In a highly anticipated decision, the Supreme Court on June 25, 2014,
issued an opinion that ruled that web-based TV streaming service
Aereo violated copyright law by providing a service substantially
similar to cable television without clearing copyrights to transmit
the streamed program content. Aereo enabled its subscription
viewers to watch or record over-the-air TV programming by renting
antennas and digital storage spaces. Subscribers used online
controls to operate their designated antenna within Aereo's
facilities. The content they selected was transcoded to a digital
signal and sent to their own dedicated space on Aereo's hard
drives. From there, subscribers could stream the programming live
or save it permanently onto Aereo's servers. Subscribers could
access their live or recorded content from anywhere in the world
via the Internet.
Aereo maintained that its television streaming service resembled
other services that courts have determined to be non-infringing,
and thus legal in a line of cases beginning with Sony Corp. of America v. Universal City
Studios (Betamax). In that case, the
Supreme Court reasoned that Sony had a right to sell Betamax video
tape recorders because they had substantial non-infringing uses,
including "time-shifting," or recording programming for
one's personal viewing at a later time.
Similarly, in Cartoon Network v. CSC
Holdings (Cablevision), the Second
Circuit ruled that Cablevision's remote storage DVR systems
were legal. The systems enabled consumers to record television
shows to Cablevision's servers for their personal viewing at a
later time. The court reasoned that "volitional conduct is an
important element of direct liability."
Cablevision, 536 F.3d 121, 131 (2d. Cir. 2008). It
concluded that "by selling access to a system that
automatically produces copies on command Cablevision more closely
resembles a store proprietor who charges customers to use a
photocopier on his premises, and it seems incorrect to say, without
more, that such a proprietor "makes" any copies when his
machines are actually operated by his customers."
Cablevision, 536 F.3d at 132. Accordingly, the
court held that Cablevision was not liable for infringing copies
that the DVR system recorded on its servers.
Aereo apparently designed its technology in a manner aimed at
avoiding volitional conduct. Specifically, Aereo allotted storage
space to each subscriber on which to record whatever content they
wanted. Moreover, Aereo allowed consumers to choose the channel to
which they would tune their antenna, leaving consumers with the
ability to record either copyrighted or uncopyrighted content.
Aereo did little more than provide the equipment and underlying
functionality to make each individual selection possible.
Aereo touted that its business model distinguished it from cable
and satellite operators, who actively decide which programming will
appear on their systems. Cable and satellite operators, as a result
of their deliberate content selection, must compensate broadcasters
for the right to carry their programming—and that
compensation accounts for a substantial portion of broadcasting
revenue. If cable and satellite operators switched to Aereo-like
technology and stopped paying retransmission fees, broadcasters
would lose a crucial income stream.
Broadcasters from around the country sued Aereo to stop its
practices. The Second Circuit ruled in Aereo's favor, concluding that its
services were legal because Aereo had not engaged in volitional
conduct that infringed copyrights. Conversely, in a separate suit,
the Tenth Circuit sided with the broadcasters by denying Aereo's request for a temporary
stay of a lower court's order requiring it to shut down
operations. The Tenth Circuit concluded that Aereo was not entitled
to a temporary stay because it had not shown that it was likely to
persuade the Supreme Court to rule in its favor.
The Supreme Court, on June 25, reversed the Second Circuit's
decision, finding that Aereo's services infringed
broadcasters' copyrights. The Court's analysis focused on
interpreting the scope of a copyright owner's exclusive right
under the Copyright Act "to perform the copyrighted work
publicly." 17 U. S. C. §106(4). Justice Stephen Breyer,
writing for the majority, conceptualized the issue in
Aereo as a set of two questions: first, does Aereo
"perform" the copyrighted works that its users stream via
its service; and second, is the performance "public"
within the meaning of the Act. Justice Breyer answered both of
these questions in the affirmative.
First, the Court determined that Aereo "performed" the
copyrighted works because the service Aereo offered was similar to
the services that Congress sought to regulate with the Copyright
Act of 1976. Specifically, the majority noted that Congress passed
the Act in part to reverse two Supreme Court decisions,
Teleprompter Corp. v. Columbia Broadcasting System,
Inc., 415 U. S. 394 (1974), and Fortnightly Corp.
v. United Artists Television, Inc., 392 U. S. 390 (1968).
