Zuffa’s Piracy Fight– Winning The Battle, But Can It Win The War?

November 10, 2010

“The piracy of live sporting events is illegal; it kills jobs, and threatens the expansion of U.S.-based companies.”  Lorenzo Fertitta, CEO of Zuffa, LLC, owner of the Ultimate Fighting Championship® (UFC®), prepared statement before the United States House of Representatives Committee on the Judiciary.

In a statement before the House Judiciary Committee in December 2009, Lorenzo Fertitta informed the Committee that Zuffa offers 12-14 pay-per-views annually to residential and commercial customers and has “been the largest pay-per-view provider in the world since 2006, with over 22 million residential transactions during that time frame.”  He also stated that the “UFC® is also the largest distributor of content to commercial locations via our network of over 5,000 restaurants and bars in North America.”  Given this strong dependence on the pay-per-view model (unlike other sports organizations – most of which have network television deals) and the spiraling rate of piracy in the United States and abroad, it should come as no surprise that Zuffa has launched a multi-pronged attack against this threat to its business model.

Over the past year, Zuffa has been stepping up its efforts to curb theft of its intellectual property through the use of (1) direct private actions against website operators that provide free streaming of UFC events; (2) subpoenas to streaming sites that permit third-parties to upload content to their sites; (3) direct actions against bars that illegally show broadcasts of UFC pay-per-view events in their venue; and (4) efforts to educate Congress about the growing problem of piracy and its deleterious effects on commerce.

While Zuffa has been successful on a case-by-case basis, completely curbing piracy is a daunting (perhaps impossible) task given the global reach of the Internet and the ease with which content can be illegally redistributed.  Accordingly, the question is whether Zuffa is simply engaged in a frustrating game of “whac-a-mole” with no real probability of long-term success.  Let there be no doubt, however, that Zuffa is committed to the fight and has had its successes.

In this article I will address some of these efforts and Zuffa’s successes, including as recently as this week.

Direct Private Actions Against Website Operators

On November 3, 2010, Zuffa was again successful in its efforts to shut down Internet websites allegedly streaming UFC pay-per-view events for free over the Internet.  Specifically, Zuffa obtained a preliminary injunction against Daniel Wallace, a United Kingdom resident that is the alleged “owner and operator” of livevss.tv and livevss.net.  Judge Kent J. Dawson entered a preliminary injunction ordering, in relevant part, that pending a full trial on the merits:

A. Defendant, defendant’s agents, servants, employees and/or all persons acting in concert or participation with defendant are prohibited from copying, manipulating, adapting, reproducing, uploading, distributing, sharing, selling or displaying any of Plaintiff’s Copyrighted Broadcasts and are prohibited from copying, manipulating, adapting, reproducing, uploading, distributing, sharing, selling or displaying UFC 120 in any manner;

B. The domain name registrar, eNom, Inc., shall immediately transfer the <livevss.tv> and <livevss.net> domain name registrations to Plaintiff for the pendency of this action;

This approach by Zuffa, i.e. filing a lawsuit and seeking an injunction shutting down websites that allegedly stream UFC events without authorization, has been successfully utilized on more than one occasion.

As you may recall, in September 2010, Zuffa successfully obtained a permanent injunction (by stipulation) against Johnny Tike, who acknowledged that  “he created the ‘hq-streams’ website in question and has copied, manipulated, adapted, reproduced, uploaded, distributed, shared, sold and/or displayed Zuffa’s Copyrighted Broadcasts or used the UFC® Marks in any manner, or has permitted others to do so.”

In instances where Zuffa has been able to identify the relevant websites and the operator of the allegedly infringing sites and has spent the requisite money in legal fees and costs to initiate a cause of action, Zuffa has been enjoying success.  That said, it is questionable whether Zuffa has (and will) recoup the money it spends to litigate and there is a broader question concerning whether individuals operating these sites will be deterred—especially if the culprits operate outside the United States.

Subpoenas to Streaming Sites to Obtain the Identity of Uploaders of Illegal Content

Zuffa has also obtained subpoenas under the Digital Millennium Copyright Act (DMCA) and served them on streaming sites to obtain the identity of users who allegedly broadcast illegally uploaded content, including UFC events.  While it is not clear from the publicly filed documents, it is certainly plausible that Zuffa obtained the identities of Tike and Wallace (above) through subpoenas it has served on streaming sites.

As you may recall from a recent Zuffa press release, it obtained subpoenas issued by the United States District Court for the Central District of California in April 2010 and served them on two streaming websites, Justin.tv and Ustream.tv.  In the subpoenas, Zuffa sought “[d]ocuments or electronically stored information in possession of or available to Justin.tv [or Ustream.tv] sufficient to allow Zuffa, LLC to identify the infringer(s) who made available for streaming on Justin.tv the video recordings described in the Notice of Copyright infringement attached as Exhibit A.”  Thus, Zuffa was not seeking the identity of those individuals who may have viewed the stream, i.e. it is concerned with the individuals or entities providing the stream.  As an aside, there is an interesting legal question concerning whether an individual can be held liable for viewing an illegal stream. For my analysis on this issue, click here.

