TKR Cable Co. v. Cable City Corp.

Opinions of the United

2001 Decisions States Court of Appeals

for the Third Circuit

10-1-2001

TKR Cable Co v. Cable Cty Corp

Precedential or Non-Precedential:

Docket 98-5341

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Filed October 1, 2001

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 98-5341

TKR CABLE COMPANY

v.

CABLE CITY CORPORATION; JAY GRABERT;

CHRIS SCHAD; JOHN DOES 1-10;

JANE DOES, 1-10; UNIDENTIFIED CORPORATIONS 1-10;

UNIDENTIFIED BUSINESS ENTITIES 1-10; MADELAINE

MURPHY; KENNY JOHNSON; ONE STEP AHEAD, INC.,

Cable City, Inc.,

Jay Grabert and Chris Schad,

Appellants

On Appeal from the United States District Court

for the District of New Jersey

District Judge Garrett E. Brown, Jr.

Argued April 17, 2001

Before: ALITO, RENDELL, and FUENTES, Circuit Judges

(Opinion Filed: October 1, 2001)

Eugene P. Franchino (argued)

3 Mills Court

Flemington, New Jersey 08822

Attorney for Appellants

Patrick J. Sullivan (argued)

Daniel J. Lefkowitz

Lefkowitz, Louis and Sullivan

350 Jericho Turnpike, Suite 300

Jericho, New York 11753

Attorneys for Appellee

OPINION OF THE COURT

FUENTES, Circuit Judge.

TKR Cable Company ("TKR") brought this action against

sellers of cable television descramblers, seeking statutory

damages and injunctive relief for alleged violations of 47

U.S.C. SS 553 and 605. On cross-motions for summary

judgment, the District Court determined, among other

things, that (1) the defendants had conducted 16 sales of

cable descramblers in violation of SS 553 and 605, and (2)

through these sales, the defendants had assisted in the

interception of radio communications and therefore were

subject to the more severe statutory penalties ofS 605,

rather than the relatively lenient penalties ofS 553. After an

evidentiary hearing on damages, the court imposed the

minimum damages pursuant to S 605 of $10,000 per

device, for a total of $160,000. The court also awarded

counsel fees and granted injunctive relief.

The issue on appeal is whether S 605, which prohibits the

unauthorized interception of radio communications, applies

to the sale of cable decoding equipment. The defendant

sellers, Cable City Corporation and its officers Jay Grabert

and Chris Schad (collectively "Cable City"), argue that S 553

is the sole statutory remedy for cable piracy of signals sent

over terrestrial cable lines, and that S 605 applies only

against offenders who directly intercept satellite or radio

broadcasts as they pass through open air.

We hold that a cable television descrambler does not

facilitate the interception of "communications by radio" and

therefore the statutory damages available underS 605 do

not apply here. Accordingly, we will vacate the penalties

imposed and remand the case for further proceedings.

2

I

TKR, based in Piscataway, New Jersey, provides cable

television services under the authority of various municipal

franchises it has purchased. These franchises authorize

TKR to construct, operate, and maintain cable television

systems in parts of Middlesex, Monmouth, and Somerset

counties. TKR offers its subscribers programming in

packages, which include Basic and Standard services, as

well as the option to elect premium programming services,

such as Cinemax, Home Box Office ("HBO"), and Showtime,

each at an additional monthly charge. TKR also offers Pay-

Per-View programming, providing subscribers the

opportunity to purchase individual movies, sporting events,

or other entertainment at a per event fee. TKR transmits

the signals for all of its cable television services from its

reception facilities in Piscataway to the homes of

subscribers through a network of cable wiring and

equipment. To prevent subscribers from receiving services

they have not purchased, TKR encodes the signals,

providing paying subscribers with a decoder that deciphers

transmissions for the appropriate channels. Scrambling

constitutes the primary means by which TKR, as well as

most cable service providers, prevent theft of their

transmissions.

In spite of TKR's precautions, the cable theft business

persists. Cable pirates have permeated the marketplace

with unauthorized decoders that render viewable previously

scrambled transmissions. In most cases, TKR cannot detect

or prevent the theft of its programming services without

permission from a subscriber to inspect his or her home.

Cable City conducted a cable piracy operation out of an

office in Matawan, New Jersey. Specifically, Cable City sold

cable television decoders to the public, offering

descrambling services to the region for a profit. Cable City

represented to customers that its descramblers were"bullet

protected" or "bullet proof," meaning that they could

circumvent TKR's electronic security measures designed to

disable pirate decoders. Cable City advertised and marketed

its illicit wares to TKR's subscribers via "Val-Pak" direct

mailings, promoting their descramblers as devices designed

for use on TKR's cable television system.

