Supreme Court to Aereo: You’re no different to cable TV – and you just lost

The Supreme Court of the United States this week defused the unexploded bomb that the country’s over-the-air broadcasters have been walking around on their way to work every day, deciding that the Internet redistribution of broadcast content by Aereo Inc., using a centralized array of individual antennas for each consumer to take the signals off-air, does infringe broadcaster copyright. The Court made it clear that subtle technological differences between the way Aereo works and the way cable TV systems work were not sufficient to treat Aereo differently to how cable TV is treated under copyright law. The ruling noted that the U.S. Congress had amended the Copyright Act in 1976 to ensure CATV (the precursor to modern cable systems) were covered and yesterday’s verdict outlined the technical reasons why Aereo, as far as the law is now concerned, is like a cable service.

Justice Breyer delivered the opinion that Aereo is infringing the exclusive right of broadcasters to perform the copyrighted work publicly and the exclusive right “to transmit or otherwise communicate a performance of the copyrighted work… 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.”

The judge said there were two key questions that needed to be answered. First, does Aereo ‘perform’ in the sense of the legal definition, and if so, does it perform publicly? The arguments around the first point hinged on whether Aereo “transmits… a performance” when a subscriber watches a show using its system, or whether it is only the subscriber who transmits the performance.

Aereo has been using similar core arguments – along the lines that the service provider is just a passive equipment provider/enabler and not a ‘performer’ of the copyrighted material – that were used successfully by lawyers in 1968 when the Supreme Court decided that CATV was not covered by the Copyright Act as it existed then (Fortnightly Corp. vs United Artists Television). In the 1974 Teleprompter Corp. vs Columbia Broadcasting Systems case the court maintained its position in respect of long-distance redistribution of broadcast signals, accepting that the cable systems were effectively ‘viewers’ of the content rather than ‘performers’ under the law.

These cases were noted in yesterday’s ruling, which went on to point out how the U.S. Congress then amended the Copyright Act in 1976 to ensure that cable TV was covered by the Act. New language was applied to ensure that the technical process of getting content to someone could be interpreted as a performance. The new wording stated that to ‘perform’ an audiovisual work means to ‘show its images in any sequence or to make the sounds accompanying it audible’.

In many ways, the Aereo case was a modern re-enactment of the same battles, only this time with streaming over the Internet and some other modern twists like store-then-stream and one-to-one sessions rather than one-to-many. The Court ruling says this history “makes clear that Aereo is not simply an equipment provider. Rather Aereo, and not just its subscribers, performs (or transmits). Aereo’s activities are substantially similar to those of the CATV companies that Congress amended the Act to reach.”

It adds: “Aereo’s equipment may serve a ‘viewer function’; it may enhance the viewer’s ability to receive a broadcaster’s programmes. It may even emulate equipment a viewer could use at home. But the same was true of the equipment that was before the Court and ultimately before Congress in ‘Fortnightly and Teleprompter’ [the two CATV cases].”

This week’s ruling then dismissed some technical subtleties as grounds to treat Aereo as a special case. The CATV systems transmitted constantly and sent continuous programming to each subscriber’s television set. In contrast, Aereo’s system remains inert until a subscriber indicates that she wants to watch a programme. Then, in automatic response to the subscriber’s request, the Aereo system activates an antenna and begins to transmit the requested programme. One judge who dissented the verdict argued that as subscribers and not Aereo select the copyright content that is ‘performed’,  Aereo is no more liable for this usage than a photocopying shop that lets people photocopy copyrighted books from the library.

The Court decided that this sole technological difference between Aereo and cable companies does not make a critical difference, and that the “copy shop argument makes too much out of too little.” It adds: “The subscribers of the Fortnightly and Teleprompter cable systems also selected what programmes to display on their receiving sets…and could choose any of the programmes he wished to view by simply turning the knob on his own television set.”

The Court ruling says the fact that cable signals lurked behind the screen ready to emerge at the turn of a knob, whereas Aereo signals pursue their ordinary course of travel through the universe until today’s turn of the knob – a click on a website – activates machinery to intercept and reroute them over the Internet, does not change anything. “This difference means nothing to the subscriber. It means nothing to the broadcaster. We do not see how this single difference could transform a system that is, for all practical purposes, a traditional cable system. We conclude that Aereo is not just an equipment supplier and that Aereo performs.”

The second big question was whether Aereo performs the broadcaster’s work publicly, within the meaning of the Transmit Clause of the Copyright Act. Aereo denied that it satisfied the definition of ‘transmitting…a performance…of the work…to the public’. As a starting point, the petitioners against Aereo argued that Aereo retransmits a prior performance of their works, whereas Aereo argued that it transmits a new performance created by its act of transmitting. This new performance comes into existence when Aereo streams the sound and images of a broadcast programme to a subscriber screen (the argument goes). The Court did not deny this so focused next on whether Aereo transmitted a performance ‘to the public’.

“As we have said, an Aereo subscriber receives broadcast television signals with an antenna dedicated to him alone, Aereo’s’ system makes from those signals a personal copy of the selected programme. It streams the content of the copy of the selected programme to the same subscriber and to no one else. One and only one subscriber has the ability to see and hear each Aereo transmission. That fact that each transmission is to only one subscriber, in Aereo’s view, means that it does not transmit a performance ‘to the public’.”

