee of copyrighted work, which requires a per work payment, i.e. a per record or a per DVD). 264Id. at 619. 265Kim, supra note 259, at 270 (“With increased memory capacity, RS-DVR users could potentially create a library of recorded programming which they could access on-demand.”). 494 TOURO LAW REVIEW [Vol. 27 ftware. This system enriches Cablevision through additiona in DVD sales due to RS-DV-R usage, the possible reduction or eliminatio f lic uncertainty of ve works, may prompt these authors to stop producing additional creative works and will certainl adverse effect on DVD sales by giving an RS-DV-R user the incen-tive to purchase additional server space rather than purchasing the copyrighted sol subscription fees and additional server space fees, but does not compensate the copyright owners who spent their resources to create the works that are aired and recorded by the RS-DVR user and who receives royalty payments based on the number of units of their work sold.266 The Screen Actors Guild Brief, in support of Fox, stated that “[t]he value of a creative work in the entertainment industry is based on revenues earned during discrete windows of exploitation through its lifetime.”267 For example, the Screen Actors Guild stated that its Guild members receive roughly 36% of their earnings on residuals which are paid throughout the lifetime of a project, and these earn-ings are solely dependent on the content owners’ ability to maximize revenues from licensing the rights to others.268 These copyright own-ers’ livelihoods are based on the residual payments during the life-time of the creative project, including licensing fees for the cable transmissions of their works and royalties from the sales of their co-pyrighted works through VOD systems and DVD sales.269 Wide-spread use of DV-Rs to reproduce copies of these individuals’ works, without Cablevision’s obtaining licenses for these copies, could se-verely inhibit the entire creative system. The creative system is based on investors and creative talent estimating “the value of [a] contem-plated work [which] is . . . based on projections of potential revenue in . . . exploitation” of each potential market.270 Such a possible loss n oensed VOD systems by Cablevision, together with the residual compensation for creatiy discourage investors from investing in these creative works. 2662 NIMMER & NIMMER, supra note 171, § 8.04[H 267Screen Actors Guild268Id. at *10-269Id. at *2. 270Id. at *6. 2011] DIGITAL RECORDING AGE 495 as well as current, “on-demand services will simply adopt the same ‘c able transaction,” such as the buffer copies created works they transmit. Amici briefs also point to current on-demand services for the e-book readers Sony Reader and Amazon Kindle.278 These content C. Blue-Print for Others to Follow to Avoid Licensing or Disavow Current Licenses The Second Circuit’s decision has also “amount[ed] to a blu-eprint for clever intermediaries to design and operate automated computer systems . . . to evade the need for copyright licenses.”271 As a result of The Cartoon Network decision, Fox contended that new, opy then play’” method used by Cablevision.272 These com-panies would be able to avoid any licensing or infringement liability by arguing that the machine is “mak[ing] a unique copy . . . as an au-tomatic response to [a customer’s] request” 273 without any human in-teraction, such as the transmission by Cablevision’s RS-DV-R sys-tem. This may also cause current on-demand companies to use “[m]ultiple copies . . . , even when a single copy is more efficient”274 to “evade the ‘public’ nature of performance” because the single copy transmission would be considered a private performance, one requir-ing no license.275 The ruling “provides an incentive” to these compa-nies “to design their systems . . . to minimize the time . . . they retain a copy of the work . . . to claim . . . the cop[y] . . . fall[s] outside the scope of . . . a licens by Cablevision’s RS-DV-R.276 Additionally, as long as the “cost of . . . additional server space” to store copyrighted works “is less than the cost of negotiating and paying for a license,” these com-panies will design their on-demand systems based upon Cablevision’s model and avoid paying license fees to the copyright owners of the 277271Fox’s Petition, supra note 237, at *3. 272Id. at *37. 273Id. 274Id. at *38. 275Record Label Brief, supra note 242, at *24. 276Copyright Alliance Brief, supra note 24 owTo Buffer Your Way Out of a Scrape: Potential Abuse of The Cartoon Network v. Cab-levision Decision, 4 BROOK. J. CORP. FIN. & COM. L. 139, 157-59 (2009) (stating that “screen-scraping” is another potential abuse based on The Cartoon Network decision). 277Fox’s Petition, supra note 237, at *38. 278See David Segal, Gadget Makers Can ID Th496 TOURO LAW REVIEW [Vol. 27 ervices that [curren user’s request provides these companies with th distributors have already negotiated licenses “to distribute [copy-righted] content . . . via automated processes.”279 However, if the Cablevision ruling stands, such on-demand copyrighted content ser-vice providers which have already obtained licensing may disconti-nue their licensing or modify their current systems to fall outside a licensable transaction. Such service providers could argue that they are exempt from liability similar to Cablevision, because the “sub-scriber (rather than the service itself) selects the works to download” and that this work is “delivered by a[n automated] system” respond-ing to a user’s command rather than a system controlled by the con-tent provider.280 This decision will also “encourag[e] stly] engage in . . . unlicensed copying . . . to adapt their [cur-rent on-demand] technology to fit within . . . [this] holding;” further frustrating the exclusive rights of the copyright owner.281 Additionally, computerized systems that automatically deliver copyrighted works to the public “are becoming the dominant mode for deliver[y],”282 and the Second Circuit’s decision expands immuni-ty for all these “businesses that employ computers instead of humans to carry out customer requests.”283 Yet, the use of automated systems by companies to carry out ae added benefit of reductions in personnel costs, by champion-ing the use of a machine instead of paid employees, all at the expense of the copyright owners.284 Cablevision claimed that the only issue decided by the Second Circuit was “[w]ho ma[de] the cop[y] with the RS-DV-R”285 system and “[i]n the unlikely event that [this] decision . . . spawns illegal co-lectronically, an279Record Lab280Id. at *12. 