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The 11th U.S. Circuit Court of Appeals has temporarily blocked a lower court ruling that would have prevented tens of thousands of satellite TV customers around the country from watching “Ally McBeal” and other network television programs. In a 53-page ruling issued Monday, the appellate court overturned a preliminary injunction issued last September by U.S. District Judge Lenore Nesbitt in Miami that prohibited EchoStar Communications Corp. from retransmitting programs provided by CBS, Fox, ABC and NBC. EchoStar is a publicly traded Littleton, Colo., company that, through its subsidiaries, delivers television programming to millions of customers nationwide via satellite dishes. The appellate decision grew out of a legal battle, begun in 1996, between the broadcast networks and the satellite television industry over the retransmission of network programs. Key to the dispute is whether satellite companies should have to pay for the right to offer network shows. In its ruling this week, the appeals court said that the lower court “abused its discretion” in holding that there was a substantial likelihood that the networks would be able to prove at trial that EchoStar was in violation of the Copyright Act. The 11th Circuit particularly noted that, before entering her preliminary injunction, Nesbitt refused to hold an evidentiary hearing that might have allowed EchoStar to prove that it had not violated the law. While the appellate court’s ruling may appear to be a strike against the networks, lawyers for the networks say they aren’t too concerned. They point to the fact that the appellate court provided Nesbitt with guidance on the type of evidence needed to support a preliminary injunction. The court’s language suggests that if Nesbitt follows this road map, a preliminary injunction would be on firmer legal ground, says David Rogero, of counsel at Lott & Friedland in Coral Gables, Fla., who represented CBS, Fox and several other plaintiffs. “It basically means that if you do it the way we prescribe, then you should have an order that will be upheld on appeal,” Rogero says. Attorneys for EchoStar did not return phone calls for comment. The issue, of course, comes down to money. Many satellite dish owners live within the range of local network affiliates, which want viewers to watch the network programs with their local advertising. But the signals retransmitted by satellite companies may not come from the local affiliate and thus may not contain the local ads. The networks and National Association of Broadcasters, which also is party to the litigation, contend that this threatens the economic survival of the station affiliates. “Advertising revenue is the lifeblood for affiliated stations,” says Terry Bienstock, a prominent Miami telecommunications attorney who is not involved in the case. “It’s all based on eyeballs; the less eyeballs, the less revenue.” A spokesman for the broadcasters’ association declined to comment, saying his organization had not yet seen the appellate ruling. From a broader legal standpoint, the ruling is significant because it places the district courts on notice that they generally need to hold evidentiary hearings to resolve conflicting evidence, Bienstock says. EVADING AN INJUNCTION? The legal battle between EchoStar and the broadcast networks started in 1996, when CBS, Fox and their local station affiliates filed a copyright infringement suit in U.S. District Court in Miami against PrimeTime 24, a New York-based programming wholesaler. The complaint asked the court to stop PrimeTime 24 and its distributors, including EchoStar, from transmitting network programming via satellite. CBS and Fox argued that PrimeTime 24 was selling its service to customers who did not qualify under the Satellite Home Viewer Act to gain access to satellite retransmissions of network programs. While federal law permits satellite carriers to resend network programs to certain subscribers for “private home viewing,” those subscribers must live in “unserved households,” which are defined as those that don’t receive clear local broadcast signals via a rooftop antenna. In May 1998, a federal district judge in Miami granted the networks’ request, issuing a preliminary injunction against PrimeTime 24 and its distributors. The order would have resulted in up to 1 million customers being disconnected from EchoStar’s service. Rather than obey the order, EchoStar terminated its relationship with PrimeTime 24 two months later and began to sell its own satellite television packages, including network programs. The networks argued that Echostar’s move was an effort to evade the injunction. They complained that EchoStar was simply transferring hundreds of thousands of ineligible PrimeTime 24 customers to EchoStar’s own packages of “unauthorized secondary transmissions of network programming.” EchoStar responded that it screened customers to make sure they were eligible to receive satellite transmission. In November 1998, the networks filed a new copyright infringement suit against EchoStar in federal court in Miami, alleging that the company was reselling their programs — including everything from daytime soap operas to prime time shows such as “Ally McBeal” — to ineligible satellite dish owners in violation of the Copyright Act. EchoStar challenged the federal restrictions on retransmission, calling them a violation of the First Amendment. But Nesbitt disagreed with EchoStar’s First Amendment argument, issuing her preliminary injunction against the satellite company last September. EchoStar immediately appealed to the 11th Circuit. The court entered a stay, allowing EchoStar to continue transmitting the network programs until it ruled on the injunction. The 11th Circuit, however, disagreed with EchoStar’s constitutional arguments. It held that the law restricting retransmission of network programming “actually permits more speech than EchoStar would constitutionally be entitled to under the Copyright Act.” The Satellite Home Viewer Act, the appellate court noted, “strikes a balance between protecting the copyright interests of the networks and the public interest in obtaining network programming, whatever its content, for all Americans.” Rogero says the two sides have tried to resolve the case through mediation, but have not succeeded.

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