Echostar Satellite LLC et al v. ViewTech Inc et al

Filing 177

Amended ORDER Granting Plaintiffs' 165 Motion for Summary Judgment. Judgment is in favor of Plaintiffs and against Defendants in the sum of $214,898,600. Plaintiffs are entitled to permanent injunction and reasonable attorneys' fees and costs. Plaintiffs' ex parte motions to file certain audio recordings by disk and to file portions of an expert report identifying the locations of proprietary security codes within receivers are granted. Signed by Judge Roger T. Benitez on 4/20/2011.(All non-registered users served via U.S. Mail Service)(knh)

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UNITED STATES DISTRICT COURT

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SOUTHERN DISTRICT OF CALIFORNIA

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ECHOSTAR SATELLITE LLC,
ECHOSTAR TECHNOLOGIES
CORPORATION, NAGRASTAR LLC,

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Plaintiffs,

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Civil Case No. 07cv1273 BEN (WVG)

vs.

AMENDED ORDER GRANTING
PLAINTIFFS’ MOTION FOR
SUMMARY JUDGMENT

VIEWTECH, INC. and JUNG KWAK,

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Defendants.

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INTRODUCTION

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Plaintiffs DISH Network LLC,1 EchoStar Technologies LLC, and NagraStar LLC move

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for summary judgment on their first claim for relief against Defendants ViewTech, Inc. and Jung

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Kwak.

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Millennium Copyright Act (“DMCA”), 17 U.S.C. § 1201(a)(2); statutory damages for the

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violations; a permanent injunction; and reasonable attorneys’ fees and costs. Defendants’

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opposition was due by February 28, 2011, but Defendants have not opposed the motion.2 For

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the reasons discussed below, Plaintiffs’ motion for summary judgment is GRANTED.

Plaintiffs seek a finding that Defendants are liable for violations of the Digital

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Plaintiff DISH Network LLC was formerly known as EchoStar Satellite LLC and Plaintiff
EchoStar Technologies LLC was formerly known as EchoStar Technologies Corporation.
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The Court provided Defendant Kwak with the notice required by Rand v. Rowland, 154 F.3d
952 (9th Cir. 1998) (en banc) and Klingele v. Eikenberry, 849 F.2d 409 (9th Cir. 1988).
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07cv1273

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BACKGROUND

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Plaintiffs provide satellite television programming to those that pay for the

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programming. To protect against unauthorized use, Plaintiffs scramble their copyrighted

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programming. Plaintiffs’ receivers contain smart cards that convert Plaintiffs’ encrypted

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satellite signals into viewable programming for paying customers. Plaintiffs protect their

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transmissions from unauthorized viewing by developing new versions of the smart card,

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deployment of countermeasures that disable piracy devices, and prosecuting satellite piracy.

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Defendant Viewtech sells Viewsat receivers that may be used to receive free-to-air
(“FTA”) programming. FTA receivers are designed to receive unencrypted free satellite

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transmissions, but can be converted, using piracy software and additional devices, to obtain

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encrypted subscription programming. Defendant Kwak founded and is the principal owner

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of Defendant Viewtech.3 Defendant Kwak used Defendant Viewtech to pay his personal

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expenses, federal taxes, and to purchase gifts and real estate for family members. He

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received more than fifteen million from Defendant Viewtech in 2007 and 2008.

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Pursuant to a plea agreement, Defendant Kwak is currently serving an eighteen-month

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criminal sentence. He plead guilty to orchestrating a conspiracy to circumvent Plaintiffs’

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security technology by developing piracy-enabling software for Defendants’ Viewsat

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receivers in violation of the DMCA.

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Defendants have a significant history of paying people to develop and distribute piracy

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software over the internet, including piracy mechanisms to circumvent Plaintiffs’

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countermeasures. Defendants’ receivers are designed for piracy. Each model reviewed by an

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expert contained more than one exact match of the proprietary code and data that resides on

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Plaintiffs’ smart card, a particular algorithm, and a graphical user interface. These elements

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are essential to decrypt Plaintiffs’ signals and serve no purpose in a receiver intended only to

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obtain free programming. More then 95% of the functions in Defendants’ receivers relate to

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piracy. Additionally, many of Defendants’ receivers have structural variations necessary to

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Defendant Viewtech is currently in bankruptcy proceedings, but Plaintiffs have obtained relief
from the automatic stay from the bankruptcy court to pursue a judgment against Viewtech.
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add particular modules or boards designed to pirate Plaintiffs’ programming.