281Id. at *21. 282Fox’s Petition, supra note 237, at *16 (explaining that “computerized systems” include a service such as Apple’s iTunes, which permits an individual to purchase a copyrighted work through an automated computer system that responses automatically to the “purchase” omputer in response to the individual’s “command” wi283Id. at *28. 284Copyright Allia285Cablevision’s Opposition, supra2011] DIGITAL RECORDING AGE 497 ourt’s decision in Napster, Inc.291 Although these latter enti pying, there will be time enough for [the c]ourt to act.”286 In its brief, Cablevision only acknowledges the possibility of individuals manipu-lating their current systems based on court decisions, without recog-nizing that such a situation has already occurred following the Ninth Circuit’s decision in A&M Records, Inc. v. Napster, Inc.287 Follow-ing the court’s ruling in Napster, Inc.,288 Grokster, Ltd.289 and In re Aimster Copyright Litigation290 were decided, which were based on new infringing technologies were developed to exploit the loophole created by the cties were ultimately found liable, such a recent example of the modification of existing infringing technologies based on a judicial ruling supports the contention that individuals and companies contin-ue to take advantage of the court-announced blue-prints to avoid cop-yright liability. Subsequently, the recent district court decision of Cellco Partnership v. American Society of Composers, Authors, and Publi-shers292 applied the framework established by the Second Circuit and denied a copyright owner’s claim to impose additional licensing fees on ringtones293 sold by Verizon Wireless to its customers.294 The dis-trict court denied ASCAP’s295 claim that Verizon Wireless publicly 286Id. at *20-21. 287239 F.3d 1004 288Id. at 1011 (holding Napster liable as a direct infringer of copyrighted works for de-signing and operating a system that facilitated the transmission of unauthorized sound files between its users). 289545 U.S. at 919-20 (holding Grokster liable aorks for distributing a product that allowed a user’s computers to share files by directly communicating with each other’s computers rather than through central servers, as the file distribution system in Napster, Inc. had operated). 290334 F.3d 643, 646 (7th Cir. 2003) (finding Aimster liable as a contributory infringer of copyrighted works foraging Service Cke in Napster, Inc.). 291Id. at 649. 292663 F293Id. at 367 (defon or other sound’ that is . . . played by a customer’s telephone in order to signal an incom-ing call”). 294Id. at 373-74. 29517 U.S.C.A. § 101 (explaining that the American ublishers (“ASCAP”) is a “performing right society,” which “licenses the public perfor-mance of498 TOURO LAW REVIEW [Vol. 27 e “potential audience of the underlying work.”296 The district court ruling was othe ploiting a court articulated blue-print to unjustly profit from another’s copyrighted work by avoiding the payment of additional licensing fees to those required performed its copyrighted works and focused on the Second Circuit’s ruling in The Cartoon Network, which required the court to look at the potential recipients of the ring-tone transmission rather than th anr instance of a corporation, Verizon Wireless, ex who own and actually created the works they sold. D. New Legislation Necessary to Combat Unjust Enrichment The Supreme Court “previously warned that ‘[t]he promise of copyright would be an empty one if it could be avoided’ merely by crafting a creative legal argument.”297 Yet, in The Cartoon Network, the Second Circuit “encourages and propagates just such a strate-gy.”298 The Supreme Court’s denial of certiorari, in addition to the district court’s decision in Cellco Partnership, further strengthens the ruling’s precedential value. Yet, there must be a way to adequately compensate the copyright owners for their potential loss in revenue due to the widespread usage of the RS-DV-R system by Cablevi-sion’s users as well as the potential use by subscribers of other cable providers that waited until the resolution of Cablevision’s suit to de-termine whether to release their own RS-DV-R systems with licens-ing.299 Since the Second Circuit ruled that Cablevision’s systemno additional licensing,300 other cable providers probably will also not negotiate licenses. Therefore, the authors and investors in the copyrighted works, who expended their time, money, and creative ability, lose out, while other corporations unfairly profit from the works created by these individuals. This should not be allowed. The potential loss in revenue by copyright owners due to Cab-296Cellco Partnership, 663 F. Supp. 2d at 371 (citing The Cartoon Network, 536 F.3d at 134-35). 297Cop3nc., 471 U.S. at 557). 298Id. 300 he Cartoon Network, 536 F.3d at 140. 