By: Anthony Keats, Konrad Gatien and Bernadette Bolan
Brand Development & Content Protection Practice
This memo summarizes the United States Supreme Court’s decision in American Broadcasting Companies, Inc v. Aereo, Inc. which came down June 25, 2014. Justice Breyer delivered the opinion of the Court, with Roberts, Kennedy, Ginsburg, Sotomayor, and Kagan joining. Scalia filed a dissenting opinion, in which Thomas and Alito joined.
The United States Supreme Court found in favor of the broadcast companies, in the matter of American Broadcasting Companies, Inc. v. Aereo, Inc. The Court’s finding hinged on the Court’s rejection of the premise that “re-transmission” via the internet to a single user constituted any significant difference from the existent regulations in place for cable broadcasts of copyrighted material to a single end-user. From this perspective, the Court upheld a conservative and literal reading of the Copyright Act.
II. Procedural History
American Broadcasting Companies, Inc. (“ABC”) sued Aereo, Inc. (“Aereo”) for copyright infringement and sought a preliminary injunction, arguing that Aereo was infringing on their right to “publicly perform” their copyrighted works. The District Court denied the injunction and the Second Circuit affirmed. The Supreme Court reversed and remanded.
Aereo sells a service that lets subscribers watch television via the Internet for a monthly subscription fee. Though many television networks post shows to their sites for the public to view online after the show has aired (usually a day later), this service allows users to watch shows at about the same time that the show is airing. When a subscriber wants to watch a show, s/he selects it from a menu on the Aereo website. Aereo neither owns the copyright to any of the shows, nor has a license from the owners to perform the works publicly.
Aereo has a warehouse that that houses thousands of small antennas, about the size of a dime each. Each antenna is dedicated to one subscriber. A server tunes the subscriber’s antenna to the broadcast of the show that the subscriber has picked. A transcoder translates the signal picked up by the antenna into data that can be sent out over the Internet. Instead of sending the data directly, a server saves the data for that broadcast in a folder, specific to that subscriber, on Aereo’s hard drive and then begins to stream the show to the subscribers one a few seconds of programming have been saved. This goes on, with a few seconds of delay from the initial broadcast, until the entire show has been transmitted to the subscriber. A subscriber can watch the show on any device that gets Internet service such as a personal computer, tablet, smart phone, or Internet-connected television.
ABC consists of television producers, marketers, distributers, and broadcasters. They own the copyrights in many of the shows that Aereo streams to users.
IV. Relevant Law
The Copyright Act of 1976 gives a copyright owner the “exclusive right” to “perform the copyrighted work publicly.” The Act’s Transmit Clause defines that exclusive right to include the right to “transmit or otherwise communicate a performance . . . of the [copyrighted] work . . . to the public, by means of any device or process, whether the members of the public capable of receiving the performance . . . receive it in the same place or in separate places and at the same time or at different times.”
Aereo emphasizes that the data that the system streams to each subscribers are the data from his or her own personal copy, made from the broadcast signals received by the subscriber’s own personal antenna. Though multiple subscribers may wish to watch the same program at the same time, Aereo’s system activates just as many antennas, one per subscriber, and sends just as many transmissions separately to each person.
Aereo’s argument, which was initially agreed with by the Second Circuit, is that Aereo does not perform the works publicly within the meaning of the Transmit Clause because it does not transmit “to the public,” rather only to an individual subscriber each time. Furthermore, Aereo argues that it does not perform anything but merely provides equipment that allows the subscribers to “perform” the works. Aereo likens their service to the operation of a home antenna connected with a digital video recorders (DVR).
ABC says that Aereo transmits a prior performance of their works, and so when it retransmits a network’s prior broadcast, the underlying broadcast is the performance that Aereo transmits. Aereo claims it transmits a new performance created by its act of transmitting and that performance comes into existence when Aereo streams that images ad sounds of a broadcast program to the subscriber’s screen.
VI. Court’s Analysis
Does Aereo Perform?
One of Congress’s purposes in amending the Copyright Act in 1976 was to overturn the Supreme Court’s decision that community antenna television (CATV) systems fell outside of the Act’s scope. In Fortnightly Corp. v. United Artists Television, Inc., a CATV provider put antennas on hills above two cities and used cables to carry the signals that it picked up to home television sets of its subscribers. The system amplified the signals so the subscribers could better receive them. The CATV provider did not edit the programs or originate them, it just conveyed what it picked up via the antennas. A subscriber could choose any of the programs to view by turning the knobs on the home television set. The Court held that broadcasters perform and that viewers do not, placing the CATV providers under the category of “viewers.” Essentially, the court said that the CATV system only enhanced a viewer’s ability to receive broadcast signals by providing amplifying equipment and that like a viewer who does not become a “performer” by using enhancement equipment directly, the CATV provider did not perform. The Court had a similar holding in Teleprompter Corp. v. Columbia Broadcasting System, Inc.
The amended Copyright Act sought to erase the Court’s line between broadcaster and viewer, in respect to “performing.” The amended statute clarifies that to “perform” an audiovisual work means “to show its images in any sequence or to make the sounds accompanying it audible.” Under this language, both the broadcaster and the viewer of a television program “perform” because they both show the program’s images and make the program’s sounds audible. Congress also enacted the Transmit Clause, which specifies that a performance becomes public when it is transmitted to the public. Congress also created a new section of the Act to regular cable companies’ public performances of copyrighted works, Section 111. The section creates a complex system of compulsory licensing that sets out conditions and payment terms for cable systems to retransmit broadcasts under.
