Call it “the little antenna that could.” Remember the classic rabbit ears that topped television sets? Now there is a miniature version that doesn’t look like a rabbit but moves very fast. A new device developed by Aereo, Inc. provides access to live TV online for local channels within a given coverage area. Using an array of tiny dime-sized antennas, the system makes it possible to watch television without a television set. For a rate currently around $8-12 per month, subscribers can view and record live television broadcasts over the Internet through mobile electronic devices. Since its inception in 2010, Aereo’s online television playback system has expanded into 11 major U.S. media markets and garnered the company nearly one hundred million dollars in funding. This expansion has also earned the small startup company the enmity of major broadcasters and a date in the U.S. Supreme Court.
Could broadcast television networks and studios lose control of the distribution of their content as a result of these antennas and the associated software? What’s the right policy to incentivize creativity?
Sixteen broadcasting networks and licensees have sued Aereo for copyright infringement in federal courts in New York, Massachusetts and Utah. These broadcasting companies are able to profit by licensing content to cable and satellite providers and by delivering content over their own Internet platforms in various controlled ways, including statutory and negotiated licenses. Broadcasters also transmit some content freely “over-the-air” (in the old-fashioned way) to earn additional revenue selling airtime to advertisers. Technically, anyone within range of a transmitter can pick up these over-the-air broadcasts with an antenna.
Broadcasters fear that Aereo’s growing business will affect their revenue base, especially for local stations. From their perspective, Aereo free-rides off of their copyrighted content by delivering this content to consumers, for profit, without paying a licensing fee, supplanting those providers who do pay. To Aereo, its service remains within the confines of copyright law because its technology mimics a traditional in-home antenna and recording device that leave users in control. Aereo believes that legal precedent supports this view.
The issue before the Court is whether Aereo’s retransmission of television broadcasts constitutes a public performance, which would require Aereo to obtain a license. Under the Copyright Act, only copyright owners have the right to perform their copyrighted work publicly, which includes transmitting or communicating the work to the public, even if members of the public ultimately perceive the work at different times and/or locations. In other words, a private experience like watching a TV show at home alone does not necessarily make the performance private.
Aereo argues that its retransmissions are private performances, pointing to the individualized structure of its hardware. In each market with an Aereo presence, the company has set up banks of antennas to capture local broadcasts. When a subscriber selects a program to view or record online, Aereo assigns an antenna to fulfill that request. The program is then recorded on a hard drive assigned to the individual subscriber who can watch a buffered live feed of the program with about a 10-second delay. One more fact: the same recording is never shared between subscribers.
That last distinction may be a fine one, but it is important in the wake of an exceedingly technical 2008 decision from the Second Circuit Court of Appeals. In Cablevision v. Cartoon Network, the Second Circuit ruled that a remote DVR system that Cablevision employed did not infringe Cartoon Network’s and others’ copyrights. The case hinged on the fact that Cablevision recorded each program separately on distinct hard drives for each customer. Because each customer could view only his or her own separate recording, the court found that the recordings constituted a private performance, not a transmission of a copyrighted work. Analogizing to Cablevision, Aereo convinced the Second Circuit that it merely rents the equipment that consumers use to access already-public content, which they have a right to view. In a dissent, Judge Denny Chin said that the use of countless tiny antennas (instead of one large antenna) serves no technological purpose. According to Judge Chin, this platform was designed to take advantage of a loophole in the law.
The broadcasters have made several arguments in the lower courts to distinguish Aereo’s service from the remote DVR system in Cablevision, and now they ask the Court, in effect, to overrule Cablevision altogether. They ask the Court, in part, to interpret the Copyright Act according to its functional impact on copyright owners rather than the technical design of Aereo’s apparatus.
On March 3, 2014, the Copyright Office and the Solicitor General filed a joint amicus brief supporting the broadcasters on behalf of the United States. They argued, “The fact that as part of that system respondent uses unique copies and many individual transmissions does not alter the conclusion that it is retransmitting broadcast content ‘to the public.’” In contrast to a pure equipment rental, they believe that Aereo subscribers purchase “a right of access to a shared pool of antennas and the content . . .” (emphasis added).
Still, Aereo also emphasizes the practical effects of its service for users, who independently control their “transmissions,” similar to buying blank VHS tapes and recording programs on a VCR. Do these many individual transmissions in the aggregate equate to a public performance under the Copyright Act? The Court will tell us soon.
On April 22, 2014, the Supreme Court heard the broadcasting companies’ appeal from the Second Circuit. The justices expressed a number of concerns, both technical and practical: including whether Aereo should qualify as a cable company subject to a compulsory license, protecting the simple hardware suppliers, keeping retail out of the definition of public performance, the impacts on cloud computing and other technologies, and “what disturbs everyone” – the fact that through Aereo consumers can access content but circumvent license fees.
The broadcasting companies and the government emphasized (a) that Aereo delivers new content and (b) that cloud locker storage services should not be impacted by the decision. In other words, Aereo “provides content in the first instance” to subscribers in their “capacities as members of the public,” while cloud storage lockers function like valet parking services, allowing users in their individual capacities to park content that they already have.
Aereo stressed that its system was user-initiated. It construed its role as a passive bystander once the antennas are rented out. Aereo also argued that “this is really a reproduction rights case masquerading as a public performance case.”
In a larger sense, this case is yet another chapter in the application of copyright law to new technologies. Should an extremely technical reading of the Copyright Act so affect the broadcast networks and local stations? As we the people interact with media in new ways and do so more pervasively through the Internet, the complex and growing network of “transmissions” increasingly blurs the lines between public and private performances. Aereo is either a pernicious erosion of copyright, or a boon to consumers via new technology. The real question, though, is: Who should control the distribution of television content, the networks and their affiliates or Aereo? Regardless of how the Supreme Court rules, Congress may have the final say. Tune in for the decision. Will the little antenna that thinks it can change television be allowed to do so?
Mark A. Fischer is a partner at Duane Morris LLP. His law practice is focused on solving problems and making deals for innovative companies, institutions and individuals. Mr. Fischer’s clients are typically in the creative industries such as new media, social networking, music, interactive entertainment, information technology, software, television, publishing and toys. He may be contacted at: email@example.com.
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