Second Circuit Won't Rehear <i>Aereo</i> Case

Aereo, the online service that captures over-the-air broadcasts of copyrighted TV programming and sells them to subscribers for a monthly fee, notched another victory at the U.S. Court of Appeals for the Second Circuit. The circuit has denied rehearing en banc of its April 2013 decision that found Aereo is not in violation of the Copyright Act.

The decision was a win for Barry Diller and his fellow investors in the Aereo start-up. They are taking their service nationwide this year after a New York City test run where signals broadcast from the Empire State building are captured and put on a “platform” for retransmission to subscribers.

The Second Circuit's en banc denial came in tandem cases, WNET v. Aereo , 12-2786, and ABC v. Aereo, 12-2807, where on April 1 a divided panel upheld Southern District of New York Judge Alison Nathan's refusal to grant a preliminary injunction against Aereo ' a business modeled on the circuit's language in Cartoon Network v. CSC Holdings, 536 F.3d 121, a 2008 decision that found Cablevision's DVR service did not violate the Copyright Act.

In its April decision, a 2-1 Second Circuit panel accepted the argument, in light of the Cablevision case, that the transmissions offered by Aereo are not “public performances.” Instead, Aereo argues, they are private performances because Aereo uses thousands of small antennas that individual subscribers access to watch broadcasts in real time or, more critically, record and watch later. Just as is the case with the recorded programming in the Cablevision case, the ability to copy renders each copy of the broadcast “unique,” said the majority of Judges Christopher Droney and Eastern District Judge John Gleeson.

Circuit Judge Denny Chin had dissented. He called Aereo's technology platform “a sham” and said the dime-sized antennas it uses are a “Rube Goldberg-like contrivance.”

The appeals court does not reveal the tallies on votes on whether to rehear a case en banc unless the individual judges decide to put their names on the decision indicating which way they voted and/or whether they were writing or joining a majority or dissenting opinion. Of the 12 judges who voted on the en banc request, only Circuit Judges Chin and Richard Wesley went on the record in a 31-page dissent penned by Chin. Judge Chin said the case presents issues of “exceptional importance” and both “the text of the Copyright Act and its legislative history make clear that Aereo's retransmissions are public performances.”

Cablevision Wrongly Decided, Says Dissent

Aereo's reliance on the Cablevision case was “misplaced, because in my opinion, Cablevision was wrongly decided,” Judge Chin wrote, adding that Cablevision was “misapplied by the majority and should not be extended to the circumstances of this case.”

The most significant difference, Judge Chin said, was that Cablevision pays “statutory licensing and retransmission consent fees for the content it retransmitted, while Aereo pays no such fees.” The reason it is important, Judge Chin noted, is that the decision could encourage other companies, such as Time Warner Cable, to reduce or even eliminate their own retransmission fees.

In fact, the Dish Network is in talks to acquire Aereo, Judge Chin observed, and Fox, Univision and CBS have threatened to move their free broadcasts to paid cable while CBS has already talked to cable companies about removing their signals off the air in the New York metropolitan area to block Aereo's theft of its content.

Judge Chin noted that broadcasters are increasingly relying on retransmission fees and the Second Circuit's April 1 decision “caused the share price for major media firms to drop because of the threat it posed to a vital source of revenue.”

The April 2013 decision also sets up inconsistency in the circuit's jurisprudence, including its 2012 decision in WPIX v. ivi, 691 F.3d 275 (2012), where the court talked about the harm of allowing ivi to stream copyrighted TV programming over the Internet as an example of a “public performance.”

Judge Chin, who was the district judge in the Cablevision case whose summary judgment ruling against Cablevision was vacated in 2008, said rehearing Aereo en banc “would also give the Court the opportunity to reconsider Cablevision.” He said the Cablevision case was wrongly decided because of the way the court approached the language of the Copyright Act as to the broadcasters' exclusive right to perform “the copyrighted work[s] publicly.” 17 U.S.C. '106(4).

The Copyright Act defines “to perform or display a work publicly” as “(1) to perform or display it at a place open to the public or at any place where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered [the 'performance clause'] or (2) to transmit or otherwise communicate a performance or display of the work to a place specified by clause (1) or to the public, by means of any device or process, whether members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times [the 'transmit clause'].”

Judge Chin said the Cablevision panel misread the transmit clause of the Copyright Act “in isolation, rather than in the context of the performance clause.” He said that panel “erroneously conflated the phrase 'performance or display' with the term 'transmission,' shifting the focus of the inquiry from whether the transmitter's audience receives the same content to whether it receives the same transmission.”

“It makes no difference whether each member of the public receives the work by means of several individualized, asynchronous transmissions or a single, shared transmission,” Judge Chin emphasized.

Fox said in a statement: “The Second Circuit's denial of our request for an en banc hearing, while disappointing, was not unexpected. We will now review our options and determine the appropriate course of action, which includes seeking a hearing in the U.S. Supreme Court and proceeding to a full trial on the merits of the case.”

Paul Smith of Jenner & Block argued for plaintiffs in WNET before the circuit in 2012. Bruce Keller of Debevoise & Plimpton argued for the plaintiffs in ABC. R. David Hosp of Fish & Richardson argued for Aereo.

Mark Hamblett is a Reporter for the New York Law Journal, an ALM affiliate of Entertainment Law & Finance.

