Interference with "Pay-Per-View" Billing Information Prohibited under Section 553 and DMCA

Author: Morgan Galland

Defendants, Jon Chaffee, Amy Chaffee and Ramalda Bou ("Chaffee"), appealed a summary judgment decision of the United States District Court for the District of Rhode Island holding that defendants violated the Cable Communications Policy Act of 1984, 47 U.S.C. § 553(a)(1), and the Digital Millennium Copyright Act, 17 U.S.C. § 1201. Chaffee argued that summary judgment was improperly granted and that Plaintiff CoxCom lacked standing to sue. Chaffee also appealed the District Court’s bench trial decision granting damages and injunctive relief. The United States Court of Appeals for the First Circuit affirmed in all respects.

CoxCom Inc. is a cable television company, offering services to subscribers in Rhode Island, Massachusetts and Connecticut. As part of this service, it leases cable boxes to subscribers. The cable boxes descramble incoming signals so that subscribers can watch "pay-per-view" programming and then transmit information, including pay-per-view billing details, back to CoxCom using low-frequency signals. Chaffee sells digital cable filters, which interfere with low-frequency signals in order to prevent the pay-per-view billing information from being transmitted back to cable companies (in addition to enhancing viewing quality). Chaffee sells these filters at computer trade shows, including in Rhode Island and Connecticut. Both in person and in written instruction sheets for the filters, Chaffee explicitly instructed customers how to use the filter to prevent billing information from being sent to their cable companies.

The First Circuit held that CoxCom had standing to sue, because even though CoxCom presented no proof that the filters had been used to deprive the company of any particular payment, the chain of events that could have resulted from the sale of filters in CoxCom’s service area was a sufficient loss of remuneration to warrant standing to sue under Article III.

The court next turned to the issue of whether summary judgment was properly granted. Section 553(a)(1) of the Cable Act provides that a person shall not "intercept or receive or assist in intercepting or receiving any communications service offered over a cable system. . . ." Section 554(a)(2) defines "assist in intercepting or receiving" to include the manufacture or distribution of equipment "intended by the manufacturer or distributor for "unauthorized reception" or a service offered by a cable system. Chaffee argued that the filters were not intended to and in fact did not "receive" cable programming and therefore did not satisfy Section 553. Rejecting this argument, the First Circuit affirmed that the filters were intended for unauthorized reception of pay-per-view programming, in violation of Section 553(a). Relying on appellants’ advertising strategies, the court determined that they had specific knowledge of cable customers’ planned illegal use of the filters to receive programming without charge.

Chaffee also argued that that the district court improperly applied the anti-circumvention provisions of the DMCA. Section 1201 (a)(2) prohibits a person from selling any product that is produced for the purpose of "circumventing a technological measure that effectively controls access to a work" protected under the Copyright Act. Chaffee argued that this section did not apply to its case because the filters did not "circumvent" any technological measure controlling access to pay-per-view programming. The First Circuit again affirmed the district court decision, holding that Chaffee violated Section 1201 (a)(2) by trafficking in a filter technology that allowed subscribers to avoid or bypass CoxCom’s encoding and scrambling "technological measure." In its decision, the First Circuit avoided the question of whether CoxCom’s billing technology effectively controlled access to pay-per view programming.

Finally, the court affirmed the district court’s award of damages of $35,000 under Section 553 and $105,000 under the DMCA jointly and severally against the appellants. It also affirmed the issuance of a permanent injunction prohibiting appellants from future possession, sale or distribution of digital cable filters. In support of the damages decision, the court cited appellants’ waiver of a jury trial right by participating in the bench trial without objection. In support of the injunction, the court found that the case satisfied the eBay four-factor test described in eBay Inc v. MercExchange, L.L.C., 547 U.S. 388 (2006).

CoxCom, Inc. v. Chaffee, 536 F.3d 101 (Aug. 4, 2008).

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