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Omniverse: It's All HovSat's Fault

Jeff Baumgartner
10/1/2019

Omniverse One World Television has tossed HovSat under the bus. And the train. And the semi. And the Sherman Tank. And just about any other type of vehicle that happened to cross its path.

Accused by several major Hollywood studios of copyright violations, Omniverse has urged a California court to add its erstwhile business partner, HovSat, and its owner, Shant Hovnanian, as a third-party defendant in a case being led by the Alliance for Creativity and Entertainment (ACE), a legal consortium backed by a wide range of studios, OTT services and other media companies. ACE is representing Paramount Pictures, Columbia Pictures, 20th Century Fox, Warner Bros. and Universal in the case against Omniverse.

In a filing with the court last week, Omniverse is seeking indemnification while also accusing HovSat of breach of contract, negligent misrepresentation and a breach of "good faith and fair dealing."

Omniverse alleges that HovSat led Omniverse to believe that it held valid licenses and contracts with DirecTV that allowed for the national distribution of OTT-TV services, and that it should be HovSat, not Omniverse, that is responsible for any alleged copyright violations. Omniverse believed that HovSat, a New Jersey-based private cable operator, held a long-term contract with DirecTV that allowed the national distribution of TV services without limitation to delivery method.

Omniverse said subpoenas, so far, have not located records of significance between HovSat and DirecTV (or its predecessor companies, such as Hughes) earlier than 2003, and doesn't know if any records prior to that year will be found in the discovery process.

Omniverse, which inked a joint venture with HovSat in November 2017, used the purported contract between HovSat and DirecTV to underpin a service that was marketed in conjunction with a variety of partners further downstream, including Flixon Media, Silicon Dust, VivaLiveTV and TikiLive, among many others. Omniverse and HovSat also signed a colocation agreement that enabled Omniverse to install equipment for video streaming at a HovSat data center facility in New Jersey.

The ACE-led lawsuit against Omniverse and CEO Jason DeMeo was filed in February 2019. Omniverse shut down its streaming service for residential subscribers on May 31, 2019.

Omniverse: We were misled by HovSat
Based on information it said came from HovSat, Omniverse said it "understood" that DirecTV "held the right to distribute and subdistribute content ... by way of DirecTV's distribution agreements with television networks and movie studios."

"Omniverse believed it was lawfully marketing technology and other media delivery services under the Joint Venture agreement with partner HovSat's lawfully licensed content," Omniverse told the court. Omniverse also argued that it is HovSat's duty to "indemnify and hold harmless Omniverse from any damages that Omniverse may suffer" in connection with its agreements with HovSat.

Omniverse contends that it paid "substantial monthly sums, including licensing fees" to HovSat for years, ranging from $9,000 to $46,000, and believed that those fees were being used by HovSat to pay for copyright licenses through its relationship with DirecTV. "HovSat made multiple communications to ensure these payments were made," Omniverse told the court.

Based on HovSat's representations that the deal it had with DirecTV was "unique," Omniverse said investors, including an individual named David Cash, advanced "millions of dollars" to Omniverse for equipment and infrastructure for its TV streaming service.

A big question the court will have to consider is whether Omniverse itself did proper due diligence on what HovSat was representing, including details around HovSat's purported long-term deal with DirecTV.

Omniverse's move to add HovSat and Hovnanian to the case as a defendant faces another challenge. Shant Hovnanian, the owner and operator of HovSat, appears to be out of the reach of US authorities. According to court filings, Hovnanian, the subject of a default judgement filed against him in July in a civil tax enforcement proceeding involving $16 million in alleged penalties, is believed to be in Armenia.

"Mr. Hovnanian's attorneys have not come forward to support the legal position of HovSat," Omniverse told the court.

If a judgement is entered against Omniverse, the company is requesting the court also enter a judgment against HovSat for the amount of the judgment, if any, plus attorneys' fees, interest, the cost of the suit and other relief "the Court finds just and proper."

Get up to speed on the Omniverse saga:

— Jeff Baumgartner, Senior Editor, Light Reading

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