Supreme Court Grants <i>Cert</i> in <i>Aereo</i> Case

In each of the cities where Aereo operates, it sets up banks of dime-sized antennas that receive broadcast programming over the airwaves. Each subscriber is assigned a unique antenna, which, in turn, allows the subscriber to watch or record available programing. Whether a user watches a program live ' what Aereo calls “Watch Now” mode ' or records the program, Aereo's system makes a unique copy of the signal on its cloud-based DVR for that particular user. So, if 200,000 subscribers choose to watch the Super Bowl live or record it for later viewing, Aereo's system makes 200,000 unique copies of the Super Bowl, as opposed to a single master copy that is then available to all 200,000 subscribers.

A subscriber can watch the available television programming on a desktop computer or an Internet-connected tablet, smart phone or television. For its service, Aereo currently charges subscribers around $8 a month. Aereo pays broadcasters nothing for programs streamed to Aereo subscribers. Aereo currently offers service in over 10 cities in the United States and has ambitious expansion plans.

The Cablevision Decision and Aereo

Any discussion of the Aereo case requires revisiting the Second Circuit's decision in Cartoon Network LP, LLLP v. CSC Holdings, Inc., 536 F.3d 121 (2d Cir. 2008) (), which is commonly referred to as the Cablevision decision. Aereo concedes that it designed its system to fit within the safe harbor provided by the Cablevision decision. In fact, Aereo initially limited its service to New York City, presumably so that any challenge would occur in the Second Circuit, where Cablevision controls.

In March 2006, Cablevision, a cable television provider in New York, announced that it would roll out a new Remote-Storage DVR System (RS-DVR). The service would allow Cablevision subscribers to record programs remotely at Cablevision facilities and play those programs back in their home, without needing a DVR in their homes.

Copyright owners sued and won in the district court. On a motion for summary judgment, Judge Denny Chin ' then a district court judge but now on the Second Circuit ' held that deployment of an RS-DVR would involve unauthorized copying of the plaintiffs' copyrighted works and an unauthorized public performance during the playback of those works. Twentieth Century Fox Film Corp. v. Cablevision Sys. Corp., 478 F. Supp. 2d 607, 624 (S.D.N.Y. 2007). Cablevision appealed.

The Second Circuit reversed, holding that Cablevision's RS-DVR system would not directly infringe the plaintiffs' exclusive rights to reproduce and publicly perform their copyrighted works. With respect to the claimed infringement of the public performance right, the Second Circuit held that under the “Transmit Clause” of the Copyright Act, 17 U.S.C. '106(4), the court must examine the potential audience of a given transmission by an alleged infringer to determine whether that transmission is “to the public.” In other words, the Transmit Clause requires that the court identify the persons “capable of receiving” a given transmission to determine whether that transmission is made “to the public.” Under this analysis, because each RS-DVR playback transmission was made to a single subscriber using a single unique copy produced by that subscriber, the Second Circuit held that such transmissions were not performances “to the public,” and therefore do not infringe the public performance right.

The copyright owners sought Supreme Court review. The Supreme Court requested the views of the then-Solicitor General ' now Justice ' Elena Kagan, who took the position that “while some aspects of the Second Circuit's reasoning on the public-performance issue are problematic, the court's ultimate holding is less far-reaching than petitioners suggest and is insufficiently important to warrant this Court's review.” Brief for the United States as Amicus Curie, CNN, Inc. v. CSC Holdings, Inc., No. 080448 (May 2009). The High Court refused to hear the case. CNN, Inc. v. CSC Holdings, Inc., 557 U.S. 946 (2009).

The District Court's Decision in Aereo

On Feb. 14 2012, Aereo announced that it would launch its service on March 14, 2012, and that it would be available only to New York City residents. On March 1, 2012, the major broadcasters filed two separate actions against Aereo in the U.S. District Court for the Southern District of New York.

In one of the actions, ABC, NBC, CBS and other copyright holders claimed that Aereo violates (or authorizes others to violate) one or more of their exclusive rights under the Copyright Act, including the reproduction and public performance rights. See , Complaint, ABC, et al. v. Aereo, Inc., 1:12-cv-01540-AJN (S.D.N.Y. March 1, 2012) (ECF No. 1) (the Complaint is available from the Electronic Frontier Foundation (EFF) at http://bit.ly/1ppgO05).

