U.S. Supreme Court Holds That Aereo Infringes Broadcasters' Copyrights Despite "Behind-the-Scenes" Technological Innovations Designed to Avoid Infringement

by Wilson Sonsini Goodrich & Rosati

On June 25, 2014, the U.S. Supreme Court issued its eagerly anticipated decision in American Broadcasting Companies, Inc., et al. v. Aereo, Inc., fka Bamboom Labs, Inc., No. 13-461.1 In a 6-3 majority opinion, the Court found that Aereo's "behind-the-scenes" use of "servers, transcoders, and thousands of dime-sized antennas housed in a central warehouse" to provide each of its subscribers with their own personal Internet connection to over-the-air TV broadcasts was legally indistinguishable from a cable TV service that "transmits" copyright-protected TV programming "to the public." Consequently, the Court held that Aereo's service infringed the plaintiff copyright owners' exclusive right to "perform" their copyrighted TV programs "publicly" under 17 U. S. C. ยง106(4). The Court's decision will immediately govern a handful of currently pending lawsuits brought by copyright owners against Aereo and its rival FilmOn X.2 Although the Court took pains to say that the decision was a narrow one, its lack of clear standards or focus on technological details is likely to spawn litigation over other innovative technologies.

Relying on existing precedents, most notably Cartoon Network LP v. CSC Holdings, Inc., 536 F.3d 121 (2d Cir. 2008), Aereo set up its television service in a manner it believed would avoid infringing copyrights covering programming carried on broadcast television. It assigned each of its subscribers their own personal antenna from which they could receive TV shows over the air, and then transmitted those shows to users' devices via Internet streams. Even if two subscribers wanted to watch the same show at the same time, each subscriber was assigned a separate antenna from which a separate copy of the show was made and separately transmitted. Further, Aereo's system would not transmit or record any programs absent a specific directive from a user to do so. Based on this set-up, Aereo argued that it simply rented equipment that customers could use to emulate the operation of a home antenna and digital video recorder, and that Aereo did not perform any copyrighted work publicly.

The Court, without expressly overruling (or even discussing) Cartoon Network, disagreed. It found that Aereo's operation was functionally identical to community antenna television (CATV) systems and cable TV systems, operations that Congress specifically intended to be covered when it amended the Copyright Act in 1976. Like CATV and cable TV services that "publicly performed" copyrighted works by receiving over-the-air broadcasts and transmitting them to the homes of individual subscribers, Aereo "performed" copyrighted works by using its collection of antennas to receive and transmit the same over-the-air broadcasts to "large" numbers of subscribers "who are unrelated and unknown to each other." To the Court, the fact that each subscriber received their own dedicated antenna and separate transmission of the broadcast TV shows they selected did not matter. The Court reasoned that these "technological differences" from traditional CATV and cable services "concern the behind-the-scenes way in which Aereo delivers television programming to its viewers' screens," but "they do not render Aereo's commercial objective any different from that of cable companies. Nor do they significantly alter the viewing experience of Aereo's subscribers." Put differently, because Aereo's service functioned like cable services, Congress would have intended it to be treated like cable services and deemed to publicly perform the copyrighted over-the-air broadcasts passing through its system.

The decision should counsel caution for technology companies whose products or services regularly interact with copyrighted content, especially cloud computing and storage products that allow the same copyrighted work to be transmitted to "a large number of people who are unrelated and unknown to each other." To be sure, the Supreme Court's opinion nods in the direction of innovation. It expressly states that the Copyright Act was not intended "to discourage or to control the emergence or use of different kinds of technologies," refers to its holding as "narrow" and "limited," and expressly confines it to entities like Aereo that transmit "contemporaneously perceptible images and sounds" of broadcast television. At the same time, however, the Court declined to offer to other types of ventures, and those who would invest in and work with them, the sort of clear guidance that could be used to structure future operations and avoid lawsuits and liability for copyright infringement. The Court instead said that "questions involving cloud computing, remote storage DVRs, and other novel issues" were best left for another day.

Copyright holders are likely to be emboldened by the Aereo decision. Despite the Supreme Court's caution, some will read the case as supporting expansive copyright protection and litigation over new technologies. As Justice Antonin Scalia stated in his dissenting opinion, the majority decision "will sow confusion for years to come." Companies should seek legal advice from a qualified attorney to determine how this decision may affect them.

2 Fox Television Stations, Inc., NBCUniversal Media, LLC, et al. v. FilmOn X, LLC, et al., Nos. 13-55156, 13-55228, 13-55226 (9th Cir.); Fox Television Stations, Inc., et al. v. FilmOn.TV Networks Inc., et al., Nos. 13-7145, 13-7146 (D.C. Cir.); FilmOn X, LLC v. Window to the World Commc'ns, Inc., No. 13-08451 (N.D. Ill.); Hearst Stations Inc. v. Aereo, Inc., No. 13-2282 (1st Cir.); Cmty. Television of Utah, et al v. Aereo, Inc., No. 14-4020 (10th Cir.).

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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