Why it matters: On November 12, 2015, a D.C. federal judge ruled in Fox Television Stations, Inc. v. FilmOn X LLC that the FilmOnX Internet streaming service is not a "cable system" entitled to a compulsory license under Section 111 of the Copyright Act. As a result, the judge ruled that the service was liable to broadcaster copyright holders for infringing their exclusive public performance rights via the unlicensed streaming of their programming. That case has now been appealed to the D.C. Circuit. The district court's opinion is in direct contrast to a ruling handed down by a Central District of California court in July 2015 (now on appeal to the Ninth Circuit) involving the same players and facts that the Internet streaming service does potentially qualify as a cable system under the Copyright Act. Based on what happens on appeal in these two cases, the issue of whether Internet streaming services can be classified as cable systems entitled to compulsory licenses under the Copyright Act could be heading to the U.S. Supreme Court to decide.

Detailed discussion: On November 12, 2015 (redacted opinion unsealed on December 1, 2015), Judge Rosemary Collyer of the D.C. district court ruled in Fox Television Stations, Inc. v. FilmOn X LLC that Internet streaming service FilmOnX was not a "cable system" under the Copyright Act of 1976 (Copyright Act) and thus was not entitled to a compulsory license under Section 111 thereof (Section 111 Compulsory License). As a result, Judge Collyer ruled that FilmOnX was liable under the Copyright Act to the plaintiff broadcasters and programmers (collectively, "Plaintiffs") for streaming their programming without authorization. Judge Collyer certified the case for appeal to the D.C. Circuit on January 5, 2016. Contrast Judge Collyer's ruling with a ruling by a Central District of California judge in July 2015 in Fox Television Stations, Inc. v. FilmOn X LLC.—involving the same players and facts—that reached the opposite conclusion and held that the Internet streaming service does potentially qualify as a "cable system" that is entitled to a Section 111 Compulsory License. That latter decision is now before the Ninth Circuit on interlocutory appeal—more on that later.

Judge Collyer began her detailed, 45-page opinion by succinctly framing the issue she was being asked to resolve: "whether a service that engages in Internet retransmission of over-the-air television programming violates the Copyright Act." The opinion then provides a synopsis of the relevant facts and procedural history, which we briefly summarize here: In 2010, the Plaintiffs sued FilmOnX's predecessor, FilmOn, in the Southern District of New York for copyright infringement based on FilmOn's unauthorized streaming of their programming. FilmOn was described in court papers as a service that streamed broadcast signals over the Internet on a "live basis." In that litigation, FilmOn claimed that it was essentially a "cable system" within the meaning of the Copyright Act and was thus entitled to a Section 111 Compulsory License. The district court disagreed, holding that FilmOn was not a cable system and thus its retransmissions were infringements of the Plaintiffs' copyrights. The Second Circuit affirmed that decision. Subsequently, FilmOn was permanently enjoined from streaming the Plaintiffs' programming without permission. In 2012, FilmOnX was launched. The "new and improved" FilmOnX was described as a service that "captures the signals of multiple television channels that are broadcast over-the-air and streams them over the Internet to the public." Unlike the prior system, FilmOnX relied on "mini-antenna/data video recorder technology" (including thousands of dime-sized antennas distributed in major metropolitan areas throughout the United States) that provided individual viewers with "both time-delayed and nearly simultaneous retransmissions of copyrighted content." Also unlike the prior system, FilmOnX expressly denied that it was a cable system within the meaning of the Copyright Act and instead maintained it was a "remote storage DVR" exempted from copyright liability altogether under then applicable Second Circuit precedent. A Southern District of New York judge agreed with this "remote storage DVR" argument in connection with separate litigation over a virtually identical Internet streaming service called Aereo (Barry Diller's start-up) (Aereo I). As a result, FilmOnX was not part of the injunction imposed upon its predecessor FilmOn.

The Plaintiffs next filed suit against FilmOnX in the Central District of California in 2012 in Fox Television Stations, Inc. v. FilmOn X LLC (f.k.a. Aereokiller). At that time, Central District of California Judge George Wu disagreed with the decision in Aereo I, and preliminarily enjoined FilmOnX from the unauthorized streaming of the Plaintiffs' broadcasts… but only within the Ninth Circuit. After the Second Circuit affirmed Aereo I in 2013 (Aereo II), the Plaintiffs filed suit in the District of Columbia, still hoping to obtain a nationwide injunction against FilmOnX. In September 2013, Judge Collyer ruled that FilmOnX's unauthorized retransmission "likely" infringed upon the Plaintiffs' copyrights and preliminarily enjoined FilmOnX from continuing the unauthorized streaming of their programming. In 2014, the U.S. Supreme Court overturned both Aereo I and Aereo II in its landmark decision in American Broadcasting Companies, Inc. v. Aereo, Inc. (Aereo III) and ruled that the retransmission of over-the-air broadcasts to Internet-connected devices did indeed constitute an unlicensed and unauthorized public performance of the Plaintiffs' copyrighted programming in violation of the Copyright Act. Key to what was argued later in the D.C. district court and other cases was the analogy the Supreme Court drew in Aereo IIIbetween the Internet streaming systems (e.g., FilmOnX and Aereo) and the "highly similar" community antenna television (CATV) systems (the precursors to modern cable systems) that Congress brought within the scope of the Copyright Act in 1976, which the Supreme Court used to conclude that "retransmitting copyrighted programming over the Internet constitutes a public performance within the meaning of the [Copyright Act]."

