Court rules in favor of Cablevision network DVR

By Martha Graybow and Yinka Adegoke

NEW YORK (Reuters) - A U.S. appeals court ruled that Cablevision Systems Corp may go forward with its plan to introduce a new digital video recorder service that film studios and television networks had said violated their copyrights.

Reversing a lower court ruling, the U.S Court of Appeals for the Second Circuit in New York said Cablevision's proposed new service "would not directly infringe plaintiffs' exclusive rights to reproduce and publicly perform their copyrighted works."

The ruling could have a huge impact on the relationship between pay-TV operators and programmers, who are concerned that cheaper DVR functionality will lead to accelerating advertising viewership losses.

Cablevision appealed a March 2007 ruling in which it lost a battle to introduce a network-based DVR system, called Remote Storage Digital Video Recorder, or RS-DVR, which would allow subscribers to store TV programs on the cable operator's computer servers.

By contrast, typical DVRs store programs on individual hard drives that are part of customers' set-top boxes.

The case was brought by film studios and television networks including Time Warner Inc, News Corp, CBS Corp and Walt Disney Co.

The ruling could allow cable operators to save money by reduced capital spending on DVR set-top boxes as well as installation costs.

"The ruling is a huge win for cable operators," said Craig Moffett, analyst at Bernstein Research. "Cable operators would no longer need to provide a unique piece of hardware for each individual subscriber in order to offer DVR functionality."

Moffett said major cable operators spend around 10 percent of capital investment on DVR boxes.

The appeals court, in a written ruling, also said it was sending the case back to the U.S. District Court in New York for further proceedings.

"This is a tremendous victory for consumers, which will allow us to make DVRs available to many more people, faster and less expensively than would otherwise be possible," Tom Rutledge, Cablevision's chief operating officer, said in a statement.

"We appreciate the Court's perspective that, from the standpoint of existing copyright law, remote-storage DVRs are the same as the traditional DVRs that are in use today," he said.

Cablevision's network DVR plans have received a range of support from pay-TV companies including Comcast Corp and Verizon Communications.

"I think that's a positive for the industry," said Charlie Ergen, chief executive of DISH Network, on a quarterly conference call with analysts.

Shares in Cablevision shares were up 6 cents at $25.42 in midday trading.

(Editing by Derek Caney)