Paramount Pictures Corp. v ReplayTV & SonicBlue

Complaint (Oct. 30, 2001)

WHITE O’CONNOR CURRY GATTI & AVANZADO LLP

Andrew M. White (State Bar No. 060181)

Jonathan H. Anschell (State Bar No. 162554)

Lee S. Brenner (State Bar No. 180235)

10100 Santa Monica Boulevard

Los Angeles, California 90067

Telephone (310) 712-6100

Facsimile (310) 712-6199

WILMER, CUTLER & PICKERING

Thomas P. Olson

Randolph D. Moss

Peter B. Rutledge

2445 M Street, NW

Washington, DC 20037

Telephone (202) 663-6000

Facsimile (202) 663-6363

Attorneys for Plaintiffs

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

Plaintiffs Paramount Pictures Corporation, Disney Enterprises, Inc., National Broadcasting Company, Inc., NBC Studios, Inc., Showtime Networks Inc., The United Paramount Network, ABC, Inc., Viacom International Inc., CBS Worldwide Inc., and CBS Broadcasting Inc. (hereinafter referred to as “plaintiffs”), by their counsel, allege the following against defendants Replay, Inc. and SONICblue Inc. (hereinafter referred to as “defendants”).

JURISDICTION AND VENUE

1. This Court has subject matter jurisdiction under 28 U.S.C. §§ 1331 & 1338, under the Copyright Act, 17 U.S.C. § 101 et seq, under the Declaratory Judgment Act, 28 U.S.C. §§ 2201(a) & 2202, and under the Communications Act, 47 U.S.C. §§ 553 & 605. Pursuant to 28 U.S.C. § 1367, this Court has supplemental jurisdiction over Claim V because it is so related to the federal claims as to form part of the same case or controversy. This Court has personal jurisdiction over defendants Replay, Inc. and SONICblue Inc. due to their operation of their principal place of business in this State and their extensive commercial activities in this State, including this District. Venue is proper in this judicial district pursuant to 28 U.S.C. § 1391(b) in that a substantial part of the events or omissions giving rise to this lawsuit, as well as substantial injury to the plaintiffs, have occurred or will occur in this District as a result of defendants’ past and impending acts of copyright infringement, violations of the Communications Act, and unfair competition, as alleged in detail below. Venue is also proper in this judicial district pursuant to 28 U.S.C. § 1400(a) in that the defendants may be found in this district in light of their extensive commercial activities in this district.

PRELIMINARY STATEMENT

1. Plaintiffs bring this action to obtain preliminary and permanent relief against an unlawful plan by defendants to arm their customers with -- and continuously assist them in using -- unprecedented new tools for violating plaintiffs’ copyright interests in the programming they supply to various television distribution services, including their own program services. Defendants’ unlawful scheme, which is centered on a new device called a “ReplayTV 4000,” seeks to profit from two novel methods of violating plaintiffs’ rights. First, defendants enable, assist, and induce their ReplayTV 4000 customers to make unauthorized digital copies of plaintiffs’ copyrighted television programming for the purpose of -- at the touch of a button -- viewing the programming with all commercial advertising automatically deleted. (Defendants offer essentially this same feature on another device, a new analog videocassette recorder (“VCR”) called the “DDV2120.”) This unlawful activity harms the potential market for and value of plaintiffs’ copyrighted works because commercial advertising is a crucial (and often the sole) means by which plaintiffs receive payment for such programming. Second, defendants provide their customers with a feature that makes it (in defendants’ words) “a breeze” to make perfect digital copies of plaintiffs’ copyrighted programs, including entire theatrical motion pictures, and distribute them to other people -- even many other people -- through high-speed Internet connections. This unlawful activity likewise deprives plaintiffs of the means of payment for, and diminishes the value of, their copyrighted works. These new infringing features, which defendants plan to bolster through daily contact with their customers, are the principal selling points of the ReplayTV 4000 package and the DDV2120 device.

2. The activity enabled, facilitated, and supervised by defendants differs radically from the copying of over-the-air broadcast television programming found to be permissible (under certain narrow circumstances and using much simpler technology) in the Supreme Court’s 1984 Sony decision. (Plaintiffs do not challenge the use of either VCRs or ordinary digital video recorders for that purpose.) Most importantly, the unprecedented new methods of copying and distribution enabled and induced by defendants will deprive plaintiffs of the means of payment for their works and erode the value of plaintiffs’ copyrighted programming, in which plaintiffs have invested billions of dollars. In essence, the defendants are seeking to profit from the sale of features that are calculated to disrupt the ability of copyright owners to market their works for telecast by free, over-the-air television, by basic and premium subscription services, and by pay-per-view distribution services.

3. Plaintiffs are willing to incur the enormous costs of creating and disseminating television programming because copyright provides the economic incentive to do so. Indeed, copyright protection powerfully encourages free expression, since plaintiffs cannot be expected to incur the large costs of producing news and entertainment content (such as television programs and theatrical motion pictures) for the public unless they have a way to recoup and profit from those expenditures.

4. Copyright owners are rewarded for the creation, production and delivery of copyrighted television programming almost exclusively through one or both of two methods: (i) advertiser support and (ii) subscription fees. Defendants’ unlawful scheme attacks both.

5. The licensing of most copyrighted works for television viewing is dependent on payments by advertisers for the right to include commercials during designated breaks within and between programs. The sale of commercial time is virtually the sole means of paying for the copyrighted programming offered by free, over-the-air television networks and stations, such as the ABC, CBS, NBC, and UPN television networks owned by plaintiffs and the hundreds of local television stations (many owned by plaintiffs) that broadcast the programming of those networks. Commercial advertising is also a vital source of payment for copyrighted works purchased, licensed, or created by “basic” subscription program services, such as plaintiffs’ CNBC, Nickelodeon, and SoapNet services, which are transmitted by distributors such as cable systems and satellite carriers. Both over-the-air and basic subscription program services depend on being able to deliver to advertisers consumer audiences of pre-determined size and demographic characteristics.

