Legal decision: US

Aereo crashes in copyright battle

THE CASE: American Broadcasting Companies, Inc v Aereo, Inc Supreme Court of the US 25 June 2014

The Supreme Court of the US’ long-awaited Aereo decision highlights the need for copyright reform, Seward & Kissel’s Jeffrey M Dine says

On June 25, the Supreme Court of the US Aereo in SCOTUS Clause, and, if so, does it perform ‘publicly’?9 (SCOTUS) issued its decision in American In 2012, broadcast networks and television Aereo contended that it did not perform Broadcasting Companies, Inc v Aereo, stations brought suit, claiming that Aereo’s because all it did was provide equipment that Inc (‘Aereo’).1 Reversing the district and service infringed their rights under the US the user operated remotely, the equivalent of appeals courts, the Supreme Court, in Copyright Act of 1976, and sought to enjoin a home antenna and a majority opinion written by Justice the live-streaming part of Aereo’s service. Their (DVR). Justice Breyer conceded that the Breyer, ruled 6-3 that Aereo’s live motion was denied by the district court,5 and language of the Transmit Clause ‘does not streaming of local over-the-air broadcast the Second Circuit Court of Appeals affirmed. clearly indicate when an entity “perform[s]” television programming infringes SCOTUS granted review in January 2014. (or “transmit[s]”) and when it merely supplies copyright owners’ exclusive right to The case attracted great interest on both equipment that allows others to do so”.10 perform their copyrighted works publicly. sides. The US Solicitor General weighed in on Absent statutory clarity, Justice Breyer In a strong dissent, Justice Scalia (joined the side of the plaintiffs, and 30 amicus briefs turned to the history of the Transmit Clause. by Justices Alito and Thomas) criticised were filed by groups ranging from the Electronic Beginning in 1968, prior to the adoption of the majority for adopting an “improvised Frontier Foundation (favouring Aereo) to the the Transmit Act in the Copyright Act, the standard… that will sow confusion for National Association of Broadcasters. Supreme Court held that community antenna years to come”.2 The arguments focused on whether Aereo’s television (CATV) systems (the precursors of Shortly after the decision, Aereo suspended transmissions of broadcast programmes to cable systems, in which a single antenna on a its operations. As of this writing, its future is subscribers constituted ‘public performances’ hill would amplify and carry a signal, from local very much in doubt, but Aereo is continuing under the Copyright Act and were therefore or distant broadcasters to subscribers’ home to litigate in the district court and seeking infringing. As defined in the Copyright Act’s televisions) did not violate the copyright law. to operate under the compulsory licensing ‘Transmit Clause,’ public performances include In 1976, Congress amended the scheme applicable to cable companies. transmissions “by means of any device or Copyright Act to incorporate the Transmit process, whether the members of the public Clause, a revised definition of ‘perform’ and Aereo’s operation capable of receiving the performance… receive a section11 setting out a compulsory licensing Aereo offered subscribers the ability to it in the same place or in separate places and at scheme for cable systems’ retransmissions of digitally record and live stream local broadcast the same time or at different times”.6 broadcast programming. Congress’ intent was television over the internet to their computers, The leading US copyright treatise concludes to effectively overturn SCOTUS’ case law, so tablets and smartphones. When a subscriber that a ‘transmission’ is a public performance that ‘a system is performing wanted to record a show, she would log onto only if one copy of the work is used for multiple when it retransmits [a network] broadcast to Aereo’s website (accessible by computer and transmissions.7 The Second Circuit agreed its subscribers’.12 smartphones) and select a current or future and in 2008, found that a cable company’s The court rejected Aereo’s contention that programme from its programme guide. At the remote streaming DVR service, where the user it was a mere equipment provider, furnishing time of recording, a dime-sized antenna on a controlled the creation of individual recordings the equivalent of an antenna and a DVR to circuit board at Aereo’s local server site would on a remote server accessible only by the user, its subscribers. Rather, it found that ‘Aereo’s be assigned to her request, the programme did not transmit performances to the public.8 activities are substantially similar to those of is recorded to storage permanently assigned Aereo unquestionably designed its service to the CATV companies that Congress amended to her and, if she desired, her copy is live- conform to that decision. the Act to reach.’13 Thus, the court found streamed with a brief delay.3 that Aereo performed broadcast works that it Post-decision filings by Aereo showed that The majority decision streamed to its subscribers. Aereo had about 77,500 subscribers in its 10 Justice Breyer’s analysis focused on two The court also dismissed Aereo’s argument markets at the end of 2013, 27,000 of those questions: does Aereo (rather than the user) (pivotal to the dissent) that Aereo’s role in the area.4 ‘perform’ within the meaning of the Transmit in transmitting broadcasts was passive, in

