United States: Fox v. Aereokiller: Another Nail In The Internet "Cable" Coffin

Back in 2014, the Supreme Court, in American Broadcasting Companies. v. Aereo, Inc. (Aereo I), shot down a service designed (1) to offer its subscribers internet/mobile access to live network TV programming, (2) without first obtaining licenses, (3) by employing a Rube Goldberg technology that "rented" personal (mini) TV antennas to each viewer, (4) in an effort to dodge a judicial ruling that the service violated the copyright holders' exclusive right to transmit performances of their programming to the public.

Since then, Aereo—the startup whose streaming service was blocked by the Court—and others have made numerous attempts to tweak the details in ways that would enable an internet cable solution. However, the Ninth Circuit Court of Appeals recently handed down yet another ruling that suggests that it will be difficult indeed to find such a solution.

Precursors to the Ninth Circuit Ruling

First, a quick look back. The Supreme Court's 2014 ruling that Aereo infringed was substantially driven by the Court's sense that Aereo's service was functionally equivalent to cable TV, and, therefore, that a contrary result would be inconsistent with Congress's intent, in the 1976 Copyright Act, to apply copyright restrictions to cable.

Aereo tried a last-ditch response, but that too met with failure in litigation. "Doing its best to turn lemons into lemonade," the district court observed a few months later in American Broadcasting Companies v. Aereo, Inc. (Aereo II), "Aereo now seeks to capitalize on the Supreme Court's comparison of it to a CATV system to argue that it is in fact a cable system that should be entitled to a compulsory license under § 111" of the Copyright Act, 17 U.S.C § 111.

Undaunted by Aereo's demise, a technologically similar service by FilmOn (formerly Aereokiller) also offered internet access to live TV programming without licenses from copyright holders. Like Aereo, FilmOn attempted to re-characterize itself as a cable system, likewise spawning lawsuits from network copyright owners.

The Ninth Circuit's Ruling in Fox v. Aereokiller

In the first appellate decision on this topic since the Supreme Court's Aereo I ruling, in March 2017, the Ninth Circuit held in Fox Television Stations. v. Aereokiller that a service that "captures copyrighted works broadcast over the air, and then retransmits them... over the Internet without the consent of the copyright holders," is not a cable system eligible for a compulsory license.

In effect, the ruling confirmed the Copyright Office's prior refusal to accept FilmOn's offer to pay the compulsory license fee for cable systems, and appears to doom this latest effort to offer television programming over the internet without the consent of the networks.

The Ninth Circuit began with an exercise in close statutory reading, first considering and rejecting each side's claim that the "plain language" of the statute compelled a ruling on its behalf. It finally resolved the issue by deferring to the Copyright Office.

The Copyright Act provides:

The court first addressed Fox's argument that the "plain text" of § 111 requires that the entirety of a cable system, including the means for secondary transmission of broadcast signals, must be under the ownership or control of the putative cable company. FilmOn would not meet such a requirement, of course, because it does not own or control the internet.

While the court considered the theory "not implausible," it noted that the "most important difficulty with Fox's interpretation is that it finds insufficient support in the text of the statute." Fox. 17 U.S.C. § 111 does not say the transmitter must own the retransmission means it lists, and ordinary language is replete with examples of usage to the contrary. (For example, we may speak of "someone 'mak[ing] a transmission' of money 'by wire' when he initiates an electronic funds transfer" even though he does not possess or control the wires. Fox.)

What of FilmOn's position that the statute plainly supports recognizing it as a cable system? "FilmOn first argues that § 111 'should be interpreted in a technology agnostic manner.'... making compulsory licenses available to any facility that retransmits," the court observed, regardless of the means it uses.

The court also took note of numerous considerations tending to undermine the argument that the statute would allow internet-based retransmitters to be deemed cable systems. It indicated that:

• The statute does not simply say, as it could have, that all secondary transmitters are entitled to a statutory license.
• Separate compulsory license provisions (17 U.S.C. §§ 119 and 122) cover secondary transmission by satellite carriers.
• The statutory reference, "other communications channels," appears to have a technical meaning that does not encompass the internet.
• One could reasonably conclude that "other communications channels" must (as the Copyright Office maintains) be "inherently localized transmission media of limited availability."
• Powerful arguments suggest that including internet-based services would undermine the balance of interests that 17 U.S.C. § 111 was intended to strike.
• Treating internet-based retransmission services as cable might violate U.S. treaty obligations.

Although the court could "not foreclose the possibility that the statute could reasonably be read to include Internet-based retransmission services," the panel found that such a reading was not compelled.

To resolve the ambiguity of the statute, the Ninth Circuit turned to the Copyright Office. When a court considers an agency's interpretation of a statute it administers, it may defer to the agency's interpretation, the court observed.

The Copyright Office's interpretation – that to qualify as a "cable system," a retransmission service must use a localized retransmission medium – finds support in the text, structure and purposes of the Copyright Act, the court held, and denying the statutory license to internet services plausibly maintains the balance Congress sought between the public's interest in improved access to broadcast television and the property rights of copyright holders.

"The Office's position is longstanding, consistently held, and was arrived at after careful consideration; and it addresses a complex question important to the administration of the Copyright Act."

End of analysis and of story. Unless there is a rehearing en banc or Supreme Court review, so ends FilmOn's run.

Wins for the Broadcast Networks, at Least for Now

It seems fair to question the propriety of deference in areas of law like this, in which the agency's view does not rest on highly technical matters as to which the agency possesses specific expertise. One way to view Fox might be that instead of interpreting the statute, the panel decided it was good enough to agree to what someone else—the Copyright Office—reasonably thought the law meant. Arguably, such an approach may be seen as an abdication of the judicial responsibility to say what the law is.

The rise of the internet as a major channel of communications, discourse and commerce—and as a disruptor of industries, society and social norms—has repeatedly been accompanied by struggles for control based on copyright law. With two federal courts of appeal having ruled that internet-based services are not entitled to compulsory licenses as cable systems, and with the Copyright Office firmly supporting the network position, the broadcast networks may be able to hold the line regarding exploitation of their content—at least until some as-yet-unanticipated technology opens new ways to challenge the application of copyright law to broadcast content.

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