American Broadcasting Companies, Inc. v. Aereo, Inc.

Facts

Respondent Aereo allows its subscribers to watch and record locally-broadcast television programs over the internet for a monthly fee. Aereo provides the functionality of a television, a Digital Video Recorder (“DVR”), and a slingbox. A user can “watch” a program currently being broadcast with a seven-second delay, or “record” the program for later viewing. Users can watch their programs on a number of devices, including computers, mobile devices, and tablets. Aereo retransmits the content without a license and without paying a fee to copyright holders.

Aereo’s facility in Brooklyn, New York houses large antenna boards, each containing eighty individual, dime-sized antennas. When an Aereo user records or watches a program, that user is assigned an antenna, with no two users ever sharing the same antenna simultaneously. Each antenna creates a unique copy of the program. Thus, when a user watches a program, the user is seeing an individually-created copy on their device. Each copy is accessible only to that user, and no other Aereo subscriber can ever view that particular copy.

The American Broadcasting Company (“ABC”) and other major broadcasters sued Aereo for copyright infringement, and moved for a preliminary injunction in the Southern District of New York. ABC sought to prevent Aereo from transmitting television programs while the programs were still being broadcast. Although ABC established a likelihood of suffering irreparable harm without an injunction, the district court concluded that ABC did not demonstrate a likelihood of success on the merits or a balance of hardship tipping in their favor. The court denied ABC’s motion for preliminary injunction.

On appeal, a three-judge panel for the Second Circuit Court of Appeals affirmed the district court. The court pointed to the language of the 1976 Copyright Act, which requires a copyright owner’s permission for “public performances” of their work. In concluding that Aereo’s broadcasts are not “public performances,” the court said that Aereo’s system is similar to the RS-DVR system that the Second Circuit previously validated in Cartoon Network, LP v. CSC Holdings, Inc. and Cablevisions Systems Corp. As in Cablevision, the court held that the potential audience for each Aereo transmission is the single user to whom each antenna is assigned. Like the district court, the Second Circuit held that Aereo’s transmission of unique copies of television programs did not add up to a “public performance,” but instead to thousands of private performances. The court concluded that the plaintiffs did not demonstrate a likelihood of prevailing on the merits in their copyright infringement action. In dissent, Judge Chen called Aereo’s system a “Rube Goldberg-like contrivance” that attempts to avoid the reach of copyright law through legal loopholes. The Supreme Court granted certiorari on January 10, 2014.

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Discussion

This case presents the Supreme Court with the opportunity to determine whether a company that retransmits television broadcasts to paid subscribers without appropriate licensing violates the Copyright Act. ABC and other major networks argue that Aereo’s unauthorized retransmissions are the type of copyright infringement that Congress intended to prevent with the Copyright Act. Aereo argues that it merely facilitates the private viewership that the Copyright Act allows. The Supreme Court’s determination will have broad implications for the business model of broadcast television and the rapidly-changing distribution models for copyrighted content.

ECONOMIC CONSEQUENCES OF VALIDATING AEREO’S TECHNOLOGY

In support of ABC, the Screen Actor’s Guild argues that allowing unlicensed streaming of broadcast content harms the public by destroying the economic incentives to create technological innovations and quality television programming. Additionally, ABC argues that Aereo threatens the very innovation that copyright protection is meant to foster. If the Supreme Court affirms the lower courts, ABC contends, retransmission and advertisement fees will sharply decline, making broadcast television a less financially attractive medium for distributing copyrighted content. The United States adds that networks will have no option but to move their content to paid cable networks, adversely impacting millions of households who rely on free television programming as a principal source of information and entertainment. Two major sports leagues, the National Football League ("NFL") and Major League Baseball ("MLB"), argue that although Aereo currently limits its services to retransmitting local programming, upholding the Second Circuit’s interpretation of the Copyright Act could allow any user in the world to stream programming from anywhere, putting the U.S. in violation of its international obligations.

In support of Aereo, the Computer and Communications Industry Association ("CCIA") and Mozilla argue that adopting ABC’s position would endanger the emerging cloud computing industry, which has the potential to create 685,000 jobs over the next five years and generate $1.1 trillion in revenue per year by 2015. Furthermore, they argue, a decision against Aereo could imperil socially beneficial innovations, like those of Google and Amazon, that build on the efficiencies promised by cloud computing. Similarly, various independent broadcasters contend that services like Aereo’s enable smaller broadcasters to provide broader television access to lower income viewers that cannot afford cable or satellite subscriptions.

IMPACT ON BROADCAST TELEVISION

The National Association of Broadcasters, in support of ABC, argues that this case could jeopardize the entire compensation model for broadcast television. Specifically, the Association notes that a ruling against ABC could dry up the revenue stream paid to networks for the right to retransmit their programming, and the advertising revenues that support free television. Aside from these fees, the NFL and MLB express concern about the consequences of allowing Aereo’s business model, because they stand to lose billions in retransmission and licensing fees, forcing them to move sports games and other programs exclusively to cable. Additionally, the Leagues contend, Aereo could undermine the networks’ efforts to allow users to watch their programming, such as the Super Bowl, from the network’s own internet channels. Finally, Petitioners argue that if Aereo prevails, nothing will stop other cable and satellite companies from devising their own Aereo-like systems to avoid paying retransmission fees and achieve the same results.

In contrast, the Electronic Frontier Foundation ("EFF") argues that Aereo’s versatile and creative technology will expand viewers’ access to broadcast television, increasing revenues and allowing broadcast programming to better compete against cable programming. The EFF contends that if Aereo’s business model cannot bring more value to its customers than other video technology providers can, then Aereo and similar technology will disappear from the market without court intervention. Finally, the CCIA and Mozilla contend that because Congress could not foresee the technological and legal problems of Aereo-like technology when the Copyright Act was passed, Congress, not the Court, is best equipped to balance the competing societal interests at stake and narrowly address ABC’s concerns.