6. Defendants’ unlawful scheme attacks the fundamental economic underpinnings of free television and basic nonbroadcast services and, hence, the means by which plaintiffs’ copyrighted works are paid for. Advertisers will not pay to have their advertisements placed within television programming delivered to viewers when the advertisements will be invisible to those viewers. In effect, by eliminating the embedded advertising, defendants’ copying-and-commercial-deletion feature will (as to those viewers who employ the feature) eliminate the source of payment to the copyright owner for the very program being viewed. As a result, defendants’ unlawful scheme impairs the value of plaintiffs’ works and reduces the incentive for their creation and dissemination. For subscription television program services that depend in part on advertising revenues, use of the AutoSkip feature has the same effect. In both cases, the AutoSkip feature would fundamentally and inevitably erode the means by which copyright owners are paid for their works and hence the value of the programming they create.

7. Copyrighted works sold or licensed by cable television networks are paid for, in part, by a second funding source -- payment of subscription (or similar) fees. Such fees fund the purchase and creation of content by basic nonbroadcast program services such as Nickelodeon, Toon Disney, and MSNBC, and are virtually the sole means by which copyright owners are paid for programming licensed to “premium” nonbroadcast program services such as Showtime and The Movie Channel, which do not contain or derive any revenues from advertising. The payment of fees to view individual programs is the central feature of pay-per-view distribution systems and, in effect, the means by which copyright owners are paid for content licensed to those systems. Copyrighted works are licensed to all subscription and pay-per-view services on the assumption that viewers of the content will be charged a fee for the content they watch. The ability of copyright owners to be paid for their works would plainly be undermined by any system that facilitates the unauthorized dissemination of the contents of subscription or pay-per-view services for free. Yet defendants’ “Send Show” feature promotes and enables precisely such unlawful conduct.

8. Defendants’ ReplayTV 4000 package is centered on a “digital video recorder,” a computer-like device for making perfect digital copies of television programming. (The device is usable only with ongoing assistance from defendants in the form of data delivered from defendants’ servers each day.) In two key ways, the capabilities of defendants’ new ReplayTV 4000 go far beyond traditional home recording technology and are instead specifically designed to violate the rights of copyright owners and program services.

9. First, defendants’ ReplayTV 4000 offers the ability (without any authorization from copyright owners) to make digital copies of television programs and then to use an “AutoSkip” feature that -- in defendants’ own words -- enables viewers “to watch recorded programs totally commercial-free” with a single press of a button. In fact, the ReplayTV 4000 enables the user to set “AutoSkip” so that it will automatically delete all commercials in all future playbacks of television programming, without any need to activate the feature for viewing of a particular program. (Defendant SONICblue also offers a different method, through use of a new dual-deck videocassette recorder called the “DDV2120 Dual-Deck VCR,” to block all exposure to advertising.) Here is how defendants describe the ReplayTV 4000 AutoSkip feature in a “Frequently Asked Question” on their web site (www.replay.com):

Q. Can ReplayTV play shows without the commercials?

A. Yes! We call the new feature AutoSkip^TM. Here’s how it works. You go to the Replay Guide and select a recorded show that you want to watch. When you select the show, a pop-up menu will ask you if you want to play it with or without commercials. If you choose to skip commercials or “AutoSkip^TM”, then you get to sit back, relax and enjoy your favorite show commercial-free! (Emphasis added)

1. Although defendants position the AutoSkip feature as an option, they expect it to be used routinely. Their web site, for example, says this: “You’ll still have the choice to watch recorded shows with the commercials, if you really want to . . . .” (Emphasis added.)

2. When a user copies a television program with a ReplayTV 4000 and plays it back with the AutoSkip feature, defendants ensure that all commercials are automatically omitted when viewing the program. Nor is it necessary for a viewer to wait until the program is over for defendants’ copying-and-commercial-deletion scheme to work. For example, if a viewer begins watching an 8 p.m. comedy at 8:08, defendants’ scheme enables the viewer to watch the program during virtually the same time slot with no exposure whatsoever to commercials.

3. Copying a copyrighted program or film with a digital video recorder is a violation of the exclusive rights of the copyright owner under Section 106 of the Copyright Act. Such copying is entirely distinguishable from the type of copying which, in narrow and different circumstances, might be defended as a fair use. Copying programming for playback with defendants’ AutoSkip feature effectively circumvents the means of payment to copyright owners for the programming being viewed and therefore their ability to fund it. Viewers will continue to be able to watch the program, but the copyright owner will be deprived of the means of obtaining payment for the programming. Defendants’ copying-and-commercial-deletion scheme thus constitutes copyright infringement. As discussed below, the conduct also constitutes a violation of California law.

4. The second unlawful new service offered by defendants to owners of the new ReplayTV 4000 is a function – revealingly called “Send Show” -- for making and distributing to third parties perfect reproductions of entire copyrighted television programs and motion pictures. With this feature, defendants facilitate and induce the unauthorized reproduction and distribution of plaintiffs’ valuable works and encourage unauthorized access to subscription programming, in violation of both federal and state law. Under the Copyright Act, of course, plaintiffs enjoy the exclusive right to copy and to distribute copies of their copyrighted works. 17 U.S.C. § 106(1), 106(3). Nothing in the Copyright Act gives defendants or their customers any right to make, for distribution to third parties, digital copies of “Will & Grace,” “The Tonight Show,” “20/20,” “Lizzie McGuire,” “Daria,” or “Rugrats,” much less entire theatrical motion pictures appearing on television, such as “Quiz Show,” “Sister Act 2,” “102 Dalmatians,” “Powder,” “Election,” “Planes, Trains, and Automobiles” or “The Talented Mr. Ripley.” These practices violate not only the Copyright Act but also the federal Communications Act and California law.

