News

Ruling Reaffirms Pirate Bankruptcy

4/19/1998 8:00 PM Eastern

A federal judge in Philadelphia has reaffirmed his own
injunction, which should prevent set-top-pirate firm Nu-Tek Electronics &
Manufacturing Inc. from remaining in business.

Last year, General Instrument Corp. filed a civil suit
against Nu-Tek, which advertised its wares in national magazines, alleging that the
company sold altered set-tops to consumers in violation of Section 553 of the Cable
Communications Policy Act. A jury found in favor of GI, but the judge rejected GI's
argument that Nu-Tek's fine, under federal law penalties, should be multiplied by the
number of doctored boxes that GI asserted Nu-Tek had sold.

Instead of the multimillion-dollar fine, Judge Robert S.
Gawthorp III of the U.S. District Court for the Eastern District of Pennsylvania said the
law justified a total judgment of $60,000.

In posttrial motions, Steven Armstrong, attorney for Nu-Tek
principal David Abboud, argued for an amendment to Gawthorp's final injunctive order.
Since the order covered Abboud, his employees and related companies, it was overly broad,
he asserted.

But the judge wrote, "The underlying fact is that
Nu-Tek's business essentially facilitated cable theft ... to stop such an operation
is the primary purpose of the injunction. It forecloses none of Nu-Tek's remaining
legitimate businesses, because from the start, no identifiable legitimate business
existed."

GI was also awarded more than $400,000 in attorney's
fees, which the company will probably not collect because Nu-Tek has filed for bankruptcy
in Austin, Texas.

"We're very pleased with the reaffirmation of the
verdict ... we just wish [Gawthorp] had a different interpretation of statutory
damages," said Stan Durey, director of security programs for GI.

Cable attorneys said the injunction is unprecedented in its
assertion that third-party distributors are responsible for seeking authorization for use
from operators. Piracy defendants have been successful in the past arguing that consumers
are to blame for illegal use of distributors' products. However, the attorneys noted
that Gawthorp's penalty ruling has been replicated in other jurisdictions.

"Congress ought to consider an amendment of the
statute that led to the decision in this case," attorney Geoff Beauchamp said, adding
that the current interpretation results in a license fee, and not a deterrent.

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