The Second Circuit’s Aereo Math: One Copy + One Subscriber ≠ Public Performance

by Morrison & Foerster LLP - Social Media
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Last week­—the week of May 12, 2013­—proved to be an eventful week for Aereo.

On May 14, 2013, the controversial broadcast television streaming service filed a motion for summary judgment in the Southern District of New York on copyright claims brought by broadcast television networks (including ABC, NBC, CBS and Fox) that Aereo’s service directly infringes the networks’ public performance rights and directly and secondarily infringes their reproduction rights.

The very next day, Aereo kicked off its plans to expand the New York City-based service to 22 additional U.S. cities by launching in Boston.

This flurry of activity shortly follows the April 1, 2013 opinion of the Second Circuit Court of Appeals, which affirmed the District Court’s opinion in WNET v. Aereo, Inc. denying a motion for preliminary injunction against Aereo based on infringement of the networks’ public performance rights.

In case you are not yet familiar with Aereo’s inner workings, the service transmits broadcast television programs to subscribers via the Internet by using miniature antennas. Specifically, Aereo provides each subscriber with a dedicated antenna for the period of time during which the subscriber is using the service.  When a subscriber chooses to “Watch” or “Record” a particular television program through the Aereo interface, the Aereo system makes a unique copy of the television program from the broadcast signals received by the antenna and transmits such copy to the subscriber’s Internet-connected device.

To the disappointment of the broadcast television networks, the Second Circuit found that the operation of Aereo’s service does not infringe the networks’ public performance rights under the Copyright Act.  Citing the doctrine of stare decisis (which obligates judges to follow precedential court opinions), the majority of the three-judge panel found that the Second Circuit’s 2008 opinion in Cartoon Network, LP v. CSC Holdings, Inc. (commonly referred to as “Cablevision”) precluded a finding that Aereo’s transmissions are “public performances” within the meaning of the Copyright Act’s “transmit clause.”

The Cablevision court held that whether a performance is made “to the public” should be determined by the potential audience of the copy of the work being performed (as opposed to the potential audience of the work being performed).  Accordingly, the Aereo court found it inconsequential to its copyright analysis that the Aereo service makes broadcast television programs available to members of the public; instead, the court looked at how each subscriber received access to a particular television program to determine whether the performance of such program was a “public performance.”  Because Aereo transmits the broadcast television programs to its subscribers using a copy unique to each individual subscriber, the court determined that Aereo’s transmissions constitute private performances for the purposes of copyright law.

Circuit Judge Denny Chin dissented in the Aereo case, referring to Aereo’s system as “a sham” that has been technologically manipulated to fall within an apparent loophole created by copyright case law in the Second Circuit.  According to Judge Chin, both the plain meaning of the Copyright Act’s “transmit clause” and legislative history support a finding of copyright infringement by Aereo, as Aereo is transmitting the networks’ copyrighted works to “paying strangers” through the use of Aereo’s system.  Judge Chin also made much of the fact that Aereo does not hold a license to retransmit the broadcast television programs, unlike Cablevision had in the Cablevision case (a fact that the majority of the Aereo court found irrelevant).

Judge Chin’s arguments echo those of Judge George Wu of the Central District of California, who ruled in favor of the networks in Fox Television Stations, Inc. v. BarryDriller Content Systems, PLC  (commonly referred to as “Aereokiller”) in December 2012.  Noting tension between the Second Circuit’s Cablevision decision and Ninth Circuit copyright case law, Judge Wu issued an injunction against service provider Aereokiller, a competitor of Aereo based in California that offers a streaming service technologically similar to that of Aereo.  The Aereokiller decision offers an alternative interpretation of the Copyright Act’s “transmit clause” that directs courts to look at whether a performance made via a transmission is made “to the public” (rather than whether the specific transmission is made “to the public”).  Based on this interpretation, Judge Wu found that Aereokiller’s transmissions of broadcast television programs to its subscribers using unique copies of such programs were nonetheless “public performances” under copyright law.  The Aereokiller case is currently on appeal to the Ninth Circuit.

If the Ninth Circuit affirms Judge Wu’s opinion, a significant split is likely to arise between the Second and Ninth Circuits on the critical question of when an online transmission constitutes a “public performance” for purposes of the Copyright Act.  The broadcast networks have not given up in the Second Circuit, however, and have petitioned for an en banc rehearing (i.e., a rehearing before all Second Circuit judges) of the Aereo case, hoping to achieve a reversal of the three-judge panel opinion.

The ultimate outcomes of the Aereo and Aereokiller cases are likely to have a big impact on how consumers access broadcast television over the coming years.  Both copyright owners and online distributors are undoubtedly staying tuned for future developments.

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