In the latest, but not unexpected, development in the ongoing Aereo saga, the United States District Court for the Southern District of New York has rejected Aereo’s contention that it is a “cable system” eligible for the Copyright Act’s cable compulsory license and has granted the broadcast plaintiffs’ request that a nationwide preliminary injunction be entered against Aereo’s retransmission of over-the-air television programming while that programming is still being broadcast. In a separate, but potentially related development, Aereo recently urged the FCC to find that Internet-based services are “multichannel video programming distributors” (“MVPDs”) for purposes of the Communications Act. However, it is unclear how Aereo would benefit from such a ruling.
Background. Briefly summarized, in February 2012, Aereo launched a new subscription service that streamed over-the-Internet broadcast television programming to consumers who “rented” an “individualized antenna” from Aereo. Aereo did not obtain copyright clearances from the broadcasters. (Aereo also did not obtain “retransmission consent” from the broadcast stations, a requirement imposed by the Communications Act on MVPDs). The broadcasters quickly brought a copyright infringement action against Aereo and sought a preliminary injunction that would prevent Aereo from retransmitting the broadcasters’ copyrighted programming in violation of the broadcasters’ exclusive “public performance” rights. Judge Nathan of the Southern District of New York, relying on the Second Circuit’s decision in the Cablevision remote storage DVR case, concluded that Aereo did not publicly perform the broadcasters’ programming and refused to grant the requested injunction. The Second Circuit affirmed Judge Nathan’s decision and the broadcasters appealed to the Supreme Court. In June, the Supreme Court agreed with the broadcasters, holding that Aereo’s operations were comparable to those of a cable system and, as such, Aereo was engaging in public performances for which a copyright license was required. The Supreme Court remanded the case back to the Southern District for further proceedings.
Ordinarily, the Supreme Court’s decision would have resulted in the immediate issuance of the injunction requested by the broadcasters. However, on remand, Aereo raised several new arguments in a last ditch effort to remain in operation. These arguments included: (i) that the Supreme Court decision stood for the proposition that Aereo was a cable system entitled to retransmit the broadcasters’ programming pursuant to the Copyright Act’s cable compulsory license; (ii) that Aereo was a “mere conduit” whose operations were protected by the safe harbor provisions of the Digital Millennium Copyright Act; (iii) that the broadcasters cannot show any imminent irreparable harm from Aereo’s continued operations and thus should not be granted the requested injunction; and (iv) that any injunction granted by the court should be narrowed to cover the use of Aereo’s system to play back programming only when it occurs within ten minutes of the commencement of the broadcast. For their part, the broadcasters, who initially had sought to enjoin Aereo’s “live” or “near live” retransmissions, but not Aereo’s delayed playback remote storage DVR-like operations, requested that an expanded injunction that would cover all of Aereo’s retransmissions regardless of when they occur. Judge Nathan rejected all of Aereo’s arguments as well as the broadcasters’ request for a broader injunction than the one they originally sought. Instead, she granted a preliminary injunction (applicable nationwide) against Aereo retransmitting broadcast signals at any time while the original over-the-air transmission was ongoing.
Decision. With respect to the eligibility of Aereo for the cable compulsory copyright license, the court rejected Aereo’s attempt to “turn lemons into lemonade,” ruling that the Supreme Court had merely held that Aereo was “comparable” to a cable system, not that Aereo was a cable system. According to the Judge Nathan’s decision, Aereo was mistaken in assuming that because it publicly performed television programming in a way that is similar to a cable system, the court was required to treat it as being a cable system. The court pointed, for example, to direct broadcast satellites, which also are comparable to cable systems when it comes to retransmitting broadcast signals, but which had been determined by the courts not to be covered by the cable license (and ultimately were made the subject of a separate compulsory license by Congress). The court also pointed to the Second Circuit’s 2012 decision in the “ivi” case holding that an Internet-based service that streams copyrighted television programming live to subscribers is not a cable system for purposes of the Copyright Act’s cable compulsory license, a decision that the Supreme Court did not mention and thus cannot be presumed to have overturned. While Aereo sought to distinguish ivi on the grounds that Aereo had put in place mechanisms to limit its retransmissions to local markets, the court found that those safeguards are easily overridden and, in any event, the unlimited geographic reach of ivi was not determinative of the result in that case.
