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Ninth Circuit holds internet streaming service FilmOn X is not “cable system” under Copyright Act and is therefore not entitled to compulsory license to stream copyrighted content without permission.

Fox Television Stations Inc. and other broadcasting companies filed a copyright infringement suit against FilmOn X LLC, an internet-based service that uses antennas to capture broadcast television signals and then streams the content over the internet to its paying subscribers. After the Supreme Court found in American Broadcasting Cos. v. Aero Inc. that FilmOn’s technology resulted in public performances and therefore infringes the rights of copyright owners, FilmOn applied to the Copyright Office for a compulsory license that is available to “cable systems” under Section 111 of the Copyright Act. The district court held that FilmOn qualified as a “cable system” under that section of the Copyright Act, entitling it to access and transmit the networks’ content without infringing their copyrights, after paying a small fee. On appeal to the Ninth Circuit, the parties differed on their interpretation of Section 111, which defines a “cable system” as “a facility … that … receives signals transmitted or programs broadcast by one or more television broadcast stations … and makes secondary transmissions of such signals or programs by wires, cables, microwave, or other communications channels.”

Fox Television argued that FilmOn does not qualify as a “cable system” because it does not have ownership or control of the internet channels through which it retransmits the broadcast signals. Because a “cable system” is a “facility” that both captures and retransmits the broadcast signals by wires, cables, microwave or other communications channels, Fox Television argued, control over the entire process, including the retransmission medium, is required in order to qualify as a “cable system” under the plain text of the statute. The Ninth Circuit disagreed, reasoning that just as one can send a letter by mail without controlling the postal service, a “cable system” retransmitting a broadcast signal by some communication channel does not require control of that channel. The Ninth Circuit also noted other sections of the Copyright Act that suggest retransmissions may be made by a facility even when it does not control all of the channels used for the retransmission.

For its part, FilmOn argued that Section 111 should be read to make compulsory licenses available to any facility that retransmits broadcast signals, regardless of the technology used to do so. The Ninth Circuit disagreed, explaining that Congress could have easily written a broad compulsory license statute if that was what it intended. The Ninth Circuit also found FilmOn’s reliance on the Supreme Court’s decision in American Broadcasting Cos. v. Aereo Inc. to be misplaced because Aereo involved the Transmit Clause of the Copyright Act, not Section 111. Additionally, the Ninth Circuit was not persuaded by FilmOn’s argument that its internet retransmissions were made by “other communications channels.” The Ninth Circuit construed that phrase narrowly as being consistent with other inherently localized methods of transmission, akin to wires and cables. Lastly, the Ninth Circuit determined that the inclusion of internet-based retransmission services like FilmOn might undermine Congress’ purpose in enacting the Section 111 compulsory license scheme, which was intended to aid the nascent cable industry so that it could provide broadcast content to isolated communities – concerns that do not apply to an internet-based service that can retransmit content around the world.

Finding that neither Fox Television nor FilmOn had demonstrated that Section 111 unambiguously excludes or includes internet-based retransmission services from the class of “cable systems” eligible for a compulsory license, the Ninth Circuit turned to the Copyright Office’s interpretation of the statute for guidance. The Copyright Office, the agency tasked with administering the Copyright Act, has consistently taken the position that internet-based retransmission services should not be classified as “cable systems” under Section 111, the Ninth Circuit pointed out. Even under Skidmore v. Swift & Co.’s less deferential standard for giving weight to an agency’s statutory interpretation, the Ninth Circuit found that the Copyright Office has persuasively reasoned that internet-based retransmission services are not “cable systems” because they are not the kind of localized retransmission services envisioned by Congress in passing Section 111 of the Copyright Act in the 1970s. Furthermore, the Ninth Circuit found that the Copyright Office’s interpretation is in line with the balance of interests that Congress struck in passing the law, which is further evidenced by the fact that Congress has not taken any action to overturn the Copyright Office’s long-held interpretation of “cable systems” under Section 111 of the Copyright Act, despite amending other provisions of that section.

Accordingly, the Ninth Circuit reversed the ruling of the district court and held that FilmOn is not eligible for a compulsory license under Section 111 of the Copyright Act.