On Wednesday 25 June 2014, the Supreme Court of the United States handed down a greatly anticipated copyright decision. In a 6-3 decision, the Court found that the Aereo TV service, which allows subscribers to stream free-to-air television broadcasts over the internet, infringed copyright in television programs.

In commentary and in the media since the Supreme Court’s decision, it has been heralded variously as:

  • a victory for broadcasters and TV copyright owners;
  • a decision with potential to throw a copyright spanner in the works for cloud computing and emerging technologies; and/or
  • a carefully crafted “middle ground” designed to prevent Aereo from operating, while keeping cloud computing safe.

Well what did the Supreme Court actually say? What is the impact of this decision (if any) on Australian copyright law?   Given the strong interest in this case, we hope that our readers will bear with us if we delve into the decision in some detail.   After all, it isn’t every day that the US Supreme Court looks at copyright.

Background on how Aereo TV works

The Aereo TV service is a service that allows subscribers to stream free-to-air television programs over the internet.

The system works as follows:

  1. A subscriber selects a currently airing TV program they would like to watch from an online programming guide.
  2. Aereo’s system allocates an individual TV antenna to the subscriber which is then tuned to the correct TV station.
  3.  Using the allocated antenna, Aereo’s system records the TV program to a personal folder for the subscriber on a hard drive.
  4. Once a few seconds have been recorded, the TV program is streamed over the internet to the subscriber, with only a few seconds delay behind the original broadcast.

What is of particular interest in this decision is the technology behind Aereo. Aereo uses thousands of tiny TV antennae so that a single antenna is only ever allocated to a single subscriber at a time. If a subscriber requests a program, it is recorded using that subscriber’s antenna. Then, the recordings are not streamed to anyone except the subscriber who requested them.

The Supreme Court case

The US Supreme Court was asked to consider the narrow question of whether Aereo directly infringes the copyright of the petitioners (a number of television producers, marketers, distributors and broadcasters) by “perform[ing]” their copyrighted works “publicly”.

The US Copyright Act provides that a copyright owner has the exclusive right to “perform the copyrighted work publicly” (17 USC §106(4)). In 1976, the “Transmit Clause” was added to the Copyright Act, so that “perform” includes the right “to transmit … a performance … of the work … to the public” (17 USC §101).

The two key issues that were before the Supreme Court were whether Aereo “perform[ed]” the petitioners copyrighted works, and if so, whether it did so “publicly”.

The majority opinion

The majority (Justice Breyer with whom Roberts CJ and Kennedy, Ginsburg, Sotomayor and Kagan JJ joined) found that Aereo did perform the petitioners’ copyrighted works publicly and thus directly infringed the petitioners’ copyright.

Aereo argued that it is the subscriber who transmits the TV programs, as they tell the Aereo systems what programs to stream and when. Aereo argued that it is merely an equipment provider, in the same way as a digital video recorder (or DVR).

The majority rejected Aereo’s argument, holding that both Aereo and the subscriber “perform[ed]” the copyrighted work. The majority stated that the language of the Act is unclear so they looked to the Act’s purpose. Essentially, the majority looked at the intention behind the 1976 amendments to the Copyright Act and found that the activities of Aereo fell squarely within the purpose of that amendment. The majority opinion noted that the 1976 amendments were intended to capture community antenna television (“CATV”) services. CATV services (a bit like cable television services) used antennae to receive television broadcasts, amplified them and carried the signals via cables to subscribers. The majority found that “Aereo’s activities are substantially similar to those of the CATV companies that Congress amended the Act to reach”. The fact that in Aereo’s case not all programs are streamed, but only those selected by a subscriber, was “not critical here”.

Aereo further argued that when the program is streamed to a subscriber, it is a stream of that subscriber’s personal copy, a copy is not streamed to anyone else, and therefore it is not a performance “to the public”.

The majority felt that these merely “technological differences” should not matter. They asked “why, if Aereo is right, could not modern CATV systems simply continue the same commercial and consumer-oriented activities” simply by adopting these “new technologies”? “Congress would as much have intended to protect a copyright holder from the unlicensed activities of Aereo as from those of cable companies.” They found that the section “suggests that an entity may transmit a performance through multiple, discrete transmissions” and “the fact that Aereo transmits via personal copies of programs [does not] make a difference” to whether the transmission is made “to the public”.