Judge Nathan then made short work of Aereo’s DMCA safe harbor and lack of irreparable harm arguments. The DMCA safe harbor applies to “service providers” that operate as “mere conduits”1 without storing, caching, or providing links to copyrighted material. The court found that Aereo did not qualify as a mere conduit, given that its activities involved capturing, storing, and providing links to the broadcasters’ over-the-air programming. The court also faulted Aereo for not showing that it satisfied certain other statutory preconditions for safe harbor eligibility, including the requirement that the service provider have in place a policy for terminating the service of “repeat infringers.” On the issue of irreparable harm, the court pointed out that it had issued its original decision denying the broadcasters’ request for an injunction despite having found that Aereo’s operations posed a threat of irreparable harm to broadcasters. In light of Aereo’s failure to appeal the court’s original irreparable harm ruling and the fact that the Supreme Court’s decision makes it likely that, after a trial, Aereo would be found to be engaging in copyright infringement, the court declined to reopen the issue of irreparable harm, noting only that Aereo could attempt to revive those arguments in subsequent proceedings (if any) to determine whether a permanent injunction should be issued.
Finally, the court concluded that it would neither expand nor limit the scope of the injunction as originally sought by the broadcasters (other than to make it applicable nationwide). The injunction thus applies to Aereo’s operations anywhere in the country insofar as they would allow a viewer to begin viewing a program before the program has ended. Implicitly, the court’s decision in this regard suggests that if Aereo can modify its system so that subscribers can play back recorded content once the program has ended, it can remain in operation.
Analysis. The conventional wisdom is that the Judge Nathan’s decision is unassailable and will be the final nail in Aereo’s coffin absent Congressional action amending the Copyright Act to provide Aereo with a compulsory license. Although Congress is likely to take up “must pass” legislation reauthorizing the satellite compulsory license before the end of the year, most observers believe that Aereo has little chance of persuading Congress to address its issues in that legislation. Moreover, even if the decision leaves the door slightly ajar for Aereo to provide a remote storage DVR service, it is questionable whether such a broadcast-only RS-DVR service would have much consumer appeal – for example, it would mean viewers could not watch a live sporting event or other live programming (e.g., the Academy Awards) before the program was over.
Judge Nathan gave Aereo and the broadcasters two weeks to submit a joint letter outlining how the case should proceed. There already has been extensive pre-trial discovery and the court indicated that it would set a rapid schedule for completing discovery so that the case could proceed to a final determination as to whether Aereo should be permanently enjoined from operating its live/near live service. Thus, we should learn relatively quickly what Aereo’s next move will be.
Lastly, an additional development that should be mentioned is the acknowledgment by the FCC that it is considering issuing a Notice of Proposed Rulemaking that would recommend treating Internet-based “linear” video programming distribution services as “multichannel video programming distributors” under the Communications Act. Despite the fact that this would mean a service such as Aereo would need to obtain retransmission consent from the broadcasters (separate and apart from needing a copyright license), Aereo has made the rounds at the FCC urging the adoption of such a rule. At first blush, it seems odd that Aereo would support the characterization of its service as an MVPD, but it may be that Aereo believes, based on a letter written by the Copyright Office after the Supreme Court decision was issued, that a decision by the FCC treating an Aereo-like service as an MVPD would improve its chances of being deemed a cable system for copyright purposes. But notwithstanding the Copyright Office’s somewhat perplexing reference to the FCC’s MVPD proceeding, there is no compelling reason for either the Office or any court to find that Aereo is entitled to the cable compulsory license simply because it has been held to be an MVPD by the FCC. Other services, most notably DBS, are MVPDs under the Communications Act but not cable systems for purposes of the Copyright Act.
While Aereo apparently supports the adoption of a rule under which it would be deemed an MVPD when it provides live/near live broadcast retransmissions, Aereo also has argued to the FCC that the MVPD definition should not apply to services that offer consumers access to programming on an on-demand or “non-linear” channel format. This might suggest that Aereo has not ruled out continuing its operations in a purely remote storage DVR format. If it does so, however, it is likely to face a new copyright infringement complaint asserting, among other things, that it is unlawfully making copies of the broadcasters’ programming. A case raising that issue could reopen the question, resolved in favor of Cablevision in the RS-DVR case, as to whether the copies of copyrighted programming made in connection with the operation of a “cloud” type service are made by the service provider or by the user of the service.