In an industry where technology is constantly evolving and racing to keep up with consumer habits, a recent court ruling came down to one basic component: antennas.
Last Monday the Second Circuit ruled in favor of Aereo, Inc., a television streaming service, in a lawsuit filed by a consortium of network broadcasters who argued that Aereo’s services constitute a public performance that violates their copyrighted material. The Court affirmed an order of the District Court denying the broadcasters’ motion for a preliminary injunction. The Court ruled that since Aereo assigns each of its subscribers an individual antenna, and makes each of them an individual copy of the network programming to stream or record, the potential audience for each viewing is one person, resulting in a private performance that would not infringe the plaintiffs’ copyright. The court therefore refused to terminate Aereo’s operations and held that the broadcast networks were unlikely to prevail on the merits of their claims.
The Second Circuit panel majority’s approach, if widely followed, has the potential to alter the television industry as we know it. Normally, networks are able to extract large retransmission fees from cable providers, fees that make up a significant chunk of their operational costs. Aereo, in contrast, pays no royalties. While Aereo is currently only available in New York markets, the Court has certainly opened the door for the company’s expansion, and for similar services to join the fray.
Broadcasters will no doubt continue to pursue every legal avenue at their disposal, and may even lobby Congress for favorable changes in governing copyright law, but they may also choose to consider fail-safe measures. Consumer preferences in this field have continued to evolve well beyond the purported threat of the Betamax. The DVR inspired networks to invent new ways to sell ad space, and a current trend in “binge viewing” has led to expedited DVD releases and more on-demand services. If courts continue to rule in favor of Aereo and services like it, networks may wish to consider plans that will allow them to heed consumer demand for better on-the-go and online streaming services while remaining financially viable.
The networks are not without hope under the current law, however. In a strongly worded dissent, U.S. Circuit Judge Denny Chin called Aereo’s individual antenna model a “sham” engineered solely for the purpose of circumventing the law and complying with previous Second Circuit decisions in this area. As an example, Judge Chin highlighted the fact that Aereo has not expanded to the neighboring state of New Jersey, implying that the company will only enter territories where its services are demonstrably legal. “Aereo is engaging in copyright infringement in clear violation of the Copyright Act,” he reasoned, because its transmissions are “very much public performances.” This issue seems ripe for further judicial review and could lead to inconsistencies among the circuits down the line. In fact, a judge in the Central District of California recently granted TV networks an injunction against a very similar service. It will be interesting to see whether this decision is affirmed by the Ninth Circuit in addition to whether or not the networks will seek an en banc rehearing in the Aereo case given the strength of Judge Chin’s dissent.
While the overall impact of the Second Circuit’s decision on broadcast networks remains to be seen, the Aereo decision has certainly put the television industry on alert. As litigation in this area of law continues to play out in the courts, you can bet that industry leaders and consumers alike will be tuning in.