IP/Entertainment Law Weekly Case Update for Motion Picture Studios and Television Networks -- July 19, 2012

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American Broadcasting Cos., Inc. v. Aereo, Inc., USDC, S.D. District of New York, July 11, 2012
 Click here for a copy of the full decision.

  • District court denies motion of plaintiffs, producers, marketers, and distributors of broadcast television, to enjoin Aereo from continuing that potion of its services that allows subscribers to watch broadcast television content contemporaneously with broadcast, finding Aereo’s service did not constitute public performance of copyrighted content under Second Circuit’s Cablevision decision.

Plaintiffs American Broadcasting Companies, Inc. and other corporate producers, marketers, and distributors of broadcast television, brought two separate lawsuits against Aereo Inc., alleging that its service unlawfully captured broadcast television signals in the New York City area, including at least some corresponding to television programs in which plaintiffs hold the copyrights, and provided them over the internet to Aereo subscribers, directly and contributorily infringing on plaintiffs’ rights under the Copyright Act. Plaintiffs moved for preliminary injunction asserting that Aereo was directly liable for copyright infringement of plaintiffs’ public performance rights in their copyrighted works because of the aspects of Aereo's service that allow subscribers to view plaintiffs' copyrighted television programs contemporaneously with the over-the-air broadcast of these programs and seeking to bar Aereo from continuing to engage in those services. The district court denied plaintiffs' motion, holding that it was bound by the Second Circuit’s 2008 Cartoon Network LP, LLP v. CSC Holdings (Cablevision) to conclude that plaintiffs would be unlikely to succeed on the merits of its public performance copyright claims (but noting that without the Cablevision decision, plaintiffs would have likely prevailed on their motion for a preliminary injunction).

At the outset, the court engaged in a detailed description of Aereo’s services, from both the subscribers and Aereo’s perspectives. Subscribers to the Aereo service log into their Aereo accounts from their computers or internet-connected mobile devices and either watch television programs "live" (more or less contemporaneously, but with the ability to pause, rewind and review) using the "Watch" function or choose to record current or future programs for later viewing, using the "Record" function. In this way, at least from the perspective of the user, the Aereo service functions much like a digital video recorder (DVR) service, particularly a remotely located DVR, although Aereo users access their content over the internet rather than through a cable connection.

In opposition to plaintiffs’ motion for preliminary injunction, Aereo argued that plaintiffs were not likely to succeed on the merits in light of Cablevision, in which the Second Circuit construed the "transmit clause" in the Copyright Act to conclude that the cable company’s DVR service did not constitute a "public performance" of the copyrighted content separate from the cable company’s transmission of content to users because it merely transmitted to a single end user a unique playback copy of content recorded by that end user. The Cablevision court explained that because each RS-DVR playback transmission is made to an individual subscriber using a unique copy produced by that subscriber, these transmissions are not performances "to the public." The use of a unique copy may limit the potential audience of a transmission, making the transmission a private not a public performance. Aereo argued that its service, similar to a DVR service, effectively rents remote equipment to users, allowing them to create and save unique, user-requested copies of content on the company’s hard drives and allowing users to watch or save that content. Because its activities are materially identical to those of the cable company in Cablevision, the Second Circuit's analysis and holding in that case are directly applicable, precluding any public-performance liability. Aereo also argued that because each of its antennas function independently, even if the court were to find that the unique, user-created copies were not legally significant, it should still not issue an injunction because each user is receiving a distinct transmission generated by their own individually rented antenna.

Plaintiffs countered that Cablevision did not control and that the court should view Aereo's system as a technological device or process through which Aereo essentially passed along copyrighted content to the public. Specifically, plaintiffs argued that Cablevision was factually distinguishable because Aereo's subscribers watch programs as they are still being broadcast and are not using the copies Aereo creates for "time-shifting." As a result, these copies do not break the chain of over-the-air transmission. They don't act as copies from which distinct transmissions to end users are made, but merely facilitate the transmission of the original broadcast signal in the same way that a community antenna simply passes along a broadcast signal to the public.