The Court found that history makes clear that Aereo is not simply an equipment provider, but that Aereo, not just its subscribers, performs/transmits the works. The Court likened Aereo to the CATV companies that Congress acted to address. Though Aereo’s equipment serves a viewer function and may emulate equipment a viewer could use at home, the same was true of the CATV companies.
The Court recognized that the difference between Aereo and the CATV systems was that those systems transmitted constantly whereas Aereo’s system remains inert until a subscriber indicates that s/he wants to watch a show and triggers the antennas to receive a broadcast. Though the dissent found this crucial, the majority did not agree that this made any critical difference.
Is the Performance Public?
Under the Transmit Clause, to transmit a performance is “to communicate it by any device or process whereby images or sounds are received beyond the place from which they are sent.” The Court assumed, arguendo, that Aereo’s argument was correct and that a to transmit a performance means to communicate contemporaneously visible images and sounds of the work. Aereo streams the program to the subscribers over the Internet and thereby communicates the images and sounds to the subscriber by means of a device or process.
The Court stated that, although each transmission goes to an individual subscriber, the differences in the way the system works does not distinguish Aereo from a typical cable system. Aereo’s commercial objective, the Court found, is no different from a traditional cable company’s objective. Additionally, the viewing experience of Aereo’s subscribers is not significantly altered. The Court found that though Aereo’s argument assumes that “to transmit a performance” means to make a single transmission, the Clause suggests that an entity may transmit a performance through multiple, discrete transmissions. The Clause says that one may transmit a performance to the public “whether the members of the public are capable of receiving the performance… receive it … at the same or at different times.” If the phrase, “to transmit a performance” were limited to a single act of communication, members of the public could not receive the performance communicated “at different times.” The Court found that Aereo does perform publicly.
Aereo performs ABC’s works publicly, within the meaning of the Copyright Act’s Transmit Clause. Aereo does not merely supply equipment to allow others to “perform” the works; it does so itself. Furthermore, this performance is “public” because Aereo “transmits” the performance of the work to the public. That each individual transmission goes to a specific subscriber only does not distinguish Aereo’s model from cable television systems, which do perform publicly.
Scalia argued that Aereo, if at all, was secondarily infringing but not directly infringing. Aereo, Scalia claims, may enable its users to infringe by providing the equipment, but does not do so directly itself because it merely operates an automated, user-controlled system. Scalia compared Aereo to a copy shop that rents out its copiers to the public – it provides the machines but the customers are the ones who choose to use the machines legally (to copy their own work) or illegally (to copy copyrighted works of others). Aereo is like, Scalia contends, a copy shop that gives patrons a library card.
Scalia stated that he shares the majority’s opinion that what Aereo is doing (or enabling) to the network’s programing should not be allowed, but that the Copyright Act should not be distorted to forbid it.
IX. General Comments
A decision to ignore the technological subtleties presented by Aereo renders their service effectively illegal, and potentially sets a relevant precedent for technology-based arguments in the future. It’s quite likely that, given the technology, social climate, and nature of copyright creation today, that were the Copyright Act written or revised today, this finding may have been different. But given the broad language of the Act as we have, it is not entirely surprising that the Court would find against the technological argument.
Although this grants the cable companies a temporary reprieve from the pressures of internet based entertainment, “(c) Given the limited nature of this holding, the Court does not believe its decision will discourage the emergence or use of different kinds of technologies. Pp. 15–17.” Though this is an important finding in the short term, the Court clearly does not believe the finding will significantly hinder the development and improvement of this sort of technology in the future. Though the Court did an excellent job interpreting the word of Congress in its application of the 1976 Copyright Act, it is hobbled by its limited variety of terms regarding technology: The text of the Clause effectuates Congress’ intent. Under the Clause, an entity may transmit a performance through multiple transmissions, where the performance is of the same work. Thus when an entity communicates the same contemporaneously perceptible images and sounds to multiple people, it “transmit[s] . . . a performance” to them, irrespective of the number of discrete communications it makes and irrespective of whether it transmits using a single copy of the work or, as Aereo does, using an individual personal copy for each viewer.” And of course, how relevant that is to actual users’ interests remains to be seen.
Aereo is one of a number of factors putting pressure on cable companies to unbundle their delivery services of copyrighted works, allowing for lower cost al la carte options. These factors include VOD, Netflix, piracy, and DVR commercial skipping. Aereo’s statement reveals a real concern that the Court’s finding has more significant repercussions for streaming content delivery. “Today’s decision by the United States Supreme Court is a massive setback for the American consumer. We’ve said all along that we worked diligently to create a technology that complies with the law, but today’s decision clearly states that how the technology works does not matter. This sends a chilling message to the technology industry. It is troubling that the Court states in its decision that, ‘to the extent commercial actors or other interested entities may be concerned with the relationship between the development and use of such technologies and the Copyright Act, they are of course free to seek action from Congress.’ (Majority, page 17) That begs the question: Are we moving towards a permission-based system for technology innovation?”
Although this decision is, according to Aereo’s lawyer Tom Goldstein, “sweeping and definitive,” Justice Scalia led the dissent, taking issue with the assertion that Aereo’s actions constitute “performance.” “In sum, Aereo does not ‘perform’ for the sole and simple reason that it does not make the choice of content,” Scalia writes. “And because Aereo does not perform, it cannot be held directly liable for infringing the Networks’ public-performance right.” Although he agreed with the result, that Aereo should be prevented from enabling access to Network’s IP, he suggests “Perhaps we need not distort the Copyright Act to forbid it.”
X. Website Follow up
 17 U. S. C. §106(4).
 Id. §101.
 392 U.S. 390 (1968).
 Id. at 398-99.
 415 U.S. 394 (1974).
 17 U. S. C. §101