5. Defendants assure their customers that using the ReplayTV 4000 to infringe copyrights will be effortless: “[W]ith its broadband connectivity, sending and receiving programs [with the ReplayTV 4000] is a breeze.” And the potential customer base for this feature is large and growing: some 10 million U.S. households are expected to have high-speed Internet connections by the end of 2001, with continued growth anticipated thereafter. There are also some nine million broadband connections in college dormitory rooms nationwide, and at least 30 million more in workplace, government, and academic institutions.

6. Defendants’ unlawful “Send Show” feature is designed to violate plaintiffs’ rights in all types of programming, from over-the-air broadcast programs to basic, premium, and pay-per-view nonbroadcast offerings. For example – with defendants’ explicit encouragement and instruction – a ReplayTV 4000 owner can record a movie exhibited on Showtime (such as “The Talented Mr. Ripley”) and use defendants’ “Send Show” feature to reproduce and transmit a perfect digital copy of the movie to many other people, none of whom subscribes to Showtime or has paid for a DVD or VHS copy of the movie.

7. Defendants not only provide the means to carry out this unlawful conduct but highlight it as a principal selling point of the ReplayTV 4000. Defendants’ press release about the ReplayTV 4000, for example, urges customers to use the “Send Show” feature to “trade movies [and] favorite TV programs.” In a September 2001 interview with CNET, SONICblue’s Vice President of Marketing said: “If there’s a great movie that you’ve recorded and you want to send it over to a friend, you’d be able to do that over your broadband connection.” And an October 9, 2001 email from Replay to potential purchasers tells them they can use the ReplayTV 4000 to transmit copies of “TV shows & movies [to] friends & family over the Internet.” (Emphasis added in each case.)

8. Defendants’ web site features an online demonstration that illustrates how to use the “Send Show” feature to reproduce and distribute recorded programs to other people. The demonstration shows a ReplayTV 4000 user employing “Send Show” to distribute to third parties digital copies of a copyrighted program owned by one of the plaintiffs. Indeed, defendants have specifically designed and are actively marketing their service as a tool to make it easy to infringe copyrighted material.

9. Defendants’ involvement with their customers’ infringements does not end with the sale of a ReplayTV 4000 box. Defendants’ continued involvement through a broadband connection is necessary for the updated program listing, which they call a “Replay Guide.” Users can engage in unauthorized copying of plaintiffs’ copyrighted works (for unauthorized viewing without commercials through AutoSkip or for unauthorized transmission to third parties through “Send Show”) only by using the Replay Guide updated daily by defendants. Defendants also plan to collect information about their customers’ use of the ReplayTV 4000 on a daily basis.

10. The plaintiffs in this case are among the largest creators and distributors of copyrighted television programming. Plaintiffs are directly threatened by defendants’ marketing of features that facilitate and induce (a) making unauthorized copies of copyrighted television programming for viewing with all commercial advertising automatically deleted and (b) making and distributing to third parties, without any authorization, digital copies of entire television programs and motion pictures. Plaintiffs will be harmed in several different capacities: as creators and copyright owners of the programming that defendants help their users to infringe, as owners of over-the-air broadcast networks and stations and subscription television program services, and as distributors of pay-per-view content.

11. Plaintiffs seek prompt judicial relief to stop defendants from violating the Copyright Act, the Communications Act, and California law through provision of these unlawful capabilities to their customers, and to prevent defendants from licensing these illegal features to third parties.

PARTIES

1. Paramount Pictures Corporation (“Paramount”) is a Delaware corporation with a principal place of business in Los Angeles, California. Paramount owns the copyright in many episodes of television series telecast on a first-run basis or otherwise by U.S. television outlets, including “Frasier,” “Soul Food,” “Enterprise,” “Raising Dad,” “Manhunt,” “Becker,” and “JAG.” Paramount also owns the U.S. copyright in many theatrical motion pictures telecast by U.S. television program services or offered through pay-per-view distributors, such as “The Talented Mr. Ripley,” “Election,” “Sabrina,” and “Planes, Trains, and Automobiles.” Among the many programs and movies in which Paramount owns the copyright are those listed in Exhibit A.

2. Disney Enterprises, Inc. ("Disney") is a Delaware corporation with its principal place of business in Burbank, California. Disney owns the copyright in many episodes of television programs, including “Lizzie McGuire,” “Book of Pooh,” “Felicity,” “The Geena Davis Show,” and “House of Mouse,” that are telecast on a first-run basis or otherwise by U.S. television outlets. Disney also owns the copyright in many theatrical motion pictures telecast by U.S. program services or offered through pay-per-view distributors, such as “Quiz Show,” “Sister Act 2,” “The Waterboy,” “High Fidelity,” “102 Dalmatians,” and “Powder.” Directly or through subsidiaries, Disney also operates numerous nonbroadcast television program services, including the Disney Channel, Toon Disney, and SoapNet. The programs in which Disney owns the copyright include, by way of illustration, those listed in Exhibit B to this Complaint.

3. The National Broadcasting Company, Inc. (“NBC”) is a Delaware corporation with its principal place of business in New York, New York and with studio facilities in Burbank, California. NBC is a diversified media company that produces news, entertainment, sports, and financial programming for broadcast and cable television, and is the copyright owner of, among other programs, "Saturday Night Live,” “The Today Show,” “Dateline NBC,” and “Meet The Press.” NBC is the sole owner of NBC Studios, Inc. ("NBC Studios"), a New York corporation with its principal place of business in Burbank, California. NBC Studios produces television programming and is the copyright owner of “Will & Grace,” “Late Night With Conan O'Brien,” "The Tonight Show," “Providence,” “Emeril,” “Lost,” “The Other Half,” “The Weakest Link,” “Three Sisters,” and “Passions” among others. In addition, NBC’s thirteen owned and operated television stations produce (and own the copyright in) a variety of programs, including daily news shows. NBC also owns CNBC, Inc., a cable network with its headquarters in Fort Lee, New Jersey, and produces and owns the copyright in most of its programming. Through a joint venture, NBC owns MSNBC Cable, L.L.C., a cable network headquartered in Secaucus, New Jersey, and is the joint or beneficial owner of much of its programming. Representative examples of copyright registrations and/or applications for recently and soon-to-be broadcast programs in which NBC and NBC Studios, Inc. own the copyright are listed in Exhibits C and D.