The court disagreed, stating that it was constrained to reject the approach plaintiffs urged, finding that the copies Aereo's system creates were not materially distinguishable from those in Cablevision. Based on the factors the Cablevision court identified as significant in determining that the cable company’s copies "thwarted the plaintiffs' public performance claim," the court concluded that Aereo's system was materially identical to that in Cablevision, suggesting that the copies Aereo creates are as significant as those created in Cablevision. The court found that Aereo' s system creates a unique copy of each television program for each subscriber who requests to watch that specific program, which is saved to a unique directory on Aereo' s hard disks assigned specifically to that user. Each transmission that Aereo's system makes to an individual subscriber is from that unique copy and is made only to the subscriber who requested it. Other subscribers cannot access that copy and Aereo makes no transmissions from that copy except to the subscriber who requested it. The court also noted that, like the Cablevision system, Aereo’s system merely allowed subscribers to enjoy a service that could also be accomplished by the subscribers using equipment available to them in their home, in this case any standard DVR and a Slingbox, and to the extent that Cablevision was premised on an inability to distinguish the company’s system from otherwise seemingly lawful activities, Aereo's system deserves that same consideration.

Plaintiffs argued that Aereo's service was unlike the DVR system in the Cablevision case because the Aereo service allowed users to watch programs close in time to the original broadcast, without any "time-shifting," whereas Cablevision only addressed copies of programs viewed after the original broadcast. The court disagreed, however, noting that the Second Circuit's analysis in Cablevision focused on the significance of the cable company's copies and did not address time-shifting as a factor in its holding. As in Cablevision, Aereo does not allow users to access broadcast television directly, but rather allows a user to record content remotely and to view that recording either later or while the program was being recorded. The court determined that Cablevision's interpretation of "public performance" did not turn on when the user accessed recorded content, but on whether the content originated from a unique copy created by a user. "Public performance" does not depend on how long the user has to wait to access the recorded content or whether the original broadcast has ended before the user accesses the recorded content.

The court likewise rejected plaintiff’s argument that Aereo's service was akin to internet streaming, which courts have previously found results in public performance, because the recording and immediate retransmission of content was similar to "buffering" streaming content. The court distinguished the cases upon which plaintiffs relied, finding that those cases had not considered the impact of the creation of unique copies on whether internet streaming transmissions involve a public performance and therefore did not address the central question in the Aereo case. The court also distinguished "buffer copies," temporary repositories of data for no purpose other than to pass along an identifiable master copy to the user, from the copies Aereo’s service allows a user to create, finding that even the copies created in "Watch" mode are not "buffer" copies, since they are stored for the duration of the user's viewing experience.

Acknowledging that it need go no further in its analysis, once it concluded that plaintiffs were unable to demonstrate a likelihood of success on the merits of copyright claim, the court considered the additional factors bearing on the preliminary injunction, in anticipation of the fact that plaintiffs would seek interlocutory review of the court’s decision. While plaintiffs were able to demonstrate they would suffer irreparable harm in a number of ways, the court concluded that the balance of hardships did not tip decidedly in plaintiffs’ favor. Given its determination that the plaintiffs could not establish a likelihood of success, the court denied plaintiffs’ motion for preliminary injunction.


CBS Broadcasting, Inc. v. American Broadcasting Companies, Inc., USDC, C.D. California, June 21, 2012
  Click here for a copy of the full decision.

  • District court denies CBS’s request for temporary restraining order enjoining production and broadcast of ABC’s reality show The Glass House, holding that CBS could not establish likelihood of success on claims of copyright infringement and specifically finding that CBS would have difficulty establishing that ABC had misappropriated protectable elements from CBS’s Big Brother.

CBS Broadcasting is the producer of the reality TV show Big Brother, in which 12 to 14 contestants live exclusively on a soundstage built to look like a house where all of their daily interactions are videotaped by cameras installed in every room and operating 24 hours a day, and who compete in a series of weekly contests to establish who will be the last contestant remaining after others are "evicted" week by week. CBS brought suit against American Broadcasting Companies, producer of The Glass House, a competing reality show with similar circumstances, and other defendants involved in producing the show, alleging copyright infringement and trade secret misappropriation, as well as other state law claims. CBS asserted that myriad similarities between the two shows, together with the defendants' prior access to Big Brother source material and ABC’s employment of 26 employees who worked on Big Brother, evidenced copying in violation of its copyright in Big Brother. CBS also asserted that its streamlined filming, editing and production schedules and techniques were protectable trade secrets and that defendants had misappropriated these trade secrets by employing the same or similar techniques in the production of The Glass House. CBS sought a temporary restraining order to enjoin the production and broadcast of The Glass House and to order the return of allegedly confidential materials, as well as an order to show cause why the court should not enter a preliminary injunction preventing the show from airing during the pendency of the lawsuit. The district court denied CBS’s requests, finding that CBS could not establish the likelihood of success on either its copyright infringement or trade secrets claims.