3

TKR initially noticed Cable City's activities in or around

April 1996 when some of its employees received these Val-

Pak mailings. The advertisements stated that Cable City

sold cable television decoders, remarking in smaller print,

"Anyone implying theft of cable services will be denied a

sale." The mailings further stated in yet smaller print, "It Is

Not The Intent Of Cable City To Defraud Any Pay Television

Operator And We Will Not Assist Any Company Or

Individual In Doing The Same." In response to these

developments, TKR retained a private investigator who

visited Cable City's office and later purchased a

descrambler based upon the representation of a Cable City

sales agent that the device would "get" all of the premium

and Pay-Per-View channels. During testing at TKR's facility,

the descrambler received and permitted viewing of all of

TKR's scrambled programming services, including premium

and Pay-Per-View programming.

On June 14, 1996, TKR sought and obtained an ex parte

temporary restraining order from the District Court,

enjoining Cable City from further sales of cable television

descramblers. The order further froze the defendants'

business and personal assets and granted expedited

discovery. The order additionally authorized the seizure of

cable television descramblers, business records, and the

proceeds of descrambler sales.

After a hearing on June 27, 1996, the court issued an

order entering a preliminary injunction: (1) enjoining the

continued sale or marketing of decoders; (2) enjoining the

alteration, removal, or destruction of any business records

concerning transactions involving decoders; (3) enjoining

the transfer, withdrawal, or encumbrance of any assets

without a showing that such action would be necessary for

personal expenses or legitimate business expenses; (4)

reaffirming the prior grant of expedited discovery; and (5)

imposing upon the defendants a duty to notify TKR of their

subsequent obtainment of any of the above items (i.e., cable

decoders, business records, illicit proceeds) and to retain

such items pending a further order of the court. See TKR

Cable Co. v. Cable City Corp., No. 96-2877(GEB), 1996 WL

465508, at *12 (D.N.J. July 29, 1996).

4

Following discovery, the parties filed cross-motions for

summary judgment. On January 27, 1998, the District

Court granted TKR's motion for summary judgment as to

all but one defendant, holding Cable City liable under both

47 U.S.C. SS 553 and 605. The District Court also entered

a permanent injunction prohibiting Cable City "from selling

or otherwise distributing any equipment intended for

unauthorized reception of any communication service

offered over [TKR's] cable system." TKR Cable Co. v. Cable

City Corp., No. 96-2877(GEB), slip op. at 11, 13 (D.N.J.

Jan. 27, 1998); see also 47 U.S.C. S 553 (1991 & Supp.

2001); 47 U.S.C. S 605 (1991 & Supp. 2001). The court

denied Cable City's cross-motion for summary judgment.

Id. The District Court determined that S 605(a) applies to

Cable City's conduct, stating that "the prohibition

contained in section 605(a) against the unauthorized

interception of `radio communications' has also been

interpreted to include cable television transmissions." Id. at

4 (quoting TKR Cable Co. v. Cable City Corp., 1996 WL

465508, at *6). Following a subsequent hearing on

damages, the District Court issued a memorandum

opinion, finding that Cable City had made 16 decoder sales.

See TKR Cable Co. v. Cable City Corp., No. 96-2877(GEB),

slip op. at 5-6 (D.N.J. June 11, 1998). In accordance with

S 605, the court assessed statutory damages of $10,000 per

violation, amounting to a total damage award of $160,000,

plus attorneys' fees and costs of $96,514.33. Id .; see also

TKR Cable Co. v. Cable City Corp., No. 96-2877(GEB), slip

op. at 2 (D.N.J. Jan. 25, 1999). Cable City filed this appeal.

The District Court exercised jurisdiction pursuant to 28

U.S.C. S 1331. We have jurisdiction under 28 U.S.C.

S 1291. With respect to the District Court's decision to

enter a temporary restraining order and a preliminary

injunction freezing the defendants' assets, we review the

District Court's legal conclusions de novo, its factual

findings for clear error, and its ultimate decision to grant

injunctive relief for an abuse of discretion. Maldonado v.

Houstoun, 157 F.3d 179, 183 (3d Cir. 1998). Regarding the

District Court's decision to grant summary judgment to

TKR, our review is plenary. Pennsylvania Ass'n of Edwards

Heirs v. Rightenour, 235 F.3d 839, 841 (3rd Cir. 2000).

Summary judgment is appropriate where the record, viewed

5

in the light most favorable to the non-moving party, shows

that there is no genuine issue of material fact and that the

moving party is entitled to summary judgment as a matter

of law. Stanziale v. Jargowsky, 200 F.3d 101, 105 (3d Cir.

2000) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322-23

(1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-

50 (1986)).

