Scott Graham covers the California appellate courts for The Recorder, an American Lawyer affiliate.

SAN FRANCISCO — A Dish Network device that can digitally record network television shows and replay them without commercials may be far more advanced technologically than Sony's Betamax VCR from the 1980s.

But Sony Corp. of Am. v. Universal City Studios remains the gold standard for copyright litigation arising from TV recordings. And under that precedent, Dish Network didn't likely infringe Fox TV's copyright — though it might have breached its programming contract, the U.S. Court of Appeals for the Ninth Circuit ruled Wednesday in a case closely watched by traditional TV networks.

"Commercial-skipping does not implicate Fox's copyright interest because Fox owns the copyrights to the television programs, not to the ads aired in the commercial breaks," Judge Sidney Thomas wrote for the unanimous panel in Fox Broadcasting v. Dish Network. "If recording an entire copyrighted program is a fair use [under Sony], the fact that viewers do not watch the ads not copyrighted by Fox cannot transform the recording into a copyright violation."

Orrick, Herrington & Sutcliffe partner Annette Hurst, who has represented Dish at the district court and on appeal, said Wednesday's decision was unequivocal. "Advertisements are a financing mechanism, but they are not part of the copyrighted work," she said.

Amicus curiae Electronic Frontier Foundation said in a statement on its website that the decision turned back an effort "by content owners to use copyright law to control the features of personal electronic devices, and to capture for themselves the value of new technologies no matter who invents them."

An attorney for Fox Broadcasting, Jenner & Block partner David Singer, said the victory pronouncements were premature because the Ninth Circuit was merely reviewing a preliminary injunction, and it emphasized throughout the opinion it was deferring to the trial judge's discretion. "It's very early in the game," he said. "The copyright lady has not sung yet."

Dish Network is the third-largest pay television service in the country. Its long-standing contract with Fox bars Dish from distributing Fox programs on an "interactive, time-delayed, video-on-demand or similar basis," though it may "connect its subscribers' video replay equipment," according to the Ninth Circuit's opinion. Dish can provide Fox Video On Demand to its subscribers, but must "disable fast forward functionality during all advertisements."

Last year Dish released its Hopper set-top box and DVR and a feature called PrimeTime Anytime. They allow Dish customers to automatically record prime time programming of all four major broadcasting networks. Dish itself also records the programming and marks where commercials begin and end. By the following morning, Dish subscribers can elect to automatically skip all commercials while watching the programming.

Fox sued for breach of contract and copyright infringement, but U.S. District Judge Dolly Gee in the Central District of California denied the network's motion for a preliminary injunction. On Wednesday, Thomas, joined by Judges Barry Silverman and Raymond Fisher, ruled that Gee had not clearly erred.

First, the court joined the Second Circuit in holding that television and DVR providers can't be liable for direct copyright infringement because it's viewers who decide to record shows.

As for secondary infringement by Dish Network viewers, Thomas looked to Sony, where the Supreme Court gave its blessing to devices that time-shift TV broadcasting. Automatically skipping commercials doesn't unwind the fair use defense established in Sony, he concluded.

The contract question was closer, Thomas wrote. But "applying our very deferential standard of review," he agreed with Gee that while Dish might have breached the contract by making its own test recordings, Fox could not show irreparable harm giving rise to an injunction.

"The court was beholden to the standard of review on the preliminary injunction," said Jenner & Block's Singer, "but I think it sent a strong message" on the contract claims. Dish Network's position is ultimately bad for consumers, he added. "Someone has to pay for programming," he said. "It's commercials that make the programming affordable for the consumer."

Orrick's Hurst said the court decided its key copyright holdings as a matter of law, not fact. "I would say that's the law of the case now," she said.

Asked if it was odd that courts still rely on a 30-year-old Supreme Court decision on video cassette recorders for technology like Dish Network's, she said the precedent works because it was both precise and flexible enough for future developments. "What's surprising," she said, "is that the court was able to get it so right 30 years ago."