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Post-Aereo: Has The Supreme Court Clouded the Future?

By Barry Werbin
Herrick, Feinstein LLP

By now, everyone is probably tired of reading the myriad blogs and articles on the Supreme Court's June 25th decision in American Broadcasting Company, Inc. v. Aereo, Inc. Yet the real question raised by the decision -- which did not set any bright-line tests -- is what its impact will be on other existing and future technologies that permit consumer end-users to access subscribed content anywhere in the world and at any time over the Internet.

In the 6-3 decision, the majority took a fairly straightforward approach in going through the two primary issues presented: whether Aereo was engaging in a "performance" by using its system of dime sized antennas to deliver one-to-one content to its subscribers, and whether such performance was "public" so as to impose direct copyright liability on Aereo. The court answered both questions in the affirmative, pointing out that even a home user watching television "performs" a broadcast merely by turning on a television and flipping channels, and that Aereo essentially acted no differently than a cable system, even when it only enhanced its subscribers' ability to receive and view over-the-air broadcast programming.

The Court emphasized that Aereo was not merely an equipment provider and, while its system remained "inert" until a subscriber indicated what he or she wanted to watch, Aereo nevertheless was communicating the same content to multiple persons and was thus engaging in a public performance. Noting that in enacting the Transmit Clause in the 1976 Act, Congress had clearly overruled prior Supreme Court precedents that had permitted CATV systems to operate (no issue here), the majority interpreted the Transmit Clause as applying to any entity that acts like a CATV or more modern cable system (conjuring up the adage that "if it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck"). Despite Aereo's system remaining inert until a subscriber designates which programming he or she wants to watch, the Court nevertheless equated Aereo's system with the CATV systems outlawed under the 1976 Act.

Consistent with the "looks like a duck" analogy, the Court said that Aereo's "technological differences" only concern "behind-the-scenes" ways in which Aereo delivers television programming to its viewers' screens, and these differences did not render Aereo's commercial objective any different from that of cable companies. Nor did Aereo's system significantly alter the viewing experience of its subscribers.

Justice Scalia's dissent said that the majority analyzed "performance" wrong, because it focused on the overall purpose of the technological system rigged by Aereo as opposed to where the "volitional" conduct was taking place. To the dissenters, the focus should have been on the individual subscribers, who controlled what programming to watch and when the allocated mini antennae would be activated in response to subscribers' commands.

This is where it gets murky. If we were to ignore all technological interfacing between, say, a cloud service provider and its subscribers, and focus only on the "commercial objective" of the provider, then all one has to do is find a for-profit motive in the context of any form of online content delivery, thereby essentially rendering meaningless the volitional conduct requirement for finding direct infringement. The Court doesn't go quite that far. In fairness to the majority, Aereo really was not such a difficult case, because the Transmit Clause covers the transmission of content to individuals at the same place or in different places, and at the same time or in different times, and has always arguably been broad enough to encompass Aereo's system.

Another key distinguishing factor, of course, is that Aereo paid no licensing fees, unlike cable and satellite operators; in the latter case, once a home subscriber lawfully receives fully licensed broadcasts, the subscriber has a fair use right under Sony to record broadcast programming and "time-shift" at will when he or she views that programming. Merely transplanting that mechanism into the cloud (à la Dish Network's "Hopper"), using a technological system developed by a provider, arguably does nothing more than what the individual subscriber is lawfully entitled to do in his or her home.

The majority itself recognized this scenario and threw a comfort blanket to the tech sector by saying: "In other cases involving different kinds of service or technology providers, a user's involvement in the operation of the provider's equipment and selection of the content transmitted may well bear on whether the provider performs within the meaning of the Act." Therefore, volitional conduct on the subscriber end really is not dead. We just have no test for the "may well bear on" assessment. Maybe the duck knows.

Providing some small assistance, the majority made a clear distinction between the specific facts in Aereo and other situations where "subscribers receive performances in their capacities as owners or possessors of the underlying works." Justice Breyers' majority bloc noted that whether a transmission to "a set of people" constitutes a public performance "often depends on their relationship to the underlying work." Courts will continue to grapple with this general guidance in assessing what constitutes being an "owner" or "possessor" and what types of relationships between end users and underlying works remove a content delivery system from the realm of infringing conduct.

Surprisingly absent from the majority's decision was any discussion that the content at issue was free over-the-air broadcasts, which any citizen within reception range could lawfully receive with a digital antenna and a digital-ready TV. It seems that what really irked the Court was Aereo taking commercial advantage of what it viewed as a loophole in the language of the Transmit Clause. The venture capitalists who funded tens of millions of dollars into Aereo (primarily Barry Diller's IAC/InterActiveCorp) likely did not do so for some high altruistic purpose (despite some of the press releases to the contrary); they did it to make money and realize significant returns on their investments. Even the dissent said that it did not really like what Aereo was doing, but was bound to apply the provisions of the Act as written; and it was the job of Congress, not the Court, to correct any ill-phrased language in the Transmit Clause.

Absent also, albeit not surprisingly, from the majority's opinion, was any mention of the now infamous Cablevision case (The Cartoon Network LP, LLLP v. CSC Holdings, Inc., 536 F.3d 121(2d Cir. 2008), cert. denied), to which the dissent cited several times with approval. Cablevision involved a remote storage DVR system that was offered to paying subscribers, where the Second Circuit found no direct infringement of the public performance right by Cablevision because its DVR customers were the ones who made the copies carried out by the DVR system. Yet in keeping with its focus specifically on the facts of Aereo, the Court's majority tried to avoid making any overreaching statements or addressing matters that were not directly before the Court. Avoiding any discussion of Cablevision was therefore prudent.

Similarly, in the Dish Network litigation in California, involving Dish's "Hopper" technology called "Sling," the Ninth Circuit ruled last year against the broadcaster plaintiffs. (Fox Broadcasting Company, Inc. v. Dish Network L.L.C., 723 F.3d 1067 (9th Cir. 2013).) The Ninth Circuit specifically found that "operating a system used to make copies at the user's command does not mean that the system operator, rather than the user, caused copies to be made. Here, Dish's program creates the copy only in response to the user's command." Fox News immediately ran back to the Ninth Circuit last week for reconsideration after the Supreme Court decided Aereo.

Certainly, the Aereo Court's majority's opinion was circumspect and cautiously avoided any overreaching language that could impact new technologies, whether cloud based or otherwise. Indeed, with a nod to the warnings identified in various amicus briefs submitted by representatives of the technology industry and the United States government itself, the Court expressly stated that "we have not considered whether the public performance right is infringed when the user of a service pays primarily for something other than the transmission of copyrighted works, such as the remote storage of content." (Emphasis added)

Yet a clear bright-line test was not provided, and we are perhaps left with "if it looks like a duck" gut assessment, which does not make for good law. The decision will undoubtedly keep judges and copyright litigators busy for some years to come. That is, unless the media broadcast industry sits down with providers like Dish Network and others (as NBC is currently doing) to work out reasonable business models that compensate content owners fairly and yet permit the public to receive lawfully licensed content anywhere they want, and at any time, as this is the age we live in and there is no going back. Even the duck would agree.

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This page contains a single entry from the blog posted on July 3, 2014 5:46 PM.

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