In a highly anticipated decision, the United States Supreme Court has found that that Aereo, an internet-based streaming service, infringed copyright by the “public performance” of television programs streamed via the service.

The Supreme Court of the United States has ruled in American Broadcasting Companies, Inc v Aereo Inc that Aereo, the provider of a service that allows subscribers to watch free-to-air television over the internet, “publicly performed” the copyright works comprised in the streamed television programs, and thereby infringed copyright in those programs. In reaching this finding, the Supreme Court found that Aereo’s service was overwhelmingly similar to cable systems, whose activities were intended by Congress to be captured as “public performances” by the 1976 amendments to the Copyright Act. The technical mechanics of Aereo’s service could not avoid infringement.

While there had been concern that a finding of infringement would have serious ramifications for cloud storage and other new technologies, the Supreme Court was careful to confine its decision to the specific circumstances of Aereo. It expressly stated that it did not determine whether other technologies also “perform” within the meaning of the US Copyright Act. However, the Supreme Court’s reasoning may have broader implications. New technology companies in the US must be careful to ensure that their services do not infringe, but may find the Supreme Court’s standard for infringement difficult to apply.

A copy of the full decision can be found here.

Background - the structure of the Aereo service

Aereo is a US-based subscription service through which subscribers can watch free-to-air television over the internet at a delay of only a few seconds. Key features of the service include:

  • Thousands of tiny antennae located in a warehouse receive television broadcasts. Each antenna is allocated to only one subscriber at one time.
  • Using the Aereo website, a subscriber can select to watch a television broadcast. The subscriber’s antenna is then tuned to that television broadcast, the system converts the broadcast signal, records a few seconds of the program and then begins to stream the program to the subscriber over the internet.
  • Subscribers can also watch the recording at a later time, although this was not an issue before the Supreme Court. Subscribers pay $8 to $12 per month for the Aereo service.

Aereo argued that it was merely a high-tech equipment provider; it did not “perform” the works, and since each subscriber was streamed the television program from his or her own personal copy, made using his or her own antennae, Aereo’s transmissions were not “public” performances.

The Supreme Court’s decision

Under the US Copyright Act of 1976, the copyright owner has the exclusive right to “perform the copyrighted work publicly”. By reason of the “Transmit Clause”, an entity performs publicly when it transmits a performance to the public.

By a 6-3 majority, the Supreme Court found that Aereo essentially looked like a cable retransmitter. When viewed in light of the congressional intention behind the Transmit Clause, which was to ensure that the activities of cable retransmitters fell within the scope of a “public performance”, it was clear that Aereo’s services infringed. In reaching this decision, the majority held:

  • Aereo “performed” the television program by streaming the program to the subscriber. Aereo was not merely an equipment provider. Under the amended legislation, both the viewers and broadcasters of a television program “perform”. Whenever a subscriber selects a program, through streaming, the images and sounds were contemporaneously visible and audible on the subscriber’s device. The “sole technical difference” between Aereo and cable companies, being that subscribers select the program that is being performed, made no difference.
  • Aereo performed the works “publicly”. A transmission to the public may be made through one or several transmissions, or the transmissions may be from different copies of the television program, so long as the transmission is of the same work. The fact that each transmission was only to one subscriber and the fact each transmission was from a separate copy, was merely part of the “behind the scenes” way in which Aereo delivered television programming. These mechanics did not change Aereo’s commercial objective and did not change the subscriber’s viewing experience. Importantly, Aereo transmitted to a large number of subscribers who lacked any prior relationship to the works, such as being the owner or possessor of the work.

The strong dissenting opinion, delivered by Justice Scalia, found that Aereo did not “perform” at all. The dissent stated that copyright law required some aspect of volition directed at the copyright material before direct liability can be imposed. While a performance clearly resulted from the use of the service, the performance was not the product of Aereo’s volitional conduct. In short, Aereo did not perform because it did not make the choice of content. Aereo did not capture the full range of broadcasts, but rather transmitted only specific programs selected by the user, at specific times chosen by the user. The dissent criticised the majority for adopting an “improvised standard (“looks-like-cable-TV”) that will show confusion for years to come”. While agreeing that Aereo’s services should not be allowed, the dissenting opinion stated that any loophole should have been closed by Congress.

Aereo and the Australian TV Now decision

The Aereo decision does not directly apply to Australia – the copyright laws in the US are different to Australia and the decision would not necessarily be persuasive in an Australian Court. In particular, the US “public performance” right does not mirror Australia’s “communication to the public” right.

Nevertheless, it is interesting to note that the reasoning of the majority Aereo contains some parallels with the Optus TV Now decision of the Full Federal Court of Australia in 2012 (see our previous alert here), albeit the question considered by the Full Court was which entity was the maker of the copy of the underlying broadcast, not the communication. Optus provided a “TV Now” subscription service which allowed subscribers to record free-to-air television programs and play them back on compatible devices. The Full Court found that the copy was made by Optus, or by Optus and the subscriber, and that Optus thereby infringed copyright in the underlying broadcasts.

Implications for cloud computing

Before the Supreme Court, Aereo and a number of amici briefs submitted that a finding that Aereo infringed copyright would have broad and chilling ramifications for emerging technologies, especially cloud computing. The Supreme Court was careful to emphasise that its decision was narrow and specific to the Aereo technology. On this basis, the implications for cloud computing may not be as severe as feared. However, the decision may nevertheless cause uncertainty and concern for cloud service providers.

In particular, the dissenting opinion stated that the majority’s opinion would cause such uncertainty. Justice Scalia said that it would take years, perhaps decades, to determine which automated systems now in existence are governed by the traditional volitional-conduct test and which get the “Aereo treatment”. The dissent warned that the decision may affect cloud storage providers, given the imprecision of the result-driven rule.

Given the differences between Australian and US copyright law on this point and the current Optus TV Now authority in Australia, the Aereo decision is unlikely to have immediate implications for cloud computing providers whose services are confined to Australia. However, like Optus TV Now, the decision serves as an important reminder to providers of new technologies that they must undertake a careful examination of how copyright law will apply to the delivery of their service. It also remains to be seen how the Government’s response to the ALRC’s recent recommendations on fair use (see our previous alert here) will impact upon the provision of cloud computing services in Australia. Without a broad fair use defence, or at the very least a specific fair dealing exception, there will remain risks and uncertainties involved in the operation of cloud computing services in Australia.