United States: Television Broadcasters Prevail In Dispute Over Disruptive Content Distribution Technology

On June 25, 2014, the Supreme Court issued an important decision for the television industry, ruling that storage and delivery service Aereo violates the Copyright Act when it captures over-the-air broadcasts and then retransmits unique copies to subscribers via individual, dime-sized antennas. Cognizant that the decision was closely watched and could impact developing technologies, the Court issued a narrow opinion stating that "we do not believe that our limited holding" will "discourage . . . the emergence or use of different kinds of technologies." ABC, Inc. et al. v. Aereo, Inc.  Slip op. at 16.

The case pitted upstart Aereo against broadcasters ABC, NBC, CBS, Fox, and others. In the proceedings below, the U.S. Court of Appeals for the Second Circuit denied the broadcasters' request for a preliminary injunction against Aereo, holding there was no public performance because the potential audience for each Aereo transmission was a single subscriber who requested that the program be recorded. The transmission, the lower court found, was therefore private. The Supreme Court reversed the Second Circuit, determining that Aereo was performing the broadcasts publicly within the meaning of the Copyright Act's Transmit Clause and without authorization of the copyright owners.

In ruling against Aereo, the Supreme Court first addressed whether Aereo was performing the broadcasts at all. Aereo argued there was no "performance" within the meaning of the statute because it only supplied equipment that responds to subscribers' requests and did not make any content selection itself. Justice Breyer, writing for the 6-3 majority, was not persuaded. Breyer began by noting that in 1968 the Court ruled in Fortnightly Corp. v. United Artists Television, Inc., that a community antenna television, or CATV (a precursor to cable), did not perform when it placed antennas on hills to carry broadcast signals to the homes of subscribers because it "neither edited the programs received nor originated any programs of its own." In that decision, the Court concluded that broadcasters perform, viewers do not. The Court determined CATV was more like a viewer than a broadcaster because its equipment simply enhanced a viewer's ability to receive a broadcaster's signal—similar to viewers using antennas in their own homes. In 1976, however, Congress amended the Copyright Act and in doing so expressly overturned the Fortnightly decision, bringing cable systems within the Act's scope. The new language erased the line between broadcaster and viewer with respect to performing, declaring that to "perform" an audiovisual work means "to show its images in any sequence or to make the sounds accompanying it audible." Under this language, Justice Breyer explained, both the broadcaster and viewer perform.

The Court then concluded that because Aereo's activities were similar to that of a cable system, Aereo "performs." Writing for the dissent, Justice Scalia argued there was no performance because Aereo's subscribers, not Aereo, selected the content that was performed. Scalia compared Aereo to "a copy shop that provides its patrons with a library card." Post at 5. Just like the copy shop is not directly liable whenever a patron uses the shop's machines to reproduce copyrighted materials, Aereo should not be directly liable when subscribers use its equipment to transmit copyrighted television programs. Justice Breyer rejected this analogy, stating that "the dissent's copy shop argument makes too much out of too little," slip op. at 10, and finding that "the sole technological difference between Aereo and traditional cable companies" is insufficient to overcome the 1976 amendments to the Copyright Act. Id.

The Court next addressed whether Aereo was performing the broadcasts publicly under the meaning of the Transmit Clause. This clause, enacted under the 1976 Copyright Act, states that an entity performs publicly when it "transmit[s] . . . a performance . . . to the public." 17 U.S.C. § 101. Aereo argued that because each subscriber received broadcast signals from an individual antenna, any performance was transmitted privately, not publicly. The Court viewed this distinction as irrelevant to the analysis, concluding that the behind-the-scenes technology did not alter the viewing experience for subscribers nor did it make Aereo's commercial objective any different than those of cable companies.

The Court further determined that the Transmit Clause suggests an entity such as Aereo may transmit a performance through multiple, discrete transmissions—not merely through a single communication. This was so, the Court reasoned, because the Clause provides that one may transmit a performance to the public "whether the members of the public capable of receiving the performance . . . receive it . . . at the same time or at different times." § 101. "Were the words 'to transmit . . . a performance' limited to a single act of communication, members of the public could not receive the performance communicated 'at different times.'" Slip op. at 14. Therefore, it makes no difference whether Aereo is making a series of single transmissions; Aereo is ultimately communicating the same images and sounds to multiple subscribers. And these subscribers constitute "the public" because they involve a large number of people unrelated and unknown to each other. These facts matter, the Court explained, because although the Copyright Act does not define "the public," it specifies that an entity performs publicly when it performs at "any place where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered."

The Court's decision is considered a major victory for the broadcasters. Had the Supreme Court determined that Aereo's technology and business model did not violate the Copyright Act, as posited by the dissent, it would have cleared the way for other technologies that take advantage of over-the-air broadcasts without paying copyright royalties, undermining broadcasters' ability to generate revenue from those who seek to retransmit their programming.

In its decision, however, the Court emphasized that its ruling was limited to the technology presented by Aereo, and in particular its similarity to CATV systems, stating that "we cannot now answer more precisely how the Transmit Clause or other provisions of the Copyright Act will apply to technologies not before us." Slip op. at 17. The Court expressly reserved any decision regarding other technologies and acknowledged that the Transmit Clause might not apply to other technologies in different contexts, particularly if, unlike here, the users of those other technologies are the "owners or possessors" of the underlying works.

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