Supreme Court Rules Against Aereo

How Aereo Operated

Although it has recently suspended operations, Aereo provided a “cloud-based” service that enabled 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 offered 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 operated, it set up banks of dime-sized antennas that received broadcast programming over the airwaves. Each subscriber was assigned a unique antenna, which, in turn, allowed the subscriber to watch or record available programming. Whether a user watched a program live ' what Aereo calls “Watch Now” mode ' or recorded the program for later, Aereo's system made a unique copy of the signal on its cloud-based DVR for that particular user. So, if 200,000 subscribers chose to watch the Super Bowl live or record it for later viewing, Aereo's system made 200,000 unique copies of the Super Bowl, as opposed to a single master copy that was then available to all 200,000 subscribers.

A subscriber could watch the available television programming on a desktop computer or an Internet-connected tablet, smart phone, or television. For its service, Aereo charged subscribers around $8.00 a month. Aereo paid broadcasters nothing for programs streamed to Aereo subscribers. Before it suspended service, Aereo offered service in over 10 cities in the United States and had ambitious expansion plans.

Did Aereo Perform Copyrighted Works?

With respect to whether Aereo engaged in performances of copyrighted works, the Supreme Court held that that Aereo did. The Court found that Aereo is in all material respects the same as a cable television provider, and that the relevant provisions of the 1976 Copyright Act were enacted specifically to overturn the Court's decisions in Fortnightly Corp. v. United Artists, 392 U.S. 390 (1968) and Teleprompter Corp. v. CBS, 415 U.S. 394 (1974), that cable television providers did not engage in public performances in retransmitting broadcast television signals.

The majority left open the question of whether an operator of some other services would be found to be engaged in a performance of works. The Court held that: “In other cases involving different kinds of service or technology providers, a user's involvement in the operation of the provider's equipment and selection of the content transmitted may well bear on whether the provider performs within the meaning of the Act.” The Supreme Court held that whether a party performs a work in connection with some other type of service will be guided by the totality of the circumstances, rather than the bright-line volitional conduct test.

It is on this first question that the majority and the dissent differed. The dissent took the position that under a bright-line volitional conduct test, Aereo would not be engaged in performances of copyrighted works. In other words, the dissent took the position that it was the Aereo subscribers who performed the works, not Aereo, which simply provided the facilities for subscribers to do so. Having reached the first question in the negative, the dissent argued that deciding the second question would not be necessary.

Did Aereo Perform Copyrighted Works Publicly?

Having decided the first question against Aereo, the Court turned to the second question of whether Aereo performed copyrighted works publicly. The Court held that Aereo did.

In deciding this issue, the Court held that even if, as Aereo argues, the performance to be considered is the transmission of the work to the subscriber rather than the underlying performance embodied in each transmission, the fact that each Aereo subscriber received a unique transmission of the signal does not render the resulting performance a private one.

Indeed, after examining the issue, the Court held that “when an entity communicates the same contemporaneously perceptible images and sounds to multiple people, it transmits a performance to them regardless of the number of discrete communications it makes.”

The Limits of the Aereo Decision

In the final section of the opinion, the Court lists a number of limitations on its decision in an effort to avoid impacting other technologies.

First, the Court held that “the history of cable broadcast transmissions that led to the enactment of the Transmit Clause informs our conclusion that Aereo 'perform[s],' but it does not determine whether different kinds of providers in different contexts also 'perform.'” Here, the Court reiterated that, while Aereo was engaged in performances, it does not necessarily follow that other types of service providers will be found to be so engaged.

Second, the Court held that “an entity only transmits a performance when it communicates contemporaneously perceptible images and sounds of a work.” Thus, the Court suggests that its decision would not be applicable to services that do not provide the same content at the same time to multiple users.

Third, the Court held that “we have interpreted the term 'the public' to apply to a group of individuals acting as ordinary members of the public who pay primarily to watch broadcast television programs, many of which are copyrighted. We have said that it does not extend to those who act as owners or possessors of the relevant product.” Read together, these two sentences may suggest that when a user has a lawful right to the content, such as with a licensed transmission service, or the storage of licensed content, the public performance right would not be implicated. The interpretation of this language, however, will be open to considerable debate, such as when a user “owns or possesses” a “relevant product.”

Fourth, the Court held that “we have not considered whether the public performance right is infringed when the user of a service pays primarily for something other than the transmission of copyrighted works, such as the remote storage of content.” Here, the Court held that whether a service that primarily provides remote storage rather than the playback of licensed content is engaged in a public performance is a question for another day.

Finally, the Court reiterated that it made no decisions regarding technologies that were not at issue in this case. The Court held that it “cannot now answer more precisely how the Transmit Clause or other provisions of the Copyright Act will apply to technologies not before” the Court and that “[q]uestions involving cloud computing, [remote storage] DVRs, and other novel issues not before the Court, as to which 'Congress has not plainly marked [the] course,' should await a case in which they are squarely presented.” And, even with respect to the Aereo service, the Court held that it was not ruling on the time-shifting aspects of the service, stating “that aspect of Aereo's service is not before us.”