In the other action, Fox, the local PBS affiliate, and other copyright holders claimed that Aereo engages in unlawful public performances of copyrighted works by retransmitting them to its subscribers and unlawful reproduction of copyrighted works through the provision of its cloud-based DVR. In addition to the direct infringement claims, the networks also alleged that Aereo is liable for secondary copyright infringement by: i) inducing and encouraging its subscribers' unlawful reproduction of copyrighted works; and ii) acting with knowledge of subscribers' unauthorized reproduction and causing or materially contributing to such infringement by providing the site and facilities to make those copies. The networks also asserted a claim for unfair competition under New York state law. See, Complaint, WNET et al. v. Aereo, Inc., 1:12-cv-01543-AJN (S.D.N.Y. March 1, 2012) (ECF No. 1). ??

On March 13, 2012, the networks moved for a preliminary injunction, focusing only on the public performance claims arising out of streaming in the “Watch Now” mode. On July 11, 2012, after a period of expedited discovery and a two-day evidentiary hearing, the district court denied the networks' motions for a preliminary injunction. ABC v. Aereo, Inc., 874 F. Supp. 2d 373, 375 (S.D.N.Y. 2012). The copyright holders did not show a likelihood of success that Aereo's “Watch Now” mode directly infringed their public performance rights. Relying on the Cablevision decision, the court held that Aereo's system makes unique copies of programs specific to individual subscribers and that the transmission is from that unique copy to the subscriber. The court rejected the network's argument that Aereo's service is materially distinguishable from Cablevision's RS-DVR, and held that the Cablevision decision precludes claims that Aereo's transmissions are performances “to the public” under the Transmit Clause.

The networks immediately appealed to the Second Circuit.

The Second Circuit's Decision in Aereo

On April 1, 2013, a panel of the Second Circuit affirmed the district court. WNET v. Aereo, Inc. , 712 F.3d 676 (2d Cir. 2013). Circuit Judge Christopher Droney wrote the majority opinion, joined by Judge John Gleeson of the United States District Court for the Eastern District of New York, sitting by designation. Judge Chin ' whose Cablevision decision case was previously overturned by the Second Circuit ' wrote a strongly worded dissent.

Stating that it was bound by the doctrine of stare decisis to follow Cablevision , the court held that it must consider the potential audience of an individual transmission to determine whether the transmission is “to the public” under the Transmit Clause. Applying this analysis, the court concluded that each Aereo transmission was to an audience of one: “Just as in Cablevision , the potential audience of each Aereo transmission [was] the single user who requested that a program be recorded.” Rejecting network arguments, the court held that multiple private transmissions ' e.g. , 200,000 subscribers simultaneously streaming the Super Bowl ' cannot be aggregated for this analysis unless the transmissions originate from a single copy. The court also found it of no consequence that Cablevision, unlike Aereo, held a license to retransmit the copyrighted television programming. Nor was the court persuaded that the Cablevision decision should be distinguished because Cablevision's RS-DVR functioned much like a traditional DVR, whereas Aereo's service is similar to a cable television provider. The court found nothing in legislative history to support the networks' reading of the Transmit Clause.

In his dissent, Judge Chin took the position that the Aereo system is a “a Rube Goldberg-like contrivance, over-engineered in an attempt to avoid the reach of the Copyright Act and to take advantage of a perceived loophole in the law.” According to Judge Chin, Congress broadly defined “transmit” in the Transmit Clause to include as a “public performance” transmissions from new technologies like Aereo. In his view, the plain meaning of the Transmit Clause supports a finding that Aereo uses a “device or process” to transmit copyrighted works “to the public.”

The networks filed a petition for rehearing en banc, which was denied on July 16, 2013. WNET v. Aereo, Inc., 722 F.3d 500 (2d Cir. 2013). With this denial, Judge Chin, joined by Judge Richard C. Wesley, issued another lengthy dissent.

Aereo and Aereo-Like Cases in Other Jurisdictions

Although Aereo had initially limited its service to New York City, safely within the Second Circuit's jurisdiction and the protections of the Cablevision decision, cases involving the technology have now been filed in district courts across the country with differing outcomes.

