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Dish Network LLC v. Barnaby

United States District Court, E.D. Tennessee

November 8, 2016

DISH NETWORK LLC, ECHOSTAR TECHNOLOGIES LLC, and NAGRASTAR LLC, Plaintiffs,
v.
LESTER BARNABY, Defendant.

          MEMORANDUM OPINION

          Thomas A. Varlan CHIEF UNITED STATES DISTRICT JUDGE.

         This civil action is before the Court on plaintiffs' Motion for Default Judgment [Doc. 6]. Plaintiffs move for entry of a judgment by default against defendant pursuant to Rule 55(b)(2) of the Federal Rules of Civil Procedure for failure to answer the complaint or otherwise defend this action. The Court has carefully considered the record as well as the relevant law, and for the reasons discussed herein, the Court will grant plaintiffs' motion.

         I. Background

         Plaintiff DISH Network LLC ("DISH") is a multi-channel video provider that delivers video, audio, and data services to approximately fourteen-million subscribers throughout the United States via a direct broadcast satellite system [Doc. 1 ¶ 9]. DISH uses high-powered satellites to broadcast entertainment services to consumers who have been authorized to receive such services after payment of a fee [Id. ¶ 10]. It contracts for and purchases the distribution rights for most of the programming available for broadcast [Id. ¶ 11]- The programming DISH broadcasts are copyrighted and DISH has the authority of the copyright holders to protect these works from unauthorized reception and viewing [Id. ¶ 12].

         The programming is digitized, compressed, and then scrambled prior to being transmitted to multiple satellites [Id. ¶ 13]. The satellites relay the encrypted signal and DISH subscribers, who have the necessary equipment, receive the signals [Id.]. Plaintiff EchoStar Technologies LLC ("EchoStar") provides receivers, dish antenna, and other digital equipment for the DISH system [Id. ¶ 14]. Plaintiff NagraStar LLC ("NagraStar") provides security technologies [Id.]. The security measures are encryption-based technologies that descramble the satellite signal [Id. ¶¶ 16-18]. These measures prevent unauthorized users from viewing the programming [Id.]

         A new form of piracy has emerged called "Internet key sharing, " or "IKS, " that can circumvent this system by use of passcodes [Id. ¶¶ 21-24]. NFusion Private Server ("NFPS") is a subscription-based IKS service, whereby members purchase the service to receive DISH's encrypted satellite broadcasts of programing without authorization [Id. ¶ 25]. Plaintiffs received records showing that defendant purchased at least 220 passcodes to the NFPS service [Docs. 8-1, 8-2].[1]These passcode are primarily designed and produced for circumventing the DISH system and have no commercially significant purpose other than to do so [Doc. 1 ¶ 32]. Plaintiffs assert that defendant re-sold certain IKS passwords that he purchased [Id. ¶ 27]. They allege that defendant intended for his IKS passwords to be used in the unauthorized decryption of plaintiffs' satellite signal, and knew or at least should have known they were used primarily in this unlawful manner [Id. ¶¶ 34, 38-39]. Defendant and his customers received the benefit of viewing DISH programming without purchasing a subscription [Id. ¶¶ 27-28].

         Plaintiffs filed this action on November 2, 2015, alleging violations of the Digital Millennium Copyright Act ("DMCA"), 17 U.S.C. § 1201, et seq., and the Federal Communications Act ("FCA"), 47 U.S.C. § 605, et seq. [Doc. 1 ¶ 5].[2] Defendant failed to respond to the complaint or otherwise defend this action despite being properly served [Docs. 2, 3]. On February 9, 2016, plaintiffs applied for the Clerk's entry of default [Doc. 4], and on March 3, 2016, the Clerk of Court entered default [Doc. 5].

         II. Analysis

         Rule 55 of the Federal Rules of Civil Procedure contemplates a two-step process for obtaining a default judgment against a defendant who has failed to plead or otherwise defend. First, pursuant to Rule 55(a), a plaintiff must request from the Clerk of Court an entry of default, describing the particulars of the defendant's failure to plead or otherwise defend. If default is entered by the Clerk, the plaintiff must then move the Court for entry of default judgment pursuant to Rule 55(b). The determination of whether a motion for default judgment should be granted is committed to "the sound discretion of the court." In re Irby, 337 B.R. 293, 294 (Bankr.N.D.Ohio 2005) (applying Federal Rule of Bankruptcy Procedure 7055, which incorporates Federal Rule of Civil Procedure 55).