II

Cable City's principal argument is that the District Court

erred in subjecting it to the exacting liability provisions of

S 605, rather than assessing liability under the milder

provisions of S 553.1 Section 605 subjects Cable City to a

_________________________________________________________________

1. Section 605 provides in relevant part:

(a) . . . No person not being authorized by the sender shall intercept

any radio communication and divulge or publish the existence, contents,

substance, purport, effect, or meaning of such intercepted

communication to any person. No person not being entitled thereto shall

receive or assist in receiving any interstate or foreign communication by

radio and use such communication (or any information therein

contained) for his own benefit or for the benefit of another not entitled

thereto. . . .

(e)(3)(C)(i)(II) [T]he party aggrieved may recover an award of statutory

damages . . . for each violation of paragraph (4) of this subsection

involved in the action an aggrieved party may recover statutory damages

in a sum not less than $10,000, or more than $100,000, as the court

considers just.

(e)(4) Any person who manufactures, assembles, modifies, imports,

exports, sells, or distributes any electronic, mechanical, or other device

or equipment, knowing or having reason to know that the device or

equipment is primarily of assistance in the unauthorized decryption of

satellite cable programming, or direct-to-home satellite services, or is

intended for any other activity prohibited by subsection (a) of this

section, shall be fined not more than $500,000 for each violation, or

imprisoned for not more than 5 years for each violation, or both. . . .

Section 553 provides in relevant part:

(a)(1) No person shall intercept or receive or assist in intercepting or

receiving any communications service offered over a cable system, unless

specifically authorized to do so by a cable operator or as may otherwise

be specifically authorized by law.

6

minimum liability of $10,000 in damages for each of its

sixteen decoder box sales, amounting to damages of no less

than $160,000. Section 553, by contrast, provides a

statutory damages range of $250 to $10,000 and increases

the range by an additional $50,000 for violations committed

"willfully and for purposes of commercial advantage or

private financial gain." Cable City maintains that Congress

provided liability in S 605 for cable pirates who directly

intercept airborne transmissions but not for offenders like

Cable City who sell decoder boxes that intercept cable

transmissions. TKR contends that S 605 applies because

Cable City's actions constitute interception or unauthorized

reception of radio communications. We agree with Cable

City.

A

We begin by recounting the historical background

underlying S 605. Although S 605 originally addressed wire

communications, such as those with which Cable City

interfered, Congress subsequently revised the section in

1968, confining its scope nearly exclusively to radio

transmissions. This statutory alteration proves critical to

our analysis.

Section 605 has its genesis in the beginning of the

twentieth century with the enactment, in 1912, of the "Act

to Regulate Radio Communication." Act of Aug. 13, 1912,

_________________________________________________________________

(2) For the purpose of this section, the term "assist in intercepting or

receiving" shall include the manufacture or distribution of equipment

intended by the manufacturer or distributor (as the case may be) for

unauthorized reception of any communications service offered over a

cable system in violation of subparagraph (1).

(c)(3)(A)(ii) [T]he party aggrieved may recover an award of statutory

damages for all violations involved in this action, in a sum of not less

than $250 or more than $10,000 as the court considers just.

(B) In any case in which the court finds that the violation was

committed willfully and for purposes of commercial advantage or private

financial gain, the court in its discretion may increase the award of

damages . . . by an amount of not more than $50,000.

7

ch. 287, 37 Stat. 302. This act, originally intended to

protect the confidentiality of wireless ship-to-shore

communications, defined "radio communications" as "any

system of electrical communication by telegraphy or

telephony without the aid of any wire connecting the points

from and at which the . . . signals . . . are sent or received."

Id. S 6, 37 Stat. at 308 (emphasis added). Congress

replaced the 1912 Act with the Radio Act of 1927. Radio

Act of 1927, ch. 169, 44 Stat. 1162. This measure included

a definition of radio communication as being "any. . .

communication of any nature transferred by electrical

energy from one point to another without the aid of any

wire connecting the points from and at which the electrical

energy is sent or received . . . ." Id.S 31, 44 Stat. at 1173

(emphasis added). These definitions clearly show Congress'

desire, from the beginning of the twentieth century, to

distinguish between radio communications and

communications transmitted over wire.