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Defendants provided thousands of free receivers to moderators on popular satellite

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piracy web sites so that the moderators could test the receivers for use in pirating Plaintiffs’

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programming and then post favorable reviews of the receiver’s pirating capabilities.

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Defendants’ piracy software, distributed over the internet, has received more than eleven

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million downloads.

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In 2007, Plaintiffs announced the use of Nagra 3, a new security technology, that

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impeded the traditional piracy approach. This announcement caused Defendants’ receiver

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sales to drop significantly. By March 2008, Defendants began attempting to crack the Nagra

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3 encryption so that their receivers could continue to receive Plaintiffs’ encrypted

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programming without a subscription. Defendant Kwak hired expert computer hackers, co-

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defendants in his criminal proceedings. They collectively worked to crack Nagra 3 so that

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the computer code could be published on the internet, allowing Defendants’ receivers to,

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once again, receive Plaintiffs’ encrypted programming.

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DISCUSSION

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Summary judgment should be granted when “the movant shows that there is no

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genuine dispute as to any material fact and the movant is entitled to judgment as a matter of

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law.” F ED. R. C IV. P. 56(a). The moving party bears the burden of demonstrating the

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absence of a genuine issue of material fact. Anderson v. Liberty Lobby, Inc., 477 U.S. 242,

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256 (1986). If the moving party meets this burden, the burden then shifts to the opposing

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party to set forth specific facts showing that a genuine issue remains for trial. Id. “Summary

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judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather

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as an integral part of the Federal Rules as a whole, which are designed ‘to secure the just,

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speedy and inexpensive determination of every action.’” Celotex Corp. v. Catrett, 477 U.S.

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317, 327 (1986) (quoting Federal Rule of Civil Procedure 1)).

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I.

Defendants’ Liability Under the DMCA
The DMCA, 17 U.S.C. § 1201(a)(2), prohibits trafficking in a technology that: (1) is

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designed or produced for circumventing a measure that controls access to a copyrighted

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work; (2) has only limited commercial purpose or use other than circumventing an access

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measure; or (3) is marketed for use in circumventing an access control measure. Under the

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statute, “‘circumvent a technological measure’ means to descramble a scrambled work, to

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decrypt an encrypted work, or otherwise to avoid, bypass, remove, deactivate, or impair a

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technological measure without authority of the copyright owner.” § 1201(a)(3)(A).

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Plaintiffs have established Defendants violated all three prongs of § 1201(a)(2), although one

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would be sufficient.
Plaintiffs have demonstrated they employed measures to control access to copyrighted

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works and that Defendants sold receivers designed to circumvent Plaintiffs’ security.

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Plaintiffs’ undisputed evidence establishes that Plaintiffs use complex security measures to

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prevent unauthorized access to the copyrighted programming Plaintiffs broadcast, including

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encrypting the signals and providing equipment necessary for lawful users to decrypt the

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signals.

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Plaintiffs’ undisputed evidence also establishes that Defendants’ receivers are

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designed and produced to circumvent Plaintiffs’ security measures. As outlined above, the

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receivers themselves are structurally altered to accommodate pirating devices and Defendants

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helped develop and market the pirating software for use on their receivers. Additionally,

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Defendant Kwak plead guilty to conspiring to circumvent Plaintiffs’ most recent security

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technology, Nagra 3. Defendants’ trafficking in the receivers violated the first prong of §

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1201(a)(2).4

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Plaintiffs have also established Defendants violated the second prong of § 1201(a)(2)

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— limited use other than circumventing an access measure — because Plaintiffs’ undisputed

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evidence shows that Defendants’ receivers are primarily used for pirating. Defendants have

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Certainly, selling receivers designed and constructed for free satellite programming, without
more, would not violate 17 U.S.C. § 1201.
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sold approximately 1.5 to 1.8 million receivers and there have been more than eleven million

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downloads of piracy software tailored to operate on Defendants’ receivers. Additionally, the

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announcement of the new Nagra 3 security technology resulted in a significant drop in sales

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of Defendants’ receivers. From these undisputed facts, it is reasonable to infer that

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Defendants’ receivers had limited use other than circumventing Plaintiffs’ security measures.

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Finally, Plaintiffs have also established Defendants violated the third prong of §

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1201(a)(2) — marketing a technology used in circumventing an access measure — because

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Plaintiffs’ undisputed evidence shows that Defendants provided free receivers to moderators

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on popular piracy web sites and encouraged the moderators to provide favorable reviews of

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the receiver’s ability to obtain Plaintiffs’ protected programming.

