438 180 FEDERAL SUPPLEMENT C. Mr. and Mrs. Clinton Bird Plaintiffs allege that Mr. and Mrs. Bird copied two episodes of a Universal televi sion series entitled "Bionic Woman" and that defendants are liable for this infringement. There is no evidence to support this allegation except two tapes which plaintiffs attorney said were made by the Birds. D. James Lowe Plaintiffs also allege that the corporate defendants are liable for copying done by Mr. Lowe. Lowe owns a 7200 Betamax and about 170 tapes. Lowe is an attorney who has formed his own opinion that it is legal to record off-the-air. Lowe is also the publisher of the "Videophile." No defendant is involved in the Videophile in any way. Lowe recorded the Universal film "Psycho" and he intends to erase it. Lowe's son recorded a few 7-8 minute cartoons con usage of Betamax recordings was to watch once and then crase. Soule did record the Marx Brothers movies "Horse Feathers." "Coconuts" and "Duck Soup" but he never watched a playback of any one. In fact, he planned to erase the movies because he was not watch ing them for lack of time and interest, and it was too expensive to keep them. SURVEYS OF USAGE Seth plaintiffs and defendants conducted surveys of Betamax owners to ascertain use of the recorder. Field Research Corporation conducted plaintiffs' survey and Crossley Surveys, Inc. conducted defendants' survey. From June 27-July 7, 1978, plaintiffs interviewed by telephone 805 adults who identified themselves as the household member most familiar with the use of the VTR. Of the 805 interviewees, 23 owned a tained within episodes of the New Mickey non-Sony VTR. From August 3–24, 1973, Mouse Club and the two of them watched these together when Lowe got home from work. The cartoon tities were: "Donald Applecore," "Pluto's Quinpuplets," "Modern Inventions," "Two Chips and a Miss" and "Donald's Better Self." Lowe's own second recording was a cartoon entitled "Spare the Rod." None of the New Mickey Mouse Club episodes was recorded except for the foregoing cartoons. Lowe generally views what he has recorded and then erases it. Lowe nas erased some cartoons and would have erased the rest of them except that they are in the middle of tapes containing other items. E. Geoffrey Soule Geoffrey Souie owns a 7200 Betamax. He knew about other videotape recorders on the market, but the Betamax was the first he could afford. He could not remember seeing any of defendants' ads before purchasing his Betamax. He bought the Betamax for time shift usage, and this proved to be about 95% of the actual use he made of it. He always had the impression (not gained from Sony) that it was permissible to record off television provided he did not sell what he copied. Soule's generai defendants interviewed by telephone 998 persons identified as the household member who uses the Betamax most frequently: Both surveys are extensive. Some of their findings are as follows: Plaintiffs' survey found that the average number of cassettes owned by the interviewees was 31.73. 63.9% of plaintiffs' interviewees had less than five cassettes with movies on them and 81.1% had less than five cassettes with television programs on them. Defendants' interviewees reported an average of 25.21 cassettes with material recorded off-the-air. According to plaintiffs' survey, 75.4% of the VTR owners use their machines to record for time-shifting purposes half or most of the time. Defendants' survey showed that 96% of the Betamax owners had used the machine to record programs they otherwise would have missed. • When plaintiffs asked interviewees now many cassettes were in their library, 55.8% said there were 10 or fewer. In defendants' survey, of the total programs viewed by interviewees in the past month. 0.4% had been viewed only that one time and for 57.9%, there were 10 pians for further viewing. UNIVERSAL CITY STUDIOS v. SONY CORP. OF AMER Accorting to plaintiffs' sucou 1ING ( the owners eliminate commercials from the recording either "sometimes," "rary. ly." or "never": 56.1% use the fast-torward to pass commercials either "sometimes," "rarely," or "never." • Defendants found that 32.4% of the recording done by Betamax owners in the past month was done while they were gone or viewing another channel (and therefore could not use the pause button to eliminate the commercials. 11.0% of the recording was done while viewing, with the pause button being used 3.1% of the time. While viewing playbacks in the past month, defendants' interviewees fast-forwarded through commercials in 24.6% of them. • Defendants further found that for 89.8% of the interviewees, most of the cassette playback was with family members only. 319% of the defendants inter viewees watched the same amount or more of regular television as they did before owning a Betamax. 