6/10/2014
IPToday.com - Intellectual Property Today - Supreme Court's Aereo Ruling Could Have Far-Reaching Effects
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Supreme Court's Aereo Ruling Could Have Far-Reaching Effects
By Jason Bloom and Tyler Beas of Haynes and Boone
Jason Bloom is a Dallas partner and member of the Business Litigation, Intellectual Property Litigation, and Social Media Practice
Groups at Haynes and Boone, LLP. He can be reached at [email protected]. Tyler Beas is an associate in the Dallas
office whose practice focuses on complex business and commercial litigation. He can be reached at [email protected].
On April 22, 2014, the full nine-judge bench1 of the U.S. Supreme C ourt heard oral arguments in American Broadcasting Companies
Inc.2 The
Inc., et al., v. Aereo,
C ourt is expected to issue an opinion this month as to whether Aereo’s system, which captures overthe-air television broadcasts and makes them available to its customers over the Internet, violates copyright law. The ruling is
expected to have a profound impact on the television industry, affecting such issues as retransmission fees, advertising revenue,
consumer control over content, and the way networks elect to broadcast television. The ruling could also have far-reaching impacts
on other technologies, including cloud storage and computing.
Aereo, Inc., an online television service, charges its users a monthly fee to watch “live” or recorded broadcast television programs on
cell phones, computers, and other mobile platforms. Aereo utilizes “farms” of thousands of miniature antennas (with an individual
antenna assigned to each of its users) that capture local over-the-air television transmissions, create an individual DVR-like recording,
and then re-broadcast that recording over the Internet to Aereo’s users in the same local area. Importantly for the broadcasters,
Aereo does not pay the broadcasters a fee or license the use of these over-the-air transmissions.
The dispute began when the four major television broadcast networks - ABC , C BS, NBC , and Fox - brought suit against Aereo in the
Southern District of New York alleging that its retransmission system violates their copyrights to television content and represents a
threat to their ability to generate advertising revenue and control subscription fees.3 Specifically, the networks claim that Aereo’s
unauthorized retransmissions of their copyrighted material to its users are public performances in violation of copyright law. Aereo
counters that its service is perfectly legal and allows its users to obtain content they could already access legally with a personal
television antenna. Aereo asserts that the retransmissions are not public performances, but rather enable private performances that
are allowable under copyright law.
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What makes its system legal, Aereo contends, is that it is not simply capturing the networks’ signals on a large antenna and
rebroadcasting the live transmissions out to its users, which would indisputably, absent a license, be an unauthorized public
performance under the copyright law. Rather, Aereo contends that its system, by assigning each user an individual antenna and DVR
disk space, and only allowing its users to watch programming that has been captured by their individual antennas and recorded on
their individual DVR space, amounts to multiple private performances of each user’s individually recorded content. The only difference
between what Aereo does and what users are indisputably allowed to do at home, Aereo claims, is that the individual antennas and
DVRs are located at Aereo’s premises rather than at its users’ homes.
Lower courts throughout the country are sharply divided as to whether Aereo’s system and a nearly identical system offered by a
competitor, FilmOn X are legal under the C opyright Act. Federal courts in C alifornia, Washington, D.C ., and Utah have preliminarily
enjoined the operation of such systems during the pendency of litigation, whereas C ourts in New York and Massachusetts have
declined to enter injunctions.4 The present Supreme C ourt case, which should fully resolve the issue on a national scale, originated
with the Southern District of New York’s denial of the networks’ request for an injunction.
The Southern District of New York, following a prior Second C ircuit decision in Cartoon Network LP, LLLP v. CSC Holdings, Inc. (also
known as Cablevision), found the Aereo system made legal, private transmissions (or performances) rather than unauthorized public
performances.5 The Cablevision decision had previously held that remote storage DVRs, whereby consumers were able to record and
play back programs on DVRs remotely housed at C ablevision’s premises, were legal under copyright law. The Second C ircuit,
following its precedent set in Cablevision, affirmed the Aereo district court’s ruling, and the networks sought certiorari from the
Supreme C ourt. In a somewhat unusual move, Aereo also urged the high court to hear the case, even though it won at the appellate
court level. This is likely because Aereo desires one definitive ruling, and does not want to jump from circuit court to circuit court relitigating these same issues.