Seven years later, Congress repealed the Radio Act of

1927 when it passed the Communications Act of 1934 (the

"Communications Act" or the "1934 Act"), now codified in

relevant part at 47 U.S.C. S 605(a). Communications Act of

1934, ch. 652, 48 Stat. 1064. This act established the

Federal Communications Commission and granted it

jurisdiction over the regulation of radio and wire

transmissions. Id. The Communications Act originally

provided for the maintenance of privacy through four

clauses that prohibited: (1) the unauthorized divulgence or

publishing of wire or radio communications by the

operators responsible for receiving such communication; (2)

the unauthorized interception and divulgence of wire or

radio communications; (3) the unauthorized receipt and use

of wire or radio communications for the benefit of the

unauthorized receiver or someone else not entitled to the

communication; and (4) the divulgence, publication, or use

of unlawfully intercepted information by anyone knowing

that the information was wrongfully obtained. See id. at

1103-04 (codified as amended at 47 U.S.C. S 605(a)). The

1934 Act further provided definitions of wire and radio

communication that are still in use today and are codified

at 47 U.S.C. S 153. Specifically, S 153 defines radio and

wire communication as follows:

8

(33) The term radio communication or

"communication by radio" means the transmission by

radio of writing, signs, signals, pictures, and sounds of

all kinds, including all instrumentalities, facilities,

apparatus, and services (among other things, the

receipt, forwarding, and delivery of communications)

incidental to such transmission. . . .

(52) The term "wire communication" or

"communication by wire" means the transmission of

writing, signs, signals, pictures, and sounds of all kinds

by aid of wire, cable, or other like connection between

the points of origin and reception of such transmission,

including all instrumentalities, facilities, apparatus,

and services (among other things, the receipt,

forwarding, and delivery of communications) incidental

to such transmission.

47 U.S.C. S 153(33), (52) (2001). Accordingly, in both the

principal provisions of the Communications Act, now

codified at 47 U.S.C. S 605, and the definitional provisions

now codified at S 153(52) and S 153(33), Congress clearly

defined wire and radio communications as concepts

involving distinct types of transmissions.

Thirty-four years after passage of the Communications

Act, Congress restructured the regulatory framework

governing the interception of radio and wire

communications when it passed the Omnibus Crime

Control and Safe Streets Act of 1968. See Pub. L. No. 90-

351, 82 Stat. 197 (the "Crime Control Act" or the "1968

Act"). Seeking to combat a contemporary surge in crime,

particularly in organized activity, Congress greatly

expanded the authority of law enforcement officials to

monitor the communications of suspected offenders. To

ensure autonomy and coherence in the novel framework of

the 1968 Act, Congress amended S 605 from the

Communications Act to remove references to wire

communications from all but the first clause ofS 605(a),

which banned the divulgence of wire and radio

transmissions by communications personnel. See 1968 Act,

82 Stat. at 223. The legislative history of the 1968 Act

states that, while the act removed prohibitions on

interference with, and monitoring of, wire communication

9

from the purview of section 605 of the Communications

Act, Congress introduced comprehensive provisions

regulating the interception of wire and oral

communications, now codified at 18 U.S.C. S 2510 et seq.

See S. Rep. No. 1097 (1968), reprinted in 1968 U.S.C.C.A.N.

2112, 2196-97. Congress also explained why it removed the

reference to wire communication in S 605:

This section amends section 605 of the

Communications Act of 1934 (48 Stat. 1103, 47 U.S.C.

sec. 605 (1958)). This section is not intended merely to

be a reenactment of section 605. The new provision is

intended as a substitute. The regulation of the

interception of wire or oral communications in the future

is to be governed by proposed new chapter 119 of title

18, United States Code.

Id. (emphasis added) Thus, through the Crime Control Act,

Congress removed from S 605 of the Communications Act

the principal share of its authority over wire

communications, leaving S 605 primarily with radio

communications. In short, although S 605, as originally

drafted in 1934, would have reached the cable decoder box

piracy perpetrated by Cable City, the 1968 Act removed the

critical language granting S 605 authority over such conduct.2

TKR contends nonetheless that, in spite of the Crime

Control Act, S 605 continues to cover cable transmissions.

TKR asserts that, although the 1968 Act removed key

references to "wire communications" from S 605, the

remaining references to "radio communication" in the Act

suffice to encompass the acts of Cable City in the instant

case. In particular, TKR argues that the definition of

"[r]adio communication" in S 153(33) supports a

_________________________________________________________________

2. It is undisputed that the Crime Control Act itself does not cover Cable

City's actions. Congress, in 18 U.S.C. S 2510(1), restricted the scope of

wire communications to those aural communications transmitted via

wire or cable operated by a common carrier. Because, in 1968, the

Supreme Court determined that cable television distributors do not

qualify as common carriers, 18 U.S.C. S 2510(1) does not reach cable

television transmissions. See United States v. Southwestern Cable Co.,

392 U.S. 157, 169 n.29 (1968). The 1968 Act therefore does not address

the defendants' conduct.

