SCOTUS Rules Against Aereo, A TV Streaming Service - Fordham Intellectual Property, Media & Entertainment Law Journal
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SCOTUS Rules Against Aereo, A TV Streaming Service

SCOTUS Rules Against Aereo, A TV Streaming Service

Ruling Perceived as Limited in Scope

Finding that Aereo’s new approach to streaming major broadcast networks’ content to subscribers paying for Aereo’s services did not avoid violating television networks’ copyright privileges, the Supreme Court settled the battle between the major broadcast networks and TV streaming start-up Aereo, on Wednesday, in American Broadcasting Companies v. Aereo, Inc.  In a 6-3 decision, writing for the Court, Justice Breyer explained that Aereo, Inc., infringes the networks exclusive right to perform copyrighted work publicly by selling its subscribers a technologically complex service that allows them to watch television programs over the Internet at about the same time as the programs are broadcast over the air, without paying a cent in royalties to the TV networks and program developers. American Broadcasting Companies v. Aereo, 573 U.S. ___ 1(2014).

For a monthly fee, Aereo offers subscribers broadcast television programming over the Internet, virtually as the programming is being broadcast.  Although much of the programming consists of copyrighted works, Aereo neither owns the copyright in those works, nor holds a license from the copyright owners to perform those works publicly. Aereo at 2.  Aereo’s system consists of thousands of small antennas housed in a centralized warehouse, each tuned to respond to an individual customer’s Internet demand for a particular TV program, and through those antennas it delivers to each customer their own personal copy, at the customer’s request.  Id.

Petitioners, who are television producers, marketers, distributors, and broadcasters that own the copyrights in many of the programs that Aereo streams, sued Aereo for copyright infringement, and sought a preliminary injunction, arguing that Aereo was infringing their right to “perform” their copyrighted works “publicly.”  The District Court denied the preliminary injunction, and the Second Circuit affirmed, holding that Aereo does not perform publicly within the meaning of the Transmit Clause of the Copyright Act because it does not transmit “to the public,” noting that each time Aereo streams a program to a subscriber, it sends a private transmission available only to the individual subscriber. Aereo at 1-2.  Reversing the Second Circuit, the Court placed Aereo’s activities within the scope of the Copyright Act explaining that Aereo performs the copyrighted works publicly, and remanded the case for further proceedings. Aereo at 17-18.

According to the New York Times, in oral arguments before the Court in April, the broadcasters argued that Aereo and similar services threatened to cut into an essential revenue stream—the billions of dollars they receive from cable and satellite companies in retransmission fees, or money paid to networks for their right to retransmit their programming.  The networks threatened they would have consider removing their signals from the airwaves if the court ruled for Aereo.  The Court said nothing about rescuing the TV broadcasters in its opinion, basing its ruling on that Aereo’s system both performs the copyrighted programs and does so through delivery to the public. Lyle Denniston, Opinion analysis: A clever new technology for now, SCOTUSblog (Jun. 25, 2014, 2:03 PM), http://www.scotusblog.com/2014/06/opinion-analysis-a-clever-new-technology-thwarted-for-now/.

The Copyright Act grants the owner of a copyright the exclusive right to perform the copyrighted work publicly, defining “to perform… a work ‘publicly’ as, among other things, to transmit… a performance… of the work… to the public…”  See 17 U.S.C. §106(4); 17 U.S.C. §101.  Aereo argued that it does not perform the programming, it only supplies the equipment for the customer to stream the TV programs themselves, making the customer the only performer.  While the language of the Act on its  own does not clearly indicate when an entity performs or transmits and when it merely supplies equipment that allows others to do so, Justice Breyer explained that when reading the language of the Act in light of its purpose, “the Act is unmistakable:  An entity that engages in activities like Aereo’s performs.” Aereo at 4.

In a lengthy discussion, Justice Breyer recalled the legislative history of the 1976 amendments to the Copyright Act to put Aereo’s system in context with the purpose of the Act.  He wrote that Congress amended the Copyright Act in a large part to reject the Court’s holdings in Fortnight Corp. v. United Artists Television, Inc. (1968) and in Teleprompter Corp. v. Columbia Broadcasting System, Inc. (1974), where the Court delineated between broadcasters and viewers: broadcasters perform. Viewers do not.  Congress enacted new language that erased the Court’s line between broadcaster and viewer, in respect to “performing” a work. Aereo at 7.  The amended statute clarifies that to “perform” an audiovisual work means “to show its images in any sequence or to make the sounds accompanying it audible.” 17 U.S.C. §101. Aereo at 7.  Under this new language, both the broadcaster and the viewer of a television program “perform,” because they both show the program’s images and make audible the program’s sounds.  Aereo at 3-4 citing H.R. Rep., at 63.

