Aereo Decision Leaves Questions Unanswered

Narrow breadth of majority's opinion may take years to interpret.

(Originally published in the Entertainment Law column in the New York Law Journal on Wednesday, July 30, 2014)

The U.S. Supreme Court recently ruled that the Aereo service, which allowed its subscribers access via the Internet to local broadcasts of television programs on their home and mobile devices, infringed the copyrights of the plaintiff media companies.[i]  Consumers, who hoped they had found an economical alternative to costly cable company subscriptions, were disappointed.  Broadcasters, which reap billions of dollars in retransmission fees, were elated.  And anyone seeking a broad set of copyright principles to guide emerging technologies related to broadcast television will have to wait for another day. 

Justice Breyer, who wrote for the six Justice majority, took pains to characterize the decision as a “limited holding” that was not intended to intrude upon cloud storage and other digital technologies.  But the dissenting opinion of Justice Scalia (joined by Justices Alito and Thomas) voiced concern that the majority’s “test-free, ad hoc, case-by-case evaluation” will require “years, perhaps decades, to determine which automated systems now in existence …[will] get the Aereo treatment.”  

We will examine here what the Aereo service did, why the Supreme Court majority held that it violated copyright law, and what questions were left unanswered for those other automated systems. 

Background

The plaintiffs in the case were 17 media companies including NBC, CBS, FOX, Telemundo and PBS who complained that Aereo’s capture of local free over the air television programs and retransmission to its customers via the Internet infringed their copyrighted programming.  Aereo sought no permission from the broadcasters and paid them no fee on the premise that the configuration of its hardware resulted in a “private performance” of the television programs by its customers, which copyright owners don’t control.  This posed an economic threat to local stations in large markets which receive substantial fees from cable companies for the right to retransmit their signals. 

Aereo tried to distinguish its service from “public performances” that result from transmitting a program to the public. In Section 101 of the Copyright Act, the exclusive right of copyright owners to perform publicly includes the right to “transmit … a performance … to the public, by means of any device or process, whether the members of the public capable of receiving the performance … receive it in the same place or in separate places and at the same time or at different times.”  (This is referred to in the Court’s decision as the “Transmit Clause.”  In a separate clause, the Act’s definition of public performance also embraces performing a work in a public place, but that type of performance is not relevant here.)  

When an Aereo subscriber asked to “watch” or “record” a program,  Aereo’s technology dedicated one of thousands of miniature antennas — each about the size of a dime — to fulfill that sole subscriber’s order. The antenna received the TV broadcast signal of the selected show and an Aereo transcoder translated it into data that could be sent over the Internet, which was then saved on Aereo’s hard drive, which created a unique copy for each request in a subscriber-specific folder.  If the subscriber selected “watch,” Aereo’s server streamed through an individually-assigned transmitter what Aereo characterized as a “personal copy” of the program to the subscriber’s home TV, laptop, smart phone, or other Internet-connected viewing device.  This happened almost contemporaneously with the TV broadcast.  (If the subscriber selected “record,” the program was stored until the customer chose to see it, but only the “watch” function was before the Court on this appeal.)

Aereo argued that its hardware only operated at the direction of a customer and delivered a unique copy that no other customer could see, as if the customer were simply using a personal remote antenna and remote video recorder rented out by Aereo, resulting in a private performance on viewing device of the customer.  From Aereo’s perspective, its service was like any other cloud storage except that instead of uploading content from their own devices, customers directed Aereo’s antenna and recording equipment to capture the program from free over the air transmissions that were accessible to anyone. Accordingly, Aereo argued that when using its service, users supplied their own content using Aereo’s equipment, not Aereo.

The plaintiffs, on the other hand, argued that Aereo was like any cable company that captured local broadcasts through an antenna and retransmitted them to its subscribers.  Unlike Aereo, many of those cable companies pay substantial fees to broadcasters for the privilege of doing so because Congress expressly provided that an unauthorized transmission carrying a program from a cable company’s antenna to the public is an unlawful public performance.  The plaintiffs argued that by making thousands of programs available to thousands of customers in a commercial enterprise, Aereo was indeed transmitting “to the public” thousands of infringing public performances and that Aereo’s Rube Goldberg design should not distract the Court from its theft of their property. 

