June 26, 2014
By: Kollin J. Zimmermann
On June 25, 2014, the U.S. Supreme Court issued its long-awaited decision in American Broadcasting Companies, Inc., et al., v. Aereo, Inc. The case involves a lawsuit brought by ABC and other television producers, marketers, distributors, and broadcasters (collectively, “ABC”) against Aereo, a company that offers broadcast television programming to subscribers via the Internet for a monthly fee.
Aereo operates by using thousands of dime-sized antennas housed in a central warehouse. When a subscriber goes online and selects a show to watch, one of Aereo’s servers designates a single antenna to that subscriber, tunes it to receive the over-the-air broadcast of the show selected, copies and converts the broadcast into data that can be transmitted over the Internet, and streams the data to the subscriber’s Internet-connected television, computer, tablet, or smart-phone.
ABC sued Aereo for copyright infringement and sought a preliminary injunction, arguing that Aereo was infringing its exclusive right to “perform” its copyrighted works “publicly.” Aereo successfully opposed the preliminary injunction at both the district court level, and before the Second Circuit Court of Appeals. Aereo’s defense was based on two main arguments. First, Aereo argued that it does not “perform” the copyrighted works at issue because the subscribers, not Aereo, select which programs they want to watch. Aereo is merely an intermediary that follows the instructions of the subscriber and provides the content requested. As such, Aereo argued, it has not “performed” any copyrighted works within the meaning of the Copyright Act.
Second, Aereo argued that even if it does “perform” the copyrighted works, it does not do so “publicly” because each subscriber is connected to only one specified antenna, and each transmission from each antenna goes to only one specified subscriber. Thus, any performance of a copyrighted work is done so “privately” to an individual subscriber, as opposed to “publicly” to multiple subscribers or to a large group or audience.
In a 6-3 decision written by Justice Breyer, the Supreme Court rejected Aereo’s arguments and sided with ABC. The Court’s analysis was based largely on the historical foundation of the Copyright Act of 1976. The Court explained that Congress amended the Copyright Act in 1976 primarily to overturn two prior Supreme Court decisions holding that “community antenna television systems” (the precursors of modern cable TV systems) were outside the scope of the Act, and therefore were not liable for copyright infringement for transmitting the broadcasters’ copyrighted television shows to people’s homes. As a result of the 1976 amendments, cable systems fell squarely within the scope of the Copyright Act, and the relationship between cable providers and broadcasters became highly regulated by a compulsory licensing scheme.
In light of this historical context, the Supreme Court held that the subtle technological differences in how Aereo operates were insufficient to overcome the practical implication that Aereo was for all intents and purposes a traditional cable system. As the Court put it, “Congress would as much have intended to protect a copyright holder from the unlicensed activities of Aereo as from those of cable companies.” Thus, given Congress’ intent for the Copyright Act to govern such systems, Aereo’s conduct constitutes a violation of the “public performance” right.
Notably, the Court made a significant effort to ensure that its opinion would not be read too broadly. A key concern of Aereo and many of its supporting amici was that the Court’s decision would negatively affect other industries and hinder technological development, particularly with respect to cloud computing. The Court addressed this concern by stating that its holding was limited to the specific facts at hand. As the Court explained, “[w]e agree that Congress, while intending the Transmit Clause to apply broadly to cable companies and their equivalents, did not intend to discourage or to control the emergence or use of different kinds of technologies. But we do not believe that our limited holding today will have that effect.” The Court concluded, “[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.” Thus, the silver lining for those in the technology industry is that lower courts will likely be hesitant to expand the Supreme Court’s holding beyond the limited scope in which it has been applied here.
Justice Scalia, writing for the dissent, explained that ABC brought claims for direct and contributory infringement of the “public performance” right. At issue on this appeal was only whether Aereo committed direct infringement of the public performance right. As Scalia states, “The Networks’ claim is governed by a simple but profoundly important rule: A defendant may be held directly liable only if it has engaged in volitional conduct that violates the Act.” Thus, Scalia argues, because Aereo is merely an automated intermediary through which the subscriber selects which programs to watch, Aereo does not commit the “volitional” act necessary to be held liable for direct infringement. ABC’s claim, therefore, should have been remanded to the lower court to proceed under the proper legal framework of contributory infringement. According to the dissent, the Court’s decision to squeeze Aereo’s conduct into the newly created “looks-like-cable-TV” rule will create ambiguity and confusion for the lower courts and should have been left for Congress to decide.
In closing, the Supreme Court reversed the Second Circuit’s decision and remanded the case to the district court to proceed on the merits. A full copy of the Supreme Court’s opinion can be found here.