10

determination that all wire communications, be they of

wire, radio, or satellite origin, fall under S 605. TKR notes

that the provision defining "[r]adio communication" in

S 153(33) includes within its scope "the transmission by

radio of [communication] of all kinds, including all

instrumentalities, facilities, apparatus and services (among

other things, the receipt, forwarding, and delivery of

communications) incidental to such transmission." 47

U.S.C. S 153(33). TKR thereby suggests that all wire

retransmissions after the receipt of a radio transmission

necessarily fall within the definition of S 153(33) because

they entail the conveyance of a radio signal via

"instrumentalities [or] facilities . . . incidental to such

communication." Id.

We reject TKR's interpretation of S 153(33) because, as

the Seventh Circuit noted in United States v. Norris, "if the

. . . argument is taken to its full conclusion, it .. .

unacceptably blurs the line between radio and wire

communications." United States v. Norris, 88 F.3d 462, 467

(7th Cir. 1996). We believe that such an expansive

construction of "radio communication" would place an

unacceptably broad range of transmissions within the

purview of S 605, effectively ignoring the significance of

Congress' excision of "wire communication" from S 605. As

the Norris court noted, this reading of"radio

communication" would place cordless telephone

conversations within the ambit of S 605 because they

commence with a brief radio communication, followed by

an extensive wire transmission. Moreover, TKR's reading of

S 153(33) demands undue contortion of the phrase

"instrumentalities [or] facilities . . . incidental to such

transmission." Suggesting that an entire cable

infrastructure constitutes a mere instrumentality incidental

to the transmission of a satellite broadcast ignores the scale

of effort entailed in delivering this transmission to a given

residence. The wires that connect a home satellite dish to

the living room television arguably constitute facilities

incidental to the transmission. However, the entire cable

transmission infrastructure of a city or suburban area, a

structure that provides a foundation for a significant

business, such as that of TKR, or any other major cable

service provider, cannot be considered a mere

11

instrumentality to transmission. The plain language of

S 153(33), read in the context of the Crime Control Act,

therefore precludes an interpretation of "radio

communication" in S 153(33) that would include terrestrial

cable transmissions such as those in the instant case.

In sum, by transferring authority over wire

communications to the province of the Crime Control Act,

Congress removed coverage of wire communications from

S 605, and thereby excluded activities such as Cable City's

from that provision's scope. Moreover, contrary to TKR's

argument, because TKR's cable transmissions are not

"incidental" to the transmission of radio communications,

the S 153(33) definition of radio communications that

accompanies S 605 does not apply here. We believe,

therefore, that S 605 does not reach Cable City's conduct.

B

Even if there were any doubt as to the facial applicability

of S 605, the history of both SS 605 and 553 and Congress'

express intent demonstrates that only S 553, and not S 605,

applies to Cable City's conduct. Two principal reasons, both

particularly informed by a historical perspective,

demonstrate why only S 553, rather than S 605, reaches

Cable City's conduct: (1) in 1984, Congress enactedS 553

to combat the novel phenomenon of cable piracy, a crime

that acquired significance only with the recent expansion of

the cable industry in the 1970s; and (2) an interpretation of

S 605 that reaches Cable City's conduct would effectively

render S 553 superfluous because it would deprive S 553 of

any substantial activity that it could uniquely address.

We begin by setting S 553 within the context of cable

industry history. In the years following the passage of the

1968 Omnibus Crime Control Act, the cable television

industry witnessed a period of widespread and

unprecedented expansion. Although cable television, which

found "its beginnings as a means of providing the residents

of rural areas with better reception of over-the-air television

broadcast signals," spread from its inception quickly

beyond its non-commercial roots in 1949 Oregon, it had

still, by the mid-1970s, reached "no more than 12 to 15

12

percent of American homes." H.R. Rep. No. 98-934, at 20-

21 (1984), reprinted in 1984 U.S.C.C.A.N. 4655, at 4657-58.

The year 1975, however, brought significant change,

particularly through the introduction of satellite technology,

which Congress, in its legislative history to 47 U.S.C. S 553,

later documented:

The cable industry has changed dramatically since its

beginnings . . . .

In 1975, Home Box Office (HBO), a Time, Inc.

subsidiary, revolutionized the cable industry by

launching the satellite delivery of its programming

service. This development made it possible to

economically deliver to local cable systems by satellite

a vast array of national programming services. These

new services provided movies, sports, news, and

specialized programming directed to a number of

individual segments of the national audience such as

children, minorities and senior citizens. With the

availability of these new services, the cable television

industry experienced a new round of growth and

expansion, moving into still larger cities with systems

that promised over 100 channels to every home.

Id. Addressing this sudden growth of the cable industry

and its accompanying consequences, Congress in 1984

promulgated the Cable Communications Policy Act, a new

regulatory framework for the field of cable television. See

Cable Communications Policy Act of 1984, Pub. L. No. 98-

549, 98 Stat. 2779 (codified in relevant part at 47 U.S.C.

