On June 25 2014 a divided (six-three) Supreme Court reversed the denial of a preliminary injunction against Aereo, Inc's unlicensed online streaming of copyrighted broadcast programming. The court held that Aereo's practices violated 17 USC § 106(4) of the Copyright Act of 1976, which gives copyright holders the exclusive right to "perform the copyrighted work publicly".
The petitioners – a group of television producers, marketers, distributors and broadcasters which own copyrights to television programmes – brought a copyright infringement suit against Aereo, a provider of online streaming programming.
Aereo sold an online service that allowed subscribers to view over the Internet local broadcast television programming chosen from a list on its website seconds after the programmes were broadcast. Aereo broadcast the chosen programme using a system of servers, transcoders and antennas housed in a warehouse. Once a user had chosen a programme, Aereo's servers chose an antenna to dedicate to that user, which was tuned to the programme's over-the-air broadcast. As the programme was received, it was translated by Aereo's transcoder into data that could be transmitted over the Internet and a "personal copy" was saved on Aereo's server to a user-specific folder. After several seconds of the programme had been saved, Aereo began streaming it to the user over the Internet for viewing on an internet-connected device. The personal copies were never transmitted to any other subscriber.
The petitioners' suit asserted various theories of liability, including infringement of the right of public performance, the right of reproduction and contributory infringement. On July 11 2012 the US District Court for the Southern District of New York denied American Broadcasting Companies, Inc's request for a preliminary injunction.(1) The district court determined that since Aereo saved a unique personal copy of each programme that was transmitted only to that particular subscriber, it was providing a private transmission, not a transmission "to the public". It also found that, despite the petitioners' showing of irreparable harm and that an injunction would not disserve the public interest, the balance of the harms tipped in Aereo's favour.
A split Second Circuit affirmed the district court's opinion on April 1 2013, agreeing that Aereo did not transmit programmes "to the public" and thus did not "perform publicly" within the meaning of the transmit clause.(2) The Second Circuit denied rehearing en banc on July 16 2013.(3)
The issue for decision was whether Aereo infringed the petitioners' exclusive right under the act to "perform [their] copyrighted work[s] publicly" where the act provides that:
"[t]o perform... a work 'publicly' means [among other things], to transmit or otherwise communicate a performance... of the work... to the public, by means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times [the transmit clause]."(4)
Writing for the majority, Justice Breyer determined that Aereo did not merely supply equipment that responded to a user's directions, but rather performed a copyrighted programme when it re-transmitted the performance and a subscriber watched the programme. Focusing on 1976 amendments to the Copyright Act that overturned two prior Supreme Court decisions that cable television systems (precursors to cable systems) fell outside the scope of the act, the court in the present case found that Aereo's practices and those of the cable television providers were "highly similar", and that any differences were not in the fundamental nature and purpose of the services being provided, but rather in the "technological manner" in which they were provided. Thus, it concluded that Aereo's practices were within the scope of the act.
The court first determined that Aereo "performed" the copyrighted works and rejected Aereo's position that it merely supplied equipment that emulated the operation of home antennas and digital video recorders (DVRs). The court looked to its decisions in Fortnightly Corp v United Artists Television, Inc(5) and Teleprompter Corp v Columbia Broadcasting Sys Inc,(6) where it had held that cable television providers accused of copyright infringement did not "perform" anything simply by putting antennas on hills to capture broadcast signals and then using coaxial cables to carry them, without editing or adding content, to subscribers' home television sets. The court concluded that "Congress amended the Copyright Act in large part to reject the Court's holdings in Fortnightly and Teleprompter". The court noted that in the amended act, Congress clarified that to "perform" an audiovisual work means "to show its images in any sequence or to make the sounds accompanying it audible", under which both the broadcaster and the viewer of a television programme "perform" the work. Congress also added to the act the transmit clause, defining "[t]o 'transmit' a performance" as "to communicate it by any device or process whereby images or sounds are received beyond the place from which they are sent", which was directed at cable system activities. Accordingly, the court stated that "[t]his history makes clear that Aereo is not simply an equipment provider"; and that Aereo's activities were substantially similar "to those of the [cable television] companies that Congress amended the Act to reach".