4. Showtime Networks Inc. (“Showtime”) is a Delaware corporation with its principal place of business in New York, New York. Showtime offers (through cable systems, satellite carriers, and other distributors) several premium television program services (including Showtime, The Movie Channel, and Flix) consisting of theatrically released feature films, original movies, series, and other programming to subscribers, generally for a separate monthly fee. Showtime owns copyrights in episodes of its programs such as “Queer as Folk” and in many feature-length films such as “Harlan County War,” “Out There” and “Rated X.” Among the many programs in which Showtime owns the copyright are those listed in Exhibit E. Showtime also operates SET (Showtime Event Television) Pay Per View, which markets and distributes boxing events and concerts on a pay-per-view basis.

5. The United Paramount Network (“UPN”) is a Delaware partnership with its principal place of business in Los Angeles, California. UPN operates the UPN Network, which offers advertiser-supported free, over-the-air programming to the public in many television markets throughout the United States.

6. ABC, Inc. (“ABC”) is a New York corporation with its principal place of business in New York, New York. ABC is the legal or beneficial owner of copyrights in numerous ABC Television Network programs, such as “Primetime Thursday,” “The View,” “Port Charles,” “All My Children,” “One Life to Live,” “General Hospital,” “Good Morning America,” “Nightline,” “World News Tonight,” and “20/20.” In addition, ABC’s owned and operated television stations produce (and own the copyright in) a variety of programs, including daily news shows. Among the many programs in which ABC owns the copyright are those listed in Exhibit F.

7. Viacom International Inc. (“Viacom International”) is a Delaware corporation with its principal place of business in New York, New York. Viacom International operates numerous television programming services, including MTV Music Television, MTV2, VH1 Music First, Nickelodeon, TNN The National Network, CMT Country Music Television, and TV Land. Viacom International owns copyrights in numerous television programs appearing on these services, such as “Rugrats” (shown on Nickelodeon), “Daria” (shown on MTV) and “Behind the Music” (shown on VH1). Viacom International also owns copyrights in television programs shown on other U.S. television services, including “The Chris Isaak Show,” “Resurrection Blvd.,” and “Sabrina, The Teenage Witch.” Among the many programs in which Viacom International owns the copyright are those listed in Exhibit G.

8. CBS Broadcasting Inc. (“CBS Broadcasting”) is a New York corporation with its principal place of business in New York, New York. CBS Worldwide Inc. (“CBS Worldwide”), a subsidiary of CBS Broadcasting, is a Delaware corporation with a principal place of business in New York, New York. CBS Worldwide owns copyrights in numerous programs broadcast on the CBS Network, such as “The Ellen Show,” “Touched by an Angel,” and “CSI: Crime Scene Investigation.” In addition, CBS Broadcasting’s 17 owned and operated television stations produce (and own the copyright in) a variety of programs, including daily news shows. Among the many programs in which CBS owns the copyright are those listed in Exhibit H.

9. Defendant ReplayTV, Inc. (“Replay”) is a Delaware corporation with its principal place of business in Mountain View, California. Replay is a wholly owned subsidiary of Defendant SONICblue Inc. (“SONICblue”). Replay has developed and is marketing and selling the ReplayTV 4000 device and continuously facilitates its use.

10. Defendant SONICblue is a Delaware corporation with its principal place of business in Santa Clara, California. SONICblue is the parent company of Replay. SONICblue promotes and markets the ReplayTV 4000, including through promotions on its own web site, and continuously facilitates its use. SONICblue also promotes and markets the DDV2120 dual-deck VCR designed to make commercial-free copies of television programming.

STATEMENT OF FACTS

Plaintiffs’ Exclusive Rights Under the Copyright Act

1. Plaintiffs are the copyright owners of many television programs transmitted to television viewers in the United States. Illustrative works in which one of the plaintiffs owns a copyright are listed in Exhibits A-H. Each such work is an original audiovisual work fixed in a tangible medium of expression. Each work listed in Exhibits A-H is copyrightable subject matter within the meaning of the Copyright Act, 17 U.S.C. § 102, and each has been registered (or an application has been filed) with the United States Copyright Office.

2. Section 106 of the Copyright Act grants copyright owners the exclusive right, among other things, to copy their works, to distribute copies of their works, and to authorize others to do the same. No plaintiff has granted any license, permission, or authorization to defendants, or to past, present, or future customers of defendants, either to copy the works listed in Exhibits A-H or to distribute digital copies of the works to third parties.

Plaintiffs’ Operation of Television Program Services

1. In addition to producing (and owning the copyright in) thousands of television programs and movies, several of the plaintiffs own and/or operate television program services that deliver that programming (and/or programming created by third parties, including other plaintiffs herein) to the American public. Some of these services -- such as the ABC, CBS, NBC, and UPN television networks -- transmit that programming to viewers by terrestrial over-the-air broadcasts, which in many cases are retransmitted by cable, satellite and other multichannel video services. Other television program services, such as MSNBC, CNBC, the Disney Channel, Toon Disney, SoapNet, Nickelodeon, MTV, VH1, TNN, CMT, TV Land, Flix, The Movie Channel, and Showtime, are transmitted by distributors such as cable systems and satellite carriers to subscribers who pay a subscription fee to receive these channels. In all cases, the value of -- and hence the incentive for plaintiffs to create -- copyrighted works will be eroded by a technology that undermines the principal means by which copyright owners are paid for such works by television distributors.

