The Two Court Rulings Rocking Aereo, FilmOn

In today’s Legal Memo, I update my Aug. 1 column, “The 411 On Aereo’s Many Legal Challenges”.

Two major new court rulings have since rocked the Aereo/FilmOn X legal landscape.  

Last month, I focused on Aereo and its competitors, such as FilmOn X (aka Barry Driller), and others using similar technology. They are abbreviated here as “URs”, for “unauthorized retransmitters.” Without consent from or compensation to TV broadcasters, URs use multiple tiny antennas, one for each subscriber, to capture over-the-air TV broadcast signals and retransmit them to paying customers by Internet streaming to consumer devices. URs also offer digital video recorder (DVR) options enabling customers to pause broadcast programs or record them for later viewing.

That column also summarized several resulting, and still pending, lawsuits brought by broadcasters, programmers, a UR and others on copyright and other grounds. I compared the URs to the startup period of the cable industry, which at first, also retransmitted broadcast signals to paying customers without broadcaster consent or payment.

Back then, the courts ruled mainly against copyright protection for the broadcasters. In response, through the Copyright Act of 1976, Congress and the FCC required cable operators to have broadcast permission and compensation via the must carry/retransmission consent regime. 

Public performance?

The key copyright law issue now is whether the new UR transmissions of broadcast signals are “public performances” of broadcast property.  If there is a public performance, copyright law applies, and the URs cannot use the signals without broadcaster consent and the right to compensation. The federal copyright law’s  “transmit clause,” defines public performance as “… to transmit or otherwise communicate a performance … to the public, by means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times.”

In current litigation, several courts have come down on opposite sides of the public performance issue. Some courts have found no public performance because, although the URs offer their services to the entire public and some are expanding aggressively to achieve nationwide coverage, each individual antenna can only be used by one subscriber at a time. Therefore, each transmission is to one user rather than the public.

Other courts have held that the TV programs being transmitted to the public is what really matters. Each transmission may be private, but these courts have argued that those antennas are nevertheless networked together so that a single tuner server, router, video encoder, and distribution endpoint can communicate with them all. For example, in the Fox v. FilmOn ruling this month in Washington, D.C., the court endorsed a dissenting opinion in another case that FilmOn technology was “hardly akin to an individual user stringing up a TV antenna on the roof,” and that the federal Copyright Act says it applies to technologies that did not exist when the Act took effect. A court on this side of the debate found that UR technology, such as the thousands of little antennas that are co-located and offer the same broadcast programs, are not functionally necessary.

Ground-shaking New Rulings

The two new court rulings this month in D.C. and New York hold that the transmissions are public performances. These are potentially game-changing decisions, though appeals of both could take a year to conclude.

Fox Television Stations, Inc., et al., v. FilmOn X LLC, et al., issued Sept. 5 by the U.S. District Court in Washington, DC

• This is the first time that a court in the important D.C. federal circuit has addressed the new UR copyright issues. The District Court held resoundingly in favor of the broadcasters: “The Copyright Act forbids FilmOn X from retransmitting Plaintiffs’ copyrighted programs over the Internet.” On copyright, the Court said “FilmOn X is in no meaningful way different from cable television companies,” who must obtain prior consent from broadcasters.

• The Court issued a preliminary injunction against FilmOn ordering it to stop operating nationwide, except in the Second Circuit, where a New York Court had ruled earlier in favor of Aereo based on a 2008 decision known as Cablevision. The Second Circuit includes New York, Connecticut, and Vermont.

• In the Sept. 5 D.C. opinion, the court criticized the Cablevision ruling for failing to consider the potential audience of the underlying work rather than the potential audience for each separate mini-antenna transmission. The focus should be on whether the copyrighted work — the TV signal or program — is being transmitted to the public rather than whether the transmission itself is public, the court said.

• The D.C. Court embraced a dissent in the 2008 Cablevision case, which said that the thousands of individual antennas are functionally unnecessary. FilmOn, in its defense, said it followed the Cablevision ruling in designing its technology. However, the Cablevision ruling is binding only in the Second Circuit.  

