Opinion ID: 75626
Heading Depth: 3
Heading Rank: 2

Heading: Willful or Repeated Infringement

Text: 50 Networks may sue satellite carriers under the Improvement Act where the satellite carrier's violations of the Act are willful or repeated. See 17 U.S.C. §§ 119(a)(5)(A) & (B). Here, the district court found that there was a substantial likelihood that the Networks would be able to demonstrate willful and repeated violations because of: (1) EchoStar's belated submission of ILLR maps, (2) the twenty-percent rule, and (3) EchoStar's failure to demonstrate corrective action. EchoStar appeals all three conclusions, arguing that the Networks failed to demonstrate that its violations were willful or repeated. 51
52 The district court found that Hawkins' declaration established willful and repeated violations of the Act. First, the court reasoned that, in May of 1998 in CBS I, the district court for the Southern District of Florida established the ILLR model as the proper litmus for determining presumptively whether a subscriber qualifies as unserved. The court reasoned that the ILLR model was thereafter adopted by the FCC by written Report and Order in February 1999, and that Congress followed suit in July 1999 by promulgating the § 119(a)(2)(B)(ii)(I) presumption based on the ILLR model. Because EchoStar did not begin generating ILLR maps until approximately September of 1999, the court found that [t]his delay demonstrates a willful desire to avoid compliance with the [Act]. 53 We find that the district court erred in inferring a willful desire to avoid compliance from the evidence in this record. On December 2, 1998, the Networks submitted Cohen's declaration with supporting Longley-Rice maps as support for its motion for a preliminary injunction. A little over a month later, on January 15, 1999, the Networks submitted the supplemental declaration of Cohen utilizing the Longley-Rice model. Weeks later, on February 1, 1999, the FCC issued a Report and Order in the matter of Satellite Delivery of Network Signals to Unserved Hosueholds for Purposes of the Satellite Home Viewer Act, CD Docket No. 98-201 (FCC February 1, 1999) (February Order), embracing the ILLR model for determining signal intensity at individual locations. 14 Responding to the February 1999 Report, the Networks, on July 12, 1999, submitted Cohen's second amended affidavit with supporting ILLR maps. A little over two months later, on September 20, 1999, EchoStar submitted the declaration of Hawkins, with supporting ILLR maps. 54 We reverse the district court's finding of willful and repeated violations on this ground as an abuse of discretion because EchoStar's delay was not significant, as compared to the Networks' own actions, and there is no record evidence to support the court's inference. First, it took the Networks over five months to compile ILLR maps and models, and it took EchoStar only two months thereafter to submit its ILLR maps in rebuttal. 15 Second, Hawkins' affidavit attests to the fact that EchoStar attempted to employ the ILLR model, and that despite difficulties and delays in obtaining the computer software needed to utilize this technology, EchoStar began generating ILLR maps as soon as EchoStar could adapt the software to its subscriber base. 16 The only way that the court could have found a dilatory motive in the face of such statements is by finding Hawkins' statements to be untrue, and inferring from the circumstances, i.e., the amount of time it took EchoStar took to submit ILLR maps, that EchoStar had a willful desire to avoid compliance with the Act. [I]nference[s] based on speculation and conjecture [are] not reasonable. Chapman v. American Cyanamid Co., 861 F.2d 1515, 1518 (11th Cir. 1988). Here, the court inferred a willful desire to avoid compliance with the Act from Hawkins' comments and explanations for EchoStar's delay in utilizing workable ILLR maps. EchoStar's difficulty in employing the ILLR technology does not, on this record and without an evidentiary hearing, establish willful or repeated violations of the Act, and we reverse the district court's conclusion to the contrary. 55
56 Second, the court used the twenty-percent rule to find a substantial likelihood that the Networks could demonstrate willful and repeated violations. The twenty-percent rule, derived from the 1988 legislative history of § 119(a)(5) provides that: 57 In view of the possibilities for error which would occur despite reasonably diligent efforts to avoid them (because of variables such as consumer self-reporting and engineering tests of signal adequacy) it is the intent of this statute that no pattern or practice be found if, excluding subscribers grandfathered under section 119(a)(5)(C), less than 20% of the subscribers to a particular network station (on either local, regional, or national bases) are found ineligible. 58 H.R. Rep. No. 100-887(I), at 19 (1988), reprinted in, 1988 U.S.C.C.A.N. 1511, 5622. The district court reasoned that a substantial percentage (25.57%) of EchoStar's subscribers in the five markets who Mr. Hawkins's ILLR maps predict do not reside in unserved households, combined with the lack of evidence regarding waivers or field test results, supports a finding of a willful and repeated pattern or practice of infringement. 59 EchoStar argues that the Networks submitted no reliable evidence, let alone signal strength tests, to demonstrate that at least 20% of the contested subscribers are actually served. It argues that because the district court aggregated the five test markets in Hawkins' declaration, instead of considering each individual network station, the court misapplied the rule. The Networks counter that there is nothing wrong with aggregating the test markets from Hawkins' declaration because the twenty-percent rule refers to subscribers to a particular network station, not the station whose market is being invaded. 