The underlying principle of fair use in copyright law is that if a piece of work is copied, "the author doesn't suffer loss and the copying person doesn't gain".

The legal action this week, filed by the studios to stop Cablevision using network DVRs, attempts to apply a completely different definition to the thinking that underpins this part of copyright law.

The plaintiffs in the suit are Twentieth Century Fox, Universal Studios, Paramount Pictures and Disney, along with broadcasters ABC, CBS and NBC and they are charging Cablevision with copyright violations.

In the last day or so they have been joined in the suit by Time Warner's Cartoon Network and CNN networks.

Cablevision said in April that it would trial the technology using DVR in the network and standard set tops, and immediately other cable operators, notably the largest in the US, Comcast, said it was closely watching the experiment, and would like to offer the same service. Cablevision calls the services RS-DVR, for "remote-storage digital video recorder", and will trial it for 60 days and then if it is well accepted, launch flat out.

Studios agree that currently the US law, under "fair use", or "personal use", gives consumers the right to time shift, but it does not give the right to companies that have a broadcast content license to do anything other than broadcast it. Technically, the DMCA allows for temporary storage of files while they are being broadcast, but this might stretch that definition.

Fair use was originally invented to allow writers to quote from a work when writing about it, but it has subsequently been enshrined in law in various parts of the world, the US included, as a way to allow consumers to make copies of the work for various reasons – as a backup, or to play on another device, with perhaps different operating features, or to play at a later time.

The underlying principle of the owner of the work not suffering loss, is usually interpreted as being broken when a consumer buys the work but no-one pays the owner a license fee. In this case the argument is that the consumer has already paid for the work, it's just a matter of when the work is delivered.

The chances are that if this really went to court, the copyright isn't being broken, but that doesn't mean the existing distribution contract isn't being broken and that's perhaps more important.

The Hollywood studios appear ready to replace the underlying principle in fair use with one that reads "the content can never be copied unless I say so", something that would shake the original 1896 Berne Convention that underpins copyright law, and re-write the World Copyright Treaty that is rapidly becoming the basis of all copyright law globally.

It would be a major backward step in the digital content revolution for consumers and strengthen the broadcast networks that have no way of copying this move, against cable, which has much tighter control over the equipment that is used to view its channels.

What Cablevision had hoped is that it could replace pricey, hot and noisy home based DVRs with a centralised video recording service that would be cheaper for consumers, and which would eliminate the need for multi-room DVRs, while at the same time behaving exactly like a home based DVR. Each home would have its own piece of storage, each piece of storage would not be available to any other home replaying it, and all requests to save video to hard disks would come from a home based remote control.

This was to be the major work-around to network DVRs of the past, which were seen as being dangerous to content owners because a single copy of the content was held and multiple deliveries of it were facilitated. This was effectively a VoD delivery mechanism, and that's where we begin to get closer to the real reasons for the legal action.

Content companies want to decide when a particular piece of programming is ready for VoD distribution, and then place an agreed price on that content, or decide if it should fall into paid or unpaid subscription VoD services. This needs a separate contract at present.

But the real problem here is that this delivers a kind of advertising double whammy. The first issue is that more cable customers would have DVR immediately with the Cablevision system, because the company was planning to enable network DVR capabilities from existing set tops. So more people would be inclined to switch the capabilities on, even if a charge is involved. This is fine for Cablevision, which is in a war for more customers, and a cheap DVR capability would put it ahead of other cable, satellite and IPTV rivals.

The other problem is that if more people are watching DVR content, it prevents them from watching broadcast content that contains advertising, reducing the effectiveness of the cable networks as advertising mediums.

At least with Network DVRs it is possible to enforce the showing of advertising by disabling fast forward at the server for those sections of the programming. However, this would make it a weaker offering than a true disk based DVR and reduce its consumer appeal.

And anyway, it is a moot point who owns those advertising slots, the cable operator or the cable network which owns the channel. DVRs are currently at the top of US channel owners' agendas, given the blocked Upfront negotiations, which are stalled over the subject of what is the exact definition of a viewer.

Those viewers that watch a program on a DVR are suspect, because they may not watch the advertising, and this number of DVR watchers is rising alarmingly throughout the US.

The great bulk of advertising is kept back for the owner of a TV channel, the cable networks, and as long as this yields good results, they are happy to let cable operators carry programming relatively cheaply. This relationship is embedded in long term contracts, so if advertising suddenly collapses due to increased DVR usage, and if they are tied to five year terms and beyond, their revenues will inevitably slide, while the cable operator's revenues will not.

So this legal action is a way of slowing down that slide and keeping it under control.

Interestingly, the broadcast networks ABC, CBS and NBC are part and parcel of this complaint either because they are owned by content businesses, such as ABC being part of Disney, or because they provide some of the content themselves.

Companies like Fox, owned by New Corp, which also owns DirecTV won't like network DVRs because DirecTV can't take advantage of them, since it has no broadband connection to its customers. Cheap DVRs for the cable companies would be a disaster for DirecTV.

Late last year Time Warner Cable introduced its "start over" service, whereby if a program has yet to finish broadcasting, a customer can rewind to the beginning of the program and start again. This didn't get the censure of the content companies, but there were good reasons for this.

Time Warner Cable had the agreement of content business NBC Universal and the system won't allow fast forwarding or the skipping of commercials, which got Time Warner around sensitive rights issues.

Cablevision is the nation's sixth-largest cable TV provider, in US and has about three million customers around New York City, Connecticut and New Jersey.

Cablevision said it has examined the copyright implications of the service and found that it did not violate the law, and that's a reasonable interpretation. It may not even violate the spirit of the law, but content businesses never worry about that, and if this case goes against the collective might of US content businesses, then they'll just lobby to change the law until they get their way.

In the end, this is just using the courts as a form of negotiation, with on the one hand license fees paid by Cablevision and other cable operators, for effectively what is a VoD service, against the rising costs of DVR subsidy that cable operators could avoid by using network DVR.

The outcome is likely to never be decided in court and we would expect Cablevision to quietly back down after some behind the scenes negotiations and settle on some form of fee.

Copyright © 2006, Faultline

Faultline is published by Rethink Research, a London-based publishing and consulting firm. This weekly newsletter is an assessment of the impact of the week's events in the world of digital media. Faultline is where media meets technology. Subscription details here.

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• US court liberates Cablevision 'remote DVR' (5 August 2008)

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• Cablevision in triple play promo (22 June 2004)

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