• FilmOn has already appealed the Sept. 5 decision to the U.S. Court of Appeals for the D.C. Circuit, which has ordered the parties to take preliminary steps by Oct. 21. Ultimately, the Supreme Court may have to resolve the issue.

CBS Broadcasting Inc., et al. v. FilmOn.Com, Inc., Issued Sept. 10 by a U.S. District Court for the Second Circuit, in New York

Other broadcast TV networks are also plaintiffs.  The Second Circuit is also a prominent judicial circuit and handles many copyright law cases. 

• This suit was first brought on Oct. 1 2010. FilmOn launched its service in Sept. 2010. The broadcasters sought money damages and a permanent injunction, ceasing FilmOn operation.

• In July 2012 the networks and FilmOn reached a Settlement Agreement that, (1) required FilmOn and its CEO pay $1.6 million in damages to plaintiffs and agree to a permanent injunction against FilmOn issued by the Court in August 2012; (2) FilmOn would remove “inflammatory videos” from the Internet urging participation in Barry Driller’s California lawsuit against CBS; and (3) extended Court supervision over implementation of the settlement. The injunction shut down FilmOn services. On Aug. 15, oral argument was held about compliance with the Settlement Agreement.

• The Sept. 10 court ruled that FilmOn failed to pay the settlement money except for $250,000 and failed to withdraw its “inflammatory videos” from the Internet. But FilmOn’s recent launch of its video-on-demand service violated the permanent injunction.

• The New York Court found FilmOn and its CEO to be in contempt of court, ordered them to pay the rest of the $1.6 million agreed to, plus interest, costs of collection and attorney’s fees.

The net effect for FilmOn:  FilmOn may not operate now in New York, Connecticut, and Vermont until a Second Circuit Appeals Court decision. That could happen quickly. Future operation in the rest of the country could depend on how the D.C., 2^nd Circuit or another Circuit rules on appeal. In the meantime, FilmOn is barred from operating nationwide, due to the D.C. Circuit District Court injunction.

The net effect for Aereo: No injunctions have issued against Aereo yet. Aereo has announced, but delayed the start dates for its next four markets: Columbus, Cincinnati, Indianapolis and San Antonio. Aereo will likely try to distinguish itself from FilmOn. The recent wins for broadcasters in D.C. and New York may spawn further litigation against Aereo and perhaps other URs.

The net effect for broadcasters:  Two significant wins, especially the Fox D.C. Sept. 5 opinion. The Sept. 10 New York opinion addresses details of the settle agreement, but it doesn’t depart from Cablevision, which was decided in the same court.

Other recent developments: FilmOn has appealed a California preliminary injunction pending in the Ninth Circuit. Oral arguments were made on August 27, there is no appeals ruling yet.  Even if the Ninth Circuit reverses the injunction, there still remains the nationwide injunction issued by the D.C. Circuit.

What’s next?  All of these developments may take more than a year to play out, and it may be up to the Supreme Court to resolve the interpretations of the Copyright Act’s transmit clause. There may be further changes in where the URs can operate legally. Ironically, given that cable and its satellite and fiber optic competitors are required to obtain broadcasters’ prior consent for retransmission of broadcast programming, and pay stations electing retransmission consent, cable and other MVPD’s may well be on the same page as broadcasters as to the Aereos, FilmOns and others of their ilk.  Those new services could draw viewers away from cable and other MVPDs as will as from broadcast stations.

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 in communications industries. He can be reached at 1200 New Hampshire Ave., N.W., Suite 800, Washington, D.C. 20036-6802; [email protected]; or 202-776-2523. Read more of Berg’s Legal Memos here. 

Norry Sierra Harn, a legal intern at Berg’s firm, contributed to this article. She expects to have her Juris Doctor degree in 2015 from the Georgetown University Law Center.  Her email is[email protected], telephone 562-219-1212.

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