In a recent article, we said that the Supreme Court’s decision in the Aereo case doesn’t answer the most interesting question: Can Aereo now offer a lawful service by paying copyright fees to broadcasters in accordance with the compulsory copyright license for cable television services provided for in the Copyright Act and administered by the U.S. Copyright Office?

Not long after that article, Aereo teed up this very question before Judge Nathan in the U.S. District Court proceeding. But it’s not clear that either Aereo or the broadcasters have thought through thenext intriguing question, retransmission consent.

An Update on the Copyright Question

In our last article we provided a quick summary of the Compulsory Copyright License contained in Section 111 of the Copyright Act. The compulsory license allows cable television companies to retransmit broadcast programs, so long as they file a Statement of Account with the Copyright Office and pay the required royalties (which the Copyright Office dutifully doles out to the copyright owners).

In a seismic shift in business and legal strategy, Aereo told Judge Nathan that Aereo is going to file with the Copyright Office as a cable television company and pay copyright royalty fees. Aereo asserts that “After the Supreme Court’s decision, Aereo is a cable system with respect to those transmissions [of television broadcasts].” Broadcasters objected, stating that Aereo has always said it’s not a cable system and can’t use the compulsory copyright license under Section 111.

Is Either Party Thinking Through Retransmission Consent?

Both parties seem to have rushed into the compulsory copyright license arguments without thinking through the next intriguing question. Suppose Aereo is a cable television system for purposes of the Copyright Act. Is it also a cable television system under the Cable Act administered by the FCC?

Remember, the compulsory copyright license is only one of two permission slips that cable television companies need to retransmit television broadcasts. The copyright license covers the rights of the program copyright holders. But under the Cable Act, the FCC requires that cable companies negotiate retransmission consent agreements with the broadcasters. Retransmission consent isn’t needed if a broadcaster asks to be carried under the so-called must-carry rules. But broadcasters know that their programming is valuable and they don’t assert must-carry in most cases. They prefer to collect fees for retransmission consent.

We’ve seen what happens when a retransmission consent agreement can’t be reached: the dreaded channel black-out, maybe right before the Super Bowl or the World Series. The retransmission consent rules matter. So if Aereo is a cable system under the Copyright Act, is it also a cable system under FCC rules, and does it have to get retransmission consent from broadcasters?

The Parties Ought to Remember That Loose Lips Can Sink Ships

Aereo’s blanket statement that “After the Supreme Court’s decision, Aereo is a cable system…,” may go a step too far. What Aereo should have said is that Aereo is a cable system for copyright purposes. Copyright is all that the Supreme Court had before it. Retransmission consent was not at issue. The blanket statement that Aereo is a cable system hands the retransmission consent issue to the broadcasters. On the other side, the broadcasters appear to be more careful to argue that Aereo is not a cable system for purposes of Section 111 of the Copyright Act. They appear to preserve their position that if Aereo gets over the copyright hurdle, then retransmission consent will stand in Aereo’s way. Of course, if the broadcasters get paid retransmission consent fees by Aereo, they may be satisfied.

Threading the Needle

Can Aereo be a cable system under the Copyright Act, but not under the Cable Act and the FCC retransmission consent rules? Interestingly, the Copyright Act does not simply refer to the FCC definition of a cable television system. The Copyright Act has its own definition that is different from the FCC definition. The Copyright Office defines a cable television system as a system that receives television broadcast signals and makes secondary transmissions to paying subscribers “by wires, cables, microwave, or other communications channels.” It seems this could encompass an Internet-based system.

The FCC definition is different with some specific key words that raise interesting questions. Under the Cable Act and the FCC rules, a cable television system is “a set of closed transmission paths” that uses “any public right-of-way.” Is the Internet a set of closed transmission paths? Does a service provider like Aereo that uses the Internet for distribution therefore also use public rights-of-way? These are intriguing questions that will either take Aereo to a door labelled “knock here to ask for retransmission consent,” or not. And if not, will Aereo find the Copyright Office door closed? Like many Supreme Court decisions, the Aereo decision raises as many questions as it answers.

We are available to discuss.