The Structure of the Television Industry

and the Threat Posed by Defendants

1. In the United States today, there are four principal methods by which television programming is transmitted to the public. The first – and oldest – method is through “free,” over-the-air television networks such as ABC, CBS, NBC, and UPN and the hundreds of local terrestrial broadcast stations that carry their programming. Free, over-the-air television networks and local stations both create and license copyrighted content – largely entertainment, news and sports programming -- on which the public has come to rely for information and entertainment. Virtually the sole means of payment for such copyrighted content is revenue from advertisers who pay for commercials that appear during, or between, television shows. It is the advertising that pays for a particular show that a viewer may choose to watch. Although nonbroadcast services have attracted an increasing number of viewers over the past 20 years, broadcast television networks and local stations nevertheless continue to account for a large percentage of all television viewing in the United States.

2. Maintaining a nationwide system of free, over-the-air local television stations, which makes news, information, and entertainment available to virtually all Americans without any need to pay subscription fees, has been a crucial public policy goal in the United States for many decades. The creation and acquisition of the copyrighted content that has come to define free, over-the-air television is made possible through commercial advertisements that are embedded in each program. In short, advertisements provide the means of payment for the copyrighted works that the public enjoys at no direct charge.

3. The second method of television distribution is through controlled access via so-called “basic” nonbroadcast channels such as Disney Channel, Toon Disney, SoapNet, Nickelodeon, MTV, MTV2, VH1, TNN, CMT, TV Land, CNBC, and MSNBC. The sale of commercial time to advertisers and the collection of fees from distributors such as cable systems and satellite carriers are the means by which such channels create or license copyrighted works.

4. The third model of transmission of television programming in the United States is via premium television program services such as Showtime and The Movie Channel. These services, which are available to subscribers to cable, satellite, and other multichannel video distribution systems, are typically made available to consumers for a substantial monthly fee. Premium services offer original programming, theatrical motion pictures, or both, all without commercial interruption – but only to those who have paid the subscription fee. Subscription fees are the means by which the copyright owners are paid for licensing their works to these services.

5. The fourth model of transmission of television programming in the United States is through pay-per-view delivery, in which viewers obtain one-time access to particular programs (such as feature films, live boxing events and concerts) in return for payment of a fee for that access.

6. The creation and licensing of the overwhelming majority of television programs that are offered to American viewers today is made possible by and is completely dependent on the commercial advertising that is embedded in that programming. Advertisements provide the means of payment for each show that a viewer chooses to watch. A device that completely blocks the delivery of advertising to viewers therefore deprives copyright owners of the means by which they are paid for their works and diminishes both the value of the works and the incentive to create and distribute original content over the medium. By undermining the engine by which content is produced, the device will inevitably dry up the source and diminish the quality of the programming that most Americans have come to expect and demand.

7. Similarly, the “Send Show” feature will jeopardize the means by which copyright owners are paid for the creation of copyrighted content by nonbroadcast channels (whether basic or premium). Such payments are generated, at least in part, by monthly subscription fees that viewers pay for the privilege of viewing the nonbroadcast network’s programming. The “Send Show” feature, however, enables a single person who has paid the monthly subscription fee to make and to transmit to third parties perfect digital copies of the programs offered by subscription channels. This feature enables the evasion of payments for subscription programming, depriving the copyright owner of the right to control how the work is disseminated and shrinking the subscription base that pays for such programming.

8. Finally, the unauthorized copying and distribution of perfect copies of theatrical motion pictures and other programs offered on a pay-per-view basis is a clear violation of plaintiffs’ rights. These works are licensed and paid for on the basis that each viewer who wishes to see a work will pay a fee for such viewing. No permission is granted to reproduce and disseminate copies of the work to those who have not likewise paid for its exhibition. Indeed, it is self-evident that the unauthorized dissemination of works enabled by the “Send Show” feature defeats the means by which the copyright owner has agreed to be compensated for the exhibition of its work. Viewers who obtain unauthorized digital copies of such programs from other viewers have no reason to agree to pay-per-view fees to obtain access to them. Defendants’ unlawful service is also a threat to the legitimate sale of copies of television programming (including feature films) in the form of videotapes or DVDs.

Defendants’ ReplayTV 4000 and DDV2120 Dual-Deck VCR

1. The ReplayTV 4000 is a type of digital video recorder. Far from being a stand-alone device, the ReplayTV 4000 is capable of copying television programs only through continuous assistance from defendants. Each night, the ReplayTV 4000 automatically contacts SONICblue to download from SONICblue’s server a current program guide. The downloaded schedule, also known as the Replay Guide, lists on the television screen all television programming available to the viewer. By clicking on particular programs listed on the Replay Guide, including programs owned by plaintiffs, the viewer can program the ReplayTV 4000 to record and store those programs onto a hard drive built into the box. Significantly, and unlike standard video recorders, defendants’ ReplayTV 4000 also enables users to make digital copies of television programs for the unlawful purpose of playing them with all commercials deleted, and to copy and distribute copyrighted programs and movies without authorization to third parties.

2. The DDV2120 Dual-Deck VCR recently introduced by defendant SONICblue is an analog videocassette recorder. With the DDV2120, according to defendant SONICblue, “you can record all your favorite shows, and make commercial-free copies of them for viewing or archiving.” The device accomplishes this by making an initial copy of television programming for the unlawful purpose of then making a second-generation unauthorized copy that omits all commercials.

Defendants’ Commercial Deletion Technology

1. As defendants themselves boast in their marketing materials, the ReplayTV 4000 “does what no other [digital video recorder] on the market can do”: it enables viewers to make unauthorized digital copies of copyrighted television programs and then use defendants’ “AutoSkip” function to eliminate any exposure to the advertising that is the lifeblood of most television channels. On their web site, defendants explain the AutoSkip function as follows: it “[a]llows ReplayTV 4000 users to playback recorded programming while automatically bypassing all commercials. It's commercial-free television.”

