In a much-anticipated ruling, on Wednesday, June 25, 2014, the United States Supreme Court, by a 6-3 margin, overturned the decision of the Second Circuit in ABC et. al v. Aereo. The majority opinion, written by Justice Breyer, held that the transmissions of broadcast programming made to subscribers by Aereo’s unlicensed “antenna/DVR service” were infringing “public performances” under the Copyright Act. Justice Scalia authored a dissent that was joined by Justices Thomas and Alito. While the decision effectively ends Aereo’s business, the majority stressed that its holding was “limited” and was not intended to suggest that the public performance right is infringed by cloud based storage services (including remote storage DVRs). Indeed, we believe that the decision is best read as affirming the non-infringing status of the RS-DVR technology.

Background. In February 2012, Aereo launched a new subscription service that streamed copies of broadcast television programming via the Internet to consumers who “rent” an “individualized antenna” and associated DVR service from Aereo. Aereo does not obtain copyright clearances from the broadcasters or pay retransmission consent fees. The broadcasters quickly sought to shut down Aereo by suing it in the Southern District of New York (the first market served by Aereo was New York) for violating their exclusive right to publicly perform their copyrighted works. The court, relying heavily on the Second Circuit’s 2008 decision upholding the legality of Cablevision’s remote storage DVR, denied the broadcaster’s motion for a preliminary injunction. On appeal, the Second Circuit affirmed that decision. The broadcasters were granted certiorari by the Supreme Court, which heard oral argument in the case in April. Our previous advisories relating to Aereo include U.S. District Court In New York Denies Broadcasters’ Request For A Preliminary Injunction Against Aereo’s “Antenna/DVR” Service (July 12, 2012)Citing Cablevision Decision, Second Circuit Affirms Lower Court Denial of Broadcasters’ Request for a Preliminary Injunction Against Aereo’s Antenna/DVR Service (April 3,2013)Aereo Supports Supreme Court Review of its Victory in the Second Circuit (December 16, 2013), and Supreme Court Hears Arguments in Aereo Copyright Infringement Case (April 24, 2014).

Decision. Justice Breyer’s opinion identifies two separate questions presented by the Aereo case: Does Aereo “perform” the copyrighted works or is it merely the provider of equipment used by its subscribers to perform those works? And if Aereo is the entity performing the works, is it doing so “publicly” or are the performances “private” and thus non-infringing?

With respect to the first issue, the majority concluded that it is “unmistakable” that “an entity that engages in activities like Aereo’s performs.” In reaching this conclusion, the majority relied heavily on the history of the performance and transmit clauses of the 1976 Copyright Act, which were included for the specific purpose of overturning a pair of earlier Supreme Court decisions (Fortnightly and Teleprompter) in which the retransmission of broadcast signals by community antenna television systems (the forerunners of modern cable systems) was found not to violate the copyright owners’ performance right. According to the majority, the underlying rationale of those decisions (i.e., that a cable system, by providing equipment to enhance the reception of broadcast signals, was engaging in a “viewer” function rather than a “broadcast” function) had been erased by the 1976 Act, which expressly recognized that cable retransmissions of broadcast signals were public performances for which a copyright license was required. In the words of Justice Breyer, this history, and the fact that Aereo’s activities are “substantially similar” to those that Congress sought to reach in the 1976 Act, “makes clear that Aereo is not simply an equipment provider.”

Justice Scalia’s dissent focused on this first issue, arguing that Aereo does not in fact “perform” copyrighted works, and so cannot be held liable for direct infringement for publicly performing them. Justice Scalia relied in particular on the “volitional-conduct requirement,” which he argued has been adopted by every Court of Appeals that has considered whether an automated service provider could be held directly liable for copyright infringement. According to Justice Scalia’s dissent, Aereo can be found to have engaged in a performance under the Copyright Act only if it has taken some volitional action directed at the copyrighted work. By way of explanation, Scalia gave the example of a copy shop that rents out photocopiers but which plays no role in selecting the content to be photocopied, and so cannot be held directly liable for infringement, and contrasted that with Netflix, which affirmatively chooses the content that is made available to its subscribers.

According to Justice Scalia, Aereo “does not perform for the sole and simple reason that it does not make the choice of content.” He explained further that Aereo differed from traditional cable systems in that cable systems capture the “full range of broadcast signals and forward[] them to all subscribers at all times,” while Aereo transmits “only specific programs selected by the user, at specific times selected by the user.”

