Judge makes Cablevision pause

Ruling: Remote storage DVRs infringe on copyrights

A federal judge in New York has sided with Hollywood in its next-generation DVR fight with Cablevision.

Cablevision said it is considering an appeal of the ruling by U.S. District Court Judge Denny Chin, who decided last week that the proposed DVRs would have infringed on studios' content copyrights by storing recorded programming remotely on the company's computer servers.

Cablevision aims to do away with expensive set-top boxes in the homes of its DVR subscribers. In theory, the service also would allow customers to watch TV shows on-demand even if they hadn't preprogrammed their DVRs to watch the shows.

Hollywood studios and networks owned by Time Warner, News Corp., Viacom and the Walt Disney Co. sued the New York-based cable operator in May over the so-called remote storage DVR, or RS-DVR, proposal. Cablevision was the lead proponent of such systems, but other cable operators also support the concept.

Networks argued that an RS-DVR was not a DVR at all but an unauthorized VOD service that would allow Cablevision to reap the rewards without sharing profits with content rightsholders.

The legal victory by studios was viewed a positive for the pioneer DVR service TiVo, whose 4.4 million subscribers pay monthly and use the company's proprietary set-top boxes. TiVo shares initially spiked 3% early Friday on news of the legal decision before closing at $6.21 on a modest 10-cent gain.

Some analysts Friday called the decision a setback for consumers.

"The cable companies are trying to make content more accessible, and this ruling hinders that," said Sean Badding, senior analyst with the Carmel Group.

Nevertheless, Badding said he wasn't surprised by the judge's decision. "It would have gone against fair use, where the consumer has control of the content," he said. "This would have given too much control to the cable provider."

Badding and others, though, said the RS-DVR still might see the light of day because, for the right price, Hollywood could embrace the idea. "It's always a negotiation," Badding said. "Whatever networks can do to leverage a higher licensing fee, they'll do."

In suits filed at the U.S. District Court in Manhattan, the studios and networks argued the proposed service amounts to inappropriate retransmission of programming because of its remote-storage approach.

"The RS-DVR is clearly a service, and I hold that in providing this service, it is Cablevision that does the copying," wrote Chin, who dismissed a Cablevision countersuit.

Cablevision had argued that RS-DVRs are just as legal as conventional DVRs.

"The RS-DVR is not a stand-alone machine that sits on top of a television," Chin said. "Rather, it is a complex system that involves an ongoing relationship between Cablevision and its customers."

Cablevision said it is reviewing its options.

"We are disappointed by the judge's decision and continue to believe that remote-storage DVRs are consistent with copyright law and offer compelling benefits for consumers, including lower costs and broader availability of this popular technology," Cablevision said.

Cablevision shares fell 31 cents, or 1%, to close at $30.25 on Friday.
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