The Aereo decision doesn’t answer the most intriguing question

The Supreme Court’s decision in the Aereo case doesn’t answer what we think is the most intriguing question: Can Aereo start to offer a lawful service by paying copyright fees to broadcasters in accordance with the compulsory copyright license for cable television services provided for in the Copyright Act and administered by the U.S. Copyright Office?

Some Cable Television History

Cable television started out as a community antenna service and was called CATV. CATV companies said they didn’t need a copyright license to retransmit television signals because the community antenna was simply doing what any television viewer could do for herself. The Supreme Court agreed with the new CATV industry in two decisions, Fortnightly and Teleprompter. The U.S. Congress overruled those decisions. Congress amended the Copyright Act to provide that unlicensed retransmission of television broadcasts violates the copyrights of the broadcasters and the program producers. We said in earlier posts that Aereo’s unlicensed retransmission of television broadcasts violates the Copyright Act. The decision that Aereo just received was inevitable, given the history of CATV. There was simply no way that the Supreme Court, having been expressly overruled by Congress, would defy Congress again on the same point.

The Compulsory Copyright License

But what’s important to understand is that when Congress overruled the Supreme Court and amended the Copyright Act to deal with the new CATV service, Congress didn’t simply decree that unlicensed retransmission of television broadcasts violates copyright. If that’s all that Congress had said, it would have stifled the new CATV industry. The reason is that broadcasters themselves only have a license from the program producers to broadcast the shows. So even if the CATV companies went to the broadcasters to obtain licenses to retransmit the broadcasts, the broadcasters couldn’t give them the licenses they would need from the program producers. The CATV companies would have to go to all the program producers of all the programs and get licenses to retransmit the programs on CATV. Congress recognized the complexity of doing this. So Congress provided a solution.

The Copyright Act provides for a compulsory copyright license. So long as a CATV company files the proper form with the Copyright Office and pays the statutory fee, the CATV company will receive a compulsory license to retransmit television broadcasts and all the individual programs that are broadcast. The Library of Congress puts all the fees into a pool and distributes the fees to the copyright holders. All of this work gets handled by the U.S. Government, and CATV companies are free to concentrate on offering the best possible service.

Aereo Had the Wrong Business Strategy from Day One

It’s somewhat surprising that Barry Diller, an experienced broadcaster, pursued the wrong business strategy with Aereo from day one. He chose to argue that he didn’t need a license. He confronted the Supreme Court with an unlicensed service, as the Court stated (emphasis is ours):

Aereo neither owns the copyright in those works nor holds a license from the copyright owners to perform those works publicly.

Congress would as much have intended to protect a copyright holder from the unlicensed activities of Aereo as from those of cable companies.

Instead of this approach that was guaranteed to fail (See Cable Television History above), what Mr. Diller should have done is file the required forms with the Copyright Office, pay the fee and argue, as strenuously as possible, that Aereo is similar enough to a CATV system to be able to take advantage of the wonderful mechanism for a compulsory copyright license that Congress created. Yes, this would make the Aereo service a bit more expensive, but customers are looking for convenience and are willing to pay for it.

So the real question for us is, based on this decision, can Aereo take advantage of the compulsory copyright license? Will the Copyright Office process forms and accept payment if Aereo adopts a sensible business strategy and seeks a compulsory license?

Questions that Aren’t Left Open

We would take one more moment to close the door on speculation that the decision leaves other questions open. It doesn’t.

The dissent asks, what if Aereo time delays the transmissions, does that create a new open issue? No, it does not. CATV customers can use in-home DVRs or remote DVRs at the CATV headend to record programs without violating copyright for one simple reason. They are getting the programming from a CATV company that has a license to deliver it to them. The remote DVR decision inCablevision dealt with recording programs that customers were getting from a CATV company with a license to retransmit those programs. Unless and until Aereo obtains a license, it can’t take advantage of the DVR and remote DVR decisions.

Many others ask, what effect will this decision have on cloud computing and similar remote storage services? None. The law has been and remains crystal clear. You can store in the cloud data and programs for which you hold a license, or that are public domain. If you don’t hold a license for data or programs and they’re not public domain, then putting that material into the cloud does not somehow change the fact that you are violating copyright.