Responding to Justice Scalia’s argument, Justice Breyer’s opinion characterized the dissent’s “copy shop” argument as “mak[ing] too much out of too little.” According to Justice Breyer, the fact Aereo’s system “remains inert until a subscriber indicates that she wants to watch a program” does not represent a critical difference between Aereo and a cable system. He pointed out that cable subscribers also choose the programs they want to view and the differences in the way the programs are routed to the customer means nothing to the customer or to the broadcaster and does not transform a system that “for all practical purposes” is a traditional cable system.

With respect to the second issue identified by the majority, Justice Breyer’s opinion concluded that Aereo’s performances are “to the public” and therefore infringing. In reaching this conclusion, Justice Breyer assumed, without deciding, that Aereo was correct when it argued that the performance at issue was the “new” performance that Aereo created by its act of retransmission, not the “prior performance” made by the broadcaster. However, the majority rejected Aereo’s assertion that its performances were not to the public because “one and only one subscriber has the ability to see and hear each Aereo transmission.”

The majority’s decision on this issue, like its decision on the previous question, was heavily influenced by its conclusion that Aereo was engaging in the type of activity that Congress had sought to bring under the Copyright Act in 1976. Justice Breyer questioned why, in terms of Congress’ regulatory objectives, the technological differences relied on by Aereo mattered. Those differences, the majority opinion declared, “concern the behind-the-scenes way” in which Aereo delivers programming, but do not render Aereo’s commercial objectives any different from that of cable companies nor do they significantly alter the viewing experience of Aereo’s subscribers.

Turning to the relevant statutory language itself, the majority found that it was Congress’ intent to cover multiple, discrete transmissions made “by means of any device or process” that are capable of being received by members of the public “in the same place or in separate places or at the same time or at different times.” Moreover, Justice Breyer discounted the significance of the fact that Aereo only transmits “personal copies” (i.e., individualized reproductions available only to the customer receiving the transmission), finding that Aereo is performing the same work whether it transmits from the same copy or separate copies.

Finally, the majority responded to Aereo’s argument (echoed by a number of amici) that treating Aereo’s conduct as a public performance will impose copyright liability on other technologies that Congress could not possibly have wanted to reach. The majority agreed, stating that while Congress intended for the 1976 Act amendments to “apply broadly to cable companies and their equivalents,” it did not intend to discourage the emergence or use of different kinds of technologies. However, Justice Breyer’s opinion emphasized that its “limited holding” regarding Aereo would not have that effect. For example, Justice Breyer pointed out that the Court was not deciding whether other kinds of providers in different contexts also “perform” copyrighted works and stressed that an entity only transmits a performance when it “communicates contemporaneously perceptible images and sounds of a work.” Citing the amicus brief of the Solicitor General, the majority agreed that “[q]uestions involving cloud computing, [remote storage] DVRs, and other novel issues not before the Court…should await a case in which they are squarely presented.”

Analysis. The decision constitutes a total defeat for Aereo. At this point, its only recourse would be to argue that it is eligible for the cable compulsory copyright license or to seek an amendment to the Copyright Act that immunizes it from copyright liability (or brings it under an existing or new compulsory license). Neither of those approaches are promising. The Second Circuit already has held (and the Supreme Court has denied certiorari) that Internet-based services that retransmit broadcast signals are not “cable systems” for purposes of the compulsory license. And obtaining relief from Congress, over the formidable opposition of the broadcast industry, is unlikely and presumably would be accompanied by a change in the law that would make clear that services like Aereo have to obtain retransmission consent (a question that was not before the Court, but that is pending at the FCC). In this regard, it should be noted that the majority appears to have been motivated in no small measure by its conclusion that Aereo’s “commercial objectives” were no different from those of cable systems and that, if Aereo’s interpretation of the law was correct, it could open the door for cable companies to escape Congress’ intent to bring their retransmissions under the Copyright Act.

With respect to the significance of the case for other services and technologies, Justice Scalia’s dissent sharply criticizes the majority for adopting a “looks-like-cable-TV” rule, but not providing any criteria by which new technologies could be judged similar enough to cable to be captured by the 1976 Act. While it is true that the majority goes out of its way not to decide the status of other services and technologies, a close reading of the case suggests that the majority is unlikely to extend the holding in Aereo to cloud-based remote storage services and, in particular, was being careful not to upset the Cablevision RS-DVR decision. For example, the majority indicated that when an entity transmits a performance to individuals in their capacity as owners or possessors of copyrighted works, it is not performing those works “to the public.” The majority also suggested that it was not deciding that a copyright is infringed “when the user of a service is paying for something other than the transmission of copyrighted works, such as remote storage of content.” Lastly, the majority’s decision on the volitional conduct issue was focused specifically on the public performance right, not reproduction rights, and so contains additional caveats indicating that it was not the Court’s intent to call into question earlier decisions (including the RS-DVR decision) that involved the volitional conduct of someone making copies of a work using an automated system.