Aereo’s future rests on Copyright Act’s definition of ‘public’

By Alison Frankel
February 20, 2014

A ruling Wednesday by a federal judge in Salt Lake City, prohibiting the television streaming service Aereo from transmitting intercepted broadcasts from its antennas in Utah to subscribers’ Internet devices, lays out precisely the question that the U.S. Supreme Court will confront in April in a separate challenge to Aereo’s business model. Are Aereo and similar services content hijackers taking advantage of the hard work of those who produce and transmit television shows? Or are they mere facilitators, providing the technical means for individual viewers to watch private transmissions of TV shows? The answer to that question will lie in how the Supreme Court interprets a single clause of the Copyright Act, in a case that will test Congress’s ability to write laws that anticipate technological change.

In 1976, when lawmakers updated the Copyright Act of 1909, they closed a loophole that had opened with the advent of cable television. In a couple of rulings preceding the amendment, the Supreme Court found that community television antenna systems, as cable networks were then known, did not infringe broadcasters’ copyrights when they set up antennas to intercept transmissions of television shows and then relayed broadcasters’ shows to paying customers. The 1976 version of the Copyright Act made that practice illegal through a provision known as the Transmit Clause, which said that it’s a breach of copyright “to transmit or otherwise communicate a performance or display of the work…to the public, by means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times.”

When the law was passed, Congress obviously had no idea what the television industry would look like 40 years later, since the Internet in 1976 was just a rudimentary network of mainframe computers. But the Transmit Clause seemed to foresee changes in technology with the phrase “by means of any device or process.” In 1976, those devices were antennas erected by cable networks, which realized after the new law was enacted that they had no choice but to agree to license TV content from copyright owners. Now it’s possible, of course, to stream shows almost instantaneously through teensy antennas to Internet devices, but according to broadcasters and copyright holders, the technological advances of the last 40 years haven’t undercut the power of the Transmit Clause. They argue that Congress specifically left room in the provision to expand copyright protection to cover infringing transmissions via devices and processes unknown at the time.

For the most part, courts in the last 38 years have agreed with broadcasters. There was one hitch, though. In 2008, the 2nd Circuit Court of Appeals ruled in The Cartoon Network v. Cablevision that Cablevision wasn’t breaching The Cartoon Network’s copyright when it stored and retransmitted shows to individual subscribers. There’s a lot of discussion in the landmark decision of whether a “copy” must exist for more than a fleeting moment to violate copyrights, but for our purposes, the circuit court’s important holding was that Cablevision couldn’t be directly liable for infringement because its remote digital video recorder system was directed by its customers, who effectively “made” copies of shows to replay for their own private use – not for a public performance prohibited by the Transmit Clause. Broadcasters sought Supreme Court review of the 2nd Circuit’s decision, and the justices were interested enough to ask for a brief from the U.S. solicitor general, then Elena Kagan. But Kagan’s office recommended against granting certiorari, the broadcasters couldn’t show a split among the federal circuits and the Supreme Court took a pass.

Barry Diller’s IAC/InterActive saw an opportunity in the 2nd Circuit’s Cablevision ruling. IAC’s Aereo set up banks of tiny antennas capable of picking up and reairing broadcast transmissions. But unlike those archaic cable antennas from the 1960s and early 1970s, Aereo’s individual dime-sized antennas are controlled by individual Aereo subscribers. Every Aereo subscriber receives a unique retransmission, whether the subscriber streams the show as it airs (with a momentary delay) or replays it later. And each unique retransmission is a private use, according to Aereo.

Aereo started up in Manhattan, where the 2nd Circuit’s Cablevision precedent is the law of the land. TV stations sued to block the service, claiming copyright infringement. U.S. District Judge Alison Nathan denied the broadcasters’ motion for a preliminary injunction, holding that under Cablevision, broadcasters weren’t likely to be able to show infringement. Last April, in a split decision, the 2nd Circuit upheld Aereo’s victory. The majority said that Aereo’s retransmissions were not “public” performances barred by the Transmit Clause because individual subscribers receive unique copies.