53.2% reported their frequency of movie going was unaffected by Betamax. RECORDING BY RETAIL DEFEND- Plaintiffs hired Paul Ruid, a private investigator, to visit retail stores to observe videotape recorder marketing practices. Plaintiffs' attorneys instructed him to ask for demonstrations. Ruid visited the Broadway (Carter Hawley) on October 1, 1976 and asked for a demonstration of the Betamax. The salesman showed him a playback of part of an unidentified episode from a Universal series called "Adam 12" It was never determined who had made the recording. Ruid visited the Broadway again on October 18 at a time when he knew that an old Universal series called "Major Alams" was being telecast. Ruid again asked for a demonstration and this time added a request that "something in the nature of an old movie" be recorded. As he had hoped, a portion of "Major Adams" was recorded. Ruid visited Associated/Robinson's on October 14, 1976, at a time when he knew that a Universal series called "Gemini Man" was being telecast. He found "Gemini Man" already being shown on television demonstration sets at the store, and he asked for a demonstration of the Betamax. The salesman made two -minute recordings of the program, the second to correct what he thought was an error in the first. Ruid visited Federated/Bullock's on Cctober 14, 1976 at a time when he knew that a Universal mini-series called "Captains and the Kings" was being telecast. He found the television demonstration sets already showing an episode from "Captains and the Kings," and he requested a demonstration of Betamax. In response, the salesman put the Setamax in the record mode. Ruid never saw a playback, and he could not say whether "Captains and the Kings" had been successfully recorded. Nobody but Ruid ever saw the demonstration playbacks which he had requested and Ruid never saw Betamax demonstrated to anybody else. Ruid did not go to Henry's Camera and request a demonstration. Henry's Camera normally records for about one minute during customer demonstrations at its store. HARM TO PLAINTIFF Plaintiffs_admitted that at the time of trial, no existing contract, license or advanLageous business relationship of either Universal or Disney had been injured, interfered with or disrupted by the sale or use of Betamax and Betamax tapes or by any other activity of any defendant. This includes without limitation piaintiffs' theatrical, television, 8 or 16 mm, and video-dise products. In addition, plaintiffs conceded that nei ther the sale nor the use of Betamax and Betamax tapes had by the time of trial caused Universal or Disney any measurable monetary damage, economic loss or revenue loss. 1973 was a very successiu: year for both Universal and Disney. It was Disney's eleventh consecutive year of increased profit and the most profitable year in history for Universal Pictures Theatrical Division. 440 480 FEDERAL SUPPLEMENT Universal's television revenues had increased steadily over the three years prior to trial and Disney received its highest television income in 1978. Plaintiffs did present extensive expert testimony at trial on the issue of prospective harm. Executives of both Universal and Disner testified that in the future Betamax would decrease the value of their copyrights in a number of ways, e. g., by exhausting interest in reruns and by frag menting the live television audience. These predictions are discussed extensively below. Uniformly, however, these experts were unable to predict at what point in either time or Betamax sales such harm would occur. THE BROADCASTING INDUSTRY There are 727 commercial television stations in the United States, 516 broadcasting very high frequency ("VHF") signals and 211 broadcasting ultra high frequency ("UHF") signals. These commerciai stations are spread out geographically over approximately 235 television "markets." There are currently three commercial television networks in the United States, each network owning and operating ("0&0") some television stations and having many more stations as "affiliates"-each such station being the network's exclusive outlet in its particular market. Those stations which are not owned by, or affiliated with, a network are called "independents." Each network feeds programming to its affiliates from approximately 7:00 a. m. to 11:00 p. m.. with approximately five hours of local programming interspersed in that time period. The network pays the affiliate to broadcast its material. The affiliate can reject the network programming and broadcast local programming if it wishes. The affiliate can also tape the network programming and broadcast it up to seven days at a time when no network programming is being provided. The commercial networks and stations obtain their revenue primarily from advertisers. who pay to have their commercials telecast. Advertisers buy time (1) on network programming, (2) on a national “spot" basis, and (3) on a local basis—the individu al stations receiving the revenue directly on the latter two bases. A typical affiliate station obtains 10% of its revenue from the network and 45% each from national spot and local advertising. The network feed contains commercials but also allows "station breaks or position." wherein the local station may insert national “spot" or local advertising and keep the revenue. The prevailing “unit" of commercial advertising time is 30 seconds. The rule of thumb is that the larger the perceived rating of the program carrying the commercial, the larger the advertising fee. This fee can run from $45,000 to $125,000 per 30 second commercial for a prime time network slot. There are also 259 public/educational television stations in the United States, 101 being VHF and 158 being UHF, none of which is commercial network owned or affiliated. Approximately 200 of the public. educational stations are interconnected by a network called the Public Broadcasting Service. Some educational stations are also members of regional networks-i. e., the Eastern Educational Network. The public/educational stations do not carry advertising and obtain their operating funds from individual and governmental contributions. The three commercial networks obtain their programming, in part, by virtue of licenses each makes with producers to show the producer's programs. Individual sta tions, viz., O&O's affiliates and independents, also make such licenses with producers-through syndication. Syndication, as indicated earlier, is generally undertaken only for rerun material—and often is for s kind of exhibition called “stripping,” which means running the same series at the same time of day five days a week. Individual stations also create some of their own programming-i. e., commercial stations approximately 16 hours per week and pub lic/educational stations approximately 11 hours per week. RATINGS The fees which networks and stations pay producers to show their programs, and the UNIVERSAL CITY STUDIOS v. SONY CORP. OF AMER. fees which advertisers pay networks and Audience measurement uses several criteria. One size criterion is "ratings"-one rating point is one percent of all homes owning television sets in the relevant market. Nationally, there are approximately 75 million homes owning television, and one national rating point represents 750,000 homes. There is believed to be an average of two individuals viewing television in each home. Another size criterion is "market share"-a percentage figure, indicating what percent of all homes using television (“HUT”), i. e., with television sets turned on in the relevant market at a given time, is tuned to a particular network or station. The criterion of "demographics" is basically a measurement of sex, age, and income bracket of the audience. Nielsen and Arbitron perform audience measuring services for broadcasters, advertisers, and producers. Nielsen's National Television Index is a ratings service in which a meter attached to each television set in 1200 sample households continuously records what channel the set is tuned to while in use. This meter service does not teil who. if anyone, is watching the set. Ratings measurements are subject to a margin of error of plus or minus 1 to 1 points. Nielsen's National Audience Com. position Service surveys 2400 sampie households by providing diaries in which the households keep a record of the viewing actually done by individuals in the household. Diaries are also the source of demographic information. Nielsen aiso provides a meter service comparable to its national meter service in four local markets. Nielsen's fourth service is the Nielsen Station Index, which uses diaries and reports individually and periodically on some 200 local 441 market areas. These latter diaries, distributed to households four times a year during so-called "sweep periods," cover four weeks each. The Nielsen meter services aiready measure videotape recording but do not yet make any measure of playback. At the time of trial, the Nielsen diary surveys made no specific reference to videotape recorder usage, and the only playback information obtained was what people volunteered in the diary. The Arbitron rating ervice provides a meter service in three local marxe's and also a diary service in individual markets in the rest of the country. Arbitron also has sweep periods which are almost the same as Nielsen's. Arbitron was not measuring any videotape recorder usage at the time of trial. Both Nielsen and Arbitron are capable of obtaining substantially the same kind of information with respect to videotape recorder usage as they presently do with respect to television set usage. Both Nielsen and Arbitron have conducted pilot surveys with videotape recorder owners in order to develop a framework for additional survey work, all leading