The court then addressed the question of whether Aereo performed the petitioners' works "publicly" within the scope of the transmit clause, where an entity performs a work publicly when it "transmit[s]... a performance... of the work... to the public".(7) Because the parties disputed what 'performance' Aereo transmitted, the court's argument adopted Aereo's definition – namely, that the performance was: "to transmit a performance of (at least) an audiovisual work means to communicate contemporaneously visible images and contemporaneously audible sounds of the work".
Under that definition, the court found that Aereo transmitted a performance when it streamed a subscriber-selected programme over the Internet to the subscriber. It rejected Aereo's argument that it did not transmit a performance to 'the public' because it streamed a copy of a programme to only one subscriber. However, noting concerns that its decision in this case would be read broadly to cover – and possibly inhibit – the use of other and new technologies, the court expressly stated that "we do not believe that our limited holding today will have that effect". For example, although the cable television company focus of the transmit clause enactment led to the finding that Aereo infringed, that did not "determine whether different kinds of providers in different contexts also 'perform'". The court also noted that "an entity only transmits a performance when it communicates contemporaneously perceptible images and sounds of a work", contrasting that with distributing copies of DVDs to consumers. The court further stated that its interpretation of the term 'the public' applied to "a group of individuals acting as ordinary members of the public who pay primarily to watch broadcast television programs, many of which are copyrighted", and did not "extend to those who act as owners or possessors of the relevant product".
Importantly, recognising concerns about possible collateral consequences to cloud-based services, the court expressly stated: "we have not considered whether the public performance right is infringed when the user of a service pays primarily for something other than the transmission of copyrighted works, such as the remote storage of content." The court further noted its agreement with the solicitor general that: "[q]uestions involving cloud computing, [remote storage] DVRs, and other novel issues not before the Court, as to which 'Congress has not plainly marked [the] course,' should await a case in which they are squarely presented'."
Lastly, the court noted that the doctrine of fair use was available to prevent inappropriate application of the transmit clause, and that legislative action concerning the application of the Copyright Act to new technologies could always be sought.
In his dissent Justice Scalia, joined by Justices Thomas and Alito, indicated that he would have ruled that here, where Aereo did not select the content and the subscriber "call[ed] all the shots", Aereo did not perform at all and its actions in retransmitting programmes provided no basis for direct infringement. Scalia stated that liability for direct infringement claims, like that at issue in this preliminary injunction, required that the defendant "engage... in volitional conduct that violates the Act". Usually, this turns on who selected the copyrighted content – the provider or its customers. Here, since Aereo did not select the content, but merely provided its subscriber with an antenna that could be used to obtain any freely available broadcasts, it could not be held liable for direct infringement. Under Metro-Goldywn-Mayer Studios Inc v Grokster Ltd,(8) "Aereo's operation of the system is a volitional act and a but-for cause of the resulting performances, but that degree of involvement is not enough for direct liability". Scalia also viewed Aereo's system as materially different from a cable system, because it did not capture all broadcast signals and send them to subscribers all the time; it only transmitted the programmes selected by the user at specific times. He said that in his view, the majority needed to look at whether Aereo's system violated the Copyright Act, not just at whether the system looked like one from the cable television cases that Congress sought to overrule in amending the act.
For further information on this topic please contact Donald J Curry or April M Breyer at Fitzpatrick, Cella, Harper & Scinto by telephone (+1 212 218 2100), fax (+1 212 218 2200) or email (firstname.lastname@example.org or email@example.com). The Fitzpatrick, Cella, Harper & Scinto website can be accessed at www.fitzpatrickcella.com.