Last week, the U.S. Supreme Court handed down a much-anticipated ruling in the latest chapter of the saga of copyright infringement cases related to new technology.  In American Broadcasting Cos., Inc. v. Aereo, Inc., the Court held that Aereo’s broadcast television Internet streaming service constituted an unauthorized public performance in violation of the Copyright Act.  This raises the question, what does this mean for other technologies such as cloud computing and remote storage DVRs?  While the Court expressly reserves this analysis for a later case, there is no doubt this case will be on the minds of companies dealing in these and other new technologies.

Aereo’s services

For a monthly fee, Aereo provides a service that allows subscribers to watch broadcast television programs on the Internet, within seconds after the programs are broadcast over the air.  The technology that allows for this involves thousands of dime-sized antennas and other equipment that is maintained in a centralized warehouse.  When a subscriber chooses to watch a program that is currently being broadcast over the air, a server will tune one of the antennas, dedicated for that single subscriber’s use, to the selected broadcast.  The signals received by the antenna are then converted into data that is first saved in a subscriber-specific folder on Aereo’s hard drive, and then ultimately is transmitted over the Internet to the subscriber’s screen.  Aereo does not own the copyright in the transmitted works, nor does it have a license from the copyright owners.

The dispute

The entities that own the copyright in the programs that Aereo delivers to its subscribers, including television producers, marketers, distributors and broadcasters, sued Aereo for copyright infringement.  Specifically, they alleged that Aereo violated their right to publicly perform their copyrighted works.  The District Court denied their request for a preliminary injunction, and the Second Circuit affirmed.

U.S. Supreme Court’s analysis

Noting that the Copyright Act gives a copyright owner the exclusive right to perform the copyrighted work publicly, the Court was faced with two questions: (1) does Aereo “perform” the copyrighted works, and if so, (2) does Aereo perform the works “publicly”?  The Court ultimately answered both of these questions in the positive.

Does Aereo “perform”?

To address the first question, the Court first gave a lengthy analysis of the history of the cases involving community antenna television (CATV) systems (the precursors of modern cable systems) from the 1960s and 1970s, Fortnightly Corp. v. United Artists Television, Inc., 392 U.S. 390 (1968) and Teleprompter Corp. v. Columbia Broadcasting System, Inc., 415 U.S. 394 (1974).  In both cases, the Court held that the CATV providers did not “perform” copyrighted works at all, but rather were more like viewers than broadcasters, and thus were not liable for copyright infringement. However, the1976 amendments to the Copyright Act effectively rejected the Court’s holdings in these cases, and clarified that to “perform” an audiovisual work means “to show its images in any sequence or to make the sounds accompanying it audible.”  Further, Congress enacted the Transmit Clause, which specifies that an entity performs publicly when it “transmit[s]… a performance… to the public.”  These amendments swept cable system activities, like those of the CATV systems in Fortnightly and Teleprompter, into the scope of the Copyright ActFinally, Congress created a new section of the Act to regulate cable companies’ public performances of copyrighted works, including a complex compulsory licensing scheme.

After providing this backdrop, the Court held that Aereo’s activities are substantially similar to those of the CATV systems. Although the Court acknowledged that Aereo’s service was different from the CATV systems in that Aereo’s system is inactive until the subscriber selects a program, the Court concluded that this difference is not critical, and thus Aereo is not just an equipment supplier but actually “performs” the works.

Does Aereo perform “publicly”?

With respect to the question as to whether Aereo performs the works “publicly,” Aereo contended that (1) the performance it transmits is the performance created by its act of transmitting, and (2) because each performance is received by a single subscriber, the transmissions are private rather than to the public.  The Court assumed arguendo that Aereo’s first argument was correct, and focused on Aereo’s second contention.  Although Aereo’s system makes a “personal” copy of the program from the broadcast signals, and streams that copy only to the subscriber who made the request, the Court concluded that these differences do not distinguish Aereo’s system from cable systems, which do perform publicly.  The Court noted that these technological differences “concern the behind-the-scenes way in which Aereo delivers television programming to its viewer’s screens[, and] do not render Aereo’s commercial objective any different from that of cable companies[, n]or do they significantly alter the viewing experience of Aereo’s subscribers.”  Furthermore, the Court concluded that the subscribers to whom Aereo transmits the works constitute “the public.”  In reaching this decision, the Court noted:

Congress would as much have intended to protect a copyright holder from the unlicensed activities of Aereo as from those of cable companies.

Effect on other technologies

Companies that deal in technologies such as cloud computing and remote storage may be concerned in what ways, if at all, this decision will have an impact on their business.  However, the Court likely anticipated these concerns and made clear in no uncertain terms that it has not considered technologies such as remote storage.  Specifically, the Court stated:

We cannot now answer more precisely how the Transmit Clause or other provisions of the Copyright Act will apply to technologies not before us… Questions 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.

The Court also seemed to invite concerned parties to seek to address their concerns through Congress:

to the extent that commercial actors or other interested entities may be concerned with the relationship between the development and use of such technologies and the Copyright Act, they are of course free to seek action from Congress.

Nonetheless, the Aereo decision will likely have a bearing on any future decision involving these other technologies, and thus will undoubtedly be on the minds of companies using these technologies until we see the next chapter in this saga.