For instance, after Aereo prevailed in New York, a California competitor launched a copycat service using the same mini-antenna model. The networks immediately sued, but unlike in New York, the networks prevailed on their claims that the service engaged in an unauthorized public performance of copyrighted works. Fox TV Stations v. BarryDriller Content Sys., 915 F. Supp. 2d 1138 (C.D. Cal. 2012). After launching in Washington, DC, the copycat service was enjoined on the same grounds. Fox TV Stations, Inc. v. FilmOn X LLC, No. 13-758 (RMC), 2013 U.S. Dist. LEXIS 126543 (D.D.C. Sept. 5, 2013).

Likewise, after Aereo expanded into Boston, litigation followed. Nonetheless, unlike courts in California and the District of Columbia, the Massachusetts court held that Aereo's use of mini-antennas did not involve an unauthorized “public performance.” Hearst Stations Inc. v. Aereo, Inc., No. 13-11649-NMG, 2013 U.S. Dist. LEXIS 146825 (D. Mass. Oct. 8, 2013).

When the Supreme Court granted the networks' cert petition in Aereo, appeals were pending in each of these cases. All but one of those appeals have now been adjourned until the High Court issues its decision.

The Supreme Court's Grant of Cert

Although the Second Circuit was the only circuit court to decide whether Aereo-type technology involves the unauthorized public performance of a copyrighted works, the Supreme Court nonetheless granted cert.

Oral argument is scheduled for April 22, 2014, with a decision anticipated before the end of this term.

Justice Alito, took no part in the consideration of the petition, and will presumably not be participating in any decision on the merits.

J. Alexander Lawrence is a Partner and David S. Brown is Of Counsel in the New York office of Morrison & Foerster LLP (www.mofo.com).

On Jan. 10, 2014, the Supreme Court granted the petition for a writ of certiorari filed by the major broadcast networks, as well as other copyright holders, requesting that it overturn a Second Circuit decision regarding whether Aereo Inc., which “streams” broadcast television over the internet to subscribers without paying any retransmission fees, infringes those broadcasters' copyrights. ABC v. Aereo, Inc., 187 L. Ed. 2d 702 (U.S. 2014). [ Editor's Note: The SCOTUS blog has a page with the latest developments on the case, at http://bit.ly/1k7h2bo .] Along with the Supreme Court's decisions in Sony Corp. v. Universal City Studios, Inc., 464 U.S. 417 (1984) and MGM Studios Inc. v. Grokster, Ltd., 545 U.S. 913 (2005), Aereo may turn out to be one of the most important copyright decisions since enactment of the Copyright Act of 1976, with potential wide-ranging ramifications for the television industry and the fast-growing cloud computing industry.

What Aereo Does

Aereo provides a cloud-based service that enables its subscribers to watch or record, via broadband Internet access, television broadcast programming that would otherwise be available over-the-air using an antenna. For example, Aereo offers New York City residents access to the more than two dozen digital broadcast channels available in New York City with an antenna, including each of the major networks, and various independent networks.

In each of the cities where Aereo operates, it sets up banks of dime-sized antennas that receive broadcast programming over the airwaves. Each subscriber is assigned a unique antenna, which, in turn, allows the subscriber to watch or record available programing. Whether a user watches a program live ' what Aereo calls “Watch Now” mode ' or records the program, Aereo's system makes a unique copy of the signal on its cloud-based DVR for that particular user. So, if 200,000 subscribers choose to watch the Super Bowl live or record it for later viewing, Aereo's system makes 200,000 unique copies of the Super Bowl, as opposed to a single master copy that is then available to all 200,000 subscribers.

A subscriber can watch the available television programming on a desktop computer or an Internet-connected tablet, smart phone or television. For its service, Aereo currently charges subscribers around $8 a month. Aereo pays broadcasters nothing for programs streamed to Aereo subscribers. Aereo currently offers service in over 10 cities in the United States and has ambitious expansion plans.

The Cablevision Decision and Aereo

Any discussion of the Aereo case requires revisiting the Second Circuit's decision in Cartoon Network LP, LLLP v. CSC Holdings, Inc., 536 F.3d 121 (2d Cir. 2008) (), which is commonly referred to as the Cablevision decision. Aereo concedes that it designed its system to fit within the safe harbor provided by the Cablevision decision. In fact, Aereo initially limited its service to New York City, presumably so that any challenge would occur in the Second Circuit, where Cablevision controls.

