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The major broadcast networks are being forced to fight claims they engaged in an industry-wide conspiracy to blunt a growing competitive threat from a satellite television company. The 2nd U.S. Circuit Court of Appeals Monday overturned a lower court’s dismissal of PrimeTime 24′s antitrust lawsuit, finding the satellite company had sufficiently alleged that the networks made baseless and harmful challenges to PrimeTime’s right to send signals to households throughout the country. The ruling came in the case of PrimeTime 24 Joint Venture v. National Broadcasting Company Inc., 98-9392. At issue is the right of the networks to act in concert to challenge PrimeTime’s right to send network programming via satellite feed to households that get poor television reception. Under the Satellite Home Viewers Act (SHVA), 17 U.S.C. Section 119 (1995), satellite companies, in return for a fixed royalty fee, can send feeds of the networks’ copyrighted content to homes, or to direct-to-home satellite distributors, as long as the reception is poor enough as defined by the Federal Communications Commission. And the Act allows networks to challenge a satellite company’s claim that the over-the-air broadcast signal at an individual affiliate is so weak that the satellite company has a right to provide its own feed. Primetime’s claim under the Sherman Act is that the networks refused to license copyrighted television programs to PrimeTime and made countless, frivolous challenges to its findings on signal-strength. Primetime also charged that the networks refused to negotiate individually, that they were kept in line through industry trade groups and that the networks made those challenges using a single list assembled by NBC. New York Southern District Judge Lawrence M. McKenna dismissed the case, finding that the concerted action by the networks constituted protected activity under the Supreme Court’s Noerr-Pennington Doctrine. As developed, the Noerr-Pennington doctrine limits the scope of the Sherman Act by allowing businesses to engage in concerted action to petition the legislature, courts and administrative agencies. One exception to the immunity recognized under Noerr-Pennington is if the “petitions” at issue are merely a “sham” to interfere with the business relationships of a competitor. And while PrimeTime charged that the networks were engaged in just such a scam, McKenna was unconvinced. He also found that the alleged refusal of the networks to negotiate with PrimeTime was merely a rejection of a settlement offer made by PrimeTime, which he characterized as an attempt to avoid liability for infringing the networks’ copyrights. But after hearing the appeal, Chief Judge Ralph K. Winter said the 2nd Circuit believed that PrimeTime had sufficiently alleged the networks had made “objectively baseless” claims and used governmental process as an anticompetitive weapon. Primetime, he said, alleged that the networks made “simultaneous and voluminous challenges … without regard to whether the challenges had merit.” It also claimed that the networks submitted violations solely based on NBC station lists, Winter said, which persuaded the court PrimeTime had “plausibly alleged” that ABC, CBS and FOX challenged subscribers who did not even receive their programming from PrimeTime. “Moreover, PrimeTime alleges that the appellees’ coordinated scheme was done to overwhelm PrimeTime 24 and make it difficult and expensive for PrimeTime 24 to comply with the SHVA,” he said. The panel then overturned McKenna’s rejection of PrimeTime’s claim that the networks refused to negotiate. Unlike the lower court, Winter said the 2nd Circuit did not agree that the networks, which had obtained an injunction against PrimeTime for copyright infringement in Florida, were justified in refusing to deal. “Although coordinated efforts to enforce copyrights against a common infringer may be permissible, copyright holders may not agree to limit their individual freedom of action in licensing future rights to such an infringer before, during, or after the lawsuit,” he said. “A concerted refusal to license copyrighted programming to PrimeTime in order to prevent competition from it is a boycott that, if proven, violates the Sherman Act.” Judge Dennis G. Jacobs and Southern District Judge Robert W. Sweet, sitting by designation, joined in the opinion. Harry Frischer, Louis M. Solomon and Jonathan D. Lupkin of New York’s Solomon, Zauderer, Ellenhorn, Frischer & Sharp represented Primetime. Charles F. Rule, Neil K. Roman and Jonathan Galst of D.C.’s Covington & Burling; Eric Seiler of Friedman Kaplan & Seiler in New York represented the networks.

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