The Court in those cases held that cable providers did not violate
copyright law by selecting and transmitting a variety of
broadcasters' signals simultaneously to customers, who could
then choose which signal entering their cable box they would like
their TV to display. In Aereo, the Court
acknowledged the technological differences between Aereo's
user-directed tuning and storage technology on the one hand, and
cable or satellite operator-curated systems on the other, but
largely dismissed that distinction as irrelevant. Because Aereo
served virtually the same function for consumers as cable does, the
majority deemed Aereo's degree of control over the recording
process to be of little importance.
Second, the Court determined that Aereo's performance of the
work was a public one because, although viewers of the same work
deriving from different source copies normally cannot be aggregated
to constitute the "public," the distinction in this case
was inconsequential. The Court stated that Aereo could have devised
a more technologically efficient system in which all viewers
watched copies deriving from the same antenna, but it did not do
that solely because of the copyright implications. Because the
technical difference is imperceptible and irrelevant to both
viewers and broadcasters, the Court reasoned, it does not bear on
the copyright liability determination. Consequently, the Court
concluded that the fact that Aereo's service permitted access
to copies of the same work for many unrelated individuals sufficed
to demonstrate that Aereo performed the copyrighted works in
public.
The majority emphasized the limited nature of the Court's
ruling, likely in attempt to allay concerns that a ruling against
Aereo would destabilize the cloud computing and video streaming
developments that Cablevision had fostered by
reducing service providers' apparent risk of liability for the
content their consumers upload.
According to the majority, the same analysis may not apply to other
technologies outside of the broadcast retransmission context.
Because Congress had enacted the 1976 Copyright Act specifically to
bring broadcast retransmission technology into the Act's
purview, the Court concluded that broadcast retransmission
technology occupied a special place in copyright law that justified
applying a different standard than might otherwise inhere in cases
implicating other consumer-operated forms of cloud technology.
Although not binding on future decisions, the Court attempted to
distinguish the cloud storage at issue in
Cablevision from Aereo's model, stating that
"[q]uestions involving cloud computing, [remote storage] DVRs,
and other novel issues not before the Court . . . should await a
case in which they are squarely presented." Slip op. at 17,
(quoting Brief for United States as Amicus Curiae 34) (both
alterations in original).
Justice Antonin Scalia wrote the dissent, and was joined by
Justices Samuel Alito and Clarence Thomas. The dissent contended
that the majority's approach introduced a
"cable-lookalike" exception to the
Cablevision and Betamax principle
that merely providing equipment capable of infringing copyrights
does not usually constitute infringement. Drawing from the Second
Circuit's opinion in Cablevision, the dissent
compared Aereo's service to that of a photocopy shop, arguing
that neither service provider should be liable solely because its
customers sometimes use its facilities to infringe copyrights.
According to copyright professors Peter Menell and David Nimmer, however, that
analogy "rings hollow, especially in view of Congress's
clear intention to channel retransmission services into the
detailed statutory regime."
The decision largely embodies the result that the U.S. Justice
Department had urged the Court to reach: a narrow decision
favoring the broadcasters, but without broader implications in the
technology space. The Brief for United States as Amicus Curia had
argued that Aereo was "blatantly violating" copyright
law, but emphasized that its conclusion "should not call into
question the legitimacy of businesses that use the Internet to
provide new ways for consumers to store, hear, and view their own
lawfully acquired copies of copyrighted works."
For broadcasters and other copyright holders, the ruling
represents a significant victory in ensuring that technological
advancement does not undermine robust copyright protections. For
service providers, the Court left many questions open regarding the
applicability of its analysis to technologies outside the broadcast
retransmission context.
The ruling may even have implications for the ongoing IP transition
proceedings at the FCC, as beneficiaries of interconnection
obligations seek to ensure that those obligations remain in place
following the IP transition. It has not taken commentators long to
suggest the Supreme Court's congressional
intent-based reasoning in Aereo may counsel a similarly
technology-neutral application of interconnection obligations
throughout the IP transition.
For its part, Aereo temporarily shut down its operations within
days of the Supreme Court's ruling. How widespread the market
impact will be beyond Aereo and whether investors will become more
hesitant to back start-ups providing services that resemble a cable
model is unsettled, unless those firms build copyright clearance
into their business models. It is plain, however, that the opinion
represents an important landmark in copyright law illustrating, as
Professors Menell and Nimmer suggest, that "[t]he Copyright
Act of 1976 is indeed creaky."
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