Direct Actions Against Bar Owners Who Illegally Show UFC PPVs

Zuffa has also gone after a number of bar owners (and bars) for alleged violations of the Federal Communications Act (47 U.S.C. 553 and 605) and the Copyright Act (17 U.S.C. 501).  Zuffa files a number of these lawsuits each month and they all follow a similar pattern.  In these actions, Zuffa alleges that defendants intercept broadcasts of UFC pay-per-views and published it for a commercial gain.  Zuffa seeks damages for the defendants’ alleged “willful” acts.

Zuffa asserts that there are a number of ways this alleged infringement occurs, including, inter alia, using an illegal satellite receiver, splicing a coaxial line running to a residential address, registering a commercial establishment as a residence, and/or taking a lawfully obtained residential box into a commercial establishment.  In July, Zuffa globally settled a number of these actions, but has since continued to file these lawsuits throughout the country and on a consistent basis.

Frankly, I am not surprised that Zuffa globally settled these complaints because it is questionable what, if anything, Zuffa really hoped to recover from what are mostly small local bars.  Perhaps there is a deterrent effect based on Zuffa’s willingness to sue, but monitoring and enforcing infringement that is occurring throughout the country at bars showing UFC events on a monthly basis is most likely very costly and Zuffa can’t possibly hope to catch all (or even most) of those bars engaging in infringing  activity.

Zuffa’s Efforts In Congress

Zuffa has also taken its case to Congress to create awareness concerning the proliferation of piracy and its deleterious impact on Zuffa’s business.  Specifically, on December 16, 2009, Lorenzo J. Fertitta, Chairman and Chief Executive Officer of Zuffa, appeared before the United States House of Representatives Committee on the Judiciary, in the Judiciary Committee’s hearing on “Piracy of Live Sports Broadcasting Over the Internet.

These congressional efforts may be paying off.  On September 20, 2010 the Senate (not the House) introduced a bill, The Combating Online Infringement and Counterfeits Act, which would give federal law enforcement authorities additional tools to crack down on websites engaged in acts of piracy over the Internet.   The text of the CCICA is available here.   The bill would have important enforcement implications because it gives the Justice Department the ability to seek an injunction forcing the domain registrar or registry to stop resolving the allegedly infringing site’s domain.

Zuffa’s Efforts To Persuade the Courts To Read the DMCA “Safe Harbor” Provision More Narrowly Was Unsuccessful—So Far

Zuffa’s efforts to combat piracy have not all been successful.  Indeed, Zuffa (with other interested parties) filed an amicus brief in the Viacom International, Inc. et al. v. Youtube, Inc. and Google, Case No. 1:07-CV-02103-LLS, (S.D.N.Y. 2007), arguing that the DMCA “safe harbor provision” should be read more narrowly to preclude service providers who intentionally and knowingly facilitate copyright infringement on the Internet.

By way of background, in Viacom the plaintiffs were arguing that defendants (YouTube and Google) would only take down copyrighted videos after being asked to do so and that this put the burden of policing content on the copyright holder and allowed defendants’ site users to post the infringing copies again as soon as they were removed.  Defendants relied on the “safe harbor” provision of the DMCA and argued that as long as they quickly removed allegedly infringing third-party posted content after being informed of its existence, they were shielded from liability.

In the Viacom case, the defendants were successful as the Court granted their motion for summary judgment holding that they were entitled to the Digital Millennium Copyright Act’s (“DMCA”), 17 U.S.C. § 512(c), ‘safe harbor’ protection against all of plaintiffs’ direct and secondary infringement claims, including claims for ‘inducement’ contributory liability, because they had insufficient notice, under the DMCA, of the particular infringements in suit.

That case is now on appeal to the United States Court of Appeals for the Second Circuit.

Conclusion

Despite all of its successes outlined above, it is important to remember that shutting down infringing streaming sites around the world is like the old game of “whac-a-mole,” i.e. just as quickly as you shut down one site, another site pops up and so on.  Further, while Zuffa continues to file after the fact lawsuits against bar owners for publishing unauthorized broadcasts of UFC events, the problem is obviously continuing as is evidenced by the sheer number of lawsuits Zuffa is filing each month.

There is, of course, a deterrent effect – perhaps a website operator will be less likely to illegally stream a ppv (or a bar owner will be less likely to illegally publish a broadcast in its bar) knowing that it may be sued down the road, but clearly the deterrent effect alone will not completely curb the problem.

Further, the international nature of some of the streaming sites would, I imagine, make it even more difficult to obtain effective relief in the US courts.

Justin Klein is an attorney at Satterlee Stephens Burke & Burke LLP in New York City where he concentrates his practice in commercial litigation and represents clients in the fight industry.  He regularly addresses current legal issues that pertain to combat sports, including efforts to legalize MMA in New York, at his Fight Lawyer website.  He is a licensed boxing manager with the New York State Athletic Commission as well as the founder and Chairman of the Board of the New York Mixed Martial Arts Initiative, a non-profit organization that gives inner city youth the opportunity to experience the emotional and physical benefits of martial arts training.  Justin lives in New York City where he trains in jiu jitsu and boxing.