Congress also enacted the Transmit Clause, which specifies that an entity performs publicly when it “transmits… a performance… to the public.” 17 U.S.C. §101.  The Court further stated cable system activities, like those of the community antenna television systems (CATV) in Fortnight and Teleprompter lie at the heart of the activities that Congress intended the language to cover. Aereo at 7-8, citing H.R. Rep., at 63.  The concept of public performance covers any further act by which that rendition or showing is transmitted or communicated to the public. Aereo at 7-8.  According to Breyer, the Clause makes clear that an entity that acts like a CATV system itself performs, even if when doing so, it simply enhances viewers’ ability to receive broadcast television signals.

The Court explained that although Aereo’s system remains inactive until a subscriber indicates that she wants to watch a program, given Aereo’s overwhelming similarities to the cable companies targeted by the 1976 amendments, this sole technological difference between Aereo and traditional cable companies does not make a critical difference in this case.  The Court concluded Aereo is not just an equipment supplier and that Aereo performs. Aereo at 19.

After determining that Aereo’s activity was considered a performance, the Court evaluated whether Aereo performs petitioners’ works “publicly,” within the meaning of the Transmit Clause.  Under the Transmit Clause, an entity performs a work publicly when it “transmits… a performance… of the work… to the public.”17 U.S.C. §101. Aereo at 11.  Although Aereo argues that because each transmission is to only one subscriber, it does not transmit a performance to the public, the Court explained in terms of the Act’s purposes, these differences do not distinguish Aereo’s system from cable systems, which do perform “publicly.” Aereo at 12.

The Court further explained that the Transmit Clause must permit this interpretation for it 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.” Aereo at 13.  Therefore, when Aereo streams the same television program to multiple subscribers regardless of the number of discrete communications it makes, it “transmits… a performance” to all of them. Id.

The Court went on, explaining that the subscribers to whom Aereo transmits television programs constitute the public because the same contemporaneously perceptible images and sounds to a large number of people who are unrelated and unknown to each other.  Justice Breyer further explained that whether a set of people constitute “the public”, generally depends on the relations of the people to the underlying work.  An entity that transmits a performance to individuals in their capacities as owners or possessors does not perform to “the public,” whereas an entity like Aereo that transmits to large numbers of paying subscribers who lack any prior relationship to the work does so perform, he added. Aereo at 15.

Additionally, Congress created a new section of the Act to regulate cable companies’ public performances of copyrighted works. 17 U.S.C §111 creates a complex, highly detailed compulsory licensing scheme that sets out conditions, including the payment of compulsory fees, under which cable systems may retransmit broadcasts. Aereo at 8 citing H.R. Rep., at 88.

Justice Breyer made a concerted effort to stress that this holding is limited in scope and “will not have the effect of discouraging or controlling the emergence or use of different kinds of technologies.” Aereo at 15-16.  He continued, the Court will not answer more precisely how the Transmit Clause or other provisions of the Copyright Act will apply to technologies other than Aereo’s system.  “Questions involving cloud computing, remote storage DVRs, and other novel issues not before the court, as to which ‘Congress has not plainly marked the course,’ should await a case in which they are squarely presented,” he added.

In his dissent, Justice Scalia, joined by Justices Alito and Thomas, argued that although Aereo’s system violates the Copyright Act, the degree of involvement is not enough for direct liability, which is the basis for the broadcasters’ request for a preliminary injunction, and the sole issue before the Court. Aereo, Scalia dissent at 6.  Justice Scalia wrote Aereo does not “perform” for the simple reason that it does not choose its content, and cannot be held directly liable for infringing the Networks’ public performance rights. Id.

While displaying distaste for Aereo’s system, Justice Scalia said Congress should decide whether Aereo’s system should fall within the scope of the Copyright Act, writing “the proper course is not to bend and twist the Act’s terms in an effort to produce a just outcome, but to apply the law as it stands and leave to Congress the task of deciding whether the Copyright Act needs an upgrade.” Aereo, Scalia dissent at 13.

For additional reading on Aereo and public-performance issues surrounding streaming, here is a link to IPLJ’s own Daniela Cassorla’s note “Copyright Cowboys: Bringing Online Television to the Digital Frontier.”  Ms. Cassorla’s note proposes solutions that will allow the current copyright regime to adequately solve the public-performance conundrum in a way that will protect copyright authors, reward technology pioneers, and provide for the public interest.  Her potential remedies include a newly drafted Copyright Act providing for online television compulsory licenses, and a judicial remedy endorsing a copyright principle-focused public-performance framework.

Alex Buller

Alex Buller is a second year student at Fordham Law School. She is an IPLJ staff member.