LEGAL MEMO BY MICHAEL BERG

Takeaways From The ABC v. Aereo Decision

The Supreme Court’s ruling this week upholding broadcasters’ contention that the Aereo streaming service violated their copyrights was a major victory for the television business. The court majority held that Aereo technology created no critical copyright law differences between it and cable systems, which must have broadcasters’ prior consent and pay for use of their programming. Now, it seems likely that Aereo will press its case in Congress to change the federal Copyright Act to legalize Aereo and, in effect, reverse the Supreme Court.

Two days ago the U.S. Supreme Court ruled for broadcasters, sports leagues and other copyright holders against Aereo in one of the highest-profile legal disputes in recent communications law history. Today I offer observations on that 6-3 ruling in ABC v. Aereo.

Over the last several months I’ve provided background to the new ruling, including most recently on May 2 after I attended the live oral argument in the case. Earlier columns of mine on this topic can be found here.

BRIEFLY, WHAT THE COURT DID

Six of the nine justices (Chief Justice Roberts and Justices Ginsburg, Sotomayor, Kennedy and Kagan) joined the majority opinion by Justice Breyer, which is controlling and is the Opinion of the Court. Justice Scalia wrote a dissenting opinion joined by Justices Alito and Thomas.

The legal question before the judges was whether Aereo violates the Transmit Clause of the U.S. Copyright Act. The Transmit Clause gives a copyright owner the exclusive right to perform the copyrighted work (e.g., a broadcast TV program) publicly. Public performance is defined to include the right to transmit or otherwise communicate a performance of the copyrighted work to the public, by 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 or different times.

The majority opinion held that Aereo infringes this exclusive right because its sale of subscriber access to broadcast programs is a public performance (and that Aereo transmits a performance whenever its subscribers watch a program).

BRAND CONNECTIONS

The majority rejected Aereo’s arguments that it is a mere equipment provider and, that only the customer “performs” the works, and that its convoluted technology (thousands of subscriber-activated tiny antennas stored in warehouses) frees Aereo from Transmit Clause compliance.

The majority held that Aereo technology created no critical copyright law difference between it and cable systems, which publicly perform the broadcast works, must have broadcasters’ prior consent and pay them for use of their programming.

The dissenters noted that they agree with the majority opinion’s feeling that Aereo ought not be allowed. They also said that Aereo should not be directly held responsible for copyright violation, but could be only secondarily. These are somewhat unusual in a dissent that overall takes the position that Aereo does not violate copyright because it is only the Aereo subscriber who “performs” the broadcast programs supplied by Aereo, which provides the broadcast programs for subscribers to select.

Observations on the ruling and related developments:

Dissenters said “undoubtedly there is a performance, the question is who is performing.” To the dissenters, the only question is whether the performances are the product of Aereo’s “volitional conduct.” “They are not,” the dissent says, because the key steps like choosing individual programs are done by the subscriber.

However the subscriber does not design, build, supply to subscribers and maintain the complex system and equipment by which subscribers can select and view broadcast programs, and Aereo collects its monthly subscriptions for its role in that. It’s as if Aereo emulates the ostrich, which I’m told believes that when it buries its head in the sand it can’t be seen. Or, the “elephant in the room” metaphor may apply.

In my Aereo columns, I’ve written that ABC v. Aereo replays many of the legal issues from the time of the start and development of the cable industry. Then, community antenna television (CATV) systems strung wires over hills to sell broadcast signals by subscription — without broadcaster consent or payment to them — to viewers who couldn’t get them over the air because the hill blocked them.

Cable, of course, evolved from that model (though it still delivers broadcast signals to viewers without over-the-air reception). Back then the Supreme Court upheld, twice, the “right” of cable operators to carry broadcast material because, the court said, cable was more like a viewer than a user of copyrighted material. In 1976 Congress updated the Copyright Act to change that. Both the majority and dissenting opinions noted that concerned parties “are of course free to seek action from Congress” (the majority opinion). The dissent seemed to invite that for Aereo.

At this time of congressional deadlock, I doubt that quick action on Capitol Hill will update the Copyright Act, which to most voters (and many members of Congress) is too complex and ethereal to be concerned about.

Technology almost always outpaces the law. But during the oral argument the chief justice and others asked Aereo if there was any reason for the design of Aereo’s technology other than to evade copyright law. Other Justices asked, from the start, why Aereo isn’t just like a cable system with behind-the-scenes technical differences. The majority opinion, in softer and more legalistic language, says essentially those things.

In a prior column I described the oral argument as “turbulent.” Though the turbulence was not directed to both the broadcast and Aereo sides, there was a strong sense in the courtroom that day that many of the justices thought that Aereo’s business operations just don’t pass the copyright smell test.

That sense carries through to the majority (and to a lesser degree the dissenting) opinions. Some oral arguments are not necessarily predictive of how the Supreme Court will rule. In this case, though there were hard questions to both parties, it was mostly Aereo that frustrated the judges.