S 553) ("Cable Act" or "1984 Act").

As part of the 1984 Act, Congress passed what is now 47

U.S.C. S 553(a), which provides, among other things:

(1) No person shall intercept or receive or assist in

intercepting or receiving any communications

service offered over a cable system, unless

specifically authorized to do so by a cable operator

or as may otherwise be specifically authorized by

law.

(2) For purposes of this section, the term "assist in

intercepting or receiving" shall include the

13

manufacture or distribution of equipment intended

by the manufacturer or distributor (as the case

may be) for unauthorized reception of any

communications service offered over a cable

system in violation of subparagraph (1).

47 U.S.C. S 553(a). Through these provisions of the Cable

Act, Congress acknowledged the novel expansion of the

cable television industry, and created strict new penalties

to deter cable pirates who would otherwise exploit this

phenomenon.

As we noted above, Congress enacted S 553 specifically to

combat the novel phenomenon of cable piracy, a crime that

emerged in abundance only with the cable industry

developments of the 1970s. The legislative history to the

Cable Act supports this interpretation. Congress therein

expressly identified the threat to the rapidly changing cable

industry that the newly enacted S 553 would address:

The Committee is extremely concerned with a

problem which is increasingly plaguing the cable

industry--the theft of cable service. This problem has

taken on many forms from the manufacture and sale of

equipment intended to permit reception of cable

services without paying for it, to apartment building

dwellers "tapping" into cable system wire in a building's

hallway that is used for providing service to a

neighbor's apartment unit, to the sale by building

superintendents of cable converters left behind by

previous tenants to new tenants. Such practices not

only often permit one to obtain cable service without

paying the installation and hook-up costs, but also, for

instance, involve individuals gaining access to premium

movie and sports channels without paying for the

receipt of those services.

Theft of service is depriving the cable industry of

millions of dollars of revenue each year which it should

otherwise be receiving. The Committee believes that

theft of cable service poses a major threat to the

economic viability of cable operators and cable

programmers, and creates unfair burdens on cable

subscribers who are forced to subsidize the benefits

14

that other individuals are getting by receiving cable

service without paying for it.

H.R. Rep. No. 98-934, at 83, reprinted in 1984 U.S.C.C.A.N.

at 4720. It is clear, from the language of the statement

above, that Congress sought primarily to address the

phenomena associated with the recent accelerated growth

of the cable industry, fueled by the "satellite delivery of . . .

programming service." Id. at 4658. Without this

"development [which] made it possible to economically

deliver to local cable systems by satellite a vast array of

national programming services," there would have been

neither a greatly expanded cable industry, the greatly

expanded cable piracy that accompanied it, nor the

necessity to pass legislation regulating either the former or

the latter. Id. These concerns all strongly suggest that, in

enacting S 553 as part of the Cable Communications Policy

Act, Congress wished to address cable piracy in the most

thriving and vital sector of the industry. That is, Congress

intended to regulate the sector wherein cable networks

"economically deliver to local cable systems by satellite a

vast array of national programming services"-- the sector

that had driven the unprecedented growth of the prior

decade. Id.

TKR argues, however, that S 605 already addressed this

growing field of cable piracy. We reject TKR's interpretation,

not only because the legislative history accompanying S 553

demonstrates that Congress drafted the provision to deter

the newly emergent and previously unaddressed cable

piracy, but also because TKR's reading of S 605 would

effectively render S 553 superfluous.

To avoid suggesting that S 553 is redundant, TKR

contends that Congress actually drafted S 553 to provide

liability for interception of communications directed from a

point of origin to a particular destination solely by wire

transmissions, a form of transmission that S 605

undisputedly has not addressed since the passage of the

1968 Act. Both history and the plain language of the

statutes, however, expose the flaws in this conception of

the regulatory framework. By suggesting that Congress

drafted S 553 because it was primarily concerned with

purely wire-bound cable transmissions, TKR proposes that

15

Congress conceived S 553 to address only local cable

programming, a relatively minor segment of the industry.

This argument ignores Congress' acknowledgment,

recounted above, that the satellite technology and market

forces reshaping the cable industry motivated its passage of

the Cable Act. See, H.R. Rep. No. 98-934, at 19, reprinted

in 1984 U.S.C.C.A.N. at 4656 (explaining that new

legislation was necessary since "[t]he Communications Act

of 1934 . . . was enacted well before the advent of cable

television").