to the ultimate measurement of videotape recorder usage. In attempting to maximize ratings and audience shares. networks frequently broadcast their better and stronger programs at the same time-a practice known as "counter-programming." Heightened competition during sweep periods encour ages counter-programming. LEGAL CONTENTIONS The above discussion sets forth the factual background for this awsuit. The fundamental legal premise of this liugation is plaintiffs contention that the activity of the individual and the retail defendants in recording plaintiffs' copyrighted works offthe-air is copyright infringement. With this basis, they assert that the involvement of Sony, Sonam, DDBI, and the retail stores in the manufacturing, distributing, advertising, and selling of the Betamax makes the defendiante luble as direct or contribu 96-601 0-82--14 442 480 FEDERAL SUPPLEMENT tory infringers or under the theory of vicarious liability. Finally, building on these assertions. plaintiffs look to the economic arrangements of today's broadcasting industry and foresee irreparable harm to themselves from these allegedly infringing activities. They ask this court for injunc tive relief to prevent future infringement. Plaintiffs' legal argument depends on the basic assumption that the off-the-air recording of their works by defendant William Griffiths and other individuals as weil as by the retail defendants constitutes infringement. Because plaintiffs predict the greatest harm from individuals' home-use copying, this court has considered the issue of infringement first with respect to homeuse recording and then with respect to the retail defendants' store demonstrations. HOME-USE RECORDING "Home-use" recording as used in this opinion is the operation of the Betamax in a private home to record a program for subsequent home viewing. The programs involved in this lawsuit are broadcast free to the public over public airwaves. The court heard extensive testimony from defendant William Griffiths and four non-defendant individuals about this activity, and the court's declaration of non-infringement is limited to this home use-situation. It is important to note the limits of this holding. Neither pay nor cable television stations are plaintiffs in this suit and no defendant recorded the signals from either. The court is not ruling on tape swapping, organized or informal. The court is not ruling on tape duplication within the home or outside, by individuals, groups or corporations. Nor is the court ruling on off-theair recording for use outside the home, e. g., by teachers for classrooms, corporations for employees, etc. No defendant engaged in any of these activities and the facts necessary to determine their legality are not before this court. The ramifications of this new technology are greater than the boundaries of this lawsuit. A court reviewing the limited claims of specified parties in a particular factual setting cannot and should not undertake the role of government commission or legislative body exploring and evaluating all the uses and consequences of the videotape recorder. I. INFRINGEMENT AND FAIR USE Recordings made prior to January 1, 1978 are governed by the Old Act (1909) and those made after that date are governed by the New Act (1976). The testimony showed that Marc Wielage had recordeu two broadcasts, one Universal and one Disney, after January 1, 1978. All other incidents of copying occurred prior to that date, and these included the recording of five Univer sal titles by defendant Griffiths; nine Universal and seven Disney by Wielage: two Universal by Soule; one Universal and six Disney by the Lowes; and two Universal by the Birds. This court finds that this home-use re cording is not an infringement under either the Old Act or the New Act. This finding rests on statutory interpretations of both the Old and the New Acts, the legislative history of the New Act, and the doctrine of fair use. A. The Old Act Section I of the Copyright Act, 17 U.S.C. 91, gave the copyright owner the "exclusive right: (a) To print, reprint, publish, copy, and vend the copyrighted work: Under this broad, unqualified language. Betamax recording appears to be an infringing activity. The legislative history does not discuss home-use recording: in 1909, television and its ensuing technolo gy was not even contemplated by Congress. [1] In applying the Old Act, courts created the fair use doctrine to immunize some forms of copying from the literal implica tions of the statute. The fair use doctrine is discussed extensively below. This court concludes that home-use copying is fair use. This conclusion is based on the doctrine is it was developed by the courts under the Old Act and left unaltered by the New Act. Therefore, this conclusion applies equally to instances of home-use r corcing under the Old and New Acts. |