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noting other courts have “found that broadcast signals are valuable property in and of themselves and that plaintiffs may obtain damages for wrongful interception of these signals without resort to the Copyright Act”
Summary of this case from Joe Hand Promotions, Inc. v. JacobsonOpinion
No. SA-04-CV-136-RF.
September 29, 2004
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS
BEFORE THE COURT is Defendant's Motion to Dismiss (Docket No. 17), filed on February 2, 2004, as well as Plaintiff's Response. After due consideration, the Court is of the opinion that the Motion to Dismiss Plaintiff's state interception of communication claims should be DENIED. Because Plaintiff stipulates to dismissal of its state conversion claim, the Court will GRANT Defendant's Motion to Dismiss this claim.
FACTUAL AND PROCEDURAL BACKGROUND
This case involves the alleged unauthorized reception by Defendant Yvette Cantu of satellite television programming signals broadcast by Plaintiff DirecTV. DirecTV is a California-based company in the business of distributing satellite television broadcasts throughout the United States. DirecTV relays signals from within the United States to satellites in space, which send the signals back to earth, where they are received by outdoor antennae. The returning satellite signals carrying Plaintiff's television broadcasts are encrypted and are intended to be decrypted only by additional reception equipment which DirecTV provides or sells to its subscribing customers.
In its complaint, DirecTV contends that Defendant purchased devices that allowed her to receive DirecTV's signals without subscribing to DirecTV's service. DirecTV alleges that Cantu wrongfully possessed and used equipment allowing her to decrypt and receive DirecTV's encrypted satellite signals for the purposes of illegally gaining free access to television programming, in violation of federal telecommunications and wiretapping laws and state statutory and common law.
Defendant Cantu moves to dismiss DirecTV's state law claims under Fed.R.Civ.P. 12(b)(6), arguing that the state claims are preempted by federal law and that the state law violates her rights to due process by providing an inappropriate monetary remedy. Defendant also initially argued that Plaintiff has not properly stated a claim for conversion under state law. Plaintiff has since stipulated to dismissal of the conversion claim, so the Court will not address that claim further and will dismiss it accordingly.
DISCUSSION
I. Motion to Dismiss for Failure to State a Claim
A. Rule 12(b)(6) Standard
For purposes of a Rule 12(b)(6) Motion to Dismiss for failure to state a claim, the complaint must be liberally construed in favor of the plaintiff, and all the facts pleaded in the complaint must be taken as true. Dismissal on this basis is a disfavored means of disposing of a case, and district courts should avoid such dismissals "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." "The question therefore is whether, in the light most favorable to the plaintiff and with every doubt resolved in his behalf, the complaint states any valid claim for relief." In reviewing a motion to dismiss, the Court is conscious of the Federal Rules of Civil Procedure's "powerful presumption against rejecting pleadings for failure to state a claim."
Campbell v. Wells Fargo Bank, N.A., 781 F.2d 440, 442 (5th Cir. 1986).
Kennedy v. Tangipahoa Parish Library Bd. of Control, 224 F.3d 359, 365 (5th Cir. 2000).
Conley v. Gibson, 355 U.S. 41, 45-46 (1957); 5A CHARLES A. WRIGHT ARTHUR R. MILLER, FEDERAL PRACTICE PROCEDURE § 1356.
Brown v. Nationsbank Corp., 188 F.3d 579, 586 (5th Cir. 1999).
Auster Oil Gas v. Stream, 764 F.2d 381, 386 (5th Cir. 1985).
B. Copyright Act Preemption of State Law Claims
Plaintiff's complaint included claims under Texas law proscribing interception of communications. In particular, Plaintiff alleges that Defendant's use of special equipment to intercept DirecTV's satellite broadcasts violates Chapter 123, which provides statutory damages of up to $10,000 for each intercepted communication, in addition to punitive damages, attorneys' fees, and costs. Chapter 123 provides that one party to a communication may sue a person who: (1) intercepts, attempts to intercept, or employs or obtains another to intercept or attempt to intercept the communication; [or] (2) uses or divulges information that he knows or reasonably should know was obtained by interception of the communication."
Tex. Civ. Prac. Rem. Code § 123.001 et seq ["Chapter123"].
Id. § 123.002.
Defendant claims that the remedies created by Chapter 123 are preempted by federal law protecting copyright. The federal law preempts Chapter 123 only if both prongs of a two-part test are satisfied: (1) the work of authorship in which rights are claimed falls within the subject matter of copyright as defined by the Copyright Act and (2) the state law creates "legal or equitable rights that are equivalent to any exclusive rights within the general scope of federal copyright law. Thus, to decide whether the Copyright Act preempts Chapter 123, the Court must determine whether these two prongs are met.
