The U.S. Supreme Court held last week that a service provider directly infringes a copyright owner’s exclusive performance right when it transmits to subscribers individualized streams of copyrighted works almost simultaneously to their broadcast over the air. Justice Stephen Breyer, writing for a six-justice majority, opined that one of Congress’s chief purposes in amending the Copyright Act in 1976 (the 1976 Amendments) was to bring the activities of cable television service providers under the Act. A service that accomplishes the same objectives as cable TV, the majority held, should therefore be subject to the same legal prohibitions, regardless of the technological underpinnings of the service. The Supreme Court’s opinion in American Broadcasting Cos., et al. v. Aereo, Inc. is here. The holding serves as a stark reminder, to developers of emerging technologies in particular, that apparent compliance with the letter of the law is not an absolute shield to liability.         

Section 106 of the Copyright Act provides copyright owners with the exclusive right to “perform the copyrighted work publicly.” 17 U.S.C. § 106(4). The Act’s Transmit Clause, added as part of the 1976 Amendments, defines the public performance right as the right to “transmit or otherwise communicate a performance … of the [copyrighted] work … to the public, by means of any device or process.” 17 U.S.C. § 101.

Aereo, Inc. (Aereo) provides a service that allows subscribers to view television programs on internet-connected devices at about the same time the programs are broadcast over the air. Aereo’s system consists of servers, transcoders and thousands of dime-sized antennas. When a subscriber wants to watch a show, the subscriber selects the show from a list of local programming on Aereo’s website. Then one of Aereo’s servers selects an antenna and dedicates it to the subscriber, and only that subscriber, for the duration of the selected television program. The server tunes the antenna to the selected over-the-air broadcast, and a transcoder translates the signal received by the antenna into data that can be transmitted online. The server then saves the data in a folder that, like the antenna, is dedicated solely to the subscriber. After a buffer of several seconds, the server streams the saved personal copy of the show to the subscriber’s internet-connected device.

The television producers, marketers, distributors, and broadcasters (the Networks) that own copyrights in the content Aereo streams sued Aereo in the U.S. District Court for the Southern District of New York for copyright infringement. The Networks sought a preliminary injunction for their claim of direct infringement, which the District Court denied. A split panel of the U.S. Court of Appeals for the Second Circuit affirmed, holding that Aereo does not perform publicly because it does not transmit content “to the public.” The panel found that Aereo’s individualized streams were private transmissions, not public performances.

The Supreme Court reversed and remanded. Aereo directly infringed the Networks’ performance rights, the Court found, because (1) it performed the Networks’ copyrighted works, and (2) it performed them publicly.

Prior to the 1976 Amendments, Supreme Court precedent had held that “Broadcasters perform. Viewers do not perform.” Slip Op. at 5 (quoting Fortnightly Corp. v. United Artists Television, Inc., 392 U.S. 390, 398 (1968)); see also Teleprompter Corp. v. Columbia Broadcasting System, Inc., 415 U.S. 394, 408 (1974) (“The reception and rechanneling of [broadcast television signals] for simultaneous viewing is essentially a viewer function, irrespective of the distance between the broadcasting station and the ultimate viewer.”). The Court had held that cable access television providers fall on the viewer side of the line because they “receive programs that have been released to the public and carry them by private channels to additional viewers.” Slip Op. at 5 (quoting Fortnightly, 392 U.S., at 398).

The 1976 Amendments not only inserted the Transmit Clause in the Act. They also established a compulsory licensing scheme that required cable television providers to pay copyright owners for the retransmission of their content. Justice Breyer found in these amendments and in an accompanying House report (which stated that Fortnightly and Teleprompter had been “completely overturned”) a clear purpose to bring the conduct of cable companies under the Act. The text of the Act, Breyer wrote, does not clearly indicate when an entity “performs” or “transmits.” “But when read in light of its purpose, the Act is unmistakable: An entity that engages in activities like Aereo performs.” Slip Op. at 4.

Justice Breyer acknowledged that Aereo differs from the cable companies in existence at the time of the 1976 Amendments because it transmits only those programs that subscribers select, and only upon their selection. But the Court dismissed the difference as inconsequential. Technological machinations aside, Aereo “for all practical purposes [is still] a traditional cable system,” the Court wrote. Slip Op. at 10.

The majority found therefore that Aereo, not the viewer, performs. Having found that Aereo performs, it next considered whether it performs publicly. The Court found that Aereo’s transmissions to individual subscribers did not distinguish it from cable companies which are considered to perform publicly. “Behind-the-scenes” technological differences do not matter, the Court held. Slip Op. at 12. Television looks the same whether received by a “large multisubscriber antenna or one small dedicated antenna.” Id. What matters are commercial objectives, the Court held, and found that Aereo’s and the cable companies are the same.

The Court next addressed concerns, expressed by amici and others, that a decision against Aereo would hamper the development of innovative technologies, especially “cloud computing.” The Court assured that its decision applied neither to services that stream content to subscribers that the subscribers themselves own, nor to services that transmit content to less than a “substantial number of people outside of a family and its social circle.” Slip Op. at 17. Justice Breyer commented that entities concerned with the applicability of the Copyright Act to new technologies are always free to seek action from Congress, if desired. Slip Op. at 17.

While Justice Antonin Scalia, in dissent, agreed with the majority that Aereo’s service “ought not to be allowed,” Dissent at 12, he could not find a basis for doing so because all that was before the Court was the Networks’ claims of direct copyright infringement of their performance rights, not the Networks’ claims of contributory infringement (nor their claims regarding reproduction rights). Justice Scalia found that because Aereo’s conduct is not volitional, it “does not ‘perform’ at all.” Dissent at 1.

Justice Scalia, citing earlier Breyer opinions for support throughout his dissent, characterized the majority opinion as “guilt by resemblance”: “(1) Congress amended the Act to overrule our decisions holding that cable systems do not perform when they retransmit over-the-air broadcasts; (2) Aereo looks a lot like a cable system; therefore (3) Aereo performs.” Dissent at 7. Justice Scalia found defects in the majority’s analysis at each turn. First, he criticized the majority for deriving Congressional intent from snippets of legislative history penned by a fraction of one chamber of the legislature. Second, he distinguished Aereo from the cable companies on the basis that it only transmits content that subscribers select, and only at the direction of its subscribers. This distinction is critical, Justice Scalia wrote, because it demonstrates the absence of volitional conduct by Aereo. Finally, Justice Scalia wrote, even if the purpose of the 1976 Amendments were to override the Court’s cable TV precedents, “what [the Amendments] were meant to do and how they did it are two different questions – and it is the latter that governs the case before us here.” Dissent at 9.

If a challenged activity complies with the letter of the law, Justice Scalia concluded, but not its perceived intent, the onus falls on Congress to act, if it so chooses. It is not the Court’s job, Justice Scalia wrote, to “identify and plug loopholes,” Dissent at 12, or “apply laws that have not yet been written.” Dissent at 13 (quoting Sony Corp. of America v. Universal City Studios, Inc., 464 U. S. 417, 456 (1984). This conclusion highlights the fundamental rift between the dissent and the majority. The dissent would permit technologies unforeseen by Congress until Congress expressly forbids them. The majority finds such technologies prohibited until Congress is persuaded to allow them.