In support of its application, CBS asserted that myriad similarities between the two shows, together with the defendants' prior access to Big Brother source material and the networks' employment of 26 employees who worked on Big Brother, including defendant Kenneth Rosen, who became The Glass House’s "show runner," evidenced copying in violation of its copyright in Big Brother. CBS also asserted that its streamlined filming, editing and production schedules and techniques were protectable trade secrets and that defendants had misappropriated these trade secrets by employing the same or similar techniques in the production of Glass House. Defendants opposed the application on the principal grounds that CBS has failed to demonstrate either the requisite "similarity" between the two shows, or that any of the purported trade secrets qualified for protection under California law.

The court denied CBS's motion, finding that while it appeared likely that ABC had engaged in some copying, given the similarity in the concepts of the two shows, CBS was unlikely to be able to establish the copying of any protectable original expressive elements from Big Brother. Noting that no dispute existed that CBS owned copyright interests in the Big Brother show or that the two shows shared some similar elements, and that prior broadcasts of multiple seasons of the show, as well as the employment of several members of The Glass House team on earlier seasons of Big Brother, eliminated any dispute that defendants had access to the copyrighted work, the court framed the issue in terms of CBS’s ability to demonstrate that The Glass House copied protectable elements of Big Brother. The court concluded that CBS could not.

As the court explained, copyright law does not protect abstract and generalized plot ideas or "scenes à faire," only the concrete expressions of those ideas, the specific details or concrete elements that make up the sequence of events and the relationships between major characters. It does not protect the author’s hard work, persistence or tenacity. It protects only his original expression of an idea and not the procedures or processes or methods of creating those expressions. CBS argued that a number of procedures, processes and techniques used to produce Big Brother constituted protectable elements, including the number and placement of cameras used to record the activities of the "cast" of the show; live video steam to the Internet; that contestants are housebound for some or all of the period during which the show is shot; the timing and scope of the post-production work, that the shows air before the final episode has been shot; and the size of the production crew and the array of crew member positions. The court disagreed, finding that while these various procedures and processes might ultimately impact the expressive elements of the show, they were not protectable elements and had to be removed from the substantial similarity analysis.

The court reasoned that the nature of the works – voyeuristic reality TV shows – was critical to the substantial similarity analysis, and that the traditional protectable elements of plot, themes, dialogue, mood, setting, pace, characters, and sequences of events, in which CBS claimed articulable substantial similarity, were largely absent from the shows. Until the cameras begin recording and the action unfolded in the purposefully unscripted and unpredictable way, the shows contain no plot or interaction between the character (in fact, no set characters at all, since the shows have no authors), no dialog, pacing or sequencing of events. The shows have a setting, which the court found "hardly novel," and some general ideas about the structure, but little else. Once the non-protectable processes and techniques elements were eliminated from consideration, the court reasoned, CBS was really seeking copyright protection for what amounted to the format or template that underlies its show – a voyeuristic reality show involving 12 to 14 contestants, competing for a grand prize while being subjected to round-the-clock observation, locked in a sound stage designed to look like a house and subject to periodic contests and challenges to create plot elements and interactions among the housemates that are more interesting, and building drama as, one by one, the contestants are voted off during the weekly broadcast.

The court considered whether CBS’s Big Brother format contained a sufficient number of concrete, expressive elements to merit copyright protection or whether CBS was seeking to protect what amounted to an abstract concept, and concluded that while the Big Brother concept was more concrete than the broad abstraction of "voyeuristic reality programming," it was still general and contained only unprotectable elements. The ideas of placing contestants an environment where their every move is recorded and having them compete for a cash prize are not unique or new to Big Brother, and subjecting them to lesser events and competitions is also a staple of reality TV, "for obvious reasons," according to the court: "competition creates conflict; conflict creates drama; and drama (hopefully) creates interest, viewers and revenue." The court rejected CBS’s various assertions that Big Brother’s use of diverse "characters" – the houseguests – "improvised" dialogue, competition and expulsions, and the expectation that episodes would be about "about trust, betrayal, ambition, disappointment, bonding, competitiveness," constituted unique and protectable elements, noting that these were "nothing but particular tropes of the reality television genre, each of which is too generic to merit copyright protection." The court likewise rejected the argument that all of these elements, together and in combination, supported a finding of "substantial similarity," concluding that CBS's assertion that "wholesale borrowing" of Big Brother’s constituent features "emulates the key expressive features" of the show "still fails to identify the sort of concrete discernible and protectable 'plot,' 'themes,' or 'dialogue' that might give rise to a finding of similarity."

