Locast

In May 2019, New York Times reporter Edmund Lee wrote that Goodfriend's stated intention to quickly expand Locast nationwide "is basically a dare to the networks to take legal action against him. By giving away TV, Mr. Goodfriend is undercutting the licensing fees that major broadcasters charge the cable and satellite companies." In 2019, those fees exceeded $10 billion, according to the research firm Kagan S&P Global Market Intelligence, while adding about $12 to a monthly cable subscription fee.[7]

On July 31, 2019, The Walt Disney Company, CBS Corporation, NBCUniversal, and Fox Corporation – the respective parent companies of ABC, CBS, NBC, and Fox – filed a lawsuit in the United States District Court for the Southern District of New York seeking a permanent injunction against Locast for infringing on the copyrights of their programming by retransmitting it without permission and compensation. The suit acknowledged that U.S. copyright law (17 U.S.C. § 111) allows non-profit organizations to freely retransmit programming, charging only for the costs of operations and maintenance of the equipment. (The exemption was originally intended to cover third-party translator stations owned by non-profits and other organizations such as municipal and county governments.) The broadcasters maintained that Locast has undermined its non-profit status, citing Goodfriend's previous ties to Dish Network, a donation of $500,000 made by AT&T, and both companies' promotion of the Locast service as complementary to their pay television services to dodge retransmission fees.[17][18][19]

On September 27, 2019, Locast answered the claim and filed a countersuit citing the aforementioned exception. Locast argued that it did not obtain any "direct or indirect commercial advantage" from the service, and that the networks were "[using] their copyrights improperly to construct and protect a pay-TV model that forces consumers to forgo over-the-air programming or to pay cable, satellite, and online providers for access to programming that was intended to be free." Locast accused the networks of engaging in collusion to effectively require viewers to use pay television services, including intentionally using low-end equipment on station transmitters to provide signals inadequate for serving the entirety of their market, and forbidding affiliates from streaming their programming online. Locast considered these tactics a violation of the statutory mandate for broadcasters to operate in the public interest. Locast also accused the networks of "threatening business retaliation and baseless legal claims against any current or prospective donors, supporters, or business partners", specifically alleging that YouTube TV had been threatened in this manner.[20][21]

On October 25, 2019, the broadcasters filed a motion to dismiss Locast's antitrust claims, arguing that they were "an attempt to shift focus from Locast's wholesale infringement of the broadcast companies' copyrights".[22] On March 30, 2020, the Electronic Frontier Foundation announced it was joining law firm Orrick, Herrington & Sutcliffe as defense co-counsel for Locast[23][24] Goodfriend credited EFF, which is working pro bono, with eliminating what could have been Locast's single largest expenditure. In November 2020,.[16]

On April 23, 2021, both parties sent letters to U.S District Court Judge Louis Stanton. The broadcasters asked for a summary judgement in their favor. In their letter, they argued that Locast didn't qualify for a copyright exemption for three reasons: the exemption was intended for local retransmissions, whereas Locast's use of the internet gave it global reach; the service in fact operated for commercial advantage; and that the donations it requested were in fact charges to obtain uninterrupted service. The defendants in their letter asserted that Locast's services were exempt from copyright liability because they met five conditions: they were secondary retransmissions, not made by a cable company, made by a non-profit organization, without the intent of commercial advantage, and without charge other than to defray costs.[25]

On August 31, 2021, Stanton denied Locast's request for a summary judgment. He noted that Locast donations were used not just for system maintenance and operations, but for expansion of the service into new media markets. "Expansion is nowhere mentioned" in the law, he wrote, "and it is therefore excluded from the short, tightly-crafted grant of exemptions." He also ruled that because a donation is required to avoid service interruptions, it is therefore "not merely a recurring gift to a charitable cause." The opinion, while leaving open the possibility of a trial, represented a substantial legal setback for the service.[26][27][28]

On September 2, 2021, after announcing it would no longer interrupt service to request donations,[29] Locast suspended operations.[30] The Electronic Frontier Foundation said the ruling "demonstrates once again how giant entertainment companies use copyright to control when, where, and how people can receive their local TV broadcasts, and drive people to buy expensive pay-TV services to get their local news and sports. We are disappointed that the court is enabling this callous profiteering that tramples on Congress’s intent to ensure local communities have access to news that’s important to people regardless of their ability to pay. The court made a mistake, and Locast is considering its options."[31]

The broadcasters called the ruling "a victory for copyright law, vindicating our claim that Locast is illegally infringing copyrights in broadcast television content in violation of federal law."[32] On September 15, the plaintiffs won a permanent injunction requiring Locast to shut down.[33]

On October 28, 2021, the plaintiffs were awarded statutory damages of $32 million under the Copyright Act, payable by Locast's operator, Sports Fans Coalition NY.[34][35] However, broadcasters ultimately agreed to settle for $700,000 plus the liquidation of some used computer servers.[36]