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Legal decision: US

that its subscribers selected the copyrighted operates an automated, user controlled to merge with content provider Time Warner. material that was transmitted to them and system, such as an internet service provider or Telecommunications company AT&T is set the machinery in motion. The court found cable-company operated DVR system, does seeking to buy DirectTV to strengthen not that this argument was not meaningful, as not engage in volitional conduct. On this view, only its cable offering but its mobile television CATV subscribers chose the programming it is not Aereo (which, unlike cable systems, offerings as well. Aereo is at the intersection they wanted to watch by ‘turning the knob’ passively made only local over-the-air signals of technological and industry change. While on their own television sets, and that Aereo’s in a given service area available to users; did the impact of SCOTUS’ decision on, for ‘click on a website’ was simply the modern-day not pick and choose which stations it would example, cloud computing is unclear and equivalent. make available; or add its own commercials) may be minimal, its impact on cord-cutting The court disclaimed the effect of this but the user who ‘performs’ any given stream. consumers on the one hand and broadcasters/ part of its analysis on ‘different kinds of Because it is the user, not Aereo, who makes cable companies on the other, is immediate service or technology providers,’ emphasising the choice of content to stream, it is the user, and significant. the similarities between Aereo and cable not Aereo, who performs, and Aereo is not companies. liable for direct copyright infringement. Footnotes Turning to the question of whether Aereo Instead of applying the traditional rules for 1. 134 S Ct 2498 (2014). performs ‘publicly’, the court assumed for liability, according to Justice Scalia, the majority 2. Id at 2512. the sake of argument that the performance instead applied an “ad hoc rule for cable- 3. WNET v Aereo, Inc, 712 F 3d 676, 680-83 (2d being transmitted (by live-streaming) was the system lookalikes”, the parameters and extent Cir 2013). transmission from Aereo to its subscriber, not of which are unclear. As a result, he said, it will 4. Peter Kafka, ‘Here’s how many subscribers aereo the transmission made by the broadcaster. take “years, perhaps decades”, to determine had last year’, re/code (July 21, 2014). Nonetheless, the court found that Aereo’s what automated systems (including cloud- 5. Am Broad Cos, Inc v Aereo, Inc, 874 F Supp 2d ‘behind the scenes’ use of individual antennas storage systems and cable-television systems) 373, 405 (SDNY 2012). and streaming from individual copies of a will satisfy the copyright law. 6. 17 USC § 101. broadcast did not meaningfully distinguish 7. See 2-8 Melville Nimmer & David Nimmer, Aereo’s system from cable companies. Instead, What next? Nimmer on Copyright § 8 14[C][[3] the court found that Aereo’s ‘commercial After the decision, Aereo submitted filings with 8. Cartoon Network LP, LLLP v CSC Holdings, objective’ (presumably the delivery of broadcast the US Copyright Office under the compulsory Inc, 536 F 3d 121 (2d Cir 2008) (known as programming to its subscribers) is the same licence for secondary transmissions by cable “”). as a cable company’s, and Aereo’s technical systems of Section 111 of the Copyright 9. 134 S Ct at 2504. mechanisms did not impact Aereo subscribers’ Act. The Copyright Office’s response 10. Id. ‘viewing experience’. suggested, without deciding, that “internet 11. 17 USC § 111. Having found that the fact that each retransmissions of broadcast television fall 12. 134 S Ct at 2506 (quoting H R Rep No 94-1476 subscriber received a transmission of a copy outside the scope of the [statutory] licence”.14 at 63 (1976)). made uniquely for her was not relevant to its Whatever the merits of SCOTUS’ decision and 13. Id. analysis, the court had no difficulty holding the Copyright Office’s position, at the moment, 14. Letter from US Copyright Office to Aereo, dated that Aereo’s subscribers “constitute ‘the Aereo is in the bureaucratic contradiction 16 July 2014 (available at http://www.nab.org/ public’” - ‘ordinary members of the public who of being too much like a cable company to documents/newsRoom/pdfs/071614_Aereo_ pay primarily to watch broadcast television operate outside Section 111, and too unlike a Copyright_Office_letter.pdf) programs, many of which are copyrighted’. As cable company to operate inside it. Aereo has 15. Sandvine, ‘Global internet phenomena report a result, Aereo’s transmissions violate the public since argued to the district court that it should 1H 2014’, at 5. performance right. not be enjoined from live streaming because it 16. Cord-cutting refers to the process of cutting The court took pains to limit its holding to ought to be treated as a cable system. expensive cable connections in order to change the circumstances before it – the application to a low-cost TV channel subscription through of the Transmit Clause to ‘equivalents’ of Summary over-the-air broadcast via antenna, or over- cable companies transmitting to ‘the public’. Copyright reform in the US has drawn the-top broadcast over the internet. The public does not include “those who increasing attention from the Copyright act as owners or possessors of the relevant Office, industry participants, academics and product”. The court made clear that it was not Congress. Aereo demonstrates the need for Author considering whether the “public performance copyright reform that addresses not only the right is infringed when the user of a service explosion and continuing evolution of digital Jeffrey M Dine pays primarily for something other than the creation, reproduction and transmission of is an associate transmission of copyrighted works”. creative works, in ways not anticipated almost in the litigation 40 years ago, but also the convergence of group at Seward & Kissel in New Justice Scalia dissents copyright and telecommunications law and York. He counsels Justice Scalia, in a strong dissent, criticised policy. US and foreign the majority for ignoring (in his view) a basic The way that consumers obtain content clients in a wide requirement of US copyright law: for an actor to is changing. makes up 34% of range of matters, be held liable for direct copyright infringement, peak-period US internet traffic,15 and ‘cord- including copyright, trademark and it must engage in ‘conduct directed to the cutting’16 is becoming increasingly common. trade secret, as well as complex plaintiff’s copyrighted material’ (the ‘volitional- The media and telecommunications industries commercial, securities and maritime conduct requirement’). US appeals courts are changing too. Cable company litigations, arbitrations and arbitration enforcement actions. have consistently held that a defendant who has purchased NBCUniversal and is seeking

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