"Remote DVR" Ruling Could Raise Copyright Risks for Other Services
On March 22, the U.S. District Court for the Southern District of New York issued a ruling blocking the cable television provider Cablevision from rolling out a "remote storage" digital video recorder (DVR) system. In addition to preventing deployment of the specific type of system Cablevision had proposed, the ruling could increase the risk of copyright liability for innovators deploying a variety of Internet-based services
On March 22, the U.S. District Court for the Southern District of New York issued a ruling blocking the cable television provider Cablevision from rolling out a "remote storage" digital video recorder (DVR) system. In addition to preventing deployment of the specific type of system Cablevision had proposed, the ruling could increase the risk of copyright liability for innovators deploying a variety of Internet-based services.
Cablevision had proposed a system that would enable users to select television programs for recording and later playback, much as they do today with DVRs offered by cable companies and others such as TiVo. But instead of storing the programs on a hard drive inside a device in the user's home, the remote DVR would store programs on central servers at Cablevision's facilities.
The plaintiffs in the case were suppliers of cable television content, including Twentieth Century Fox, The Cartoon Network, and others. They argued that Cablevision is licensed to transmit their copyrighted programs to subscribers using a standard cable television delivery model, but not to engage in the additional copying and transmission functions that a remote storage DVR would entail. They said that where Cablevision wishes to distribute content in new ways, it must obtain additional license agreements with the copyright holders -- as it does in the case of its video-on-demand and pay-per-view offerings.
Cablevision argued that its proposed system would not involve any new use or distribution of the programs in question, but rather would merely enable customers to engage in lawful time-shifting of the cable programs they already receive. Cablevision engineered the remote storage DVR system to mimic the operation of a home-based DVR. For example, programs would be recorded only upon request by a user; a separate, dedicated recording of a program would be made for each requesting user; and the user would have the exclusive ability to play or delete her dedicated recordings of programs. From the user point of view, the service would work no differently than existing DVRs.
The case turned mainly on the following question: when a user hits the "record" or "play" button, who is actually recording or playing the program? Is it the user, or Cablevision?
The answer to this question matters because the Supreme Court, in the 1984 Sony Betamax case, upheld the distribution of VCRs on the ground that they enable lawful copying by users for time-shifting purposes. If Cablevision's remote DVR were treated as a product that simply enables users to record and play television programs, it presumably would fall squarely within the precedent of the Sony case and hence be lawful for the same reasons as VCRs.
Instead, the court ruled that Cablevision's proposed remote storage DVR system would entail the recording and playing of programs by Cablevision itself. In justifying this conclusion, the decision cited a number of distinctions between a VCR and a remote storage DVR. For example:
- The court said that the remote storage DVR is a "service" rather than a "device." For one thing, its operation entails ongoing participation by Cablevision and a continuing relationship between Cablevision and the customer.
- The court also stressed that the remote storage DVR is "not a single piece of equipment" but rather a complex system of computers, network cables, and facilities. This presumably stands in contrast to a VCR, the circuitry of which can be neatly contained in a single box.
- The court observed that the bulk of the equipment necessary for the remote storage DVR would be located at Cablevision's facilities and be under Cablevision's physical control. The court went so far as to note that a customer generally would not be able to walk into Cablevision's facilities and "touch" the relevant equipment.
- The court stated a number of times that Cablevision would determine what programs are eligible for recording, and in fact is the provider of those programs. The remote storage DVR could not be used for recording programs from non-Cablevision sources.
- The court observed certain similarities in the technical architecture of Cablevision's remote storage DVR and its video-on-demand platforms, in terms of the way transmissions and encryption/decryption occur.
As discussed below, some of these distinctions could provide troubling precedents for future cases. Based on these factors, however, the court held that Cablevision's remote DVR would infringe on the rights of copyright holders and should not be permitted without copyright holder authorization. Cablevision is likely to appeal the decision.
The immediate impact of the court's decision will be to put the brakes on a new DVR architecture that could lead to faster uptake than today's set-top box DVRs. Remote storage DVRs do not require delivery and installation of new hardware in each user's home, which could make deployment significantly easier from the perspective of both the user and the cable (or other multichannel video) provider. Copyright holders, on the other hand, likely view fast and ubiquitous deployment of DVR capabilities as a potential threat to video-on-demand services, for which they receive licensing revenues. They might be willing to permit the use of remote DVR services with respect to their content, but only if they can negotiate acceptable licensing terms.