17 U.S.C. § 301 et seq.
17 U.S.C. § 301(a); Harper Row, Publishers, Inc. v. Nation Enterprises, 723 F.2d 195, 199-201 (2d Cir. 1983).
1. Whether Work of Authorship in Which Rights Are Claimed Falls Within Subject Matter of Copyright
The first question in determining whether Chapter 123 is preempted by the federal Copyright Act is whether the work of authorship in which the rights are claimed falls within the "subject matter of copyright." Sections 102 and 103 of the Copyright Act set out the subject matter of copyright, which does include "motion pictures and other audiovisual works." In this case, DirecTV's programming is made up of motion pictures and other audiovisual works. Thus, signals broadcast by DirecTV and allegedly intercepted by Defendant Cantu certainly could be seen to include material amenable to copyright protection under federal law. Indeed, the Court is aware of other district courts that have found that rights to satellite-broadcast programming can be protected under the Copyright Act.
Harper Row, 723 F.2d at 200.
Plf.'s Orig. Compl. at paras. 2-5.
See Entertainment Sports Programming Network, Inc. v. Edinburg Community Hotel, Inc., 735 F. Supp. 1334, 1340 (S.D. Tex. 1986) (finding that interception of satellite broadcasts violates rights of copyright holders to the broadcast materials and citing other district court opinions reaching similar results).
As a general matter, the Copyright Act grants exclusive rights to the copyright holder or owner. Either of these parties may institute an action for infringement of the copyright while an owner, and obtain relief thereunder. DirecTV has not asserted claims under the Copyright Act here; instead, it pursues claims based upon rights to the broadcast signals themselves. To the Court, this focus and the fact that Plaintiff does not seek to raise claims under copyright law makes questionable the proposition that Chapter 123 is preempted by the copyright act for the purposes of pursuing claims based upon these intercepted signals.
The Court notes that decisions of other courts — while not controlling here — have found that broadcast signals are valuable property in and of themselves and that plaintiffs may obtain damages for wrongful interception of these signals without resort to the Copyright Act. Indeed, the Cable Communications Policy Act — the main federal statute under which Plaintiff asserts claims before the Court — was created by Congress to protect the precise type of communications relevant here: satellite broadcasts of cable television programming. Decisions of other courts that allow recovery under the Copyright Act for intercepted cable or satellite communications do not require this Court to find that the medium in which rights are claimed here — satellite television broadcasts — is limited to protection under the Copyright Act alone.
See, e.g., Time Warner Cable of New York City v. Negovan, 2001 WL 1182843, at *5-6 (E.D.N.Y. 2001) (discussing congressional intent in Cable Communications Act to punish and deter unlawful interception of cable television communications, separate from the federal copyright regime); Sioux Falls Cable Television v. South Dakota, 838 F.2d 249 (8th Cir. 1987).
47 U.S.C. § 605 et seq.
See Edinburg Community Hotel, 735 F. Supp. at 1338.
If Plaintiff was asserting infringement claims under the Copyright Act based on copyrights owned or held on the programming that makes up the satellite broadcasts, the outcome of this analysis would likely have been different. However, Plaintiff does not bring this type of claim. Instead, DirecTV brings suit under the Cable Communications Act, which specifically targets the type of signal interception at issue here. Under these facts, since the nature of the rights Plaintiff asserts fundamentally differ from those created under the Copyright Act, the Court finds that the first prong of the test for preemption is not met.
See Negovan, 2001 WL 1182843, at *5.
2. Whether State Law Creates Rights Equivalent to Those Created Under Federal Copyright Law
The second part of the test for preemption by the Copyright Act asks whether the state law creates legal or equitable rights that are equivalent to any exclusive rights within the general scope of copyright law as defined in section 106. Generally, section 106 of the Copyright Act creates rights to copy, excerpt, distribute, or perform a copyrighted work. Under this part of the test, a state law claim is not preempted if the state law requires an "extra element" instead of or in addition to the acts of reproduction, performance, distribution, or display enumerated in section 106. In particular, state law claims are not preempted if the `extra element' changes the nature of the action "so that it is qualitatively different from the copyright infringement claim." To determine whether a claim includes `extra elements,' courts should ascertain what rights the plaintiff seeks to protect and what theories the plaintiff relies upon for protection.
Harper Row, 723 F.2d at 200.
Id. (citing 17 U.S.C. § 106).
Computer Assocs. Int'l v. Altai, Inc., 982 F.2d 693, 716 (2d Cir. 1992); 1 M.B. NIMMER D. NIMMER, NIMMER ON COPYRIGHT § 1.01(B)(1).
Computer Assocs., 982 F.2d at 716.
Id.
The Court must now determine whether Chapter 123, proscribing interception of communications, creates rights that are equivalent to any exclusive rights within the general scope of copyright protections. Chapter 123 differs markedly from the copyright regime, providing a right to confidential communications. This is simply not analogous to the type of right protected by the Copyright Act, as described in section 106. Further, Chapter 123 requires fundamentally different elements and proof, focusing on the confidential communications and actions which would compromise such communications, rather than on reproduction, performance, or distribution of copyright-protected material.
In support of her argument that Plaintiff's state interception claim is preempted by the Copyright Act, Defendant does nothing more than offer conclusory statements that DirecTV's "state law claims overlap with federal rights conferred under the Copyright Act." Defendant fails to articulate particular rights that Plaintiff seeks to vindicate under Chapter 123 that are within the exclusive domain of the Copyright Act as defined by section 106. Again, the Court notes that DirecTV is not asserting claims under the Copyright Act.