The Second Circuit Court of Appeals, which had the case before it went to the Supreme Court, sided with Aereo, as did the district court before it.  On the plaintiffs’ appeal to the Supreme Court, Aereo cautioned that a reversal could inflict serious collateral damage on the entire cloud storage industry.  The plaintiffs, on the other hand, contended in a brief that “the very existence of broadcast television as we know it” was at stake.  And in the press some of them threatened to abandon over the air broadcasting if they lost their appeal.

The Majority Decision

The majority framed the question this way: did Aereo infringe the plaintiffs’ exclusive right of public performance “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”?  Six Justices concluded that it did based essentially on the definitions of “public performance” and “transmit” in the 1976 Copyright Act and the resemblance of Aereo’s service to cable TV retransmissions of local signals for which Congress mandated licenses.

The Court began by holding that Aereo – rather than merely its subscribers — “performed” others’ copyrighted works because the origin of relevant Copyright Act provisions unmistakably showed that “[a]n entity that engages in activities like Aereo’s performs.”  The narrative began in 1968 when the Court’s opinion in Fortnightly Corp. v. United Artists Television, Inc.,[ii] held that a community antenna television (CATV) system that amplified, modulated and retransmitted an unedited flow of local copyrighted television broadcasts did not infringe the copyright owners’ performance right because it did not perform at all.  As the Fortnightly Court succinctly observed, “Broadcasters perform. Viewers do not perform.” CATV providers were held to fall “on the viewer’s side of the line” because they passively retransmitted free over-the-air broadcast signals.  In a 1974 decision,Teleprompter Corp. V. Columbia Broadcasting System, Inc.,[iii] the Court extended that holding to CATV retransmissions of distant broadcast signals.

The Court in Aereo emphasized that in 1976, when amending the Copyright Act, Congress “completely overturned” those decisions by defining performance of an audiovisual work as “to show its images in any sequence or to make the sounds accompanying it audible.”  As a result,  “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” (emphases original).  Moreover, the Transmit Clause in the definition of public performance includes “to transmit …a performance … to the public,” and “transmit” means “to communicate [a performance] by any device or process whereby images or sounds are received beyond the place from which they are sent.” The Transmit Clause “makes clear that an entity that acts like a CATV system itself performs” (emphasis added) even though “it simply enhances viewers’ ability to receive broadcast television signals”.[iv]

Rather than merely supplying equipment, Aereo’s activities were “substantially similar” to those of CATV systems “that Congress amended the Act to reach.”  Even if Aereo’s equipment may “emulate equipment a viewer could use at home,” the same was true of the CATV companies targeted by the 1976 amendments, to which Aereo bore an “overwhelming likeness.”  The Court stated that the “sole technological difference between Aereo and traditional cable companies” was that Aereo viewers selected particular programs to “watch” instead of receiving a flowing retransmission of an entire broadcast day.  In the Court’s view, this was not a “critical difference” because subscribers of cable systems also decide what programs to display.

Having decided that Aereo “performed” copyrighted programs without a license, the Court next determined that those performances were “public” within the meaning of the Transmit Clause and therefore infringing.  In light of the Act’s purpose, Aereo’s “technological differences” from cable systems were merely “behind-the-scenes” delivery methods that made no difference:  Aereo’s “commercial objective” was the same as that of cable companies and from a subscriber’s perspective, whether the programs arrived via “a large multisubscriber antenna or one small dedicated antenna” or “simultaneously or after a few seconds’ delay” or “directly or after a personal copy is made” was all irrelevant.   If Aereo could sidestep the Act’s purposes by these means, so could cable companies, which would thwart the intent of Congress.  Moreover, the Transmit Clause suggests that an entity may transmit a public performance through “multiple discrete transmissions” of the same work to different recipients at different times and locations, just as Aereo was doing.  The Court was particularly unimpressed by Aereo’s use of distinct data files to send “personal copies”; Aereo was still transmitting particular television programs “to a large number of people who are unrelated and unknown to each other” – that is, to the public.

