Will Aereo Kill the TV Star?

Author: Matthew Byrnes, Associate Member, University of Cincinnati Law Review

In late April, the Supreme Court heard oral arguments on a case that has the potential to drastically change how Americans watch broadcast programming. The case, American Broadcasting Companies, Inc. v. Aereo, Inc., (“Aereo”) involves the online television subscription service Aereo.[i] Founded in 2012, Aereo allows its users to view or record local network broadcasts on their computer or web-enabled devices starting at $8 a month, plus tax.[ii] Unlike a cable television provider however, Aereo does not pay licensing fees to carry these over-the-air transmissions. Broadcasters fear this will undercut more than $3 billion in annual revenues that they receive from retransmission fees.[iii] In light of the “cut-the-cord” trend, this fear is warranted. If Aereo’s business model is upheld amidst copyright infringement claims, it will rock the traditional cable provider structure. However, when looking to the history of the Copyright Act and its treatment of the broadcasting industry, the Supreme Court is right to pull the plug on Aereo’s system unless it starts paying royalties.

If Aereo’s system were deemed non-infringing, its impact would be more than substantial. A traditional cable provider like Comcast would likely seek to develop a similar internet-based system, not only to combat drops in subscribers, but also to save the expense of paying royalties to broadcasters. For a broadcaster like CBS, it would have to choose between continuing over-the-air broadcasts or letting the airwaves go dark, moving its programming to cable channels or even establishing their own cable network. Some copyright holders have already expresses this interest, as the NFL and MLB have indicated that if Aereo prevails, sports programming would likely migrate to cable networks to prevent Aereo-like services from exploiting their programming.[iv]

Not surprisingly, the nation’s leading broadcast companies, including CBS, ABC, and Fox, as copyright holders, objected and filed suit in the Second Circuit and various district courts under the public performance clause of the Copyright Act.[v] So far, Aereo has been able to temporarily escape liability by virtue of its technological make-up, at least in the Second Circuit. Under Aereo’s system, when a subscriber wants to watch a TV show, an individual, temporary antenna is assigned to that subscriber and that antenna picks up the free, over-the-air signal. Once the signal is obtained, Aereo begins recording the broadcast on a virtual DVR, also temporarily assigned to the subscriber, and the recording is retransmitted to the subscriber’s mobile device.[vi]

All of these actions are permissible if done by an individual, because broadcast programming is freely transmitted over the airwaves and the act of recording free TV shows for later private viewing has been previously upheld.[vii] For cable providers however, following the enactment of the Copyright Act of 1976 and its Transmit Clause, they have been required to first obtain permission from the broadcaster-copyright holder and pay a royalty fee before they could retransmit any local network programming to subscribers. This is because unlike individuals, cable providers are retransmitting copied broadcasts from a limited number of antennas to the public at large. In essence, Aereo’s system is inefficient as compared to a standard cable provider. If ten Aereo subscribers wish to watch a show, Aereo uses ten antennas, makes ten copies, and retransmits accordingly. For a cable provider, a single antenna can be used to pick up and retransmit a copied broadcast to thousands of people.

Therefore, the issue is whether Aereo’s service is performed to the “public.” Under the Second Circuit’s view, Aereo is not performing to the “public” because by providing individual copies and antennas to each subscriber, that specific performance or retransmission of the television show only reaches the individual subscriber and not the public.[viii] However, when looking to the history of the public performance right and its relationship with the television broadcasting industry, it seems that Congress’ intent was to bar any form of dissemination by commercial enterprises like Aereo, rather than allow for new technological advancements to subvert the copyright holders’ exclusive right to publicly perform.[ix]

Dueling Interpretations on the Public Performance Right

The copyright holder of a television show or other similar work has the exclusive right to perform the copyrighted work publicly.[x] Under the Transmit Clause of the 1976 Copyright Act, to perform or display a work “publicly” includes:

“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 are capable of receiving the performance or display receive it in the same place or in separate places and at the same time or different times.”[xi]

Therefore, cable television providers’ transmissions are “public” performances, and in turn, they must pay royalties for these “performances.”

