The network in question is called Plaza TV, and can be found at Flying J truck stops across the US. This network spans 130 locations with total foot traffic of 140,000 people every month. Using a device from a company called segOne, Flying J strips out the commercials from the networks' content and replaces them with new spots they sell. Technically, a partner called TON Services handles the ad sales, which bring in over $30,000 per month. While Flying J thought the commercial display license that they purchased from Echostar allowed them the leeway to do such a thing, Southern District of New York Judge Deborah A. Batts felt otherwise. According to the writeup at law.com:
Flying J had argued that its conduct was authorized based on its license or agreement with satellite dish company Echostar Communications' DISH Network. Even if its conduct was not authorized under this agreement, Flying J argued that it was protected under a statutory provision (known as the "homestyle" exemption) that allows certain types of businesses to perform copyrighted television and radio works without explicit permission from the copyright holders.While I'm not a lawyer (and thus not qualified to give legal advice or interpret findings), it seems that Flying J was banking on the fact that satellite TV is now commonplace enough that it would allow them to use the tried-and-true homestyle exemption, instead of having to rely on something newer and less vetted, such as the Intellectual Property Protection Act of 2004. (I wrote about the IPP Act in a previous blog article, where I discussed how the proposed law might actually provide language that specifically allows for commercial replacement.) The judge shot down their argument essentially by pointing out the difference between a standard television display and a digital sign: the computer device that feeds location-specific content to the screen. On March 2, the judge denied Flying J's motion to dismiss the claim, finding that, "the company's sale of commercials to replace network advertising on televisions at its truck stops was not protected under an exemption to the federal copyright law."
Judge Batts rejected this argument, however, saying the exemption "has no application" to the networks' infringement claims.
"The homestyle exemption was not designed to apply to the particular allegations of copyright infringement contained in the Complaint," the judge said. "Were the Court to find that the homestyle exemption potentially protects the particular conduct that Plaintiffs allege is infringing, it would effectively be reading a new right into the plain language of 17 U.S.C. 110(5)(A)."
She cited National Football League v. McBee & Bruno's. Inc., 792 F.2d 726, 727 (8th Cir. 1986), which involved taverns that showed certain "blacked out" football games to their patrons by picking up "the signals for such games by means of a satellite dish antennae."
The court in National Football League held that the antennae used by the tavern owners were not, at that time, commonly found in American homes, and concluded that the showing of the blacked-out games was not protected by the homestyle exemption.
Based on this case, Flying J argued that its actions were protected because DISH Network is "commonly found in the home."
Judge Batts rejected this argument, however, saying that the segOne device is not available to most homeowners.
She said that "the plain language of the [homestyle exemption] statute is not susceptible to an interpretation that would extend such protection to brand new commercial technology that instead [was] apparently designed to increase competition in the television advertising business," and added that it would be "entirely improper" for her to construe the exemption in such a manner.
The studios haven't won yet, nor has Flying J lost. This particular action simply indicates that the trial is going to move forward, but as we all know the only people who ever win in copyright violation cases are the lawyers. If you ask me, despite what I wrote in the IPP Act article (and still stand behind), stripping out a network's commercials and replacing them with your own just doesn't feel right. I don't know if it's more akin to stealing or cheating, but Flying J was clearly making money by selling highly-visible ad placement opportunities to relevant parties, and they weren't sharing that revenue with the studios or paying for the right to commercial-free content (at least according to the article). I thus have to wonder whether the outcome of this case is going to have repercussions for other networks. It's worth noting that commercial-replacement technology probably isn't at risk of being deemed illegal, since it does have legitimate uses like allowing networks to replace their own ads with localized ones during Internet broadcasts, but the scope of what third-parties can do with the technology may certainly change once this case is settled.
Considering that CBS, ABC and NBC have all started licensing their content for digital signage and out-of-home advertising projects (which Time Warner has been doing for years with their CNN Airport Network), it's probably not a good idea for other companies to go around misusing their copyrighted material. After all, most digital signage networks are public -- they literally must be out in the open and viewable by all or else they're not doing their jobs -- so it's only a matter of time before somebody will notice any potential infringement (if it does in fact turn out to be infringement). Now, every time a studio exec is standing in line at the bank or sitting in a doctor's waiting room, he's going to be watching those screens and noting if, when and how his content is being displayed. Considering all of the attention that digital signage has been grabbing of late, it just makes sense for the broadcast networks to step in and defend their rights as media owners. But while it remains to be seen who will prevail in the Flying J case, I hope that savvy digital signage network owners -- and in particular, those thinking about using live TV broadcasts -- will pay close attention. Regardless of whether swapping out commercials ends up being permitted by the courts, my long-term advice is straightforward: if your digital signage network relies upon someone else's content, you should probably think of a plan to ensure that you're working with them, and not against them.