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Analysis

The Court must determine whether the Copyright Clause of the Constitution allows a company to transmit television programs to its paying viewers over the internet without the permission of the broadcasting network being viewed. ABC argues that Aereo’s technology clearly infringes their public performance rights. On the other hand, Aereo argues that they have not publicly performed copyrighted works because their technology only enables private, lawful performances. ABC argues that the Second Circuit’s decision was based on an incorrect reading of the transmit clause of the 1976 Copyright Act that clearly disregards Congress’s intent. Aereo argues that copyright policy supports affirming the Second Circuit’s decision.

THE MEANING OF “PUBLIC PERFORMANCE”

ABC argues that Congress clearly intended to prevent companies from retransmitting broadcasts without permission. ABC reasons that the Copyright Act unambiguously states that displaying a work publicly means to “transmit or otherwise communicate a performance . . . of the work . . . to the public, by means of any device or process.” ABC thus argues that the fact that Aereo transmits broadcasts to subscribers’ homes is irrelevant because Congress broadly included performances that were either received “at the same time or at different times.” Moreover, ABC asserts that even though the Court has previously concluded that retransmitting over-the-air broadcasts were not public performances because there were already made free to the public, Congress later rejected this determination in revisions of the transmit clause. ABC contends that the legislative history of the transmit clause shows that Congress believed a retransmission service is offering access to content, not just equipment, so it must be authorized by the copyright holder to do so. ABC states that Congress intended the clause to encompass all technology (even that which is not yet known) that transmits copyrighted works to the public. Additionally, ABC contends that Aereo’s arguments neglect the sole purpose of the Copyright Act, namely to encourage individuals to advance the public welfare through authors’ innovation. ABC further contends that Aereo’s business model is solely based on the unauthorized exploitation of copyrighted broadcasts that it retransmits to subscribers for a lower fee. ABC fears that the transmit clause will be rendered useless if companies like Aereo can find simple ways to circumvent the statute.

Aereo argues that it does not “publicly” retransmit content because it uses individual antennas to transmit to private parties in their own homes. Aereo’s equipment uses an individual antenna connected to a DVR to record a program only when the subscriber selects “watch” or “record.” Additionally, this program is not saved permanently, so the transmission made by the subscriber is generated from the individual recording of the program and not the broadcast itself. The Second Circuit determined that the relevant performance to determine if a work is publicly performed is the transmission itself; therefore, Aereo contends that its individual transmissions are private performances. Aereo further argues that video-on-demand companies such as Netflix and Hulu would not be affected by this determination because they transmit performances to the public unlike Aereo’s acts. Aereo argues that they cannot be held liable for infringement because Aereo’s equipment simply responds to subscribers’ requests. Moreover, Aereo maintains that they should not be held liable for copyright infringement because they are not directly engaged in infringing conduct. At most, Aereo contends that their conduct could only be liable for contributory infringement. Moreover, Aereo argues that the government’s incorrectly asserts that Congress intended to impose direct liability on any company that offers technology to facilitate over-the-air broadcasts. To the contrary, Aereo asserts that when a cable company transmits frequencies to a user, the user’s directions dictate Aereo’s data stream.

CONGRESS’S INTENDED COPYRIGHT POLICY

ABC argues that the Second Circuit’s decision was based on a flawed reading of the transmit clause that cannot be reconciled with Congress’ intent or the text of the statute. Specifically, ABC contends that the Second Circuit violated a basic canon of statutory construction by rendering part of the statutory language superfluous. In ABC’s view, the Second Circuit ignored Congress’s language that states that transmitting “to the public” regardless of “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.” ABC contends that this was meant to broaden the statute, but that the Second Circuit used it to limit the statute to mean a performance is communicated to the public if multiple people can receive a particular transmission of a performance at the same time. The court’s reading, ABC contends, creates a gaping hole in copyright law, which allows companies to retransmit any broadcast they wish, that will threaten the existence of public broadcast television. In turn, ABC argues, affirming the Second Circuit would significantly harm the quality and quantity of broadcast television because broadcasters will reconsider publicizing these performances for free in the first place. By allowing Aereo to retransmit unauthorized copyrighted performances without the copyright holder’s input on the timing and nature of the distribution, ABC believes that the public performance right of every copyright holder is at stake.

Aereo asserts that copyright policy directly supports affirming the Second Circuit’s reading of the Copyright Clause. Aereo argues that if ABC’s argument is accepted, cloud computing would be gravely threatened because providers would be apparently infringing on copyright laws when any two users shared and played a song. For a cloud computing company to avoid liability because of its customers’ actions, the company would have to monitor the content of all its customers. Additionally, Aereo argues that copyright policy should not require royalties for consumers’ viewing of local programming. Instead, Aereo contends, a third party that retransmits copyrighted content, even to the public, does not have to pay copyright royalties under § 111(d) and § 122(a) of the Act. Furthermore, Aereo argues that copyright law is meant to reward creators for contributing creative products to the public; thus, forcing consumers to pay for a second use of an authorized performance may be implied. Aereo states that the FCC’s Cable Act, not copyright law, mandates retransmission fees by cable systems, so they would not be affected by this ruling.

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Conclusion

The Supreme Court will decide whether a company that retransmits programming to paid subscribers over the internet without appropriate licensing violates the Copyright Act. ABC and other major networks argue that Aereo’s unauthorized retransmissions are the type of copyright infringement that Congress intended to prevent with the Copyright Act. Aereo argues that it merely facilitates the private viewership that the Copyright Act allows. The Court’s determination will have broad implications for the business model of broadcast television and the rapidly-changing distribution models for copyrighted content.

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