FilmOn Finds no Relief From Networks in N.Y.

(CN) - The bad news for FilmOn keeps coming with a federal judge finding that the Internet TV service violated a settlement and court injunction by streaming the copyrighted shows of major broadcast television networks.

The ruling is a further blow to FilmOn and its billionaire owner Alki David. Last week, a federal judge in Washington, D.C., issued a nationwide injunction against the paid subscription service for streaming live TV shows over the Internet to personal computers and mobile devices.

Now the Southern District of New York court has ordered FilmOn to pay $1.35 million for failure to comply with the terms of a settlement agreement with CBS, NBC, Fox and ABC. The order also found FilmOn in violation of an August 2012 order that enjoins it from streaming the networks' copyrighted shows.

FilmOn cited tax complications to avoid paying the full $1.6 million settlement and instead has only coughed up $250,000, the networks claimed.

Since CBS did not return that partial payment, counsel for FilmOn argued that it had accepted modified terms.

But U.S. District Judge Naomi Buchwald said Tuesday that a ruling in FilmOn's favor would "would undermine the enforceability of contracts generally, as it would permit a party to enter into a binding contract and later modify its terms unilaterally." FilmOn relied on an earlier 2nd Circuit ruling that rejected the networks' copyright claims against FilmOn competitor Aereo.

It said Fox had breached the settlement by sending notice of the service's alleged copyright violations to several companies - including Apple, Google and Microsoft - even though it knew FilmOn was using newer technology that the East Coast's Court of Appeals found lawful.

But Judge Buchwald wrote that the "state of the law with respect to the retransmission of television broadcast signals was in flux," noting that Fox sent the letters six months before the court of appeals issued its April 2013 ruling.

"There was no binding 2nd Circuit precedent concerning the legality of FilmOn's technology," the judge added.

David failed to comply with the settlement by refusing to take down "inflammatory videos" at his website www.cbsyousuck.com, the court found.

The FilmOn principal claims CBS-owned tech media website CNET allows people to download and use peer-to-peer software to illegally download music, TV shows and child porn.

Buchwald also found FilmOn in contempt for offering video-on-demand services in violation of the injunction, writing that the company had "offered no evidence whatsoever that they have validly acquired the right to stream plaintiffs' copyrighted programming."

But in a statement Wednesday, FilmOn attorney Ryan Baker told Deadline that crucial information on third-party licensing agreements was never shared with the judge, though it had been emailed to a CBS lawyer.

"Counsel for CBS failed to notify the court of the document it obtained," Baker said.

"FilmOn and Mr. David have always conducted themselves in good faith, and in this instance, they complied with the court's order to provide evidence of their right to provide FilmOn users with video-on-demand content," Baker added.

"FilmOn and Mr. David are evaluating their next move, but certainly intend to take steps to modify any determination that they are in contempt of a court order," the attorney stated.

CBS poured scorn on FilmOn's claims.

"Would not this lawyer produce such an agreement to the court if it did?" the network told Deadline. "The client failed to produce such an agreement, the lawyer failed to produce such an agreement and the court pointed this out in its opinion. CBS has never received or for that matter even seen such a so-called executed licensing agreement. Talk of diversionary tactics. This is sour grapes so strong that the fermentation has already begun. They lost, period."

David wrote on LinkedIn: "Surprise shock at the bent district judge's opinion going against the 2nd circuit. Anyway that is an irritating setback but we will win the war."

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