The Supreme Court's Aereo Ruling: Is the Sky Falling for Cloud Computing?

by Foley & Lardner LLP

With the Supreme Court’s Aereo decision finally out, the digital industry is struggling with its impact, if any, on various products and services, particularly with regard to cloud computing. However, the Supreme Court narrowly tailored the Aereo decision to services that closely resemble cable TV. Thus, suggestions that “the sky is falling” for cloud computing or other services that might re-transmit copyrighted content may be premature.

In American Broadcasting Cos., Inc. v. Aereo, Inc., 573 U. S. __ (2014), the Supreme Court held that Aereo infringed broadcasters’ copyrights by providing customers access to public TV programming over the Internet via individualized antennas owned and operated by Aereo. Aereo’s business is built around two products: mini-antennas assigned to each customer and stored at Aereo’s warehouses, and a digital video recorder with a large storage capacity on Aereo’s servers, which acts as a private cloud service. At a user’s request, Aereo captures the signal from a specific over-the-air television broadcast, saves the data into a user specific folder on Aereo’s server, and then streams it to a user’s computer, mobile phone or other device with only a few seconds of delay. If the user wishes to watch the recorded program at a later time, Aereo stores the recording on its server and streams it to the customer at a requested time.

The essence of the legal issue in Aereo was whether Aereo’s capturing and streaming of local TV programs to its users constituted a “public performance” which, without authorization, would violate the broadcasters’ copyrights. The Copyright Act of 1976 clarified that “transmission” of a copyrighted work to the public “by means of any device or process” constitutes public performance of that work and further requires cable companies to pay broadcasters for the transmission of their programing to subscribers. Despite differences in the respective technologies, the Supreme Court held that Aereo’s streaming services were very similar to the transmission services of cable companies and therefore, too, constituted “public performance.” Because Aereo did not obtain licenses from the broadcasters, its streaming service was held to infringe. (For a more detailed overview of the Supreme Court’s decision in Aereo, see here.)

The Aereo decision is a serious blow to Aereo and other providers who transmit, in real or near-real time, over-the-air television broadcasts to their customers without paying broadcasters. Mindful of the potential implications of its decision for the digital industry, the Supreme Court tried to limit its ruling to technologies that closely resemble cable television transmission and expressly excluded Aereo’s other services, i.e., the remote digital video recorder and storage functionality, from the reach of its ruling. Yet, the Court left many questions unanswered, such as what it means to perform digital content, when such performance is public, or how the “fair use” doctrine might affect the analysis.

Because of the decision’s narrow focus, digital content delivery services such as cloud based storage and digital video recorder (DVR) technologies should not be directly affected. For example, the Court expressly carved out from the scope of the Aereo decision services “where the user … pays primarily for something other than the transmission of copyrighted works, such as the remote storage of a content.” As long as the stored content is owned or has been legally acquired by the user, storing it remotely and playing it back should not raise copyright concerns under Aereo.

Similarly, remote digital video recording services seem not to be directly implicated by Aereo. Since the 2008 ruling by the Second Circuit in Cartoon Network LP v. CSC Holdings, 536 F.3d 121 (2nd Cir. 2008), cloud recording and storage services have been deemed compliant with copyright law. At issue in that case was Cablevision’s service that allowed customers to record TV programming for later viewing using Cablevision’s remote storage digital video recording devices. The Second Circuit held that Cablevision did not violate the broadcasters’ copyrights. Despite the similarities of Cablevision’s services to those of Aereo, the Supreme Court did not overrule the Second Circuit’s ruling in Cablevision and instead expressly exempted from the reach of its decision “[q]uestions involving cloud computing, [remote storage] DVRs and other novel technologies not before the Court.”

While time and future litigations will show the whole impact of the Aereo ruling, for now the major players in the cloud computing industry should be able to breathe a sigh of relief.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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