         Once default has been entered, "the complaint's factual allegations regarding liability are taken as true." Bogard v. Nat'l Credit Consultants, No. 1:12 CV 02509, 2013 WL 2209154, at *3 (N.D. Ohio May 20, 2013); see also Nat'l Satellite Sports, Inc. v. Mosley Entm't, Inc., No. 01-CV-74510-DT, 2002 WL 1303039, at *3 (E.D. Mich. May 21, 2002) ("For a default judgment, well-pleaded factual allegations are sufficient to establish a defendant's liability."). The Court must, however, determine whether the facts alleged in the complaint "are sufficient to state a claim for relief as to each cause of action for which [plaintiffs] seek[] default judgment." J & J Sports Prods., Inc. v. Rodriguez, No. 1:08-CV-1350, 2008 WL 5083149, at *1 (N.D. Ohio Nov. 25, 2008); see also Harrison v. Bailey, 107 F.3d 870, 1997 WL 49955, at *1 (6th Cir. Feb. 6, 1997) ("Default judgments would not have been proper due to the failure to state a claim against these defendants."); Vinton v. CG's Prep Kitchen & Cafe, No. L09-CV-707, 2010 WL 748221, at *1 (W.D. Mich. Mar. 2, 2010) ("A default judgment therefore cannot stand on a complaint that fails to state a claim."). Furthermore, although the allegations in the complaint pertaining to liability are taken as true, "the amount of damages must be proven." Bogard, 2013 WL 2209154, at *3.

         Plaintiffs move for default judgment as to their claims under the DMCA and the FCA. The Court will first address the sufficiently of the complaint as to the claims arising out of each statute. Then, the Court will address damages.

         A. Sufficiency of the Complaint as to the DCMA Claims

         The DCMA addresses the circumvention of copyright protection systems. 17 U.S.C. § 1201. It prohibits trafficking in any technology, service, or part thereof that: (1) is primarily designed or produced for circumventing a technological measure that effectively controls access to a copyrighted work; (2) has only limited commercial purpose or use other than circumventing a technological measure that effectively controls access to a copyrighted work; or (3) is marketed for use in circumventing a technological measure that effectively controls access to a copyrighted work. Id. § 1201(a)(2). Circumventing technological measures, as defined in the DCMA, "means to descramble a scrambled work, to decrypt an encrypted work, or to otherwise avoid, bypass, remove, deactivate, or impair a technological measure." Id. § 1201(a)(3)(A).

         Courts have previously held that encryption-based security systems, such as plaintiffs' system, constitute an effective access control measure for purposes of the DMCA. See DISH Network L.L.C. v. Sonicview USA, Inc., No. 09-CV-1553-L(WVG), 2012 WL 1965279, at *8 (S.D. Cal. May 31, 2012); Universal City Studios, Inc. v. Reimerdes, 111 F.Supp.2d 294, 318 (S.D.N.Y. 2000) (holding that security measures based on "encryption or scrambling" are effective for purposes of the DMCA). In addition, courts have held that the DCMA applies to various piracy instruments including passcodes. DISH Network LLC v. DiMarco, No. 2:11-CV-01962, 2012 WL 917812, at *5 (D. Nev. Mar. 14, 2012) (finding the DMCA applicable to the distribution of passwords used to access IKS servers); DISH Network LLC v. Dillion, No. 12-CV-157 BTM(NLS), 2012 WL 368214, at *3-4 (S.D. Cal. Feb. 3, 2012) (finding that the DMCA and the FCA apply to piracy-enabling software files); see also Actuate Corp. v. IBM Corp., No. C-09- 05892 JCS, 2010 WL 1340519, at *9 (N.D. Cal. Apr. 5, 2010) (holding the "unauthorized distribution of passwords and usernames avoids and bypasses a technological measure in violation of section[] 1201(a)(2)").

         Plaintiffs have adequately plead a claim for relief under § 1201(a)(2) of the DMCA. In their complaint, they state that defendant purchased and sold the IKS passcodes, that these passcodes are primarily designed to circumvent the plaintiffs' security system, and that they have no commercially significant purpose other than to do so. Altogether, the allegations in plaintiffs' complaint, which are accepted as true, establish that defendant trafficked in IKS passcodes in violation of the DMCA. As such, plaintiffs are entitled to default judgment as to their DMCA claims.

         B. Sufficiency of the Complaint as to the FCA Claims

         Section 605(e)(4) of the FCA is similar to § 1201(a)(2) of the DCMA. That section of the FCA by makes it unlawful for any person to import or distribute any device or equipment while "knowing or having reason to know" that the device or equipment "is primarily of assistance in the unauthorized decryption of . . . direct-to-home satellite services, or is intended for any other activity prohibited by subsection (a)." 47 U.S.C. § 605(e)(4). Furthermore, subsection (a) provides that, "[n]o person not being entitled thereto shall receive or assist in receiving any interstate or foreign communication by radio and use such communication ... for his own benefit or for the benefit of another not entitled thereto." Id. § 605(a).

         Courts have held that plaintiffs' satellite television broadcasts are direct-to-home satellite services for purposes of § 605(e)(4), and protected radio communications under § 605(a). See DirecTV, Inc. v. Webb, 545 F.3d 837, 844 (9th Cir. 2008); DirecTV, Inc. v. Huynh,503 F.3d 847, 852-53 (9th Cir. 2007); Sonicview USA, 2012 WL 1965279, at *10. The FCA also applies to various piracy instruments including passcodes. D ...


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