The court also disagreed with CBS’s reliance on the Ninth Circuit's decision in Metcalf v. Bochco, 294 F.3d 1069 (9th Cir. 2002) to support its argument that the selection and combination of any otherwise unprotectable elements are entitled to copyright protection. According to the court, Metcalf confirms that copyright law does not protect ideas, only expressions of those ideas, including the "specific details" of the author’s rendering and the "actual concrete elements that make up the total sequence of events and the relationships between the major characters." The court concluded: "CBS cannot merely cobble together a series of structural and conceptual reality television 'elements' having little, if anything to do with 'specific details' or 'concrete elements' of the artwork, and then point to Metcalf."

Similarly, the court found no likelihood that CBS would succeed on the merits of its misappropriation of trade secrets claim. CBS asserted 14 purported trade secrets allegedly misappropriated by defendants, including Big Brother manuals, which provide instructions to contestants, as well as various filming, editing and production techniques that CBS alleged were unique to Big Brother, and which resulted in its singular feel and success. The court concluded, however, that it had "serious doubts" as to CBS's ability to demonstrate either that the alleged trade secrets qualified for protection or that defendants actively misappropriated them. Specifically, the court found that while some evidence indicated that ABC used portions of Big Brother’s House Guest manual and Master Control Room schedules, these documents were not formulas, methods, or processes that provided "independent economic value" because they were unknown to the general public, as required by California law. In fact, the court noted, portions of similar manuals were available online, and testimony indicated that budgetary considerations guided ABC’s hiring decisions rather than the dictates of the Master Control Room schedule.

As to the alleged trade secrets involving filming, editing and production, the court held that CBS failed to meet its burden of showing what was particularly unique and valuable about its techniques, as well as any direct evidence of misappropriation. The court agreed with defendants' contention that similar techniques are commonplace in the production of reality television programming, and CBS bears the burden of delineating precisely what makes these particular techniques unique and valuable – a burden it failed to meet. Circumstantial evidence, including media accounts of the alleged misappropriation and the fact that former Big Brother staffers were hired by ABC, was insufficient to support an injunction in the face of California’s public policy in favor of both employment mobility and ability to use knowledge gained in prior positions.

Finally, the court found that CBS failed to satisfy any of the other grounds for an injunction, including that it would suffer irreparable harm by denial of the application for the TRO, since CBS could be compensated through monetary damages for any loss of viewership that might result from the airing of The Glass House. The balance of equities also favored defendants, since an injunction would result in the loss of employment of more than 100 employees and the contestants, as well as rendering defendants' investment of more than $20 million in the show's development and promotion almost worthless, while CBS could be compensated for any damages if the court did not enjoin the production and airing of The Glass House.



Intercollegiate Broadcasting Sys., Inc. v. Copyright Royalty Board, USCA, District of Columbia Circuit, July 6, 2012
 Click here for a copy of the full decision.

  • On appeal of final determination by the Copyright Royalty Board of default royalty rates and terms applicable to internet-based webcasting of digitally recorded music, court of appeals vacates and remands the CRB’s determination, finding that CRB as constituted at the time of the determination violated Appointments Clause of the U.S. Constitution

Intercollegiate Broadcasting Systems, Inc. (IBS), an association of noncommercial webcasters that transmit digitally recorded music over the internet in educational environments like high school and college campuses, appealed the ratemaking determination of the Copyright Royalty Board (CRB) setting the default royalty rates and terms applicable to internet webcasting for 2011 through 2015 asserting that the CRB, as currently constituted, was unconstitutional. The CRB, comprising three Copyright Royalty Judges (CRJs) appointed to staggered six-year terms by the Librarian of Congress, and the CRJs' staff, sets the licensing terms over these performances. Under the Copyright Act, when a party initiates a ratemaking proceeding, the CRJs are tasked with "mak[ing] determinations and adjustments of reasonable terms and rates of royalty payments," in which “reasonable” means payments that "most clearly represent the rates and terms that would have been negotiated in the marketplace between a willing buyer and a willing seller."