In March 2006, Cablevision, a cable television provider in New York, announced that it would roll out a new Remote-Storage DVR System (RS-DVR). The service would allow Cablevision subscribers to record programs remotely at Cablevision facilities and play those programs back in their home, without needing a DVR in their homes.

Copyright owners sued and won in the district court. On a motion for summary judgment, Judge Denny Chin ' then a district court judge but now on the Second Circuit ' held that deployment of an RS-DVR would involve unauthorized copying of the plaintiffs' copyrighted works and an unauthorized public performance during the playback of those works. Twentieth Century Fox Film Corp. v. Cablevision Sys. Corp., 478 F. Supp. 2d 607, 624 (S.D.N.Y. 2007). Cablevision appealed.

The Second Circuit reversed, holding that Cablevision's RS-DVR system would not directly infringe the plaintiffs' exclusive rights to reproduce and publicly perform their copyrighted works. With respect to the claimed infringement of the public performance right, the Second Circuit held that under the “Transmit Clause” of the Copyright Act, 17 U.S.C. '106(4), the court must examine the potential audience of a given transmission by an alleged infringer to determine whether that transmission is “to the public.” In other words, the Transmit Clause requires that the court identify the persons “capable of receiving” a given transmission to determine whether that transmission is made “to the public.” Under this analysis, because each RS-DVR playback transmission was made to a single subscriber using a single unique copy produced by that subscriber, the Second Circuit held that such transmissions were not performances “to the public,” and therefore do not infringe the public performance right.

The copyright owners sought Supreme Court review. The Supreme Court requested the views of the then-Solicitor General ' now Justice ' Elena Kagan, who took the position that “while some aspects of the Second Circuit's reasoning on the public-performance issue are problematic, the court's ultimate holding is less far-reaching than petitioners suggest and is insufficiently important to warrant this Court's review.” Brief for the United States as Amicus Curie, CNN, Inc. v. CSC Holdings, Inc., No. 080448 (May 2009). The High Court refused to hear the case. CNN, Inc. v. CSC Holdings, Inc., 557 U.S. 946 (2009).

The District Court's Decision in Aereo

On Feb. 14 2012, Aereo announced that it would launch its service on March 14, 2012, and that it would be available only to New York City residents. On March 1, 2012, the major broadcasters filed two separate actions against Aereo in the U.S. District Court for the Southern District of New York.

In one of the actions, ABC, NBC, CBS and other copyright holders claimed that Aereo violates (or authorizes others to violate) one or more of their exclusive rights under the Copyright Act, including the reproduction and public performance rights. See , Complaint, ABC, et al. v. Aereo, Inc., 1:12-cv-01540-AJN (S.D.N.Y. March 1, 2012) (ECF No. 1) (the Complaint is available from the Electronic Frontier Foundation (EFF) at http://bit.ly/1ppgO05).

In the other action, Fox, the local PBS affiliate, and other copyright holders claimed that Aereo engages in unlawful public performances of copyrighted works by retransmitting them to its subscribers and unlawful reproduction of copyrighted works through the provision of its cloud-based DVR. In addition to the direct infringement claims, the networks also alleged that Aereo is liable for secondary copyright infringement by: i) inducing and encouraging its subscribers' unlawful reproduction of copyrighted works; and ii) acting with knowledge of subscribers' unauthorized reproduction and causing or materially contributing to such infringement by providing the site and facilities to make those copies. The networks also asserted a claim for unfair competition under New York state law. See, Complaint, WNET et al. v. Aereo, Inc., 1:12-cv-01543-AJN (S.D.N.Y. March 1, 2012) (ECF No. 1). ??

On March 13, 2012, the networks moved for a preliminary injunction, focusing only on the public performance claims arising out of streaming in the “Watch Now” mode. On July 11, 2012, after a period of expedited discovery and a two-day evidentiary hearing, the district court denied the networks' motions for a preliminary injunction. ABC v. Aereo, Inc., 874 F. Supp. 2d 373, 375 (S.D.N.Y. 2012). The copyright holders did not show a likelihood of success that Aereo's “Watch Now” mode directly infringed their public performance rights. Relying on the Cablevision decision, the court held that Aereo's system makes unique copies of programs specific to individual subscribers and that the transmission is from that unique copy to the subscriber. The court rejected the network's argument that Aereo's service is materially distinguishable from Cablevision's RS-DVR, and held that the Cablevision decision precludes claims that Aereo's transmissions are performances “to the public” under the Transmit Clause.