The legislative history to S 553 shows that Congress

specifically designed the provision to combat decoder box

piracy of satellite-delivered cable services. In describing the

ills of decoder boxes, Congress explained that "[s]uch [cable

piracy] practices not only often permit one to obtain cable

service without paying the installation and hook-up costs,

but also, for instance, involve individuals gaining access to

premium movie and sports channels without paying for the

receipt of those services." H.R. Rep. No. 98-934, at 83,

reprinted in 1984 U.S.C.C.A.N. at 4720. This access to

"premium movie and sports channels" that Congress

described necessarily entails satellite transmitted

broadcasts, as such access was a largely novel

phenomenon that arrived only with the advent of HBO.

Indeed, Congress specifically ascribed to HBO's delivery "by

satellite [of] a vast array of national programming services"

the emergence of "new services [that] provided movies,

sports, news, and specialized programming directed to a

number of individual segments of the national audience."

H.R. Rep. No. 98-934, at 21, reprinted in 1984 U.S.C.C.A.N.

at 4658. In light of the legislative history and the

substantial changes in the landscape of the cable industry

that shortly preceded and certainly motivated the passage

of the Cable Act, it is clear that Congress enactedS 553

primarily to address the vast array of satellite-initiated

cable transmissions, rather than the obscure realm of

ground-initiated transmissions.

Yet, TKR suggests that the latter interpretation ofS 553

is the one that we should adopt. TKR's reading ofS 553

must be correct or else its interpretation of S 605 renders

S 553 unacceptably redundant. TKR maintains that S 605

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prohibits any interception of a cable television transmission

where that transmission can claim some satellite origin,

regardless of whether the interception occurred only after

the signal had proceeded long past the satellite

transmission phase and deep into the cable system

retransmission phase. This broad reading of S 605 would

encompass all possible interceptions prohibited byS 553,

except for interceptions of purely wire-bound, ground-

initiated cable transmissions. To avoid castingS 553 as

redundant, TKR suggests that Congress enacted S 553 with

the primary purpose of filling this obscure niche of

potential cable piracy prohibitions. Because it renders S 553

superfluous and runs contrary both to history and to

Congress' express intent, we reject TKR's interpretation.

We believe that Congress clearly enacted S 553 with the

primary purpose of addressing satellite-initiated cable

transmissions. Congress created S 553 to address an

enforcement gap created by the 1968 modification ofS 605,

which rendered S 605 applicable only to satellite

transmissions insofar as they are actual airborne

transmissions. As this gap had been of minimal significance

until the cable industry expansion, Congress could afford to

overlook it during much of the interval leading up to the

1984 Act. By 1984, however, Congress decided that the

need to deter decoder box piracy of satellite-initiated cable

television transmissions had become sufficiently pressing to

merit legislation. In sum, we believe that both the historical

context of these statutes and the expressed intent of

Congress support our reading of S 553 as the exclusive

means of addressing the defendants' conduct.

C

Finally, TKR maintains that we sho uld follow

International Cablevision, Inc. v. Sykes, 75 F.3d 123 (2d Cir.

1996), in which the Second Circuit read S 605 broadly to

encompass all satellite-originated transmissions. In

contrast to the Second Circuit, the Seventh Circuit, in

Norris, adhered to an analysis resembling more closely the

one we adopt here, concluding that "cable television

programming transmitted over a cable network is not a

`radio communication' as defined in S 153(b), and thus its

17

unlawful interception must be prosecuted under S 553(a)

and not S 605."3 Norris, 88 F.3d at 469.

In Sykes, the Second Circuit emphasized a section of the

committee report accompanying S 605, which stated as

follows:

Existing section 605 of the Communications Act of

1934 includes a prohibition against the unauthorized

reception of communications services. Nothing in

[S 553] is intended to affect the applicability of existing

Section 605 to theft of cable service, or any other

remedies available under existing law for theft of

service.

H.R. Rep. No. 98-934, at 83, reprinted in 1984 U.S.C.C.A.N.

at 4720. In analyzing this passage in the legislative history,

the Sykes court stated, "Although the issue is not entirely

free from doubt, the more likely reading of this legislative

history is that in view of the uniform prior judicial

interpretation of S 605 as applicable to the theft of cable

service, the . . . passage in the above quotation was

intended to make clear that S 605 would continue to be so

applicable." Sykes, 75 F.3d at 132.

We disagree with the Sykes panel's conclusion because

we believe it overlooked a key congressional distinction

concerning the point of unauthorized reception. The

legislative history nowhere suggests that Congress

considered S 605 as applying after 1968 to wire

retransmissions of radio communications. The same

passage of the committee report in fact demonstrates that,

when Congress passed the Cable Act, it viewed S 605 as a

provision applicable only to radio transmissions, and not to

the subsequent retransmission along cable lines:

The Committee intends the phrase "service offered over

a cable system" to limit the applicability of[S 553] to

theft of a service from the point at which it is actually

being distributed over a cable system. Thus, situations

arising with respect to the reception of services which

_________________________________________________________________

3. In 1996, Congress reorganized S 153. Sections 153(a) and (b) became,

respectively, SS 153(52) and (33). See Telecommunications Act of 1996,

Pub. L. No. 104-104, 110 Stat. 56, 61.