2011] DIGITAL RECORDING AGE 499 the Audio Home Recording Act of levision’s RS-DV-R system is similar to the potential loss in revenue that record labels faced with the distribution of new digital audio tape (“DAT”) recorders which were capable of creating perfect copies of a musical sound recording.301 As a result of the introduction of new DAT recorders, the availability of unauthorized and perfectly dupli-cated copies significantly increased and replaced the “consumer de-mand for commercially prerecorded music,” which these copyright owners distributed.302 In response to the potential loss in revenue to these copyright owners, Congress passed1992 (“A.H.R.A.”), which imposes a mandatory royalty pay-ment on any company that manufactures and imports DAT recorders or recordable media into the United States.303 This royalty is based on the number of DAT recorders and recordable media sold by each company.304 The collected funds are distributed to copyright owners to help alleviate some of these losses.305 Like the authors of sound recordings, the owners of the con-tent transmitted by cable systems are subject to similar financial losses because of the recording technology provided by Cablevision and other cable services.306 Such losses include the potential de-crease in current revenues from VOD systems due to cable services’ possible reduction or elimination as well as possible losses of addi-tional revenues from DVD sales because a RS-DV-R user possesses ability to record any episode of any program transmitted for an inde-finite period, replacing the need to purchase or rent the DVD to catch up on a television show.307 To avoid or at least limit these potential losses, new legislation similar to the A.H.R.A. imposing a per ma-chine royalty payment on every company which distributes a video recording device in the United States including VCR, STS-DV-R, and RS-DV-R systems, is necessary. Royalty payments would be given to the United States Copyright Office for distribution to copy-301 302H.R. REP. NO. 102-873(II), at 2. 303Jacobson, supra note 301, at 213; Audio Home Recording Act of 1992, Pub. L. No. 102-563, 106 Stat. 4237, 4240. 304Jacobson, supra note 301, at 213; 17 U.S.C.A. § 1003(a). 305Jacobson, supra note 301, at 213. 306Jacobson, supra note 301, at 213. 307See, e.g., Flava Works, Inc. v. Wyche, No. 10 CV 0748, 2010 WL 265784, at *2 (N.D. Ill. June 28, 2010). 500 TOURO LAW REVIEW [Vol. 27 ntent owners based on viewership ratings. This royalty distributio tatutory fees that the cable systems currently pay, especially for any cable system that provides such remote recording services, to f the losses the new recording systems will cause. volving to t other corporations right con could also be based on any royalty-sharing formula that these major content distributors negotiate between themselves. If Congress does not implement such widespread statutory change, then the Copyright Royalty Judges should authorize an increase in the cur-rent shelp alleviate some oBased on the potential harm to copyright owners’ advertising revenues and the certain erosion of DVD sales, new legislation is needed to adequately compensate copyright owners for the loss in revenue they will face due to the unfettered use of the RS-DV-R sys-tem. V. CONCLUSION Technological advancements have created numerous direct copyright infringement liability issues starting with VCRs and ehe recent Second Circuit decision regarding Cablevision’s RS-DV-R system. In The Cartoon Network, copyright owners such as Fox and NBC brought a suit to enjoin distribution of a new RS-DV-R system by Cablevision without appropriate licensing.308 The district court initially held Cablevision liable for the direct infringement of the copyright owner’s exclusive rights.309 The Second Circuit, how-ever, overturned this decision and absolved Cablevision of any direct infringement liability and the necessity of statutory licensing.310 As a result of the Second Circuit decision, numerous interest-ed parties submitted briefs in support of Fox’s certiorari petition.311 The briefs articulated numerous foreseeable ramifications of the Second Circuit’s decision finding in favor of Cablevision, including creating a blue-print for future innovators to follow.312 The court laid the foundation for subsequent cases to absolve308Fox, 478 F. 309Id. at 624. 310The Cartoon Network, 536311See supra notes 238-243. 312 Fox’s Petition, supra note 237, at *3. 2011] DIGITAL RECORDING AGE 501 from ad ally, as a result of this decision, companies that currently RS-DV-R system instead of the VOD system, may lead Cablevision to discontinue its currently licensed VOD system. The availability of potentially unlimited storage space to store recorded works may also have disastrous effects on DVD sales. The current statutory language must be altered. New legislation is needed to adequately compensate the content owners for these potential losses in revenues or the current statutory fees that these cable services pay must be increased. ditional licenses for copyrighted works.313 It overlooked the rapid expansion in the DV-R market and how this expansion further adversely affects these copyright owners and the investors who finance these creative works. The court also overlooked Cablevi-sion’s potential ability to update existing commercial advertisements in the copy of the programs stored on its servers and receive addi-tional revenues from the additional advertisements it placed in the recorded copies stored on Cablevision’s servers. Additionpay VOD licenses may also change their current automated content distribution systems to a “copy-and-play” model to conform to a non-licensable one. This possibility, combined with the likelih-ood of consumer-wide usage of the
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