2. A demonstration program on defendants’ web site (www.replay.com) shows potential customers how AutoSkip works. The demonstration shows a Replay Guide (the on-screen program guide updated daily by defendants), which lists several copyrighted television programs such as “CSI: Crime Scene Investigation” (CBS), “Friends” (NBC), “Just Shoot Me” (NBC), and “General Hospital” (ABC). The demonstration instructs users to “select the show you want to watch from your Replay Guide” and highlights the listing for ABC’s “General Hospital.” Another frame then displays a pop-up menu within the Replay Guide and explains that this “pop-up menu gives you the option to play the show without any commercials.” The demonstration directs the viewer to select the option “Skip Commercials,” and then announces that the viewer can now enjoy “commercial-free entertainment!” According to the demonstration, the program can be played commercial-free only by using the Replay Guide supplied (and updated daily) by defendants. Copies of this segment of defendants’ demonstration are attached as Exhibit I.

3. Defendants’ DDV2120 accomplishes the destruction of all commercial advertising in a different, but equally unlawful, manner. The DDV2120 offers (in defendants’ words) “One-Touch Commercial Free Copying For Ad-Free Tapes.” To do this, defendants’ DDV2120 makes a copy of an entire television transmission, including commercials, for the unlawful purpose of then making an unauthorized second-generation tape that omits all commercials.

4. The unauthorized making of copies of television programming for the purpose of viewing with all commercials automatically deleted is not a fair use, and goes far beyond the narrowly circumscribed conduct discussed by the Supreme Court in the 1984 Sony Betamax decision. The same is true of the creation (with the DDV2120) of two unauthorized copies of television programming -- a first-generation copy with commercials and a second-generation copy without them.

Defendants’ Facilitation of Unauthorized

Distribution of Plaintiffs’ Programs and Films

1. The “Send Show” feature of the ReplayTV 4000 package enables owners of a ReplayTV 4000 (in Replay’s own words) to “share programs with friends who also own ReplayTV 4000.” Defendants’ “Send Show” feature enables, materially contributes to, and induces the unlawful distribution of copyrighted works owned by plaintiffs.

2. For example, according to defendants’ web site, a ReplayTV 4000 owner could, with a few clicks on a remote control, send any television program whatsoever -- including, for example, a theatrical film such as “Con Air” or “The Talented Mr. Ripley” exhibited on the Showtime service -- to a large number of third parties, regardless of whether the third parties themselves had a subscription to the program service from which the program was copied. This would make it unnecessary for those third parties to subscribe to Showtime, jeopardizing its business and (over time) its existence. A ReplayTV 4000 owner could do the same with many theatrical motion pictures, boxing events, concerts and other copyrighted works owned by plaintiffs and transmitted on a pay-per-view basis, or with works owned by others and transmitted by a pay-per-view service operated by plaintiffs.

3. Defendants’ on-line demonstration shows potential ReplayTV 4000 customers how to use the “Send Show” feature. The demonstration illustrates how easy it is to use the feature by showing how to send a copy of the show “General Hospital” -- owned by one of the plaintiffs -- to a third party. Copies of this segment of defendants’ demo program are attached as Exhibit J.

4. The “Send Show” function is similar to the music infringement scheme recently enjoined in the Napster case. Just as Napster established a commercial business that was predicated on -- and knowingly benefited from -- the unlawful copying and distribution of music files by users, defendants plan to create a network in which they facilitate, induce, and profit from the unlawful distribution of television shows and feature films costing millions (and in some cases tens or hundreds of millions of dollars) to produce.

5. The “Send Show” feature also jeopardizes, in many ways, the system by which costly copyrighted programming is offered by free, over-the-air television networks and local stations. For example, advertisers who pay stations to run advertisements of purely local relevance will not be willing to pay for viewers in their local area who see the station’s national programming via an unauthorized copy distributed by a viewer (through defendants’ “Send Show” service) in another market with different local advertisements. (Of course, if the AutoSkip feature is not stopped, few ReplayTV users will see commercial advertising or promotional spots in any event.)

6. The unauthorized dissemination of copyrighted over-the-air programming will also impair the ability of copyright owners to realize its value – and fund the costs of that programming -- through so-called “repurposing.” Daytime dramas broadcast by ABC television stations, for example, are later shown on SoapNet, a nonbroadcast channel available to cable and satellite viewers; network newscasts are often broadcast again on local cable news channels; and several popular network prime-time dramas are shown on nonbroadcast program services shortly after their initial network broadcast. By enabling, inducing, and continuously facilitating the unauthorized copying and distribution of this programming, defendants diminish plaintiffs’ ability to market these repurposing rights.

7. The “Send Show” feature will also harm several of the plaintiffs in their capacity as owners of television stations in a number of U.S. television markets and as copyright owners who seek to achieve maximum value from their programming through repurposing.

8. Sending a copy of a copyrighted television program or film to a third party goes far beyond the scope of the fair use defense. Indeed, defendants have specifically designed and customized the “Send Show” function to encourage and provide for the easy infringement of copyrighted works delivered by program services.

9. Nor is there any geographic limit to the infringements that defendants encourage their users to commit through the “Send Show” feature. On information and belief, ReplayTV 4000 users in the United States can and will retransmit copyrighted television programs and movies from the United States to ReplayTV 4000 users in Canada, Mexico, or any other country that offers broadband connections. A recent news article about the ReplayTV 4000 machine specifically highlighted this capability: “Couch potatoes can rejoice: Soon, you’ll be able to lie around for nearly two weeks without running out of recorded programs to watch on your TV. And you’ll be able to share the shows with someone in the next room -- or the next continent.” (Emphasis added). The unauthorized copying and retransmission of copyrighted works to persons in other countries only magnifies the harm that defendants’ service will cause to plaintiffs.