Which brings us to the present case. The motion before Judge Collyer had to do with FilmOnX, after initially denying that it was a cable system within the meaning of the Copyright Act, now using the Supreme Court's analogy in Aereo III to claim that it was indeed a cable system entitled to a Section 111 Compulsory License. After first noting that Aereo unsuccessfully tried this same argument on remand to the Southern District of New York (Aereo was permanently enjoined on a nationwide basis and is now defunct), and also noting that the judge in the Central District of California FilmOnX case reached the opposite conclusion in July 2015, Judge Collyer held that FilmOnX, as an Internet streaming service, did not fall within the definition of a "cable system" under the Copyright Act, and was thus not entitled to a Section 111 Compulsory License.

Judge Collyer began her analysis by noting "the question here is whether FilmOn X is a cable system in light of the analogies in Aereo III and the text of § 111(c)." With respect to Aereo III, FilmOnX argued that, while the Supreme Court did not explicitly decide the issue of whether Internet-based streaming services qualify as cable systems under the Copyright Act, the Court impliedly did so when it "embraced a technology-agnostic" interpretation of the Copyright Act by analogizing Internet streaming services to CATV and cable systems and highlighting their "overwhelming likeness." Judge Collyer disagreed, stating that FilmOnX "overread Aereo III" and that the Supreme Court made its analogy for purposes of determining infringement liability under the Copyright Act, and not for determining whether an entity constitutes a cable system for purposes of obtaining a Section 111 Compulsory License.

Judge Collyer next looked to the "plain language" of the definition of "cable system" in Section 111(f)(3) of the Copyright Act: "a facility, located in any State, Territory, Trust Territory, or Possession, that in whole or in part receives signals transmitted or programs broadcast by one or more television broadcast stations licensed by the Federal Communications Commission, and makes secondary transmissions of such signals or programs by wires, cables, microwave, or other communications channels to subscribing members of the public who pay for such service." Judge Collyer rejected FilmOnX's myriad arguments that it fit into this definition for the following main reasons: (1) under the definition a facility must both receive and retransmit signals, FilmOnX's only "physical facilities" are the small antennas it uses to capture the broadcast signals, but those "facilities" do not also retransmit the signals as required by the definition (it relies on separate Internet service providers to do that); (2) a cable system must be "located in a State, Territory, Trust Territory, or Possession," and, by contrast, the Internet has no physical geographical location and "exists in cyberspace"; and (3) Internet delivery is not limited to "wires, cables, microwave or other communications channels." The judge also rejected FilmOnX's argument that Congress meant to embrace any new forms of delivery technologies—such as the Internet—with the "other communications channels" language, stating that "Congress did not consider the Internet in 1976 when § 111 was enacted and has not amended the definition since to include anything resembling a distribution medium with a global footprint." Finally, Judge Collyer looked for guidance to the Copyright Office's interpretation of Section 111, and found that "[f]or over fifteen years, the Copyright Office has taken the position that Internet-based retransmission services are not cable systems and do not fall within § 111."

Given her finding that FilmOnX is not a cable system entitled to a Section 111 Compulsory License, Judge Collyer went on to find FilmOnX liable under the Copyright Act for infringing the Plaintiffs' exclusive public performance rights. On January 5, 2016, Judge Collyer certified the case for immediate appeal to the D.C. Circuit. As for the Central District of California litigation, on July 24, 2015 (after the parties had filed cross-motions for summary judgment in light of Aereo III), Judge Wu reached the opposite conclusion as Judge Collyer, and held that FilmOnX does indeed potentially qualify as a cable system under the Copyright Act and is therefore entitled to a Section 111 Compulsory License, but remains potentially liable for "non-compliant secondary transmissions." Judge Wu recognized the import of his ruling, stating that the "legal issues [in the case] are close and of significant commercial importance. This Order and the Court's Opinion disagree with the analysis of both the United States Court of Appeals for the Second Circuit in an analogous case … and the United States Copyright Office, and will materially affect the outcome of this litigation." Judge Wu then certified the case for interlocutory appeal to the Ninth Circuit to resolve the issue. The Ninth Circuit agreed to take the appeal on September 16, 2015.

We will keep an eye on both these appeals and report back. Depending on the outcomes, there could be another circuit split and another trip to the U.S. Supreme Court.

Click here to read the D.C. district court's 11/12/15 opinion in Fox Television Stations, Inc. v. FilmOn X LLC.

Click here to read the Central District of California's 7/24/15 Order on Cross- Motions for Partial Summary Judgment and Certification of Immediate Appeal in Fox Television Stations, Inc. v. FilmOn X LLC.