<b><i>Online Extra:</b></i><br>TV Networks Win Another Battle on Streaming

In another blow for the web TV industry, the U.S. Court of Appeals for the Ninth Circuit on March 21 ruled that Internet-based streaming services cannot retransmit network broadcasters' content at steeply discounted licensing rates without their permission.

The opinion by a unanimous panel of the Ninth Circuit comes after at least seven other federal district and appellate court decisions have similarly concluded that Web TV providers are not “cable systems” under the law and thus are not eligible for compulsory licenses to content.

It's a big-dollar issue for all sides. As the court noted in its decision, compulsory licenses allow cable systems to pay copyright holders a statutory “de minimis” amount of royalties to retransmit the content, especially compared to the money the cable industry rakes in from subscribers.

The Ninth Circuit's ruling reverses a decision by a Los Angeles federal judge who had taken a departing interpretation of the law and granted partial summary judgement in favor of Web TV service provider FilmOn X. The copyright infringement litigation was launched in 2012 by Fox.

Fox Television Stations v. Aereokiller turned on the meaning of “cable system” as defined in the 1976 Copyright Act. The law describes a cable system in part as a “facility … that in whole or in part receives signals transmitted or programs broadcast … and makes secondary transmissions of such signals or programs by wires, cables, microwave or other communications channels.”

An alliance of broadcasters including Fox, NBC Universal and ABC — represented by Neal Katyal of Hogan Lovells — had argued that the plain language of the law means that a “cable system” is one in which the communications channel is controlled by the company. That would rule out the retransmission of content by FilmOn and similar providers, since they do not control the Internet.

Circuit Judges Diarmuid O'Scannlain, Johnnie Rawlinson and Consuelo Callahan did not buy that argument. But the panel also said they could not endorse the proposition by FilmOn's lawyer, Ryan Baker of Los Angeles firm Baker Marquart, that “wires, cables, microwave or other communications channels” necessarily encompassed transmission over the internet.

Instead, it was the position of the U.S. Copyright Office — which for decades has publicly said that Internet retransmission does not fall under the definition of “cable system” — that carried the day. The panel deferred to the office under the so-called Skidmore doctrine, granting a lower-level deference than under the Chevron framework.

“FilmOn and other Internet-based retransmission services are neither clearly eligible nor clearly ineligible for the compulsory license Section 111 makes available to 'cable systems,'” O'Scannlain wrote for the panel. “The Copyright Office says they are not eligible. Because the office's views are persuasive, and because they are reasonable, we defer to them.”

According to the panel's opinion, the office has argued that a “cable system” must be an inherently localized transmission service. This, O'Scannlain wrote, “is a plausible attempt to maintain the balance Congress struck between the public's interest in ever-improved access to broadcast television and the property rights of copyright holders.”

Baker, in an interview, said that the position taken by the broadcasters and the Copyright Office seeks to “shackle the cable world with the technology of 1976.” He added that what is really at issue is the ability of people who don't want to pay for the installation of cable in their homes to continue to have access to broadcast television.

Although the decisions so far have gone against it, FilmOn still has chances to the turn the tide. The exact same issue was argued before the D.C. Circuit on March 17, and before the Seventh Circuit in January. FilmOn, formerly known as Aereokiller LLC, has been blocked from offering broadcaster content while the court proceedings are ongoing.

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Ben Hancock writes for The Recorder, the San Francisco-based ALM sibling of Internet Law & Strategy. He can be reached at [email protected], and on Twitter @benghancock.

In another blow for the web TV industry, the U.S. Court of Appeals for the Ninth Circuit on March 21 ruled that Internet-based streaming services cannot retransmit network broadcasters' content at steeply discounted licensing rates without their permission.

The opinion by a unanimous panel of the Ninth Circuit comes after at least seven other federal district and appellate court decisions have similarly concluded that Web TV providers are not “cable systems” under the law and thus are not eligible for compulsory licenses to content.

It's a big-dollar issue for all sides. As the court noted in its decision, compulsory licenses allow cable systems to pay copyright holders a statutory “de minimis” amount of royalties to retransmit the content, especially compared to the money the cable industry rakes in from subscribers.

The Ninth Circuit's ruling reverses a decision by a Los Angeles federal judge who had taken a departing interpretation of the law and granted partial summary judgement in favor of Web TV service provider FilmOn X. The copyright infringement litigation was launched in 2012 by Fox.

Fox Television Stations v. Aereokiller turned on the meaning of “cable system” as defined in the 1976 Copyright Act. The law describes a cable system in part as a “facility … that in whole or in part receives signals transmitted or programs broadcast … and makes secondary transmissions of such signals or programs by wires, cables, microwave or other communications channels.”

An alliance of broadcasters including Fox, NBC Universal and ABC — represented by Neal Katyal of Hogan Lovells — had argued that the plain language of the law means that a “cable system” is one in which the communications channel is controlled by the company. That would rule out the retransmission of content by FilmOn and similar providers, since they do not control the Internet.

Circuit Judges Diarmuid O'Scannlain, Johnnie Rawlinson and Consuelo Callahan did not buy that argument. But the panel also said they could not endorse the proposition by FilmOn's lawyer, Ryan Baker of Los Angeles firm Baker Marquart, that “wires, cables, microwave or other communications channels” necessarily encompassed transmission over the internet.

Instead, it was the position of the U.S. Copyright Office — which for decades has publicly said that Internet retransmission does not fall under the definition of “cable system” — that carried the day. The panel deferred to the office under the so-called Skidmore doctrine, granting a lower-level deference than under the Chevron framework.

“FilmOn and other Internet-based retransmission services are neither clearly eligible nor clearly ineligible for the compulsory license Section 111 makes available to 'cable systems,'” O'Scannlain wrote for the panel. “The Copyright Office says they are not eligible. Because the office's views are persuasive, and because they are reasonable, we defer to them.”

According to the panel's opinion, the office has argued that a “cable system” must be an inherently localized transmission service. This, O'Scannlain wrote, “is a plausible attempt to maintain the balance Congress struck between the public's interest in ever-improved access to broadcast television and the property rights of copyright holders.”

Baker, in an interview, said that the position taken by the broadcasters and the Copyright Office seeks to “shackle the cable world with the technology of 1976.” He added that what is really at issue is the ability of people who don't want to pay for the installation of cable in their homes to continue to have access to broadcast television.

Although the decisions so far have gone against it, FilmOn still has chances to the turn the tide. The exact same issue was argued before the D.C. Circuit on March 17, and before the Seventh Circuit in January. FilmOn, formerly known as Aereokiller LLC, has been blocked from offering broadcaster content while the court proceedings are ongoing.

*****
Ben Hancock writes for The Recorder, the San Francisco-based ALM sibling of Internet Law & Strategy. He can be reached at [email protected], and on Twitter @benghancock.