In their Supreme C ourt briefing, the broadcast networks once again emphasized the fact that they have spent billions of dollars
creating and disseminating TV programming based on the current copyright legal regime, and that Aereo’s circumvention of the
copyright law threatens this long-established model. The networks warn that if Aereo is allowed to continue operating, they would be
forced to move over-the-air content to their pay-channels, which could have the effect of ending free over-the-air television.
Aereo countered that its system is perfectly legal under the C opyright Act, and that it is doing nothing more than renting equipment to
its users so that they can do what they would indisputably be authorized to do in their own homes—watch and record over-the-air
television broadcasts. Aereo additionally warned that an adverse ruling from the C ourt would not only shut down its business, but
could stifle a much broader array of similar technologies that enable remote storage and retrieval of data, such as cloud services.
During oral argument, the Supreme C ourt justices seemed troubled by the basic set-up of Aereo’s technology. Justice Ginsburg asked
Aereo’s attorney whether there was “a technical reason, instead of having a one-way antenna, to have all of these . . . dime-size
antennas?” C hief Justice Roberts observed that “there’s no technological reason for you to have 10,000 dime-sized antenna, other
than to get around the copyright laws.” He later went on to state that Aereo’s “technological model is based solely on circumventing
legal prohibitions that [Aereo does not] want to comply with[.]” Justice Breyer stated that “it looks as if somehow you are escaping a
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6/10/2014
IPToday.com - Intellectual Property Today - Supreme Court's Aereo Ruling Could Have Far-Reaching Effects
constraint that’s imposed upon [everyone else]. That’s what disturbs everyone.”
As worried as the C ourt may have seemed about Aereo potentially skirting copyright law, it was just as troubled, if not more so, by
the potential consequences a ruling in favor of the networks could have on cloud computing technologies. Justice Alito stated that he
“need[ed] to know how far the rationale that [the networks] want [the C ourt] to accept will go, and needed to understand . . . what
effect it will have on these other technologies.” In the questioning of the networks’ attorney, Justice Breyer stated that Aereo and their
supporting amici “have thrown up a series of serious problems not involving them, like the cloud, which the government tells us to
ignore, and many others, which makes me nervous about taking [the networks’] preferred [position].” Later in the arguments, he
again emphasized his uneasiness with adopting the networks’ position when he stated “I don’t understand what the decision for
[Aereo] or against [Aereo] when I write it is going to do to all kinds of other technologies. I’ve read the briefs fairly carefully, and I’m
still uncertain that I understand it well enough.” Justice Sotomayor specifically questioned whether a ruling against Aereo would affect
services such as “Dropbox and the iC loud,” and admitted that crafting a ruling to not affect these technologies “would be difficult.”
The Supreme C ourt’s stated concerns at the oral argument are not without cause. A broad ruling from the C ourt outlawing Aereo’s
system could, indeed, have implications for other cloud-based systems. If, for instance, the C ourt held that the storage and
transmission of unique copies of identical content, although stored and transmitted separately, always amounts to a public
performance of that content, many cloud storage systems could be found to violate copyright law. Such a ruling could lead to
considerable uncertainty and stifled innovation in the cloud-computing industry, deterring future advancements in (and possibly
shutting down) technologies that currently provide remote data storage capabilities to an increasingly large segment of the population.