The impact the case could have on other types of services is uncertain. One passage in the opinion suggests that its reasoning may not apply to many Internet-based services, where service providers are involved in handling or storing a "free flow of information" that is beyond their realistic ability to control. The decision notes several times that Cablevision would be the original supplier of all the programs that the remote storage DVR could record, rather than just providing a copying or storage capability for material supplied by the user or some other party. In other words, users select the specific programs to be recorded, but they all come from Cablevision in the first instance. If future courts were to view this as a crucial factor behind the Cablevision decision, the case could end up having limited impact on the many types of online services that permit users to supply content from outside sources.
On the other hand, if courts were to adopt the reasoning of the case in a broader range of contexts, including Internet-based services, the implications could be very troubling.
First, the idea that the legal status of a product should turn to such a great extent on its technical architecture -- and in particular, whether it uses networking capabilities to connect dispersed devices and provide data storage remotely -- sets a poor precedent from an innovation standpoint. Many familiar products may be reengineered in coming years to take advantage of the efficiencies and enhanced capabilities made possible by ubiquitous networks. Items that look like "devices" will be connected to networks, so that the providers can upgrade software, add new features, or interact with users in other useful ways. And increasingly, many functions are being provided via Web-based services, with storage space and processing power offered at physically remote locations on an "as needed" basis. These developments should not be discouraged. In short, beneficial innovation could suffer if structuring a product to perform some functions remotely, or to look more like a "service" than a "device," were to increase legal risks significantly.
More specifically, an extension of some of the court's reasoning could result in a dangerous narrowing of the pro-innovation rule established in the 1984 Sony Betamax case. That case announced a crucial principle, with importance far beyond the VCR itself: namely, that so long as a product is capable of substantial lawful uses, a distributor of the product will not be liable for copyright infringement committed by some users. The 2005 Grokster case added the caveat that the distributor must not take active steps to promote the product's infringing use. But the Grokster case did not disturb the fundamental principle that permits innocent innovators to devise products without being liable for how users may eventually use or misuse them.
Arguably, the Cablevision case could be read to suggest that the Sony rule about products with both lawful and unlawful uses applies only to "devices" -- machines that can fit inside a compact casing, are housed solely at the user's premises, and do not involve any significant ongoing role for the provider. Any provider offering a service could be treated as engaging directly in any infringing activity that happens on that service, making the Sony defense concerning users' later actions irrelevant. This would be a very narrow interpretation of the Sony rule. It would have the dangerous consequence of denying important protections to many innovators developing online products with lawful uses.
Many online offerings, from photo or video sharing to blog hosting to data backup systems, use remote storage and arguably seem more like "services" than "devices" under the court's reasoning in the Cablevision case. But even if such services therefore were denied the benefit of the Sony rule, they still could qualify for the liability protection available to hosting services under section 512(c) of the Digital Millennium Copyright Act.
Under section 512(c), online service providers that store material on their own systems at the direction of users are generally not liable if some of that material turns out to be infringing, so long as they promptly take down infringing material when notified about it. This safe harbor provision is not affected by the Cablevision case.
On the other hand, Viacom's recently filed lawsuit against YouTube appears likely to squarely raise a number of legal questions concerning the scope of the 512(c) safe harbor. In that lawsuit, Viacom is claiming that the video sharing service YouTube should be held liable for the fact that many users have posted videos consisting of material copied from Viacom's copyrighted television programs.
The Viacom/YouTube litigation is in the very early stages; Viacom just filed a complaint on March 13. But Viacom will need to argue that YouTube is not eligible for the safe harbor, and will likely present a number of theories concerning when safe harbor protection should not be available.
For example, based on its complaint, Viacom may contend that YouTube should be disqualified from safe harbor protection based on factors such as its level of knowledge about the prevalence of infringement on its service; the financial benefits it may derive from additional traffic that infringing material may attract; the degree of control that YouTube exercises over its Web site and service; or the manner in which YouTube cooperates or fails to cooperate with copyright owners seeking to identify and remove infringing material. YouTube will likely argue that it does everything the DMCA requires, including expeditiously removing infringing content, and that it is exactly the type of legitimate hosting enterprise that the safe harbor was designed to protect. The case could be an important test of when the safe harbor is available and when it is not.
The Sony case and the DMCA safe harbor both serve the important policy purpose of preventing potential copyright liability -- which in a digital world can reach astronomical levels quite quickly -- from chilling innovation in products with legitimate uses. Many technologies have the potential to be used for both legal and illegal purposes, and the law should not place too much responsibility on technology developers for bearing the consequences of illegal use. Judicial decisions that pare back or adopt narrow interpretations of the protections available to innovators acting with lawful purposes pose significant risks to innovation.