Have you ever thought about “cutting the cord,” as in the cable cord?
In the past, “cutting the cord” may have been an effort to lead a simpler, less technologically dependent life. Now, the movement stems from frustration with cable and satellite television providers for rising costs and having to pay for 300+ channels when you maybe watch 10 of them. An abundance of new technological options involving Internet streaming — from Netflix, Amazon Instant Video and Hulu to Apple TV, Google Chromecast and Roku to Simple.TV, Tablo and…Aereo — have cropped up to make it easier for consumers to “cut the cord,” while still being able to enjoy their favorite television programming. Last month in American Broadcasting Cos. v. Aereo, Inc., however, the Supreme Court nipped in the bud (or did it?) one such cord-cutting option based on an application of copyright law. Could others also be impacted?
For as little as $8 a month, Aereo offered its subscribers broadcast television programming over the Internet, almost simultaneously as the program was being broadcast. It also offered a DVR-like component too, although that feature was not before the Court. Aereo paid no licensing fees to the copyright holders of the television programming being streamed — enter lawsuit by television producers, marketers, distributors and broadcasters.
For those of you not familiar with copyright law, perhaps a bit of a primer is necessary. Under copyright law, a copyright owner is given certain exclusive rights. The exclusive right at issue in Aereo was the right “to perform the copyrighted work publicly.“ 17 U.S.C. §106(4) (emphasis added). To “perform” a work means “to recite, render, play, dance, or act it, either directly or by means of any device or process or, in the case of a motion picture or other audiovisual work, to show its images in any sequence or to make the sounds accompanying it audible.” §101.
To perform or display a work “publicly” means “(1) to perform or display it at a place open to the public or at any place where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered; or (2) to transmit or otherwise communicate a performance or display of the work to a place specified by clause (1) or to the public, by means of any devise 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.” §101.
Clause (2) cited above is called the “Transmit Clause” and was added to the Copyright Act when it was amended in 1976. Legislative history indicates that the intent behind the Transmit Clause was to make clear that “a cable television system is performing when it retransmits [a network] broadcast to its subscribers.” H.R. Rep. No. 94-1476, p. 63 (1976). The Transmit Clause was seen as Congressional rejection of two Supreme Court cases narrowly construing the Copyright Act with respect to CATV systems (precursors to modern cable), each case holding that the respective CATV providers did not “perform”. See Fortnightly Corp. v. United Artisits Television, Inc., 392 U.S. 390 (1986); Teleprompter Corp. v. Columbia Broadcasting System, Inc., 415 U.S. 394 (1974). At the same time, Congress also created the Section 111 compulsory license framework, which sets out the conditions under which cable systems may retransmit broadcasts.
Some of you may see this as a no brainer — Aereo was clearly infringing. However, the way the Aereo system was technologically set up was arguably to exploit a perceived loophole in the Transmit Clause (although in response to questioning during oral argument, Aereo stated that there were in fact technological reasons for the way it was set up).
Behind the technological veil, Aereo owned warehouses in 11 cities across the U.S., with each warehouse containing thousands of dime-sized antennas. Each antenna was dedicated to one subscriber, and one subscriber alone. When a subscriber wanted to watch a show that was currently being broadcast, the subscriber would visit the Aereo website and select a show to view from a list of the available local programming. Then, the Aereo server would select that subscriber’s antenna and tune it to the over-the-air broadcast carrying the show, and the signals received would be translated into data that could be transmitted over the Internet. The Aereo server would then save the data in a subscriber-specific folder on Aereo’s hard drive (creating a subscriber’s “personal” copy of the program, again, not addressed by the Court), and after several seconds of programming had been saved, begin streaming the saved copy of the show over the Internet to the subscriber’s Internet connected device (e.g., laptop, smart phone, iPad, etc.).
In short, Aereo argued that the “public” requirement was not met — as each transmission from each dime-size antenna was only to one individual. This argument had previously been successful in a Second Circuit case concerning remote-storage DVRs. See Cartoon Network LP, LLLP v. CSC Holdings, Inc., 536 F.3d 121 (2d Cir. 2008) (cert. denied) (“Because each RS-DVR playback transmission is made to a single subscriber using a single unique copy produced by that subscriber, we conclude that such transmissions are not performances ‘to the public,’ and therefore do not infringe any exclusive right of public performance.”) Aereo also argued that it was merely an equipment provider, and was not “performing.”
However, in a 6-3 opinion, the Supreme Court for the most part applied the duck test: If it looks like cable, acts like cable and sounds like cable, then it falls within the Transmit Clause. The Court was not impressed by the technological differences, stating bluntly, “Viewed in terms of Congress’ 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 objectives any different from that of cable companies. Nor do they significantly alter the viewing experience of Aereo’s subscribers.”
The Court did, however, make a point to respond to all the “cloud is falling” arguments, stating that “[q]uestions 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,” further referencing that concerned commercial actors could always seek action from Congress.
Overall, the Aereo decision may have stopped one avenue of “cord-cutting,” but probably did not stop the tide of technological innovation aimed at meeting consumer demand for “a la carte” television programming. Inevitably, there will be more lawsuits to explore the contours of the Aereo decision, and the application of copyright law to other technologies, such as cloud computing and remote-storage DVRs. One thing to consider, should this be left to the Supreme Court, with justices who refer to “the Dropbox” and “the iCloud” and seem uncomfortable with aspects of modern technology (see oral argument transcript), or should Congress maybe take this as an invitation to update the, now almost 40-year old, Copyright Act of 1976 to squarely address these new technologies?
As a post-script, despite arguing throughout the course of its journey through the courts that it was not a cable company (a point that seemed to be agreed on by both sides), in the aftermath of the decision, Aereo has now done an about face and has argued that it is a cable company and entitled to avail itself of the Section 111 compulsory license. Time will tell how this approach turns out, but note that the Supreme Court never said that Aereo was in fact a cable company — only that its activities were substantially similar to one. Plus, does Aereo really want to be a cable company, subject to all the rules and regulations that brings with it, including negotiating with the same broadcasters it was just sued by over retransmission fees? In the end, the consumer might end up the same place it was before — paying high fees for unwanted channels.