In a significant decision for content owners and cloud service providers, on Wednesday 25 June 2014 the US Supreme Court has ruled that Aereo Inc's online television streaming services violates copyright law by retransmitting television programming to the public without authorisation. 

The decision is a further step in the process as courts globally grapple with copyright issues thrown up by cloud technologies such as in the Australian Optus TV Now decision (and the earlier US decision of Cablevision).

Snapshot

  • The US Supreme Court has held that the Aereo television streaming service infringed copyright in television programs streamed to users.
  • The decision focuses on definitions in the US Copyright Act but does not directly engage with earlier US decisions to the effect that for similar services, those decisions stated it is the user who undertakes the relevant act of copying or transmitting rather than the service provider under the "volitional conduct" theory.
  • US copyright law is still unclear on important issues relating to services like virtual audio visual recording services and other cloud storage services.

The Aereo Service

Aereo records and transmits to its subscribers broadcast television programs over the internet for a monthly fee.  The Aereo service has largely two functions: watch and record.

The "watch" functionality enables subscribers to watch programs on a near live basis (i.e. with a delay of approximately 10 seconds). It was the "watch" function that was in issue in the appeal.

The subscriber can also select the "record" function, which causes Aereo's system to save a copy of the program for later viewing (by streaming back to the user).  A user can select the "record" function whilst watching a broadcast or in advance.  The "record" function was not at issue in the appeal.

Each subscriber is assigned an individual antenna by Aereo (which is not shared, even if the subscribers are watching or recording the same program) and all programs are streamed from a unique copy of the television program in the individual's user directory on the Aereo server to a variety of user owned devices (including computers, mobile devices, internet-connected televisions and non-internet televisions through the use of a stand-alone device for connectivity). 

Claim of copyright infringement

Holders of the copyright in programs broadcast on US network television filed copyright infringement actions against Aereo, and sought an injunction barring Aereo from transmitting television programs to its subscribers while the programs were still being broadcast. 

The US Copyright Act 1976 gives a copyright owner the "exclusive right" to "perform the copyrighted work publicly".  The Act's "Transmit Clause" defines that exclusive right to include the right to"transmit or otherwise communicate a performance...of the [copyrighted] work…to the public, by means of any device or process, whether the members of the public capable of receiving the performance…receive it in the same place or in separate places and at the same time or at different times."

The preliminary injunction was denied by both the US District Court and, on appeal, by the Second Circuit. The majority of the Second Circuit held that Aereo's transmission of unique copies of broadcast television programs created at its subscribers' requests and transmitted while the programs are still airing on broadcast television are not "public performances" of the copyrighted works under the precedent set by the Cablevision case.

The Second Circuit held that Aereo's copies do have the legal significance ascribed to the copies produced in the Cablevisioncase because the subscriber exercises the same control over their playback.  The Aereo subscriber watching a copy of a recorded program that he or she requested (by using either  the "watch" or "record" function), chooses when and how that copy will be played back.  The Second Circuit held that this volitional control over how the copy is played makes Aereo's copies unlike the temporary buffer copies generated incident to internet streaming. For internet streaming, the service provider selects the content and therefore exercises volitional control over the content that is available to the user.  By contrast, an Aereo subscriber selects what content will be made available to him or her and then controls when and how that copy is played.

US Supreme Court Decision

The copyright holders appealed to the Supreme Court.  In its decision, the majority held that Aereo's activities in receiving programs that have been released to the public and carrying them by private channels to additional viewers are substantially similar to cable companies whose basic retransmission operations are based on the carriage of copyrighted program material. The US Copyright Act had previously been amended to ensure that retransmission by cable companies fell within the definition of "performs". 

Whilst Aereo attempted to distinguish itself claiming that unlike cable companies which transmit continually, Aereo's system remains inert until a subscriber indicates that he or she wants to watch a program.  The majority did not consider the technological differences between Aereo and cable companies to be of a critical difference and held in light of Congress' intention to include cable companies within the scope of the Act, and ruled that Aereo is just not an equipment supplier but that it also "performs". 

Finally, the majority determined that Aereo's transmission is a public performance, as Aereo’s "commercial objective" was not different to that of a cable company.  It was held that Aereo’s large subscriber base constituted the "public" under the Act.  The approach taken by the US Supreme Court to the concept of the public is similar to the approach taken by the Australian High Court in the Telstra "on hold" decision.

The dissenting judgment provided a scathing critique of the decision stating, "it is not the role of this Court to identify and plug loopholes.  It is the role of good lawyers to identify and exploit them, and the role of Congress to eliminate them if it wishes."

The dissenting judgment compared the Aereo services to a copy shop that provides its patrons with a library card, lying dormant until a subscriber activates it.  Unlike other video-on-demand services,  Aereo assigns each subscriber an antenna (like the library card) that can be used to obtain whatever broadcasts are freely available.  The dissenting judgment took the position that it is the subscribers activating the service, not Aereo, and the degree of involvement by Aereo is not enough to constitute direct liability (which the copyright holders were required to prove). 

The minority criticised the majority for approaching the matter on the basis of the analogy with the activities of cable companies, rather than engaging with copyright issues arising from new technologies.  In particular the minority expressed concern that the majority did not approach the issue in line with the authorities such as the Cablevision case which approached the issue from the perspective of identifying "volitional conduct" and found that a service provider of a similar service did not engage in the relevant act, but that the users of that service did.

We note that this decision only addresses the legality of Aereo's "watch" function, which provides nearly contemporaneous access to live broadcasts.  The lower Courts will be required to determine whether Aereo's "record" function, which allows subscribers to save a program while it is airing and watch it later, infringes the copyright holders' public-performance right. 

Implications for Australia

At its broadest, the US Supreme Court decision is consistent with the decision in the Australian TV Now case, where the Full Federal Court found that Optus' TV Now virtual PVR infringed copyright in AFL and NRL content on the basis that Optus "made" the relevant copy (not the user alone). However, the majority's approach of extending the definition of "perform" by analogy to the activities of cable companies in the US, makes it difficult to compare the two decisions other than perhaps at a policy level.

While the majority in Aereo specifically identified that the decision was very fact specific and was not intended to affect other forms of cloud based services, the decision does not provide clarity over whether it is users or service providers who engage in the relevant acts (be they copying, performing, transmitting, or communicating).

Cloud service providers will need to await further decisions to see how US copyright law grapples with the complexities of cloud based services and automated copying functionality and whether the US moves away from the "volitional conduct" analysis in the Cablevision case or follows a simila