The transmission was to a large number of people who are unrelated and unknown to each other; thus the transmission was “to the public”. 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 dissent

Justice Scalia (with whom Justices Thomas and Alito joined) issued a very strong dissenting opinion holding that Aereo did not “perform” the copyrighted works. The decision was primarily based on the US requirement that there be “volitional conduct” for direct infringement. The dissenting opinion viewed the majority opinion as “disregarding widely accepted rules for service-provider liability and adopting in their place an improvised standard (“looks-like-cable-TV”) that will sow confusion for years to come”.

The dissent found that Aereo did not “perform” the copyrighted work because it merely provided a system which acted automatically upon the requests of subscribers to record and stream programs. They said that Aereo’s service was akin to a copy shop that provides its patrons with a library card. The subscribers, by telling the system to record and stream a program, performed the work, not Aereo. Aereo did not engage in the necessary “volitional conduct” required for direct infringement.

Despite their strong dissent on the finding of direct infringement, the minority notes that Aereo could well be liable for secondary infringement, an issue not before the court. The dissent stated that it was for Congress to amend the copyright legislation and it was not the role of the court to plug “loopholes”.

Matters still to be considered

The case has been remanded for consideration of the remaining issues including whether or not Aereo’s recording function, which allows subscribers to record programs to watch at a later time (time shifting), is infringing.

The Supreme Court also did not consider the application of the “fair use” defence, which provides that a “fair use” of a copyrighted work is not an infringement (17 USC §107). The “fair use” defence has been used to find a range of technological uses not to infringe copyright (including time shifting (see Sony v Universal City Studios) and digital caching (see Parker v Google, Inc)). However, the majority’s view that “Congress would … have intended to protect a copyright holder from the unlicensed activities of Aereo …” may well limit the availability of the “fair use” defence.

Optus TV Now

US copyright law is not directly applicable in Australia. The laws are quite different and an Australian Court may not find that the Aereo decision is persuasive.   In particular, the US right of “public performance” does not mirror Australia’s “communication to the public” right.

Although the law in Australia is quite different, the case finds some parallels with the Australian decision on the Optus TV Now streaming service. The Optus TV Now service similarly permitted subscribers to stream television broadcasts over the internet and did so by making individual recordings for each subscriber.

In contrast to the US Supreme Court considering “transmission” and public performance, the Full Federal Court considered whether or not Optus had made copies of the broadcasts.   Making a similar finding to that of the Supreme Court, the Full Federal Court held that the copies of television broadcasts were made by either Optus or both Optus and the subscriber, although the subscriber selected what was recorded and streamed.

IP Whiteboard posts on the Optus TV Now case are available here. King & Wood Mallesons acted for the Australian Football League and Telstra Corporation in the Optus TV Now case.

Implications of Aereo for cloud computing

Part of the “hype” surrounding the Supreme Court’s decision has been concern regarding its potential ramifications for cloud computing.

The Supreme Court was well aware of the potential ramifications (thanks to a number of Amici briefs). The majority was careful to limit the decision to the facts of the case and the Aereo service. Of some comfort to cloud computing providers are the following factors:

  • the court did not consider “transmission” in cases where there is no communication of “contemporaneously perceptible images and sounds of a work”;
  • the court did not consider “whether the public performance right is infringed when the user of a service pays for something other than the transmission of copyrighted works, such as the remote storage of content”; and
  • Aereo subscribers lack any prior relationship to the works, such as being the owner or possessor of the work.

Nevertheless, the test that the majority used may be difficult or unclear to apply in practice. It might be possible to apply similar reasoning to a range of different cloud storage and streaming services. In particular, it may be a concern that multiple different copies of an underlying work and multiple transmissions can be effectively aggregated to constitute a “performance” “to the public”.

Further, as pointed out by Justice Scalia in his dissent, the majority found direct infringement in circumstances where the defendant arguably lacked the volitional requirement which has been crucial in many direct infringement cases in the US. For example, in the 2006 case of Parker v Google Inc, Justice Surrick held that copies made by Google’s system for automatically indexing and caching internet content lacked the necessary volition for direct infringement. Such cases might now be less clear-cut.

Aereo TV was seen by some as an attempt to skirt the law, but to others, it was an example of a new technology that had found a “loophole”, or as the evolution of personal video recorders. The Aereo TV service did indeed have the potential to significantly undermine some copyright owner’s well-established business models. Both the majority and the dissent of the Supreme Court shared the opinion that what Aereo was doing to the TV networks’ copyrighted programming “ought not to be allowed”.

It remains to be seen how the US Courts will draw a distinction between infringing services like Aereo TV on the one hand and other, less controversial and widely-used, cloud technologies, like online storage lockers, on the other.

A full copy of the US Supreme Court’s decision can be found here.