 

The Dissent     

Justice Scalia’s dissent disagreed with the majority’s view that Aereo, as opposed to its subscribers, performs programs because Aereo “does not make the choice of content.”  He criticized the majority for relying on a shaky syllogism: (1) Congress amended the Copyright Act to overrule Fortnightly and Teleprompter; (2) “Aereo looks a lot like a cable system”; and therefore (3) Aereo performs.  He found a “trio of defects” in this reasoning:  First, he disapproved of the majority’s reliance on “snippets of legislative history.”  Second, unlike the majority, he discerned “material differences” between Aereo and the cable systems at issue in Teleprompter and Fortnightly, which not only “captured the full range of broadcast signals and forwarded them to all subscribers at all times,” but also – by the time of Teleprompter – began “selecting and importing distant signals, originating programs [and] selling commercials.”  Thirdly, the majority rejected “settled jurisprudence” that “applied the straightforward bright-line test of volitional conduct directed at the copyrighted work.”  Specifically, in Fortnightly and Teleprompter, the cable systems “took affirmative, volitional steps” to put programs at subscribers’ disposal, but “the same cannot be said of the programs available through Aereo’s automated system.” 

The dissent also criticized the Court for “provid[ing] no criteria for determining when its cable-TV-lookalike rule applies.”  Must a defendant offer access to live TV?  Justice Scalia thought not because then Aereo could do “exactly what it is doing right now” as long as it built in some meaningful time-shifting.   Must a defendant operate “an integrated system substantially dependent on physical equipment that is used in common by [its] subscribers”?  He thought not, because “that approach … would sweep in Internet service providers and a host of other entities that quite obviously do not perform.”  Must a defendant’s service “capture and store live broadcasts at a user’s discretion”?  This is what the “record” function of Aereo does, to be addressed on remand by the lower courts, and in Justice Scalia’s view, “it is impossible to know how the issue will come out under the Court’s analysis, since cable companies did not offer remote recording and playback services … in 1976.”[v] 

The majority, which was not alarmed by these prospects, attempted to guide lower courts by highlighting what it hadn’t decided as well as the narrow compass of what it did decide.  The Court noted that it did not determine whether “different kinds of providers in different contexts also ‘perform'” under the Transmit Clause. The Court observed that the term “the public” was only interpreted by it to mean “a group of individuals acting as ordinary members of the public who pay primarily to watch broadcast television programs, many of which are copyrighted.” Further, the term did not extend to “those who act as owners or possessors of the relevant product,” and the majority expressly reserved deciding “whether the public performance right is infringed when the user of a service pays primarily for … the remote storage of content.” (This might preserve services that charge fees for storing and streaming copies of audiovisual works that its subscribers have paid for.)  Also, public performances only embrace transmissions “to a substantial number of people outside of a family and its social circle” and exclude selling DVDs by mail.

While holding that the Transmit Clause applied to “equivalents” of cable companies, the majority expressed confidence that their “limited holding” would not “discourage or … control the emergence or use of different kinds of technologies.” They observed that courts “often apply a statute’s highly general language in light of the statute’s basic purposes.”  Further, the doctrine of fair use could “help to prevent inappropriate or inequitable applications” of the Transmit Clause.  And while those who provide “cloud computing” and remote storage DVRs must “await a case in which [those technologies] are squarely presented,” “interested entities … are of course free to seek action from Congress.”

Conclusion

Justice Scalia may be right:  until the scope of the majority’s decision is fully understood, those who now offer automated systems won’t know whether they are “governed by the traditional volitional-conduct test” or “get the Aereo treatment.”  And new players in this space “will have to take their chances.”  But apart from seeking action from Congress or distributing DVDs through the mail, technology companies recently were offered an alternative by Leslie Moonves, chief executive of CBS: “We are not against people moving forward and offering our content online, and all sorts of places, as long as it is appropriately licensed.”[vi]