Devices That Interfere With Cable TV's Pay Per View Billing Violate Both DMCA and Section 553

August 4, 2008. The U.S. Court of Appeals (1stCir) issued its opinion in Coxcom v. Chafee, affirming the summary judgment of the District Court for a cable television company against sellers of electronic devices that prevented the cable company from receiving pay per view billing information from subscribers' set top boxes.

Background. Coxcom is a cable television company. It leases set-top boxes to its subscribers that descramble incoming signals so that programming can be viewed. These boxes also transmit information from the subscribers to Coxcom, including billing information for pay per view programming.

Jon Chaffee, Amy Chaffee, and Ramalda Bou, the defendants below, and appellants in this appeal, sold digital cable filter devices that block low frequency signals. Coxcom's system uses these signals for transmitting pay per view billing information. That is, the defendants sold devices that enabled Coxcom's customers to avoid being billed for watching pay per view programs.

Coxcom filed a complaint in U.S. District Court (DRI) against these defendants alleging violation of the Cable Communications Policy Act of 1984, at 47 U.S.C. § 553(a), and the anti-circumvention provisions of the Digital Millennium Copyright Act (DMCA), at 17 U.S.C. § 1201.

Coxcom also sought and received an ex parte temporary restraining order that enjoined the defendants from further sales of the filters, and allowed Coxcom to seize defendants' business records and computers.

The District Court granted Coxcom's motion for summary judgment on the issue of liability under both claims. Following an evidentiary hearing on the issue of damages, the District Court awarded Coxcom $35,000 in statutory and enhanced damages under Section 553, $105,000 in statutory and enhanced damages under the DMCA, and $196,586.11 in attorney's fees and costs against Jon and Amy Chafee. Bou's involvement was less, and the District Court awarded Coxcom a total of $5,500 from her.

The three defendants brought the present appeal. The Court of Appeals affirmed.

Section 553. 47 U.S.C. § 553(a)(1) provides that "No person shall 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 may otherwise be specifically authorized by law."

The Subsection 553(a)(2) provides that "For the purpose of this section, the term “assist in intercepting or receiving” shall include the manufacture or distribution of equipment intended by the manufacturer or distributor (as the case may be) for unauthorized reception of any communications service offered over a cable system in violation of subparagraph (1)." (Parentheses in original.)

In the present case, the devices sold by the defendants did not intercept any signals. Moreover, the pay per view programs were provided by Coxcom at the request of subscribers. The devices interfered with the billing for those programs. Hence, the defendants argued that the reception was authorized, and that the statute pertains only to unauthorized reception of signals from Coxcom, and not signals going from the subscriber to Coxcom.

The Court of Appeals labeled this a "transparent attempt at wordplay".

The Court of Appeals held that the statute reaches the sale of these devices. It wrote that "Section 553 liability is thus not limited to situations where cable services have actually been intercepted; liability exists where a plaintiff proves that a defendant intended to assist in the unauthorized reception of cable services."

The Court continued, "A subscriber using a filter to view pay-per-view ``receives´´ programming. That programming is unauthorized, because the subscriber has interfered with the cable company's billing mechanism in contravention of the subscriber's contract with the cable company. The filter itself may not act upon the reception of cable programming, but the record is clear that a filter is ``equipment´´ that ``assists´´ a subscriber in ``unauthorized reception´´ of pay-per-view programming, in violation of Section 553."

The Court of Appeals also rejected the defendants' argument that their devices were not "intended" by them to be used for unauthorized reception within the meaning of subsection 553(a)(2). That is, they sold devices with an instruction sheet that contained a statement that the devices would block transmission of billing information, so users should notify their cable company of their pay per view use.

The Court of Appeals was also unimpressed with this argument.

DMCA. The Court of Appeals also affirmed the judgment for Coxcom on the DMCA claim.

Subection 1201(a)(1)(A) provides, in part, that "No person shall circumvent a technological measure that effectively controls access to a work protected under this title."

Subection 1201(a)(2) provides that "No person shall manufacture, import, offer to the public, provide, or otherwise traffic in any technology, product, service, device, component, or part thereof, that--
  (A) is primarily designed or produced for the purpose of circumventing a technological measure that effectively controls access to a work protected under this title;
  (B) has only limited commercially significant purpose or use other than to circumvent a technological measure that effectively controls access to a work protected under this title; or
  (C) is marketed by that person or another acting in concert with that person with that person’s knowledge for use in circumventing a technological measure that effectively controls access to a work protected under this title."

This issue turned on whether what the defendants did constitutes circumventing a technological protection measure. The Court of Appeals, with little discussion, concluded that it did.

Subsection 1201(a)(3) defines "circumvent a technological measure" to mean "to descramble a scrambled work, to decrypt an encrypted work, or otherwise to avoid, bypass, remove, deactivate, or impair a technological measure, without the authority of the copyright owner".

The Court of Appeals concluded that the Coxcom's "pay-per-view delivery and billing system that scrambles pay-per-view programming unless subscribers choose to purchase and view it" constituted a "technological measure" within the meaning of the statute, and that the defendants' engaged in acts to "avoid" and "bypass" within the meaning of the statute.

This case is Coxcom, Inc. v. Jon Chafee, et al., U.S. Court of Appeals for the 1st Circuit, App. Ct. Nos. 07-2030 and 07-2031, appeals from the U.S. District Court for the District of Rhode Island, Judge William Smith presiding. Judge Howard wrote the opinion of the Court of Appeals, in which Judges Torruella and Lipez joined.