Fox's Lawsuit Over Dish's Place-Shifting DVR Is Again Live

As a restrans deal is set to expire, Dish is facing a trial for breaching the old one.

Ten months of negotiation has produced no new deal between Fox Broadcasting and Dish Network, and now on the verge of the expiration to the parties' retransmission consent agreement before year's end, the two sides are back in court fighting a live battle over the ad-skipping, place-shifting DVR services known as the Hopper and Dish Anywhere with Sling.

This past January, Fox and Dish agreed to pause the lawsuit over a service that the broadcaster compared to an unlicensed video-on-demand service. At the time, the parties had just come to an agreement over Fox News and told a judge "it is highly likely that the negotiation later this year of a renewal of their 2010 agreement will result in resolution of this lawsuit."

The deadline was Thursday.

In advance, Dish requested a telephone conference with U.S. District Judge Dolly Gee before a stay was lifted. The reasoning behind this request is unclear as the satcaster's court papers are under heavy redaction.

On Wednesday, the judge denied the request and told the sides that the stay would lift today automatically absent an agreement. The Hollywood Reporter has confirmed no deal has been made. The parties were further directed by the judge to submit a status report proposing a new trial date.

The now-unpaused lawsuit figures to complicate negotiations of a new deal between Fox and Dish. If the parties can't come to a deal in the next few weeks, Dish customers could lose such programming as the new season of Empire and NFL games.

Fox suffered some early legal losses in its battle with Dish such as when it was denied an injunction over the Hopper. In July 2013, the 9th Circuit Court of Appeals affirmed that the record hadn't established that the broadcaster would win claims for direct and contributory copyright infringement of its programming.

But Fox may have come out with a win anyway.

In January, when the parties agreed to pause the litigation, it came days after the judge issued a secret summary judgment in the case. The judge was asked to keep it under seal lest it "impair the parties' ability to reach a resolution of the case."

The judge declined the request. Although the judge's summary judgment ruling hasn't gotten tremendous attention, probably because everyone assumed that the legal battle would soon be settled, Judge Gee handed down a ruling that could put Dish in a tricky spot.

For sure, Dish came out with some points in its favor. The judge analyzed the Supreme Court's Aereo opinion and rejected Fox's contention it was a "game-changer." The high court likened Aereo to a cable provider, but unlike Dish, Aereo hadn't license to the initial retransmission of programming. Judge Gee notes this and gives Dish further props for not engaging in "volitional conduct" to infringe. Except for "quality assurance" copying, Dish wins on summary judgment that it is not liable for direct infringement for both the ad-skipping and place-shifting. As for contributory infringement, fair use covered subscribers even if Dish was letting them record full primetime lineups without commercials.

However, the judge also ruled that Dish has breached a "no copying" provision of their 2002 deal by authorizing subscribers to retransmit programming outside of the home. The judge said that Dish subscribers are "unquestionably making copies for use outside the home" and fair use wasn't a defense here. "Parties are free to bargain away their rights to make fair use of copyrighted material under the 'private law' of contractual agreements," she wrote.

The judge also rejected Dish's argument that reasonable royalties weren't available as damages to this contract breach. What this means is that Dish is facing the prospect of a trial where parties will submit evidence about the true value of place-shifting (sure to interest industry observers wishing to peek at VOD licensing terms). Dish may have to pay millions for breaching its deal with Fox as well as infringing the broadcaster's copyrights through an internal program assuring quality control in the Hopper system.

The question now is whether the parties can settle on a dollar figure without resorting to trial. CBS, NBC and ABC all settled with Dish over the Hopper services in the midst of a retrans negotiation. Maybe Fox follows the other broadcasters' example.

Then again, there's no love lost between Team Rupert Murdoch and Team Charlie Ergen ever since the two explored a business relationship with each other in the late 20th century and had a falling out. And if Fox wishes to steal a page from Dish's playbook, it would go to trial. That's what Dish did against ESPN on the verge of expiration of their licensing deal. Ironically, in that fight, Dish alleged ESPN had violated their contract by allowing other distributors to stream ESPN online to customers. Dish got less than $5 million of the $150 million it was seeking. It's now Dish on the other end of a battle over how far and wide TV programming is traveling.

Dish and Fox are to deliver a status report by Oct. 9. The next steps should become more clear by then.

UPDATE 10/12: The two sides have come to another stipulation to stay the case until January in hopes of arriving at a settlement.

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