The Second Circuit in Aereo held that the plaintiffs, seeking an injunction, were unable to demonstrate a likelihood of success on the merits because Aereo’s system was not materially distinguishable from a DVR-like system, which has been previously upheld in Cartoon Network LP, LLP v. CSC Holdings, Inc. (commonly referred to as “Cablevision”).[xii] The Second Circuit, in both Cablevision and Aereo, found that the Transmit Clause required identifying the potential audience of a given transmission—that is, those who are capable of receiving the transmission—and not those capable of receiving the underlying work (i.e., the show or “program”).[xiii] Under the court’s analysis, any factor that limits the potential audience of the transmission is relevant in determining whether the transmission is made to the public.[xiv] Because each of Aereo’s transmissions is made to a single subscriber using a single unique copy produced for that subscriber, the Second Circuit held that such transmissions were not performances “to the public.”[xv]

Courts in other jurisdictions have disagreed with this interpretation. The Central District of California and the District Court for the District of Columbia have found that the statue does not require the Second Circuit’s focus on the uniqueness of an individual copy or transmission.[xvi] Rather, the courts look simply to whether the performance of the underlying copyrighted work is made available to the public.[xvii] Therefore, despite the fact that individual users receive unique copies of the transmissions, a system nonetheless infringes on the copyright holder’s public performance rights when it allows multiple users to view the same underlying work.

In support of this proposition, even the the Second Circuit in Aereo admitted, “perhaps the application of the Transmit Clause should focus less on the technical details of a particular system and more on its functionality.”[xviii] Further investigation into the history of the Transmit Clause supports the functionality approach, and the Second Circuit was misguided in placing such great weight on the technical aspects of Aereo’s system and its ability to create unique copies.

The History of the Transmit Clause

Congress included two key provisions in the 1976 Copyright Act in response to decisions by the Supreme Court in Fortnightly Corp. v. United Artists Television, Inc. and Teleprompter Corp. v. Columbia Broadcasting System, Inc.[xix] In these cases, the Supreme Court held that under the then-current 1909 Copyright Act, a cable television provider that received broadcast television signals via antenna and retransmitted those signals to its subscribers through a coaxial cable did not infringe on copyright holders’ public performance rights.[xx] In response, Congress included the Transmit Clause in the 1976 Copyright Act, bringing a cable providers’ transmission of broadcast television within the scope of the public performance right.[xxi] Congress also added a compulsory licensing scheme for cable providers and copyright holders engaging in these transmissions.[xxii]

The pre-Transmit Clause holdings in Fortnightly and Teleprompter arose in part because of the “drastic technological change” not addressed in the 1909 Copyright Act.[xxiii] Congress responded in the 1976 Copyright Act by broadening the scope of performing to include the act of transmitting or communicating a performance “by any device or process.”[xxiv] The House Report for the 1976 Act stressed that this was “broad enough to include all conceivable forms and combinations of wires and wireless communications” and if “the transmission reaches the public in [any] form, the case comes within the scope [of the public performance right].”[xxv] This response was certainly within the purview of Congress, as Congress is responsible for developing new principles of copyright law when it has determined that technological innovations have made them necessary.[xxvi]

The decision in Fortnightly was also based in part on the rationale that cable service providers delivered a service equivalent to what individuals could lawfully do for themselves without paying royalties, the only difference being that cable providers were entrepreneurs.[xxvii] Congress responded to this distinction as well in the 1976 Copyright Act by creating the compulsory licensing scheme between cable providers and broadcasters, demonstrating that cable providers “are commercial enterprises” whose retransmissions are based on the carriage of copyrighted program material and therefore they should pay royalties to the copyright holders.[xxviii]

But in order for the retransmissions to be deemed “public” further modification to the Copyright Act was necessary, as these performances reached traditionally non-public places like an individual subscriber’s home. Therefore, Congress added that a transmission is public “whether the members of the public…receive it in the same place or in separate places and at the same time or at different times.”[xxix]

The Supreme Court has held that a court should give broadly written statutes a broad interpretation because “the fact that a statute can be applied in situations not expressly anticipated by Congress does not demonstrate ambiguity. It demonstrates breadth.”[xxx] The text of the Transmit Clause and its legislative history support the idea that the statute is not ambiguous but actually quite broad. Congress’ “new principle in copyright law,” at least for transmissions relating to the broadcasting industry, was to include all types of processes and transmissions to avoid the mistakes in Fortnightly and Teleprompter.

