Joint Stock Company "Channel One Russia Worldwide" v. Russian TV Company Inc.

Background

Joint Stock Company “Channel One Russia Worldwide” produces and broadcasts television programming distributed by satellite. It licenses third parties to distribute versions of that programming in the United States. The plaintiff sued Russian TV Company, Inc. (“Russian TV”), SR Express Consulting Inc. doing business as Techstudio (“Techstudio”), Servernaya Inc. (“Servernaya”), ESTIDesign, Inc. (“ESTIDesign”), and Steven Rudik.

The complaint alleged violations of the Federal Communications Act (FCA) and the Copyright Act. The plaintiff agreed that a favorable resolution of its FCA claims would resolve all of its claims, including its copyright claims. The parties agreed to proceed through a summary trial based on written submissions. Judge Schofield issued findings of fact and conclusions of law under Federal Rule of Civil Procedure 52(a).

Russian TV operated a website offering access to more than 200 television channels, including channels owned by the plaintiff, in exchange for subscription fees. Subscribers could access the service through websites, mobile devices, computers, smart televisions, and set-top boxes. Rudik owned and controlled Russian TV, Techstudio, Servernaya, and ESTIDesign.

The plaintiff had authorized Kartina Digital GmbH (“Kartina”) to stream the programming until July 2019. Techstudio purchased access codes directly from Kartina between January 2011 and February 2017, and the defendants were authorized to resell those codes until February 2017. After Kartina stopped selling access codes to Russian TV, Techstudio purchased at least 6,575 codes from three other vendors. Those vendors were not authorized by the plaintiff to distribute the programming. The court also found that Techstudio sold set-top boxes and that the defendants’ television application provided access to the programming.

Federal Communications Act Section 605(a)

Section 605(a) prohibits, among other things, receiving or assisting in receiving an interstate or foreign radio communication without authorization and using it for another person’s benefit. The court found that the programming was a satellite-originated signal protected by the statute and that the defendants received and retransmitted it to Russian TV subscribers for financial gain.

The court found that the defendants’ use of access codes purchased directly from Kartina resulted in authorized retransmissions. By contrast, retransmissions using codes purchased from the unauthorized third-party vendors were unauthorized. Russian TV continued transmitting the programming through at least August 2020. The court found that the plaintiff proved unauthorized use beginning within the applicable three-year limitations period. The defendants did not prove their statute-of-limitations defense, although the effect of some subscriptions that began before the limitations period was left for the damages calculation.

The court therefore held that Russian TV, Techstudio, Servernaya, ESTIDesign, and Rudik violated FCA section 605(a). The court applied liability without requiring proof of intent, but it did not find the violations willful. It denied the plaintiff’s request for enhanced damages based on willfulness because the evidence showed that Rudik believed the third-party vendors were authorized and the plaintiff had not provided sufficient contrary evidence.

Section 605(e)(4) Claim

The plaintiff also claimed that the defendants violated FCA section 605(e)(4) by selling customized set-top boxes and developing the RTV App. That provision addresses people who manufacture, modify, sell, or distribute equipment knowing, or having reason to know, that it is primarily intended to assist unauthorized decryption or other prohibited activity.

The court found that the plaintiff proved that Techstudio sold 1,495 set-top boxes and that the boxes were equipment covered by the statute. However, the plaintiff did not prove that the boxes were primarily intended to assist unauthorized decryption or that the defendants knew, or had reason to know, that they were intended for prohibited activity. The court also rejected the claim concerning the RTV App because there was no evidence that the software decrypted anything or was primarily intended for unauthorized activity. In addition, the court held that an online application was software, not a statutory “device or equipment.” The section 605(e)(4) claim therefore failed as to both the set-top boxes and the RTV App.

Rudik’s Individual Liability

The court held that Rudik was jointly and severally liable with the defendant companies for the section 605(a) violations. Joint and several liability means that each liable party can be responsible for the full amount of the covered liability. The court found that Rudik owned and operated the companies, controlled their activities and finances, directed purchases of equipment and access codes, directed development of the RTV App, and had a direct financial interest in the unauthorized streaming.

Unclean-Hands Defense

The defendants pursued an affirmative defense called unclean hands, arguing that the plaintiff concealed the defendants’ valid purchases from Kartina and that Kartina helped fund the lawsuit to harm Russian TV. The court granted the plaintiff summary judgment on that defense. It found that the plaintiff had disclosed Kartina’s sales, that the defendants primarily attributed the alleged misconduct to Kartina rather than the plaintiff, and that any benefit to Kartina from helping fund the litigation did not bar the plaintiff from enforcing its rights. The court also held that the defense did not bar the plaintiff’s statutory damages claim.

Damages, Fees, and Relief

The court reserved the amount of damages, attorney fees, and costs. The plaintiff elected statutory damages instead of actual damages and lost profits. The court referred calculation of those amounts to Magistrate Judge Moses for a report and recommendation in a separate proceeding. The opinion states that statutory damages under section 605(e)(3)(C)(i)(II) range from $1,000 to $10,000 for each violation.

The court determined to grant a permanent injunction and declaratory relief. The proposed relief would permanently prohibit the defendants from broadcasting, rebroadcasting, transmitting, or distributing the programming unless the parties later agreed otherwise in writing, and would declare that the defendants had no right, title, or interest to do so. The court stated that the injunction and declaration would be issued in a separate order after the parties submitted any comments or proposed modifications.

Disposition

The court held that the defendants were liable for violating FCA section 605(a), denied enhanced damages based on willfulness, rejected the section 605(e)(4) claim concerning the set-top boxes and RTV App, held Rudik jointly and severally liable for the section 605(a) violations, granted the plaintiff summary judgment on the unclean-hands defense, reserved damages and fees, and determined to grant permanent injunctive and declaratory relief in a separate order.