IBS appealed the CRJs' determination in a ratemaking proceeding initiated by intervenor SoundExchange, a non-profit clearinghouse for musicians' webcast royalty payments, arguing that it was invalid because the CRJs' position, as currently constituted, violated the Appointments Clause of the Constitution on two grounds, first that the exercise of significant ratemaking authority by the CRJs, without any effective means of control by a superior (such as unrestricted removability), qualified them as "principal" officers who must be appointed by the President with Senate confirmation and, second, that even if the CRJs were "inferior" officers, the Librarian of Congress was not a "Head of Department" in whom Congress may vest appointment power.

The court of appeals agreed with IBS’s first contention, holding that CRJs are principal officers who must be appointed by the President and confirmed by the Senate, and that the current structure of the CRJs position violated the Appointment Clause.

As the court noted, the Appointments Clause of the Constitution provides that the President "shall nominate, and by and with the Advice and Consent of the Senate, shall appoint … Officers of the United States, whose Appointments are not herein otherwise provided for, and which shall be established by Law: but the Congress may by Law vest the Appointment of such inferior Officers, as they think proper, in the President alone, in the Courts of Law, or in the Heads of Departments." To qualify as an "Officer of the United States," a person must exercise significant authority pursuant to the laws of the United States. Under the Supreme Court’s decision in Edmond v. U.S., 520 U.S. 651 (1997), an officer is "inferior" if their "work is directed and supervised at some level by others who were appointed by Presidential nomination with the advice and consent of the Senate." The Court in Edmond emphasized three factors in coming to this conclusion: (1) the officers in question were subject to the substantial supervision and oversight of officers who were appointed by Presidential nomination with the advice and consent of the Senate; (2) the officers were removable by their supervisor without cause; and (3) another entity within the executive branch had the power to reverse the officers’ decisions so that they had "no power to render a final decision on behalf of the United States unless permitted to do so by other Executive Officers."

Applying these three factors, the D.C. Circuit concluded that the CRJs are principal officers who must be appointed by the President and confirmed by the Senate, and that their currently position is unconstitutional in violation of the Appointments Clause. First, the court found the CRJs have vast discretion over the determination of rates and terms, and apply ratemaking formulas that are hugely open ended. The supervision exercised over the CRJs by the Librarian of Congress and the Register of Copyrights, while not trivial, did not provide much constraint on the rate – the issue of greatest importance – and fell short of the kind that would render the CRJs inferior officers. Under the second factor – removability – the court found the CRJs could only be removed by the Librarian for misconduct or neglect of duty. Lastly, the court found CRJs' rate determinations are not reversible or correctible by any other officer or entity within the executive branch. While the Librarian may review their procedural rules, and the Register may review their legal determinations, under the Copyright Act, the CRJs are afforded "full independence in making determinations concerning adjustments and determinations of copyright royalty rates and terms…" The CRJs issue decisions that are final for the executive branch, subject to reversal or change only when challenged in a court with jurisdiction under Article III of the constitution.

With the aim of providing an appropriate remedy causing as little disruption as possible, the circuit court followed the Supreme Court’s decision in Free Enterprise Fund v. Public Company Accounting Oversight Board, 130 S.Ct 3138 (2010), invalidating and severing the statutory provision imposing the for-cause-only restriction on the ability of the Librarian of Congress to sanction or remove a CRJ. Giving unfettered removal power to the Librarian, the court reasoned, rendered the CRJs "inferior" rather than "principal" officers, and no constitutional problem with their authority remained, so long as the Librarian qualified as a Head of a Department for the purposes of the Appointments Clause.

The court concluded that the Librarian did qualify under the Supreme Court’s ruling in Free Enterprises Fund, in which the Court held that an entity is a Department if it is a freestanding component of the Executive branch, not subordinate to or contained within any other such component. Noting that the Library of Congress is a freestanding entity with powers generally associated with executive agencies rather than legislators (including the powers to promulgate regulations, to apply the statute to affected parties, and to set rates and terms case by case) and that the Librarian is appointed by the President with advice and consent of the Senate and is subject to unrestricted removal by the President, the court found that the Library is a component of the Executive Branch, and that the Librarian is a Head of Department who may appoint CRJs.

Because of the existence of the violations of the Appointments Clause at the time the CRJs made their ratemaking determination, the circuit court vacated and remanded the determination.
 



For more information, please contact Jonathan Zavin at jzavin@loeb.com or at 212.407.4161.

Westlaw decisions are reprinted with permission of Thomson/West. If you wish to check the currency of these cases, you may do so using KeyCite on Westlaw by visiting http://www.westlaw.com/.


 

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