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12 Responses to “Zuffa’s Piracy Fight– Winning The Battle, But Can It Win The War?”

  1. Matt C. on November 10th, 2010 7:12 AM

    Great info.

  2. WMJ on November 10th, 2010 8:00 AM

    I have heard both Dana White and Lorenzo Fertitta mention that the UFC still remains a cheap form of entertainment. If you take the costs of the PPV and split it amongst 3-5 guys, everyone can benefit by enjoying the PPV on a TV, versus watching it on a streaming website. I’d rather watch the PPV on a 52 inch flat screen TV instead of a 17 inch monitor any day.

    In my opinion, it boils down to people being cheap and always looking for a way to get over. As we have all read, Zuffa is moving forward aggressively in stopping these pirating actions in addition to prosecuting those involved in these illegal activities.

  3. Machiel Van on November 10th, 2010 8:07 AM

    Of course it’s not a war Zuffa can ultimately win. The internet reaches much too far across the globe. This is really a silly question, “can they win the war against piracy.” Give me a break of course not. They are doing as much as is in their power, and I seriously doubt the Fertittas or Dana White believe that they can completely shutdown piracy of their product. They are merely introducing an element of risk for individuals who choose to stream illegally that might not otherwise exist. In my opinion, they had to take SOME sort of stand against piracy, and this is the most they can do. I doubt it’s taking up too much of the company’s resources.

  4. jv on November 10th, 2010 8:11 AM

    CCICA is a proposed law that no one ever stopped to ask a technical person if it could possibly work and the answer is no. It would also lead to control of DNS management being wrestled away from the US for once and for all. The US is just barely clinging to control by their finger tips as it is.

    The US must be a wonderful place if they have no other issues on their plate other than to keep cranking out an endless stream of copy right laws.

  5. Jose Mendoza on November 10th, 2010 12:59 PM

    Great information Justin. Glad to have you here at MMAPayout. Welcome aboard!

  6. Juan Gonzalez on November 11th, 2010 4:22 AM

    3 hours of television is not worth 45 dollars for most people. Thus, if you want to watch good MMA but don’t want to get ripped off… piracy is the rational response to such ridiculous price gouging.

    (Splitting it with 10 guys is not an option for everyone.)

    Maybe they should take a clue from how the stick and ball sports operate if they want to limit the impact of piracy.

  7. Brain Smasher on November 11th, 2010 3:23 PM

    Juan

    3 hours on TV is worth it for most people. That is the thing. If the UFC could sell a PPV for half price and get double normnal buys they would. Because the revenue would be the same and the extra customers would be revenue in other streams like Merchandise, ratings, tickets, etc. But that is not the case. If the UFC raises PPVs $5 they may lose 50K buys on a 900K PPV. In other words they lose 2 million and get 4 million back for anet of 2 million. Raising prices simply dont turn off enough people. Thats why Boxing and WWE and the UFC all gradually raise their prices. Of course you have to be carefully raising because it is possible to piss the fan base off if not handled propperly.

  8. Brain Smasher on November 11th, 2010 3:31 PM

    Its interesting seeing the UFC having 5,000 business’ showing the UFC. I know the UFC has partnerships with the likes of Hooters and many others who likely get a better deal than non national chains. I also believe size of the business(customer capacity) effects the costs of a UFC. When i tried to order a UFC in my business(small business) it cost roughly $1,000 for the PPV. That is the cost im sure most bars and restaurants have to pay.

    At that cost that would mean a possible extra $5 million per PPV in close circuit buys.

  9. Str8NoChaser on November 18th, 2010 5:18 PM

    It’s just like the music industry battle with illegal downloading… Long hard battle ahead. However, why is the most “successful” promotion working SO hard to try & shut down all these websites helping MMA become more mainstream. I thought that was Zuffa’s ultimate goal. The more exposure, the better but for MMA. MMA reaches a lot more households thanks to these websites.

    But I guess what makes Zuffa the most money is what is in order here.

  10. Jay B on November 19th, 2010 11:16 PM

    What is being over looked is that the search engines are making billions of dollars on placing ad content next to stolen copyrighted materials! If you take the websites out of “search” then the money will dry up. When Google receives a takedown notice, that site is taken out of search, that stops the money flow. That is the way to stop the illegal websites. How do I know? It happen to me.

  11. doomrider7 on November 20th, 2010 12:37 PM

    @ Machiel Van

    You pretty much nailed it. Zuffa knows it’s an impossible war, but if they can make things more inconvenient and add a stronger element of punishment then mission accomplished.

  12. Observation on January 2nd, 2011 8:50 AM

    Dana has said time and time again that he is going to make UFC bigger than the NFL. It will never happen with a PPV format. If he really wants the sport to grow by leaps and bounds, he will make all events free. The advertisement money and the growth in viewership will generate more money than the PPV will.

    But greed trumps all and Dana White is a greedy man.

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