The C ourt could, of course, rule against Aereo without impacting traditional cloud computing services at all. The C ourt could narrowly
limit its ruling to Aereo’s specific technology, which is indisputably designed to fit within a perceived loophole in the copyright law,
rather than addressing the broader concept of remote storage and transmission. The C ourt could also find error with an aspect of
Aereo’s system that is not present in many cloud technologies, such as the fact that the stored and transmitted content is originally
captured by Aereo rather than the end user.6
Regardless, an adverse ruling would undoubtedly put Aereo and similar services out of business and could potentially extend the reach of the C opyright Act
beyond what C ongress intended it to be when the current Act was drafted in 1976. Moreover, a ruling against Aereo would leave unchanged the current
scheme whereby networks charge cable and satellite providers multi-million dollar fees to rebroadcast over-the-air content.
Alternatively, if the Supreme C ourt affirms the Second C ircuit’s decision, the networks could lose considerable bargaining power when negotiating lucrative
retransmission agreements with cable and satellite providers. The providers, which currently have little choice in the matter, could simply threaten to bypass
the networks by adopting Aereo-type systems (or partnering with Aereo-type companies) to provide over-the-air content to their customers. This could have
serious financial impacts on the networks, which currently derive a substantial portion of their revenue from retransmission agreements with satellite and
cable companies.
Some cable companies, such as Fox, have even threatened to shift all of their premium programming to paid cable channels if the Supreme C ourt rules in
Aereo’s favor. The NFL and MLB have echoed this sentiment, warning that if Aereo’s system is found legal it would lead the leagues to begin striking deals with
cable channels instead of the networks. The days of readily available programming on free local broadcast channels could come to an abrupt halt if the
networks and professional sports leagues were to follow through with such threats.
Alternatively, if the networks are not able to beat Aereo at the Supreme C ourt, they could consider joining them by offering similar services for a fee. In fact,
C BS chairman Les Moonves has threatened to make C BS programming available over the Internet for a lower fee than Aereo’s if Aereo wins before the
Supreme C ourt. If C BS followed through and other networks followed suit, a ruling in Aereo’s favor could have the effect of making all broadcast television
available live over the Internet. The Aereo system could, in effect, bring about the type of industry change that Napster (though found to be illegal) did years
before.
At the end of the day, regardless of the outcome, the Supreme C ourt’s decision will not likely be the final word on the ultimate legality of Aereo-type systems.
One can expect that whoever loses will simply take the fight to the first branch, spending considerable resources lobbying C ongress to amend the C opyright
Act of 1976 to address Aereo-type technologies. This, of course, begs the ultimate question: whether the 38-year-old C opyright Act should be interpreted to
apply to (and perhaps stifle) technologies that were not even dreamed of at the time of its enactment, or whether C ongress should be required to periodically
amend the Act to address newly-developed technologies. Whatever the outcome, the Supreme C ourt’s ruling and any ultimate congressional action will have
potentially significant effects throughout the television industry and beyond.
Endnotes
1 Justice Samuel Alito had previously recused himself from the case because his family owned stock in the Disney C o., which is the parent company of
petitioner ABC . It is unclear why Justice Alito ended his recusal. This is significant because it eliminates the possibility of a 4-4 split decision which would have
kept in place the conflicting C ourt of Appeals rulings.
2 C ase No. 13-461, 134 S.C t. 896 (U.S. Jan. 10, 2014) (granting petition for a writ of certiorari).
3 American Broadcasting Companies, Inc. v. Aereo, Inc., 874 F.Supp.2d 373 (S.D.N.Y. 2012).
4 A Utah federal court, for example, recently held that Aereo’s system was an illegal public broadcast. And, a similar system run by Aereo rival FilmOn X LLC
has been temporarily enjoined from operating by C ourt’s in the Ninth C ircuit and Washington, D.C . The Supreme C ourt recently denied FilmOn’s bid to
intervene in the Aereo case.
5 536 F.3d 121 (2d C ir. 2008).
6 Many cloud platforms simply store content that was originally obtained (presumably lawfully) by users through their computers. Aereo, on the other hand,
originally captures the content at issue on its own antennas and DVRs before transmitting the content to end users.
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