Where Aereo Goes From Here

In recent filings, seizing on the Court's holding that it is in all practical aspects the same as a cable television service, Aereo says it intends to avail itself of the statutory license available to cable systems under Section 111 of the Copyright Act. Aereo intends to argue that the Court has effectively overturned decisions, such as WPIX, Inc. v. ivi, Inc., 691 F.3d 275, 279 (2d Cir. 2012), which have held that unlicensed re-transmitters of broadcast television over the Internet are not entitled to the statutory license. However, on July 16 the Copyright Office said that Aereo is likely not a cable company entitled to a compulsory license under Section 111. See, “Letter to Aereo from General Counsel and Associate Register of Copyrights, Jacqueline C. Charlesworth.” This issue is likely to be decided by the district court handling the case on remand.

Aereo has further suggested that it might still be entitled to provide a time-shifted service. Aereo takes the position that “[i]f the Court finds Section 111 inapplicable and determines that it should enter a preliminary injunction, that injunction must be limited to the conduct the Supreme Court carved out from [the] general rule [in Cartoon Network LP, LLLP v. CSC Holdings, Inc., 536 F.3d 121 (2d Cir. 2008)]: the simultaneous or near-simultaneous streaming of over the-air television programs. The Supreme Court opinion did nothing to prohibit ' and indeed reaffirms the vitality of ' non-simultaneous playback from copies created by consumers.”

What the Aereo Decision Means in Other Cases

Aereo's fate will likely soon be decided by the various district courts where cases against it are pending. The more important question will be how courts interpret the Aereo decision in connection with existing technologies and technologies not yet imagined.

The Supreme Court seems to have intended to confine the decision to the specific Aereo technology at issue. In cases challenging other technologies, arguments will be made that the Aereo decision has no application. Of course, those seeking a more expansive reading of the case can ' and will ' find language that supports their argument that the case has broader application.

J. Alexander Lawrence is a Partner in the New York office of Morrison & Foerster LLP. He can be reached at [email protected].

On June 25, 2014, the U.S. Supreme Court issued its opinion in ABC v. Aereo, Inc., No. 13-461 (U.S. 2014). In a 6-3 decision, the Court reversed the Second Circuit's holding that Aereo did not directly infringe the copyright owners' public performance rights through the operation of the “Watch Now” function of its service.

In reaching its decision, the Court held that it needed to answer two narrow questions. First, does Aereo perform the copyright works at issue? Second, if Aereo does perform those works, does it perform them publicly?

After answering both of those questions in the affirmative, the Court went to great lengths to make clear that its decision should be read narrowly, noting that it does not address the legal status of other technologies not before the Court. Nevertheless, the Court's ruling is an important one, and copyright owners probably will rely on the decision in challenging new business models engaged in the unauthorized transmissions of copyrighted works. It remains to be seen how broadly the Court's narrowly crafted decision will be interpreted by the lower courts addressing other technologies.

How Aereo Operated

Although it has recently suspended operations, Aereo provided a “cloud-based” service that enabled 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 offered 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 operated, it set up banks of dime-sized antennas that received broadcast programming over the airwaves. Each subscriber was assigned a unique antenna, which, in turn, allowed the subscriber to watch or record available programming. Whether a user watched a program live ' what Aereo calls “Watch Now” mode ' or recorded the program for later, Aereo's system made a unique copy of the signal on its cloud-based DVR for that particular user. So, if 200,000 subscribers chose to watch the Super Bowl live or record it for later viewing, Aereo's system made 200,000 unique copies of the Super Bowl, as opposed to a single master copy that was then available to all 200,000 subscribers.

A subscriber could watch the available television programming on a desktop computer or an Internet-connected tablet, smart phone, or television. For its service, Aereo charged subscribers around $8.00 a month. Aereo paid broadcasters nothing for programs streamed to Aereo subscribers. Before it suspended service, Aereo offered service in over 10 cities in the United States and had ambitious expansion plans.

Did Aereo Perform Copyrighted Works?

With respect to whether Aereo engaged in performances of copyrighted works, the Supreme Court held that that Aereo did. The Court found that Aereo is in all material respects the same as a cable television provider, and that the relevant provisions of the 1976 Copyright Act were enacted specifically to overturn the Court's decisions in Fortnightly Corp. v. United Artists, 392 U.S. 390 (1968) and Teleprompter Corp. v. CBS, 415 U.S. 394 (1974), that cable television providers did not engage in public performances in retransmitting broadcast television signals.

The majority left open the question of whether an operator of some other services would be found to be engaged in a performance of works. The Court held that: “In other cases involving different kinds of service or technology providers, a user's involvement in the operation of the provider's equipment and selection of the content transmitted may well bear on whether the provider performs within the meaning of the Act.” The Supreme Court held that whether a party performs a work in connection with some other type of service will be guided by the totality of the circumstances, rather than the bright-line volitional conduct test.