Def.'s Mot. to Dismiss, at 6.
Under these facts, the Court find that Defendant has not shown that the second prong of the Harper Row test is met, since Chapter 123 does not create rights equivalent to those created under the Copyright Act. Since the Court finds that Defendant's arguments on both parts of the test are without merit, the test for preemption by the federal Copyright Act is not met. The Court now turns to the alternative grounds raised in the motion to dismiss, whether Chapter 123's damages provisions violate Defendant's right to due process of law.
C. Appropriateness of State Law Damages
Defendant also moves the Court to dismiss DirecTV's claim under Chapter 123 because Defendant believes that the state interception law impermissibly provides for statutory damages even for attempted interceptions. She contends that Chapter 123's creation of statutory damages amounts to punitive damages, since in an attempt case there is no cognizable harm. Extending this rationale, Defendant argues that since in an attempt case there are no actual damages, any amount of statutory damages would be "grossly excessive" under the Gore standard and violate Defendant's right to due process.
BMW of North America, Inc. v. Gore, 517 U.S. 559, 586-87 (finding that a punitive award of $2 million, which was 500 times the amount of compensatory damages, was so "grossly excessive" as to violate the due process clause).
DirecTV responds that Defendant's motion to dismiss based on the alleged due process violation should be denied for two reasons. Plaintiff argues that Defendant failed to notify the Texas Attorney General of the constitutional challenge and that Defendant's characterization of the remedies available under Chapter 123 as "punitive" is misplaced. The Court will address each of these arguments in turn.
State law provides that when the constitutionality of a Texas law is challenged, the Attorney General must be served with a copy of the proceeding and is entitled to be heard. As DirecTV points out, Defendant fails to show, or even allege, that the Texas Attorney General was notified of her challenge to Chapter 123 based on the alleged due process violation. Since the Defendant neither challenges this contention nor submits evidence that contradicts it, the Court finds that Defendant failed to serve the Attorney General.
Tex. Civ. Prac. Rem. Code § 37.006(b); Moore v. Morales, 63 F.3d 358, 360-61 (5th Cir. 1995).
Defendant's claim that Chapter 123 violates due process fails substantively as well. The law has held for many years that statutes may provide for damages even where a plaintiff cannot prove actual damages. Statutory damages serve the purpose of deterring the public harm associated with the activity proscribed, rather than seeking to compensate each private injury caused by a violation. When designed to address "public wrongs," statutory damages need not be limited to actual loss or damages felt by a private party.
See, e.g., F.W. Woolworth Co. v. Contemporary Arts, Inc., 344 U.S. 228, 231-32 (1952) (statutory damages awarded when no actual damages are proven, or when actual damages and profits are difficult to calculate).
St. Louis v. Williams, 251 U.S. 63, 73 (1919) (when statute designed to protect the public interest provides for fixed penalties "is considered with due regard for the interest of the public, the numberless opportunities for committing the offense, and the need for securing uniform adherence", it cannot be considered to be so severe as to be wholly disproportionate to the offense).
The authority cited by Defendant in support of her contention that Chapter 123 violates her right to due process of law fails to support her "excessive penalty" argument. Gore involved a jury award of punitive damages, which the Supreme Court found to be "grossly excessive" when compared with the small sum awarded in compensatory damages. However, in reviewing the jury award of punitive damages, the Gore Court's main focus was that the person subject to the punitive damages must have fair notice of the possible severity of the award. The Gore Court determined that an actual damages award of $4,000 could not possibly have given the defendant notice that a $2 million punitive award was possible. In reviewing the holding in Gore, is essential to keep in mind that the Supreme Court was reviewing a jury verdict in a personal injury case — it was not reviewing a statute's damages provisions and rendering judgment on a situation similar to the one before this Court.
Gore, 517 U.S. at 587.
Id. at 575.
Here, the issue Defendant takes with the statutory penalty has nothing to do with notice. Defendant does not contend that the reason she is arguing that the penalties violate due process relates to the statute's failure to provide notice to prospective violators of monetary penalties. Instead, Defendant argues without supporting authority that the fact that the statute provides penalties even in the absence of private damage proved amounts to excessive punitive damages and as a result violates due process. Further, fair notice is not a concern here because the Texas Legislature, in enacting Chapter 123, clearly set out both the forbidden conduct and the statutory damages to be assessed against violators. On the parties' arguments and the case law addressing these issues, the Court is unable to find that Chapter 123's penalty provisions violate due process of law.
As detailed above, the Court finds that the federal Copyright Act does not preempt Chapter 123 for the purposes of Plaintiff's claims here of interception of DirecTV satellite signals. The Court further finds that Chapter 123 does not violate due process of law by providing an excessive penalty under controlling case law. Based upon its resolution of these issues, the Court will deny the motions to dismiss DirecTV's claims under Chapter 123.
CONCLUSION
For the foregoing reasons, it is hereby ORDERED that Defendant's Motion to Dismiss Plaintiff's claims under Chapter 123 (Docket No. 17) is DENIED.
Because Plaintiff stipulates to dismissal of its state conversion claim, the Court GRANTS Defendant's Motion to Dismiss this claim (Docket No. 17).