CLAIMS FOR RELIEF

COUNT I: Contributory Copyright Infringement

1. Plaintiffs repeat and incorporate by reference, as if fully set forth herein, the allegations of ¶¶ 1-57 above.

2. Plaintiffs Paramount Pictures Corporation, Disney Enterprises, Inc., National Broadcasting Company, Inc., NBC Studios, Inc., Showtime Networks Inc., ABC, Inc., Viacom International Inc., and CBS Worldwide Inc. are the copyright owners of the works listed in Exhibits A-H as well as many other copyrighted works telecast by U.S. television program services. The plaintiffs have obtained (or applied for) copyright registration certificates for each work listed in Exhibits A-H.

3. Use of the ReplayTV 4000 to copy and distribute plaintiffs’ copyrighted works without authorization is a violation of plaintiffs’ exclusive rights under 17 U.S.C. § 106. Among other things, and without limitation, this conduct amounts to (a) unauthorized reproduction of plaintiffs’ copyrighted works and (b) unauthorized distribution of copies of plaintiffs’ copyrighted works to the public.

4. Use of the DDV2120 to copy plaintiffs’ copyrighted works without authorization is a violation of plaintiffs’ exclusive rights under 17 U.S.C. § 106. Among other things, and without limitation, this conduct amounts to unauthorized reproduction of plaintiffs’ copyrighted works.

5. The unauthorized copying and distribution of plaintiffs’ copyrighted works that defendants enable, encourage, and facilitate through the schemes described above is without plaintiffs’ consent and not otherwise permissible under the Copyright Act.

6. On information and belief, employees or agents of defendants, other users of the ReplayTV 4000, including testers, and customers who have purchased the DDV2120 device have already infringed (or will soon infringe) plaintiffs’ exclusive rights under 17 U.S.C. § 106 in many copyrighted works, including the illustrative works identified in Exhibits A-H hereto.

7. Defendants know or have reason to know of the direct infringement of plaintiffs’ copyrights. Indeed, defendants actively promote the infringements as a reason to purchase their products, provide tools that are indispensable to these infringements, and continuously facilitate the infringements.

8. Defendants, through their own conduct, have induced, caused, encouraged, assisted and/or materially contributed to this infringing activity.

9. The foregoing acts of infringement by defendants have been willful, intentional and purposeful, in disregard of and with indifference to the rights of plaintiffs.

10. Defendants’ conduct constitutes contributory infringement of plaintiffs’ copyrights and exclusive rights under copyright in violation of Sections 106 and 501 of the Copyright Act, 17 U.S.C. §§ 106, 501.

11. As a result of defendants’ conduct, plaintiffs have suffered and will continue to suffer irreparable injury.

COUNT II: Vicarious Copyright Infringement

1. Plaintiffs repeat and incorporate by reference, as if fully set forth herein, the allegations of ¶¶ 1-57 and ¶¶ 59-68 above.

2. Defendants have the right and ability to supervise and/or control the infringing conduct of users of the ReplayTV 4000 and DDV2120. First, defendants have made a deliberate decision to offer their users features that are specifically designed to enable widespread infringements, when they could have prevented or greatly limited that conduct by declining to offer or to facilitate or support use of those unlawful features. Second, although defendants could, on information and belief, have designed their equipment to prevent the unauthorized distribution of copyrighted works delivered by television program services (such as NBC, the Disney Channel, and Showtime) or on a pay-per-view basis, they instead specifically designed their equipment (and planned their ongoing assistance to their customers) to encourage distribution of such copyrighted works. Third, defendants’ regular involvement is an indispensable link in their customers’ infringing conduct.

3. Defendants have a direct financial interest in the infringements of plaintiffs’ copyrights by their customers. Defendants’ economic success is directly tied to the popularity of the infringing conduct that they seek to encourage. Indeed, the defendants have candidly admitted that the ReplayTV 4000 and DDV2120 are designed to enable users to copy programming for viewing with automatic deletion of commercials, and that the ReplayTV 4000 is designed to enable users to distribute perfect digital copies of entire copyrighted works to others. These new infringing capabilities of the ReplayTV 4000 and DDV2120 are among defendants’ principal selling points.

4. Defendants’ acts have been willful, intentional and purposeful, in disregard of and with indifference to the plaintiffs’ rights.

5. Defendants’ conduct constitutes vicarious infringement of plaintiffs’ copyrights and exclusive rights under copyright in violation of Sections 106 and 501 of the Copyright Act, 17 U.S.C. §§ 106, 501.

6. As a result of defendants’ conduct, plaintiffs will suffer irreparable injury.

COUNT III -- Violation of Section 553 of the Communications Act

1. Plaintiffs repeat and incorporate by reference, as if fully set forth herein, the allegations of ¶¶ 1-57, ¶¶ 59-68, and ¶¶ 70-74 above.

2. The Communications Act makes it unlawful for any person to intercept or receive or assist in intercepting or receiving any communications service offered over a cable system, unless specifically authorized to do so by a cable operator or as specifically authorized by law. 47 U.S.C. § 553. The prohibited conduct includes the manufacture or distribution of equipment intended by the manufacturer or distributor for unauthorized reception of any communications service offered over a cable system.

3. Defendants’ conduct violates Section 553. Among other things, defendants are selling equipment -- the ReplayTV 4000 device -- with a feature (“Send Show”) that they intend to be used to enable persons without authorization to receive communication services offered over a cable system, including but not limited to cable-delivered programming of over-the-air television stations, basic nonbroadcast services, premium services, and pay-per-view services.

COUNT IV -- Violation of Section 605 of the Communications Act

1. Plaintiffs repeat and incorporate by reference, as if fully set forth herein, the allegations of ¶¶ 1-57, ¶¶ 59-68, ¶¶ 70-74, and ¶¶ 76-77 above.