Interestingly, the dissenting judge in the appeals court’s Aereo decision, Denny Chin, had presided as a trial judge over the Cablevision case before his elevation to the 2nd Circuit. Chin had sided with the broadcasters, finding that Cablevision’s DVR system did infringe their copyrights, but was reversed by the 2nd Circuit. In his dissent in the Aereo case, the judge pointed out that Aereo was arguably a worse offender than Cablevision, which had at least licensed the content it was retransmitting to authorized subscribers. By contrast, Chin said, Aereo was retransmitting content without any license or authorization. Its arguments about unique transmissions to individual subscribers were a “sham,” Chin said. And by agreeing to define those transmissions as anything but infringing public performances, he wrote, his colleagues were elevating form over the substance of the Transmit Clause.

While the broadcasters sought en banc review at the 2nd Circuit and, when that was denied, a hearing at the Supreme Court, a trial judge in federal court in Boston, Nathaniel Gorton, also sided with Aereo, concluding that its retransmissions were not public performances. But a month after Gorton’s ruling, U.S. District Judge Rosemary Collyer of the District of Columbia found that a streaming service just like Aereo, called FilmOn, was likely engaged in copyright infringement. Collyer said she had considered the 2nd Circuit’s Cablevision and Aereo rulings but wasn’t bound by them. She found more persuasive, she said, a 2012 ruling by U.S. District Judge George Wu of Los Angeles in Fox Television v. BarryDriller Content, which concluded that transmissions to subscribers by another Aereo rival amounted to public performances prohibited by the Transmit Clause.

The division in the courts, as U.S. District Judge Dale Kimball explained with great lucidity in Wednesday’s injunction opinion in Utah, comes down to the Transmit Clause’s definition of a public performance. Judge Kimball said that the 2nd Circuit had twice engaged in a tortured reading of the provision and its legislative history to find an exception for transmissions to individual viewers. Aereo, he said, may be using different technology than the cable companies of the 1960s, but the end result is exactly what Congress intended to prohibit through the Transmit Clause.

He proceeded to parse the language of the provision and of the 2nd Circuit’s precedent: “The clause states clearly that it applies to any performance made available to the public. Paying subscribers would certainly fall within…a general understanding of the term ‘public,’” Kimball wrote. “However, the Cablevision court appears to discount the simple use of the phrase ‘to the public’ because it concludes that the final clause within the Transmit Clause – ‘whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times’ – was intended by Congress to distinguish between public and private transmissions. This court disagrees. The entire clause…appears to actually be Congress’ attempt to broaden scope of the clause, not an effort to distinguish public and private transmissions or otherwise limit the clause’s reach.” (The paragraph is a bit of a thicket, but such is the peril of statutory interpretation.)

The broadcasters, who are scheduled to file their merits brief at the Supreme Court on Monday, believe Judge Kimball was exactly right in his rejection of Aereo’s attempt to cast itself as a simple facilitator of private transmissions, according to Richard Stone of Jenner & Block, who represents Fox in the Utah case. “They play this shtick that they’re just like RadioShack, selling equipment,” Stone told me. “Well, when was the last time RadioShack was enjoined?…When you look at this holistically and with common sense, as three judges have, they’ve said, ‘Oh, give me a break.’”

Aereo’s Supreme Court counsel, David Frederick of Kellogg, Huber, Hansen, Todd, Evans & Figel, didn’t respond to my email requesting comment, but Aereo can point to four judges – two district courts and the 2nd Circuit majority – who have agreed that its retransmissions to individual subscribers are not public performances under the Transmit Clause. Like the broadcasters, Aereo is eager for the Supreme Court to decide who’s right; in an unusual move the company supported the broadcasters’ request for the justices to review the 2nd Circuit’s ruling.

It’s going to be very interesting to see if the Supreme Court blesses a business model based on a loophole in a law passed to close a previous loophole opened by the Supreme Court more than 40 years ago. In the law, everything old is new again.

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