It is on this first question that the majority and the dissent differed. The dissent took the position that under a bright-line volitional conduct test, Aereo would not be engaged in performances of copyrighted works. In other words, the dissent took the position that it was the Aereo subscribers who performed the works, not Aereo, which simply provided the facilities for subscribers to do so. Having reached the first question in the negative, the dissent argued that deciding the second question would not be necessary.

Did Aereo Perform Copyrighted Works Publicly?

Having decided the first question against Aereo, the Court turned to the second question of whether Aereo performed copyrighted works publicly. The Court held that Aereo did.

In deciding this issue, the Court held that even if, as Aereo argues, the performance to be considered is the transmission of the work to the subscriber rather than the underlying performance embodied in each transmission, the fact that each Aereo subscriber received a unique transmission of the signal does not render the resulting performance a private one.

Indeed, after examining the issue, the Court held that “when an entity communicates the same contemporaneously perceptible images and sounds to multiple people, it transmits a performance to them regardless of the number of discrete communications it makes.”

The Limits of the Aereo Decision

In the final section of the opinion, the Court lists a number of limitations on its decision in an effort to avoid impacting other technologies.

First, the Court held that “the history of cable broadcast transmissions that led to the enactment of the Transmit Clause informs our conclusion that Aereo 'perform[s],' but it does not determine whether different kinds of providers in different contexts also 'perform.'” Here, the Court reiterated that, while Aereo was engaged in performances, it does not necessarily follow that other types of service providers will be found to be so engaged.

Second, the Court held that “an entity only transmits a performance when it communicates contemporaneously perceptible images and sounds of a work.” Thus, the Court suggests that its decision would not be applicable to services that do not provide the same content at the same time to multiple users.

Third, the Court held that “we have interpreted the term 'the public' to apply to a group of individuals acting as ordinary members of the public who pay primarily to watch broadcast television programs, many of which are copyrighted. We have said that it does not extend to those who act as owners or possessors of the relevant product.” Read together, these two sentences may suggest that when a user has a lawful right to the content, such as with a licensed transmission service, or the storage of licensed content, the public performance right would not be implicated. The interpretation of this language, however, will be open to considerable debate, such as when a user “owns or possesses” a “relevant product.”

Fourth, the Court held that “we have not considered whether the public performance right is infringed when the user of a service pays primarily for something other than the transmission of copyrighted works, such as the remote storage of content.” Here, the Court held that whether a service that primarily provides remote storage rather than the playback of licensed content is engaged in a public performance is a question for another day.

Finally, the Court reiterated that it made no decisions regarding technologies that were not at issue in this case. The Court held that it “cannot now answer more precisely how the Transmit Clause or other provisions of the Copyright Act will apply to technologies not before” the Court and that “[q]uestions involving cloud computing, [remote storage] DVRs, and other novel issues not before the Court, as to which 'Congress has not plainly marked [the] course,' should await a case in which they are squarely presented.” And, even with respect to the Aereo service, the Court held that it was not ruling on the time-shifting aspects of the service, stating “that aspect of Aereo's service is not before us.”

Where Aereo Goes From Here

In recent filings, seizing on the Court's holding that it is in all practical aspects the same as a cable television service, Aereo says it intends to avail itself of the statutory license available to cable systems under Section 111 of the Copyright Act. Aereo intends to argue that the Court has effectively overturned decisions, such as WPIX, Inc. v. ivi, Inc., 691 F.3d 275, 279 (2d Cir. 2012), which have held that unlicensed re-transmitters of broadcast television over the Internet are not entitled to the statutory license. However, on July 16 the Copyright Office said that Aereo is likely not a cable company entitled to a compulsory license under Section 111. See, “Letter to Aereo from General Counsel and Associate Register of Copyrights, Jacqueline C. Charlesworth.” This issue is likely to be decided by the district court handling the case on remand.

Aereo has further suggested that it might still be entitled to provide a time-shifted service. Aereo takes the position that “[i]f the Court finds Section 111 inapplicable and determines that it should enter a preliminary injunction, that injunction must be limited to the conduct the Supreme Court carved out from [the] general rule [in Cartoon Network LP, LLLP v. CSC Holdings, Inc., 536 F.3d 121 (2d Cir. 2008)]: the simultaneous or near-simultaneous streaming of over the-air television programs. The Supreme Court opinion did nothing to prohibit ' and indeed reaffirms the vitality of ' non-simultaneous playback from copies created by consumers.”

What the Aereo Decision Means in Other Cases

Aereo's fate will likely soon be decided by the various district courts where cases against it are pending. The more important question will be how courts interpret the Aereo decision in connection with existing technologies and technologies not yet imagined.

The Supreme Court seems to have intended to confine the decision to the specific Aereo technology at issue. In cases challenging other technologies, arguments will be made that the Aereo decision has no application. Of course, those seeking a more expansive reading of the case can ' and will ' find language that supports their argument that the case has broader application.

J. Alexander Lawrence is a Partner in the New York office of Morrison & Foerster LLP. He can be reached at [email protected].