The Supreme Court heard the oral arguments in the Aereo case yesterday, it has received all the briefs, and now we all just wait for a decision – to probably be released late in June before the Court’s summer recess.  The transcript of yesterday’s oral argument has been released and is available here.  It makes for interesting reading, as the questions from the Court seemed to be dubious of Aereo’s claims that it can retransmit the signal of a broadcast television station over the Internet, to the public for a fee, without the consent of or any payment to the stations.  While dubious about the Aereo service, the Court was also concerned about the potential impact of any decision against Aereo on cloud services and even on other distributors of media content.  Lots of issues came up during the course of the argument, and it will be very interesting to see how the Court resolves these in its final decision.  Keep reading, and I’ll make my prediction. 

While Court arguments can never be relied on to predict the decision, they can at least provide insight into the questions that the Justices are considering.  One question that recurred throughout the argument was raised by Justice Sotomayor in the first question that was asked – why wasn’t Aereo a cable system under Copyright law, as it retransmits television programming to consumers for a fee?  Counsel for both parties contended that it was not a cable system, though neither gave an entirely satisfactory reason for that position.  The definition of a cable system inSection 111 of the Copyright Act, which governs the compulsory license granted to cable systems to retransmit over-the-air TV stations and all of the content that they broadcast, defines a “cable system” as:

a facility…that in whole or in part receives signals transmitted or broadcast by one or more television stations licensed by the Federal Communications Commission, and makes secondary transmissions of such signals by wires, cables, microwave or other communications channels to subscribing members of the public who pay for such service.

As the Justices said, this sure looks like what Aereo is doing.  As we have written before, the FCC is looking at whether an IP based video-programming service should be classified as a cable system.  It might well have been easier for the attorney representing the broadcasters to concede that Aereo was very much like a cable system, as if it was so classified, it would have proved the argument that they broadcasters were trying to make – that its retransmission of television programming was a public performance that required the permission of the broadcaster.The existence of Section 111 of the Copyright Act authorizes cable television stations to retransmit TV signals on their cable systems, and the whole ongoing debate about STELA to renew the authority of satellite television companies to retransmit local television signals into their local markets – demonstrates that cable or cable-like services require a public performance license of some sort – even if it is a compulsory license.  These licenses cover the public performances that occur from the retransmission of local television stations by cable and satellite television systems.  But what is important is that there is no similar statutory provision that would apply to the retransmission of the television signals by Aereo.

Counsel for Aereo tried to argue that the retransmission of broadcast signals within the service area of television stations were, under the Copyright Act, acts that were not compensated by other carriers including cable and satellite, as he claimed that those services paid no fees for the local reception of their services in their markets.  While disputed by counsel for broadcasters, Aereo’s counsel did not dispute that the public performances embodied in retransmissions by both cable and satellite are covered by a license – usually a compulsory license, but a license nevertheless.

The crux of Aereo’s argument is that it is just like a piece of rented equipment that allowed users to choose to send television programming to themselves.  As it is an individual sending a performance to him or herself, the transmissions are argued to be all private performances, not public performances needing permission of the TV stations and copyright holders.  Aereo’s brief and its counsel tried to press the point, and to argue that a ruling against Aereo would be a ruling against any sort of cloud service, many of which claim to rely on private performances to avoid certain copyright liability.  But, as broadcaster’s counsel pointed out, the decision as to what goes into the cloud locker service is the decision of the user.  That is not the case with Aereo’s service.  In one of the more insightful questions, Justice Sotameyer noted that the content put into the alleged locker by Aereo was not content selected by the user, but instead content selected by Aereo, and listed on a program guide that highlighted what the programs available for selection by the user.  While counsel for Aereo suggested that this selection was simply dictated by the available signals of the local TV stations, he also conceded that the service could be used to import distant signals.  Another question was asked whether they could introduce a service like HBO and contend that there was no public performance involved.  While this line of reasoning  was not taken further during the argument, it would seem to us that the service would justify the retransmission of any programming to which the service as connected – and justify it as not being a public performance and exempt from any copyright liability as the user was the one that was choosing to send the programming to their computers.

Broadcasters counsel and counsel for the government also pointed out that the content of the cloud service was most likely to be legally obtained by the user.  None pointed out that, even if the content put into the cloud service was not legally obtained, the DMCA safe harbor would probably protect the service provider, unless the service provider encouraged the uploading of content to which the user did not have rights.  In Aereo’s case, it is Aereo that, by the very nature of the service, has selected the content to be uploaded and encouraged the users to copy and perform it – that content being the TV programs to which no rights have been obtained.  There was some passing discussion of fair use and the Betamax case here, though seemingly nothing decisional.  See this article for my thoughts on why Betamax does not help Aereo

Distinguishing the Cablevision case also was asked about, as it appears that the Court did not want to upset that decision.  As we wrote here, there is a simple way to distinguish Cablevision, and that is that the Cablevision and its subscribers who used the remote DVR at issue in that case had already paid for the content that was being recorded and retransmitted.  Aereo has not paid for the content transmitted by its service.  As counsel for the broadcasters pointed out, if Aereo was to win, would Cablevision next stop paying for its content, and argue that its users were making the decision about what to record and transmit so that it was just making private performances? Of course not.

Other questions from the justices focused on whether the system was designed specifically to try to fit into a loophole in the copyright laws, and avoid the need to get permission from broadcasters before their program was retransmitted.  There was no clear answer given to that question – certainly no denial that the system was designed with preferred copyright outcomes in mind.  While the justices were clear to state that the design of the service was not necessarily determinative of the outcome of the case, the questions certainly evidenced a lot of suspicion by the judges.

The impact of a decision that Aereo infringes on the public performance rights of broadcasters was the one question that seemed to give the Justices pause before deciding that the Aereo service violated the rights of the TV broadcasters.  They were obviously troubled by the potential impact on cloud-based services.  But the easy way to address that uneasiness is to simply say that each case is a fact-based analysis of what is legal and what is not, and Aereo is not.  They can deal with other “cloud based services” on the particular facts of that service when and if they are challenged.  That would be my bet as to the outcome.  But I will be watching with the rest of you for the decision in June to see whether or not the Court validates my predictive abilities and, more importantly, for its impact on the broadcasting and online business worlds.