60 We need not resolve the above disputes regarding the interpretation and application of the twenty-percent rule. 17 Instead, we reverse the district court's finding of substantial likelihood of success in demonstrating willful or repeated violations because the court relied on extrapolations from only five test markets. As noted above, we can find no evidence in the record that the five markets tested by Hawkins are representative of EchoStar's five-million nationwide satellite subscribers in two-hundred and thirty different markets across the country. We refuse to engage in speculation and conjecture in reviewing this nationwide preliminary injunction. See Chapman, 861 F.3d at 1518. The court's finding that the Networks' had a substantial likelihood of success in demonstrating willful and repeated violations is erroneous because it is based on extrapolations from 5 out of 230 markets in the United States, and there are no findings that these five test markets are representative of EchoStar's nationwide subscriber base. 61
62 The district court's third ground for finding willful and repeated violations for preliminary injunction purposes was the fact that EchoStar failed to demonstrate corrective action. Specifically, the court found that: (1) there was no evidence that EchoStar intended to take corrective action in light of Hawkins' findings of presumptively illegal subscribers, and (2) there was no evidence that EchoStar turned off its pre-July 1998 subscribers signed-up in reliance on PrimeTime's subjective qualification process, which was held insufficient to comply with SHVA in ABC, Inc. v. PrimeTime 24, 184 F.3d 348 (4th Cir. 1999), CBS II, 48 F. Supp. 2d 1342, and CBS I, 9 F. Supp. 2d 1333. 63 As to the first finding, the court reasoned that Hawkins' declaration established that at least 9,956 of EchoStar's subscribers in the five test markets were presumptively illegal. The court reasoned that Hawkins does not suggest that a substantial portion of those 9,956 presumptively illegal subscribers received waivers or had field testing performed at their households, but instead states only that `certain subscribers' received waivers or were subjected to field testing. Finding that Hawkins did not suggest that EchoStar plans to take corrective action with regard to those subscribers, the court inferred that EchoStar was aware that significant numbers of its subscribers presumptively do not reside in unserved households, [and] has not acknowledged that fact and apparently has taken no corrective action, which demonstrates a willful disregard of [SHVA]. 64 EchoStar argues that the foregoing conclusion is clearly erroneous because the Networks submitted no evidence that EchoStar did not intend to bring itself into compliance and the record actually establishes the opposite. We agree that the district court erred. 65 The district court's inference that EchoStar will not take corrective action is an abuse of discretion on this record. First, the court rejected Hawkins' suggestion that some of the 9,956 presumptively illegal subscribers were eligible under the Act because the individuals received favorable signal strength tests or waivers from the local affiliates. Because EchoStar did not introduce evidence of waivers or signal tests in the preliminary injunction proceedings, the court inferred that no such proof of compliance existed and no such measures had been taken. Such an inference is inconsistent with Hawkins' declaration that certain subscribers are included in the sorting even though they have obtained [waivers] or cannot, in fact, receive a Grade B signal . . . as confirmed by actual field testing. (emphasis supplied). As is evident, the court rejected Hawkins' assertion that certain subscribers have obtained signal tests or waivers, and concluded that EchoStar did not possess such evidence, without any record evidence indicating this statement was untrue or otherwise not credible. Without the benefit of an evidentiary hearing, the district court erred in rejecting Hawkins' assertions as not credible. 18 We conclude that the drastic remedy of a nationwide injunction should be based on stronger evidence than we find in this record. 66 Also, the district court erred in finding willful and repeated violations from EchoStar's failure to come forward with evidence that its pre-July 1998, PrimeTime-derived subscribers, qualify as unserved. The district court reached this conclusion by erroneously relying on what it perceived to be a concession by Charles Ergen, EchoStar's president and Chief Executive Officer, that EchoStar did not attempt to determine the eligibility of its pre-July 1998 subscribers until September of 1999. 67 Ergen's affidavit discusses EchoStar's testing of pre-July 1998 subscribers under the new ILLR model, and indicates the results will be available soon. Ergen's affidavit also suggests that EchoStar did in fact test all of its subscribers to ensure SHVA compliance. The Networks argue that because Ergen's affidavit states only that EchoStar tests potential subscribers, this demonstrates that EchoStar only screens new customers, and not its pre-July 1998 subscribers. 68 The Networks' interpretation of Ergen's affidavit, which the district court embraced, is plausible. We, however, did not read Ergen's statements that way. In the face of two plausible interpretations of evidence submitted to demonstrate a contested issue, the district court is not at liberty to accept one construction of the evidence and reject the other without the benefit of an evidentiary hearing. 19 See McDonald's Corp. v. Robertson, 147 F.3d 1301, 1312 (11th Cir. 1998). In the absence of an evidentiary hearing, we cannot conclude that what we know from the instant, sparse record about Echostar's handling of its pre-July 1998, subscribers adds much to the resolution of the substantial likelihood of success issue.