Proper Respect for Congress’ “New Principle’” Calls for Reversal

Like Fortnightly and Teleprompter during the pre-1976 Copyright Act period, the ruling in Aereo means that broadcasters could again be forced to wait until Congress passes specific legislation to remedy the issue of emerging technology. But companies like Aereo cannot be immune from liability for copyright infringement “simply because the technologies are of recent origin or are being applied to innovative uses.” [xxxi] Congress’ response to Fortnightly and Teleprompter established a “new principle” in the face of emerging technology, yet the Second Circuit failed to give it credence. The “new principle” is embodied in the history Transmit Clause, as Congress, in the face of previously unconsidered technology, broadened the definitions of “public” and “performance” and established a compulsory licensing scheme between commercial enterprises. The principle is simple: regardless of the technological means, if a broadcaster’s copyrighted work is retransmitted to the public at large, royalties must be paid under the compulsory licensing scheme. This is especially true where commercial enterprises like Aereo are involved. The Second Circuit’s rejection of this idea was a departure from a common sense principle designed to protect all copyright holders from widespread transmission absent compensation. Even if unique copies or individual transmissions are being made, Aereo’s actions still constitute the basic wrong contemplated by Congress and it should be required to pay royalties.

 

[i] WNET v. Aereo, Inc., 712 F.3d 676 (2d Cir. 2013) (“Aereo”); Cert. granted sub nom. ABC v. Aereo, Inc., 2014 U.S. LEXIS 17 (U.S., Jan. 10, 2014).

[ii] Press Release, Aereo, Inc., Aereo Announces $20.5M Series A Financing Led by IAC; New Technology Platform Allows Consumers Access to Live TV Over the Internet (Feb. 14, 2012) (http://blog.aereo.com/wp-content/uploads/2012/02/press_release_20120214.pdf). See also, http://www.aereo.com (last visited Feb. 2, 2014)

[iii] Ted Johnson, Supreme Court to Hear Aereo Case, Variety (Jan. 12, 2014) http://variety.com/2014/biz/news/supreme-court-to-hear-aereo-case-1201037308/

[iv] Ted Johnson, NFL, Major League Baseball Warn That Aereo Could Trigger End of Free TV Game Broadcasts, Variety (Nov. 17, 2013) http://variety.com/2013/tv/news/nfl-major-league-baseball-warn-supreme-court-that-aereo-could-trigger-end-to-games-on-free-tv-1200847089/ . Interestingly, Aereo advertises on its website that one of the advantages of using its program is that “No more rushing home for kick-off! Tune into the game from your mobile device. Pause or rewind so you don’t miss a thing. Then switch to the big screen when you get home.” https://aereo.com/about (Last visited April 25, 2014). A switch by the MLB to cable television, rather than locally broadcasted stations would mean games are no longer broadcasted for free for individuals. I.e., one cannot simply plug his or her television into the wall and watch the game. It would also prevent Aereo from being able to record these programs unless they paid a programming fee. Unlike broadcasters and their local affiliates, cable network channels like ESPN do not freely broadcast programs over-the-air.

[v] 17 U.S.C.S. § 106(4) (LexisNexis 2014). See Aereo, 712 F.3d 676; See also, Fox TV Stations, Inc. v. FilmOn X LLC, 2013 U.S. Dist. LEXIS 126543 (D.D.C. 2013); Fox TV Stations v. BarryDriller Content Sys., 915 F.Supp. 2d 1138 (C.D. Cal. 2012); Hearst Stations Inc. v. Aereo, Inc., 2013 U.S. Dist. LEXIS 146825 (D. Mass. 2013).