The networks immediately appealed to the Second Circuit.

The Second Circuit's Decision in Aereo

On April 1, 2013, a panel of the Second Circuit affirmed the district court. WNET v. Aereo, Inc. , 712 F.3d 676 (2d Cir. 2013). Circuit Judge Christopher Droney wrote the majority opinion, joined by Judge John Gleeson of the United States District Court for the Eastern District of New York, sitting by designation. Judge Chin ' whose Cablevision decision case was previously overturned by the Second Circuit ' wrote a strongly worded dissent.

Stating that it was bound by the doctrine of stare decisis to follow Cablevision , the court held that it must consider the potential audience of an individual transmission to determine whether the transmission is “to the public” under the Transmit Clause. Applying this analysis, the court concluded that each Aereo transmission was to an audience of one: “Just as in Cablevision , the potential audience of each Aereo transmission [was] the single user who requested that a program be recorded.” Rejecting network arguments, the court held that multiple private transmissions ' e.g. , 200,000 subscribers simultaneously streaming the Super Bowl ' cannot be aggregated for this analysis unless the transmissions originate from a single copy. The court also found it of no consequence that Cablevision, unlike Aereo, held a license to retransmit the copyrighted television programming. Nor was the court persuaded that the Cablevision decision should be distinguished because Cablevision's RS-DVR functioned much like a traditional DVR, whereas Aereo's service is similar to a cable television provider. The court found nothing in legislative history to support the networks' reading of the Transmit Clause.

In his dissent, Judge Chin took the position that the Aereo system is a “a Rube Goldberg-like contrivance, over-engineered in an attempt to avoid the reach of the Copyright Act and to take advantage of a perceived loophole in the law.” According to Judge Chin, Congress broadly defined “transmit” in the Transmit Clause to include as a “public performance” transmissions from new technologies like Aereo. In his view, the plain meaning of the Transmit Clause supports a finding that Aereo uses a “device or process” to transmit copyrighted works “to the public.”

The networks filed a petition for rehearing en banc, which was denied on July 16, 2013. WNET v. Aereo, Inc., 722 F.3d 500 (2d Cir. 2013). With this denial, Judge Chin, joined by Judge Richard C. Wesley, issued another lengthy dissent.

Aereo and Aereo-Like Cases in Other Jurisdictions

Although Aereo had initially limited its service to New York City, safely within the Second Circuit's jurisdiction and the protections of the Cablevision decision, cases involving the technology have now been filed in district courts across the country with differing outcomes.

For instance, after Aereo prevailed in New York, a California competitor launched a copycat service using the same mini-antenna model. The networks immediately sued, but unlike in New York, the networks prevailed on their claims that the service engaged in an unauthorized public performance of copyrighted works. Fox TV Stations v. BarryDriller Content Sys., 915 F. Supp. 2d 1138 (C.D. Cal. 2012). After launching in Washington, DC, the copycat service was enjoined on the same grounds. Fox TV Stations, Inc. v. FilmOn X LLC, No. 13-758 (RMC), 2013 U.S. Dist. LEXIS 126543 (D.D.C. Sept. 5, 2013).

Likewise, after Aereo expanded into Boston, litigation followed. Nonetheless, unlike courts in California and the District of Columbia, the Massachusetts court held that Aereo's use of mini-antennas did not involve an unauthorized “public performance.” Hearst Stations Inc. v. Aereo, Inc., No. 13-11649-NMG, 2013 U.S. Dist. LEXIS 146825 (D. Mass. Oct. 8, 2013).

When the Supreme Court granted the networks' cert petition in Aereo, appeals were pending in each of these cases. All but one of those appeals have now been adjourned until the High Court issues its decision.

The Supreme Court's Grant of Cert

Although the Second Circuit was the only circuit court to decide whether Aereo-type technology involves the unauthorized public performance of a copyrighted works, the Supreme Court nonetheless granted cert.

Oral argument is scheduled for April 22, 2014, with a decision anticipated before the end of this term.

Justice Alito, took no part in the consideration of the petition, and will presumably not be participating in any decision on the merits.

J. Alexander Lawrence is a Partner and David S. Brown is Of Counsel in the New York office of Morrison & Foerster LLP (www.mofo.com).