Aereo, the online service that captures over-the-air broadcasts of copyrighted TV programming and sells them to subscribers for a monthly fee, notched another victory at the U.S. Court of Appeals for the Second Circuit. The circuit has denied rehearing en banc of its April 2013 decision that found Aereo is not in violation of the Copyright Act.

The decision was a win for Barry Diller and his fellow investors in the Aereo start-up. They are taking their service nationwide this year after a New York City test run where signals broadcast from the Empire State building are captured and put on a “platform” for retransmission to subscribers.

The Second Circuit's en banc denial came in tandem cases, WNET v. Aereo , 12-2786, and ABC v. Aereo, 12-2807, where on April 1 a divided panel upheld Southern District of New York Judge Alison Nathan's refusal to grant a preliminary injunction against Aereo ' a business modeled on the circuit's language in Cartoon Network v. CSC Holdings, 536 F.3d 121, a 2008 decision that found Cablevision's DVR service did not violate the Copyright Act.

In its April decision, a 2-1 Second Circuit panel accepted the argument, in light of the Cablevision case, that the transmissions offered by Aereo are not “public performances.” Instead, Aereo argues, they are private performances because Aereo uses thousands of small antennas that individual subscribers access to watch broadcasts in real time or, more critically, record and watch later. Just as is the case with the recorded programming in the Cablevision case, the ability to copy renders each copy of the broadcast “unique,” said the majority of Judges Christopher Droney and Eastern District Judge John Gleeson.

Circuit Judge Denny Chin had dissented. He called Aereo's technology platform “a sham” and said the dime-sized antennas it uses are a “Rube Goldberg-like contrivance.”

The appeals court does not reveal the tallies on votes on whether to rehear a case en banc unless the individual judges decide to put their names on the decision indicating which way they voted and/or whether they were writing or joining a majority or dissenting opinion. Of the 12 judges who voted on the en banc request, only Circuit Judges Chin and Richard Wesley went on the record in a 31-page dissent penned by Chin. Judge Chin said the case presents issues of “exceptional importance” and both “the text of the Copyright Act and its legislative history make clear that Aereo's retransmissions are public performances.”

Cablevision Wrongly Decided, Says Dissent

Aereo's reliance on the Cablevision case was “misplaced, because in my opinion, Cablevision was wrongly decided,” Judge Chin wrote, adding that Cablevision was “misapplied by the majority and should not be extended to the circumstances of this case.”

The most significant difference, Judge Chin said, was that Cablevision pays “statutory licensing and retransmission consent fees for the content it retransmitted, while Aereo pays no such fees.” The reason it is important, Judge Chin noted, is that the decision could encourage other companies, such as Time Warner Cable, to reduce or even eliminate their own retransmission fees.

In fact, the Dish Network is in talks to acquire Aereo, Judge Chin observed, and Fox, Univision and CBS have threatened to move their free broadcasts to paid cable while CBS has already talked to cable companies about removing their signals off the air in the New York metropolitan area to block Aereo's theft of its content.

Judge Chin noted that broadcasters are increasingly relying on retransmission fees and the Second Circuit's April 1 decision “caused the share price for major media firms to drop because of the threat it posed to a vital source of revenue.”

The April 2013 decision also sets up inconsistency in the circuit's jurisprudence, including its 2012 decision in WPIX v. ivi, 691 F.3d 275 (2012), where the court talked about the harm of allowing ivi to stream copyrighted TV programming over the Internet as an example of a “public performance.”

Judge Chin, who was the district judge in the Cablevision case whose summary judgment ruling against Cablevision was vacated in 2008, said rehearing Aereo en banc “would also give the Court the opportunity to reconsider Cablevision.” He said the Cablevision case was wrongly decided because of the way the court approached the language of the Copyright Act as to the broadcasters' exclusive right to perform “the copyrighted work[s] publicly.” 17 U.S.C. '106(4).

The Copyright Act defines “to perform or display a work publicly” as “(1) to perform or display it at a place open to the public or at any place where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered [the 'performance clause'] or (2) to transmit or otherwise communicate a performance or display of the work to a place specified by clause (1) or to the public, by means of any device or process, whether members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times [the 'transmit clause'].”

Judge Chin said the Cablevision panel misread the transmit clause of the Copyright Act “in isolation, rather than in the context of the performance clause.” He said that panel “erroneously conflated the phrase 'performance or display' with the term 'transmission,' shifting the focus of the inquiry from whether the transmitter's audience receives the same content to whether it receives the same transmission.”

“It makes no difference whether each member of the public receives the work by means of several individualized, asynchronous transmissions or a single, shared transmission,” Judge Chin emphasized.

Fox said in a statement: “The Second Circuit's denial of our request for an en banc hearing, while disappointing, was not unexpected. We will now review our options and determine the appropriate course of action, which includes seeking a hearing in the U.S. Supreme Court and proceeding to a full trial on the merits of the case.”

Paul Smith of Jenner & Block argued for plaintiffs in WNET before the circuit in 2012. Bruce Keller of Debevoise & Plimpton argued for the plaintiffs in ABC. R. David Hosp of Fish & Richardson argued for Aereo.

Mark Hamblett is a Reporter for the New York Law Journal, an ALM affiliate of Entertainment Law & Finance.