[vi] For further discussion and explanation of Aereo’s system, visit https://aereo.com/about (last visited Feb. 14, 2014).

[vii] Sony Corp v. Universal City Studios, Inc., 464 U.S. 417 (1984).

[viii] See generally Aereo, 712 F.3d 676.

[ix] See H.R. Rep. 94-1476, reprinted in 1976 U.S.C.C.A.N. 5659.

[x] 17 U.S.C.S. § 106(4) (LexisNexis 2014).

[xi] 17 U.S.C.S. § 101(2) (LexisNexis 2014).

[xii] Aereo, 712 F.3d at 680; Cartoon Network LP, LLP v. CSC Holdings, Inc., 536 F.3d 121 (2d Cir. 2008) (“Cablevision”).

[xiii] Aereo, 712 F.3d at 689; See generally Cablevision, 536 F.3d 121.

[xiv] Aereo, 712 F.3d at 698 (citing Cablevision, 536 F.3d at 137).

[xv] See generally Aereo, 712 F.3d 676.

[xvi] Fox TV Stations v. BarryDriller Content Sys., 915 F. Supp. 2d 1138, 1144 (C.D. Cal. 2012) (“Defendants’ unique-copy transmission argument based on Cablevision and Aereo is not binding in the Ninth Circuit”); Fox TV Stations, Inc. v. FilmOn X LLC, 2013 U.S. Dist. LEXIS 126543 (D.D.C. 2013).

[xvii] Fox TV Stations v. BarryDriller Content Sys., 915 F. Supp. 2d 1138 (C.D. Cal. 2012); Fox TV Stations, Inc. v. FilmOn X LLC, 2013 U.S. Dist. LEXIS 126543 at *42-44 (D.D.C. 2013).

[xviii] Aereo, 712 F.3d at 694.

[xix] 392 U.S. 390 (1968) (“Fortnightly”); 415 U.S. 394 (1974) (“Teleprompter”). See Aereo, 712 F.3d at 685.

[xx] Fortnightly, 392 U.S. at 399-401; Teleprompter, 415 U.S. at 408.

[xxi] Aereo, 712 F.3d at 685 (citingH.R. Rep. 94-1476, reprinted in 1976 U.S.C.C.A.N. 5659, at 5963 (1976)).

[xxii] See 17 U.S.C.S. § 111(d) (Lexis 2014).

[xxiii] Fortnightly, 392 U.S. at 396.

[xxiv] 17 U.S.C.S. § 101(2) (Lexis 2014).

[xxv] H.R. Rep. 94-1476, at 64, reprinted in 1976 U.S.C.C.A.N. 5659, at 5678.

[xxvi] Columbia Pictures Inds. v. Redd Horne, 749 F.2d 157 (3d Cir. 1984); See, e.g., Sony Corp. v. Universal City Studios, Inc., 464 U.S. 417 (1984); Teleprompter, 415 U.S. at 414.

[xxvii] See Fortnightly, 392 U.S. at 400 (The Supreme Court found that if an individual, “erected an antenna on a hill, strung a cable to his house, and installed the necessary amplifying equipment he would not be ‘performing’ the programs he received on his television set. The result would be no different if several people combined to erect a cooperative antenna for the same purpose. The only difference in the case of CATV is that the antenna system is erected and owned not by its users but by an entrepreneur”).

[xxviii] H.R. Rep. 94-1476, at 89, reprinted in 1976 U.S.C.C.A.N. at 5704.

[xxix] 17 U.S.C.S. § 101(2) (LexisNexis 2014).

[xxx] FilmOn X, 2013 U.S. Dist. LEXIS at *42 (citingPGA Tour, Inc. v. Martin, 532 U.S. 661, 689 (2001)).

[xxxi] Columbia Pictures Indus., 749 F.2d at 157.

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