In yesterday’s monumental win for broadcasters and copyright owners, the Supreme Court in American Broadcasting Cos., Inc., et al. v. Aereo, Inc., No. 13-461 (June 25, 2014) reversed the Second Circuit’s ruling denying a preliminary injunction against the Aereo Internet-streaming service.  Aereo claimed it had developed a technological workaround allowing it to retransmit live television broadcasts to subscribers without having to pay for a license.  This argument – and the design of Aereo’s system – was  based on the Second Circuit’s holding in Cartoon Network LP LLLP v. CSC Holdings, Inc., 536 F.3 121 (2d Cir. 2008) (Cablevision).  In that case, the Second Circuit held that a cable provider could offer a remote DVR service (i.e., where the programs recorded by viewers were stored on a shared, remote server instead of on individual set-top boxes) without having to take a second license to cover the transmissions from the remote server that occurred when the subscribers played back the recorded programs.  The analysis was that these playback transmissions were private, because they emanated from unique copies made by subscribers, and each transmission could only be received by the subscriber who had copied the program.  Thus, according to the Second Circuit, these one-to-one transmissions from the recordings to the viewers were not a public performance under the Copyright Act. 

Legal scholars recognized that Cablevision potentially created a loophole that would allow services to transmit copyrighted programs and movies to the public without compensating the copyright owners by designing one-to-one systems.  Aereo built its system to exploit that loophole.  It used a collection of dime-sized antennas, one-per-user, to capture over-the-air broadcasts, then copied the programs before streaming them to its subscribers.  This technological contrivance allowed Aereo to argue that, when subscribers watch television on Aereo, there is no public performance because the transmissions are “one-to-one” just like in Cablevision.  Bound by Cablevision, the Second Circuit upheld the legality of Aereo’s service.  While the Aereo case was making its way up to the Supreme Court, district courts in California, Utah and Washington, DC agreed with the broadcasters and found Aereo’s business model to be infringing. Like the California, Utah and Washington, DC courts, the Supreme Court was not impressed by Aereo’s contrivance.  The Court’s analysis turned on two basic questions:  Does Aereo perform at all?  And, if so, does Aereo perform publicly?  The Court found the answer to both questions in the text of the Copyright Act known as the Transmit Clause, as well as the legislative history. 

Under the Transmit Clause, “to perform a work publicly” means, among other things, “to transmit or otherwise communicate a performance or display 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.”  17 U.S.C. s 101.  Notably, the Transmit Clause states that it is a public performance to transmit a performance (i.e., an audiovisual rendering) of the work to the public, by means of “any device or process.”  Id. 

With respect to the first question, Aereo argued that it did not perform anything – it claimed that it merely supplied its subscribers with equipment similar to an antenna and DVR that they could use to perform the programming themselves.  Slip Op. at 4-9.  The Court squarely rejected this argument.  It first observed that Congress enacted the Transmit Clause to preclude this exact argument.  The Transmit Clause was written to overrule Supreme Court case law holding that early cable companies did not “perform” when they picked up network broadcasts and retransmitted them to subscribers.  Id. at 4-7.  The rationale of these cases was that cable companies were merely providing access to equipment – i.e., a “well-located antenna” – that enhanced viewers’ ability to receive broadcast signals.  Id. at 6.  The Court explained that the Transmit Clause addressed this issue by enacting “new language that erased the Court’s line between broadcaster and viewer, in respect to performing a work.”  Id. at 7.  Under this new language, the Court explained, “both the broadcaster and the viewer of a television program perform because they both show the program’s images and make audible the program's sounds.”  Id.  The Court also expressly rejected Aereo’s argument that the subscriber who clicked a button to select a program to watch on Aereo was transmitting the program to herself.  Id. at 10.

The Court also held that Aereo performs copyrighted broadcast programs “to the public” because it “communicates the same contemporaneously perceptible images and sounds to a large number of people who are unrelated and unknown to each other.”  Slip. Op. at 14.  In so holding, the Court rejected Aereo’s argument that each of its transmissions were analytically distinct “private” performances because each subscriber received a separate transmission from a separate copy.  The Court explained that “whether Aereo transmits from the same or separate copies, it performs the same work; it shows the same images and makes audible the same sounds.”  Id.  Thus, the Court concluded, “when Aereo streams the same television program to multiple subscribers, it ‘transmit[s] . . .a performance’ to all of them.”  Id. 

Justice Scalia dissented, joined by Justices Alito and Thomas.  The dissent reasoned that Aereo’s subscribers – and not Aereo – were performing the broadcasters’ programs because the subscribers chose which programs to watch on Aereo.  Notably, even the dissent agreed that “what Aereo is doing (or enabling to be done) to the Networks’ copyrighted programming ought not be allowed.”  However, it believed that secondary infringement and/or reproduction-right theories provided the appropriate framework for analyzing Aereo’s potential liability.