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By Jonathan Stempel
(Reuters) - A federal appeals court on Wednesday rejected Twenty-First Century Fox Inc's effort to stop Dish Network Corp from selling devices that let viewers skip over commercials on primetime broadcast shows.
The 9th U.S. Circuit Court of Appeals upheld a lower court judge's refusal to temporarily halt sales of Dish's Hopper, which contains the ad-skipping feature known as AutoHop, and a related "marsupial-inspired" product called the Joey.
Introduced last year, AutoHop is available on shows recorded with Dish's PrimeTime Anytime feature, which lets subscribers record Fox, ABC, CBS and NBC primetime programs with one click, and replay them commercial-free starting the day after they broadcast. Recordings can be saved for eight days.
Fox and other networks have complained that AutoHop infringes their copyrights, and could reduce revenue from advertisers who are fearful that subscribers might fast-forward past their commercials.
Dish is the second-largest U.S. satellite TV provider, and has about 14 million customers. Its mascot for the Hopper is a kangaroo.
Last November, U.S. District Judge Dolly Gee in Los Angeles said the parent of the Fox Broadcasting Co network did not deserve a preliminary injunction to stop sales of products featuring AutoHop or PrimeTime Anytime.
She said Fox failed to show that it would likely prevail on its copyright infringement and breach of contract claims, or otherwise face irreparable harm if sales were to continue.
Writing for a three-judge 9th Circuit panel, Circuit Judge Sidney Thomas agreed that the copyright claims might fail because it is "the user, not Dish" who makes the alleged illegal copies of Fox programs such as "Glee" and "The Simpsons."
He said the breach of contract issue was a "much closer call" given Dish's 2010 agreement to disable fast-forwarding through commercials in "video on demand" programs.
But applying a "very deferential" standard of review, he said Gee "did not clearly err" in concluding that PrimeTime Anytime more closely resembled a DVR.
The 9th Circuit did not address the merits of Fox's case.
Wednesday's decision could "encourage other pay-TV providers to offer similar services," wrote Christopher King, an analyst at Stifel Nicolaus. "We suspect broadcasters are factoring potential ad-skipping losses into their demands for retransmission-content payments from Dish."
Twenty-First Century Fox spokesman Scott Grogin said the New York-based company is disappointed with the decision.
"This is not about consumer choice or advances in technology. It is about a company devising an unlicensed, unauthorized service," he said. "We will review all of our options and proceed accordingly."
Stanton Dodge, Dish's general counsel, said the Englewood, Colorado-based company is pleased with the decision, calling it a victory for consumers in an "important fight over the fundamental rights of consumer choice and control."
The Fox networks were once part of News Corp, which recently split broadcasting and movie operations from its publishing operations, which include the Wall Street Journal.
ABC is owned by Walt Disney Co, CBS by CBS Corp, and NBC by Comcast Corp.
CBS and NBC, like Fox, also sued Dish last year in California over the Hopper.
The case is Fox Broadcasting Co et al v. Dish Network LLC et al, 9th U.S. Circuit Court of Appeals, No. 12-57048.
(Reporting by Jonathan Stempel in New York; Additional reporting by Liana B. Baker and Erin Geiger Smith; Editing by Jan Paschal, Maureen Bavdek and Richard Chang)