Much of the judicial concern directed to broadcasters at the argument was about the effect of ruling against Aereo on the “cloud” and other new and future digital technologies.

The majority opinion addresses that head-on by limiting its ruling to “Aereo-like” services and by the assurance that other technologies not yet before the court will be considered case by case: “We cannot now answer more precisely how the Transmit Clause” or other copyright provisions “will apply to technologies not before us. We agree with the Solicitor General [who filed for the U.S. in support of the broadcasters] 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.”

UNANSWERED ISSUES

A downside to the “Aereo-like” limit to the June 25 opinion, as noted by the dissenters (and the majority), is the lack of certainty for entrepreneurs moving forward. This is often a problem because judges must adapt existing copyright law, which tends to change slowly, to new technologies and business models. Some issues still to be resolved are:

  • This week’s ruling emphasizes that Aereo subscribers access programs almost simultaneously with the program itself. Would there be a different result if copyrighted material is ordered for later viewing?
  • Is the public performance right infringed when the user of a service pays mainly for something other than transmission of copyrighted works, such as remote storage of content? The majority opinion raises this point.

AEREO’S PUBLIC REACTION

On Wednesday, the press reported that Aereo CEO Chet Kanojia vowed to “continue to fight for our consumers and fight to create innovative technologies.”

Years ago, a colleague described early CATV as “an industry based on theft.” Congress in effect addressed that in the 1976 revisions to the Copyright Act, including by adopting the Transmit Clause, and the “compulsory license” allowing cable to retransmit broadcast signals with statutory consent and requiring cable systems to pay royalties to broadcast and other copyright owners of broadcast material.

The FCC took steps in the same direction, e.g., it adopted retransmission consent rules after Congress added Title VI — Cable TV — to the Communications Act.

NEXT STEPS IN ABC V. AEREO

It goes back to the Second Federal Circuit courts in New York City for “further proceedings consistent with” the Supreme Court’s reversal of the two Second Circuit courts’ (District Court and Court of Appeals) rulings in favor of Aereo. That could mean grant of the injunction against Aereo sought by broadcasters unsuccessfully there. As of yesterday, press reports were that Aereo had not shut down.

It could also involve proceedings at the District Court on copyright issues other than the Transmit Clause. On those, whoever loses in the District Court could appeal to the higher Second Circuit Court of Appeals.

Aereo seems likely to press its case in Congress to change the federal Copyright Act to legalize Aereo and, in effect, reverse the Supreme Court. A recently reported multimillion dollar investment in Aereo may be part of the war chest for that.

CONCLUSION

The essence of copyright law is to prevent theft of creative works, in order to encourage their creation, innovation and public availability. Article I Section 8 of the Constitution empowered Congress “to promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.” There is no right to build a business using someone else’s property without consent from, and compensation to, that someone else.

This column on TV law, policy and regulation by Michael Berg, an experienced Washington D.C. communications lawyer and principal in the Law Office of Michael D. Berg, appears periodically. He is also the co-author of FCC Lobbying: A Handbook of Insider Tips and Practical Advice. He represents commercial and noncommercial television and radio broadcasters, and others involved in communications, in FCC, Congressional and court matters. He can be reached at Law Office of Michael D. Berg, 1200 New Hampshire Ave., N.W., Suite 570, Washington, D.C. 20036-6802; [email protected]; or 202-776-2523. Read more of Berg’s Legal Memos here.

Note: This column provides general guidance only, and is not a substitute for individualized legal advice for particular situations.


Comments (7)

Leave a Reply

james abels says:

June 27, 2014 at 10:07 am

Hmm.. If congress can be “influenced” to change the law to benefit Aereo, could it be influenced to change the law to actually benefit consumers?

Matthew Castonguay says:

June 27, 2014 at 12:26 pm

@RFburn: Funny!

Keith ONeal says:

June 27, 2014 at 1:00 pm

Does Congress ever make laws that, in effect, reverse a Supreme Court decision? Never gonna happen, Aereo!

    mike tomasino says:

    June 27, 2014 at 1:52 pm

    If you read the article it says that the 1976 Copyright Law did overturn earlier Supreme Court decisions. The question is will Congress act to overturn the 1976 Copyright Law? The court ruled in the way that Congress intended the law in 1976. But, 1976 was a long time ago, and Congress is a different animal.

Warren Harmon says:

June 27, 2014 at 6:03 pm

WE ARE SAFE, HANDS DOWN, Will Diller ever have the influence on Congress that the Content Providers have? THE ANSWER IS NO my friends. . . . Diller and AEREO are DEAD … Now let us go after the other BARRY!

darren shapiro says:

June 27, 2014 at 7:27 pm

Aereo is Not dead Yet !

Mary Goodspeed says:

June 27, 2014 at 8:23 pm

Considering the brand awareness if the Aereo technology is anything more than a a Rube Goldberg machine it may have some scrap value. I could see an investment fund that has well established relationships with broadcasters stepping in and creating an alternative consumer offering as a hedge against Over the top churn the current MVPD’s are experiencing.


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