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The Court finds Defendants Viewtech and Kwak are liable for violations of §

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1201(a)(2).

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II.

Statutory Damages

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Plaintiffs are entitled to statutory damages. In any civil action brought for violations

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of § 1201, the Court may award statutory damages “for each violation of section 1201 in the

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sum of not less than $200 or more than $2,500 per act of circumvention, device, product,

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component, offer, or performance of service, as the court considers just.” 17 U.S.C. §

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1203(c)(3)(A) (emphasis added). “[T]he court has wide discretion in determining the amount

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of statutory damages to be awarded, constrained only by the specified maxima and minima.”

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Peer Int’l Corp. v. Pausa Records, Inc., 909 F.2d 1332, 1336 (9th Cir. 1990) (quoting Harris

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v. Emus Records Corp., 734 F.2d 1329, 1335 (9th Cir. 1984)).

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Plaintiffs argue that Defendants engaged in at least 1.5 million violations of §

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1201(a)(2) based on each device sold. Sony Computer Entm’t America, Inc. v. Filipak, 406

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F. Supp. 2d 1068, 1074. (N.D. Cal. 2005) (Ҥ 1203(c)(3)(A) authorizes a separate award of

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statutory damages for each device sold”); Craigslist, Inc. v. Naturemarket, Inc., 694 F. Supp.

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2d 1039, 1064 (N.D. Cal. 2010) (treating each unit sold as a violation); Sony Computer

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Entm’t America, Inc. v. Divineo, Inc., 457 F. Supp. 2d 957, 967 (N.D. Cal. 2006) (calculating

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damages based on the number of devices sold). Defendant Kwak estimated that Defendants
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sold between 1.5 and 1.8 million receivers, and the limited documents produced establish

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sales of at least 1,074,493 from September 2005 to January 2009, without complete sales

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records for 2009. The undisputed evidence before the Court indicates that the receivers were

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designed, marketed, and sold for piracy and Defendant Kwak admitted to his efforts to defeat

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Plaintiff’s security measures to increase sales of Defendants’ receivers. Plaintiffs have

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established 1,074,493 violations based on Defendants’ sale of at least 1,074,493 receivers

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intended for piracy.

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The minimum the Court may award for each violation is $200 resulting in statutory
damages of $214,898,600.
III.

Permanent Injunction

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Plaintiffs seek a permanent injunction enjoining Defendants’ unlawful conduct.

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Section 1203(b)(1) authorizes the Court to “grant . . . permanent injunctions on such terms as

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it deems reasonable to prevent or restrain a violation.” The Court finds that under the facts

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of this case, Plaintiffs are entitled to a permanent injunction.

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Defendants are enjoined from:

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manufacturing, importing, offering to the public, or otherwise trafficking in

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Viewsat receivers, software files, or any other technology or part thereof used in

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circumventing Plaintiffs’ security system or intercepting Plaintiffs’ programming;

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•

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circumventing or assisting others in circumventing Plaintiffs’ security system, or
otherwise intercepting or assisting others in intercepting Plaintiffs’ signal;

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testing, analyzing, reverse engineering, manipulating, or otherwise extracting

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codes, data, or information from Plaintiffs’ satellite receivers, smart cards, satellite

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data stream, or any other part or component of Plaintiffs’ security system.

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IV.

Attorneys’ Fees and Costs
Section 1203(b)(4)-(5) gives the Court discretion to “allow the recovery of costs by or

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against any party . . .[and] award reasonable attorneys’ fees to the prevailing party.” An

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award of reasonable attorneys’ fees and costs is appropriate in this case. Within thirty days

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from the date this order is filed, Plaintiffs shall submit an affidavit detailing the attorney’s
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fees incurred, describing the work performed, who performed the work, time expended, and

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hourly rates. Plaintiffs may pursue costs in accordance with Civil Local Rule 54.1.

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CONCLUSION

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Plaintiffs’ motion for summary judgment is GRANTED. The Clerk shall enter

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judgment in favor of Plaintiffs and against Defendants in the sum of $214,898,600.

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Defendants are permanently enjoined as described above. Plaintiffs are entitled to reasonable

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attorneys’ fees and costs. Plaintiffs’ ex parte motions to file certain audio recordings by disk

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and to file portions of an expert report identifying the locations of proprietary security codes

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within receivers are GRANTED.

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IT IS SO ORDERED.

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DATED: April 20, 2011

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Hon. Roger T. Benitez
United States District Judge

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