2. Defendants’ conduct violates 47 U.S.C. § 605, which, with certain exceptions not relevant here, forbids any person receiving, assisting in receiving, transmitting, or assisting in transmitting, any interstate communication by radio from publishing the contents thereof except through authorized channels. By selling (and facilitating the use of) a device intentionally designed and intended to be used to publish the contents of communications by radio through the “Send Show” feature, defendants are violating Section 605.

COUNT V -- Unfair Competition under Cal. Bus. & Prof. Code § 17200

1. Plaintiffs repeat and incorporate by reference, as if fully set forth herein, the allegations of ¶¶ 1-57, ¶¶ 76-77, and ¶ 79 above.

2. California Business & Professions Code § 17200 provides for injunctive and other relief against "any unlawful, unfair or fraudulent business act or practice.” Defendants are engaged in, or propose to engage in, several such practices.

3. Plaintiffs operate numerous television program services that are available only by subscription, including the Disney Channel, Toon Disney, SoapNet, Nickelodeon, MTV Music Television, MTV2, VH1 Music First, Nickelodeon, TNN The National Network, CMT Country Music Television, TV Land, CNBC, MSNBC, The Movie Channel, Flix, and Showtime.

4. In their capacity as owners and operators of television program services, plaintiffs operate a lawful business of packaging attractive content with advertising paid for by third parties. A basic premise of this business is that the advertising is tied to the attractive content. Defendants have engaged in one or more unfair business acts and/or unfair business practices by providing a device that enables users to instantly and completely eradicate an essential revenue-producing aspect of plaintiffs’ business. By doing so, defendants have engaged (or propose to engage) in a highly unfair business practice.

5. The public policy of the State of California favors the maximum production of news and entertainment programming by means of television. Defendants’ conduct works to defeat that policy by sabotaging the ability of plaintiffs to obtain compensation for their news and entertainment programming.

6. As set forth above, defendant’s conduct is unlawful under Sections 553 and 605 of the Federal Communications Act. In addition, unlawful reception of subscription television services, and facilitation of such unlawful reception, is a violation of California law. Cal. Penal Code §§ 593d, 593e. By facilitating and encouraging conduct that amounts to receipt by nonsubscribers of content offered on a subscription-only basis, defendants are engaging in conduct that has the functional effect of a violation of Cal. Penal Code §§ 593d and 593e. This is a grossly unfair business practice.

7. Each of the aforementioned business acts and/or practices is oppressive and/or substantially injurious to plaintiffs and/or the general public. With respect to each of the aforementioned business acts and/or practices, the gravity of the harm to plaintiffs and the general public outweighs the utility, if any, of defendants’ conduct. PRAYER FOR RELIEF

WHEREFORE, plaintiffs pray that this Court enter judgment in their favor and against defendants as follows:

(a) adjudge and declare, pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201(a) & 2202, that defendants have contributorily and vicariously infringed plaintiffs’ exclusive rights under the Copyright Act, plaintiffs’ rights under the Communications Act, and plaintiffs’ rights under California law;

(b) preliminarily and permanently enjoin, pursuant to 17 U.S.C. § 502, defendants, their officers, agents, servants, employees and those persons in active concert or participation with them, from directly, contributorily and/or vicariously infringing by any means plaintiffs’ exclusive rights under the Copyright Act, including but not limited to, through any provision, use, or support of the AutoSkip or “Send Show” functions or any similar functions, and from licensing any other person to do the same;

(c) preliminarily and permanently enjoin defendants from violating Sections 553 and 605 of the Communications Act;

(d) preliminarily and permanently enjoin, pursuant to Cal. Bus.& Prof. Code § 17200, defendants, their officers, agents, servants, employees and those persons in active concert or participation with them, from engaging in one or more unfair and/or unlawful business acts or practices, including but not limited to, through any provision, use or support of the AutoSkip or “Send Show” functions or any similar functions, or from licensing any other person to do the same;

(e) require defendants and their officers, agents, servants, employees and those persons in active concert to cease any activity that encourages viewers to block access to commercial content transmitted during television programming owned by plaintiffs or offered on a television network owned and/or operated by plaintiffs, or that encourages or permits users to transmit copies of such programming to other persons;

(f) award plaintiffs costs and reasonable attorney’s fees in accordance with 17 U.S.C. § 505, 47 U.S.C. §§ 553 & 605, and other applicable law; and

(g) award plaintiffs such further and additional relief as the Court may deem just and proper.

Respectfully submitted,

___________________________________

Andrew M. White (STATE BAR NO. 060181) Jonathan H. Anschell (STATE BAR NO. 162554)

Lee S. Brenner (STATE BAR NO. 180235)

White O'Connor Curry Gatti & Avanzado LLP

10100 Santa Monica Boulevard

Suite 2300

Los Angeles, California 90067

Phone: (310) 712-6100

Facsimile: (310) 712-6199

___________________________________

Thomas P. Olson

Randolph D. Moss

Peter B. Rutledge

Wilmer, Cutler & Pickering

2445 M Street, N.W.

Washington, D.C. 20037

Phone: (202) 663-6000

Facsimile: (202) 663-6363

Attorneys for Plaintiffs

DATED: October 31, 2001

TABLE OF EXHIBITS

A. Table of illustrative copyright registrations for programs owned by Paramount Pictures Corporation

B. Table of illustrative copyright registrations for programs owned by Disney Enterprises, Inc.

C. Table of illustrative copyright registrations for programs owned by National Broadcasting Co.

D. Table of illustrative copyright registrations for programs owned by NBC Studios, Inc.

E. Table of illustrative copyright registrations for programs owned by Showtime Networks Inc.

F. Table of illustrative copyright registrations for programs owned by ABC, Inc.

G. Table of illustrative copyright registrations for programs owned by Viacom International Inc.

H. Table of illustrative copyright registrations for programs owned by CBS Broadcasting Inc.

I. Segments about AutoSkip feature from demonstration video

J. Segments about “Send Show” feature from demonstration video