On October 11, a group of networks including Fox Television Stations, Inc., Univision Television Group, and American Broadcasting Companies, Inc. (the Networks) petitioned the Supreme Court to reverse an unfavorable decision by the Second Circuit Court of Appeals in its ongoing dispute with Aereo, Inc. (Aereo). Specifically, the appellate court affirmed the denial of the Networks’ request for a preliminary injunction barring Aereo’s wireless broadcasting service as a violation of the public performance right under the Copyright Act. In a significant development, the National Football League (NFL) and Major League Baseball (MLB) recently collaborated to file an amicus brief urging the Supreme Court to hear the case, claiming that “[t]he Court’s intervention is now necessary to restore clarity and certainty in this area and to prevent the unraveling of a marketplace built upon the licensing of rights rather than the expropriation of such rights through technological chicanery.”
As previously discussed by Arent Fox, Aereo provides an Internet-based subscription service in which local broadcast signals are transmitted to individually-assigned antennas maintained by Aereo in its data centers. Not only can subscribers watch live programs, but they can also record programs to a remote DVR device for streaming on computers, cell phones, and Internet TVs. Recorded programs are copied to a user’s personal directory and then eventually deleted. By assigning each customer a unique antenna, Aereo argues, its services function just like a digital video recorder and therefore constitute private transmissions—not public performances—that are legal under the Copyright Act.
In March 2012, the Networks sued Aereo for copyright infringement and brought a motion for a preliminary injunction on the ground that Aereo’s services violate the public performance right granted under the Copyright Act. The US District Court for the Southern District of New York denied the motion, holding that Aereo’s use of individualized copies of programs falls squarely within the scope of Cartoon Network LP v. CSC Holdings, Inc., 536 F.3d 121 (2d Cir. 2008) (Cablevision), which permitted single broadcast transmissions through a DVR system. The Networks appealed the decision to the Second Circuit, but in April 2013 the appellate court ruled that because Aereo produces user-unique transmissions, such transmissions are not public performances and therefore fall within the considerations expressed by Congress in the legislative history of the Copyright Act.
After the Networks petitioned the Supreme Court to hear an appeal of the Second Circuit’s ruling, the NFL and MLB filed an amicus brief in November arguing that a successful outcome for Aereo would likely doom sports programming on free networks, as the loss of revenue from retransmission fees could force all copyright holders to migrate their programming to paid cable networks such as Disney-owned ESPN or TNT “where Aereo-like services cannot hijack and exploit their programming without authorization.” The leagues and the Networks suggest that Aereo’s system is designed solely to exploit a “judicially created loophole” in order to avoid paying copyright holders for retransmission fees, and that Aereo should have to pay copyright holders to retransmit their programming, just like cable and satellite companies.
According to the brief, cable and satellite companies currently pay in excess of $300 million annually in “compulsory” license fees, and the copyright owners of sports programming, including the NFL and MLB, receive approximately $100 million of those fees each year. The brief also alleges that content owners like the NFL and MLB “indirectly receive a share of the several billion dollars that cable systems and satellite carriers pay broadcasters for the right to retransmit broadcast signals.” The Second Circuit’s holding, they argue, “provides cable systems and satellite carriers with a roadmap to avoid paying these retransmission royalties,” and these companies “already have signaled their interest in following Aereo’s lead, should Aereo prevail.”
Critics of the leagues’ and broadcasters’ positions suggest that their arguments echo those proffered by the major networks in 1982 in their ultimately unsuccessful attempt to block Sony’s Betamax home videocassette recorder (VCR) under US copyright law. See, e.g., Jeffrey Goldfarb, Broadcasters’ Fight Against Aereo Doesn’t Serve Their Interests, N.Y. Times DealBook, Nov. 20, 2013. At the time, Universal Studios and Disney argued to the Supreme Court that “the economic incentive to risk enormous sums to produce high-quality television programming will be substantially undermined” by the public’s unfettered use of the VCR. Critics argue that contrary to this dire prediction, advertising revenue for U.S. television has increased dramatically in the past thirty years, despite consumers’ lawful use of the recording technology.
The decision by the NFL and MLB to file an amicus brief is an intriguing development in this ongoing case, and whether the leagues’ claims hold up to further scrutiny—or whether Aereo’s services will ultimately turn out to be a modern analogue to the VCR—will be a compelling issue to monitor going forward.