18

are transmitted over-the-air (or through another

technology), but which are also distributed over a cable

system, continue to be subject to resolution under

section 605 to the extent reception or interception

occurs prior to or not in connection with, distribution

of the service over a cable system.

H.R. Rep. No. 98-934 at 83, reprinted in 1984 U.S.C.C.A.N.

at 4720. This language makes clear Congress' view that

S 605 is directed solely at radio transmissions "to the extent

reception or interception occurs prior to or not in

connection with" cable distribution, and thatS 553 applies

to theft of all signals being transmitted over a cable system.

The Sykes court, however, suggests that this passage

should be interpreted as "establishing S 605's exclusive

jurisdiction over the transmission of a television signal by

radio prior to the transmission of that same signal by cable,

rather than as barring the application of S 605 to the

subsequent cable transmission of the signal." Sykes, 75

F.3d at 132.

As the Norris court noted, had Congress truly meant to

apply S 605 both to airborne and cable transmissions, it

could have included a sentence stating that

communications initiated by air transmission, but which

are subsequently distributed over a cable system, continue

to be regulated under S 605. See Norris , 88 F.3d at 469.

Because Congress did not implement such language and

instead used the "to the extent" phrasing quoted above, the

legislative history "cannot be reconciled with the conclusion

that S 605 applies to the unlawful interception of cable

television programming transmitted over a cable network."

Id. The committee report therefore substantiates the view

that S 605 does not render S 553 superfluous because S 605

does not create liability for the interception of cable system

transmissions.

The Second Circuit in Sykes nevertheless suggested an

answer to the redundancy concerns, stating:

We note that this result does not lead to a complete

overlap between the coverage of SS 605 and 553.

Section 605 applies to a considerable body of radio

transmissions to which S 553 is inapplicable, while

19

S 553 applies to any transmissions via cable, whether

or not they originate as radio transmissions.

Sykes, 75 F.3d at 133. The Sykes court accordingly

concluded that S 553 avoids a "complete overlap" by

applying to ground-initiated cable transmissions. As we

explained, however, a thorough analysis of the

circumstances surrounding the passage of the Cable Act

and its legislative history shows that Congress could not

have enacted S 553 with the primary purpose of filling an

obscure niche in cable piracy enforcement. Congress'

language clearly demonstrates that it created S 553 to

combat significant, novel, and previously unaddressed

threats to the continued growth of the cable industry. We

cannot believe that Congress invoked the imagery of a

criminal activity "increasingly plaguing the cable industry

. . . that poses a major threat to the economic viability of

cable operators and cable programmers" only then to enact

an inconsequential gap filler for an area of law enforcement

already well fortified.

We therefore conclude that S 605 encompasses the

interception of satellite transmissions "to the extent

reception or interception occurs prior to or not in

connection with, distribution of the service over a cable

system," and no more. H.R. Rep. No. 98-934, at 83,

reprinted in 1984 U.S.C.C.A.N. at 4720. Once a satellite

transmission reaches a cable system's wire distribution

phase, it is subject to S 553 and is no longer within the

purview of S 605. Cable City therefore is subject to the

statutory damages set forth in S 553(c), rather than the

damages imposed under S 605(e).

III

For the foregoing reasons, we will vacate the award of

damages under 47 U.S.C. S 605, and we will remand the

case for further proceedings consistent with this opinion.

We will affirm the District Court's imposition of the

injunction.4

_________________________________________________________________

4. We affirm the decision of the District Court with regard to the

freezing

of Cable City's assets. This Court has held that an asset freeze or

similar

20

A True Copy:

Teste:

Clerk of the United States Court of Appeals

for the Third Circuit

_________________________________________________________________

injunctive relief is appropriate where it will assist the District Court

in

preventing defendants from committing further violations of the

Communications Act. See General Instrument Corp. of Del. v. Nu-Tek

Elecs. & Mfg., Inc., 197 F.3d 83 (3d Cir. 1999). We stated in that case

that defendant's business " `essentially facilitated cable theft in

violation

of S 553. To stop such an operation is a primary purpose of the

injunction. . . . Likewise, . . . [ the defendant ] should not be allowed

to

use its remaining assets, which in all likelihood can serve only to

further

other cable theft enterprises.' . . . We see no abuse of discretion here.

. . ." Id. at 90-91 (quoting district court opinion with approval).

Similarly,

in this case, we find no abuse of discretion.

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