The Court then says that in terms of the Act’s purposes, these differences do not distinguish Aereo’s system from cable systems, which do perform publicly. “Viewed in terms of Congress’s regulatory objectives, why should any of these technological differences matter? They concern the behind-the-scenes way in which Aereo delivers television programming to its viewers’ screens. They do not render Aereo’s commercial objective any different from that of cable companies. Nor do they significantly alter the viewing experience of Aereo’s subscribers.

“Why would a subscriber who wishes to watch a TV show care much whether images and sounds are delivered to his screen via a large multi-subscriber antenna or one small reduced antenna, whether they arrive instantaneously or after a few seconds’ delay, or whether they are transmitted directly or after a personal copy is made?

“And why, if Aereo is right, could not modern CATV systems simply continue the same commercial and consumer-oriented activities free of copyright restrictions, provided they substitute such new technologies for old? Congress would as much have intended to protect a copyright holder from the unlicensed activities of Aereo as from those of cable companies.”

There follows a key techno-legal argument, with Aereo claiming that to ‘transmit a performance’ means to make a single transmission. The ruling counters that an entity may transmit a performance through multiple discrete transmissions. “This is because one can transmit or communicate something through a set of actions.” It uses the example of sending a message to your friends irrespective of whether you send separate identical emails to each friend or a single email to all at once.

“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. If the words ‘to transmit a performance’ are limited to a single act of communication then members of the public could not receive the performance communicated ‘at different times’. So the number of discrete communications used to get content to people is not a relevant argument in favour of Aereo.

“We do not see how the fact that Aereo transmits via personal copies of programmes could make a difference. The Act applies to transmissions “by means of any device or process” and retransmitting a television programme using user-specific copies is a ‘process’ of transmitting a performance.”

So the Court decided that when Aereo streams the same television programme to multiple subscribers individually, it should not be viewed differently to if they were sending it to everyone at once. And it decided that it was transmitting to the public on the basis that the sounds and images reach a large number of people who are unrelated and unknown to each other. The Copyright Act does not define ‘the public’ but does specify that an entity performs publicly when it performs ‘at any place where a substantial number of persons outside a normal circle of a family and its social acquaintances is gathered.’

The Court said it did not believe its decision would discourage or control the emergence or use of different kinds of technologies. The ruling makes clear that the interpretation of ‘the public’ does not extend to those who act as owner or possessor of the relevant product. “And 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.” So the Court was keen to note that different arguments could apply when talking about the means to play back copies of content that consumers have already lawfully acquired.

To emphasize the point, the Supreme Court declared that it agrees with the Solicitor General that 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.

Concluding, the Court said it found Aereo’s practices highly similar to those of the CATV systems in Fortnightly and Teleprompter. “And those are activities that the 1976 amendments sought to bring within the scope of the Copyright Act. Insofar as there are differences, those differences concern not the nature of the service that Aereo provides so much as the technological manner in which it provides the service. We conclude that those differences are not adequate to place Aereo’s activities outside the scope of the Act.” The Court thus reversed the contrary judgement of the Court of Appeals.

Aereo has issued a statement from its CEO and Founder Chet Kanojia saying that “the decision to deny consumers the ability to use a cloud-based antenna to access free over-the-air television further eliminates choice and competition in the television marketplace. This is a massive setback for the American consumer.”

“We have said all along that we worked diligently to create a technology that complies with the law, but today’s decision clearly states that how the technology works does not matter. This sends a chilling message to the technology industry. It is troubling that the Court states in its decision that, ‘to the extent commercial actors or other interested entities may be concerned with the relationship between the development and use of such technologies and the Copyright Act, they are of course free to seek action from Congress.’ That begs the question: Are we moving towards a permission-based system for technology innovation?

“Consumer access to free-to-air broadcast television is an essential part of our country’s fabric. Using an antenna to access free-to-air broadcast television is still meaningful for more than 60 million Americans across the United States.  And when new technology enables consumers to use a smarter, easier to use antenna, consumers and the marketplace win. Free-to-air broadcast television should not be available only to those who can afford to pay for the cable or satellite bundle.”

“Justice Scalia’s dissent gets it right. He calls out the majority’s opinion as ‘built on the shakiest of foundations.’ Justice Scalia goes on to say that ‘The Court vows that its ruling will not affect cloud-storage providers and cable television systems but it cannot deliver on that promise given the imprecision of its results-driven rule.’ We are disappointed in the outcome, but our work is not done.  We will continue to fight for our consumers and fight to create innovative technologies that have a meaningful and positive impact on our world.”

One other reaction has been provided by Piksel, the multiscreen and second screen solutions provider, which is calling it a “good day for broadcast networks”. It declares: “In an era in which content is readily accessible everywhere, Piksel strongly believes in content owners and providers’ right to remain in control of the access to and sharing of content on any screen, whether on or off the air.”
 
Alan Wolk, Global Lead Analyst at Piksel, declares: “Aereo was a direct and immediate threat to the content industry’s revenue. Today’s decision hints at the fact that the justices have understood that Aereo was invented to circumvent the retransmission fees that cable and satellite companies pay the TV networks to distribute their content. This may be a setback for Barry Diller and other Aereo investors, but it is certainly a good day for broadcast networks, which will stay assured of their revenue as the TV industrial complex withstands yet another attack on its foundation.

“It is unlikely, however, that Aereo will be the last initiative to bring broadcast TV to the Internet for free, so this remains a fascinating space to continue watching.”
 

Editor’s comment

Good call by the Supreme Court! It just seems fair, regardless of what Aereo says about being a consumer champion. My gut instinct is that this industry has plenty of competition and disruption from indisputably legal new entrant services, so the ‘consumer champion’ argument does not really impress me (looking in from the outside).