In a ruling that could have implications for emerging technologies in the television industry, and beyond, the U.S. Supreme Court ruled 6-3 yesterday that online television streaming service Aereo Inc. violates copyright law by retransmitting over-the-air programming without authorization. American Broadcasting Companies, Inc. et al. v. Aereo, Inc. f/k/a Bamboom Labs, Inc., No. 13-461. The Court held that Aereo’s streaming service represented a “public performance” of copyrighted works, in violation of the Copyright Act. The decision represents a major victory for television networks and copyrighted content owners, which had argued that Aereo’s business model amounted to nothing more than high-tech theft of protected works. 

The case centered largely on Aereo’s unusual engineering. Aereo allows its subscribers to watch over-the-air TV programs on a smartphone, tablet, or computer live or recorded for later viewing. Aereo’s technology relies on thousands of dime-sized antennas—each accessible only by one subscriber at a time—stored in local warehouses. Those antennas capture over-the-air television signals and are connected to a remote digital video recorder and internet connections. When a subscriber wants to watch a show that is currently airing, he selects the show from a menu on Aereo’s website. A server then tunes an antenna to the broadcast carrying the show and translates the signals into data which is first “stored” in a “personal copy” that can be transmitted over the internet. The server then begins to stream the show to that subscriber’s screen, nearly simultaneously to the broadcast.

The major broadcast networks, among others, sued Aereo immediately upon its launch in April 2012, arguing that the simultaneous broadcasts to thousands of paying customers represented an illegal retransmission of protected works, and sought a preliminary injunction. Aereo contended that it was merely helping its subscribers do what they could lawfully do since the era of rabbit-ear antennas: watch free broadcast television delivered over public airwaves.

The trial court denied the preliminary injunction, and the Second Circuit Court of Appeals affirmed the trial court’s ruling, concluding that Aereo does not perform publicly within the meaning of the Transmit Clause of the Copyright Act (17 U.S.C. § 106(4)) because it does not transmit to the public. The Second Circuit based this conclusion on its finding that Aereo merely sent private transmissions that were available only to that particular subscriber.

The Supreme Court reversed, holding that Aereo’s streaming service represented a “public performance” of the major television networks’ copyrighted works. The case turned largely on the historical underpinnings of the Copyright Act’s Transmit Clause, enacted in 1976 in effect to overturn a prior Supreme Court ruling (Fortnightly Corp. v. United Artists Television, Inc., 392 U. S. 390 (1968), that community antenna television (CATV) systems fell outside the scope of the Copyright Act). In Fortnightly Corp., local broadcasts were transmitted by the CATV system through antennas on hills above the cities connected by coaxial cables to the home television sets of subscribers. The networks contended, and the Supreme Court agreed, that the Aereo system was nothing more than a modernized CATV system, specifically intended to be prohibited under the Transmit Clause.

Aereo had argued that its transmissions are private performances because they are provided via an individual antenna and personal copy of the copyrighted broadcast to every viewer. Pointing out that the Transmit Clause expressly applies whether members of the public receive the performance “in the same place or in separate places and at the same time or at different times,” Justice Breyer rejected Aereo’s argument stating, “You can transmit a message to your friends whether you send identical emails to each friend or a single email all at once.”

Despite Aereo’s novel technology, the Court found that Aereo was “not simply an equipment provider,” but something closer to a pay-TV provider, which pays copyright owners for the right to air broadcast content, in that it transmitted copyrighted content. “Insofar as there are differences,” Justice Breyer wrote, “those differences concern not the nature of the service that Aereo provides so much as the technological manner in which it provides the service.” The Court further stated that “[t]hese behind-the-scenes technological differences do not distinguish Aereo’s system from cable systems, which do perform publicly. Congress would as much have intended to protect a copyright holder from the unlicensed activities of Aereo as from those of cable companies.” Thus, the Court found that “Aereo performs petitioners’ works publicly within the meaning of the Transmit Clause.”

While the dissent expressed dislike for Aereo’s business model, in the opinion of these Justices, the service had nevertheless identified a loophole in the law. “It is not the role of this court to identify and plug loopholes,” wrote Justice Antonin Scalia. “It is the role of good lawyers to identify and exploit them, and the role of Congress to eliminate them if it wishes.” As he summarized the opinion, “The proper course is not to bend and twist the [Copyright] Act’s terms in an effort to produce a just outcome, but to apply the law as it stands and leave to Congress the task of deciding whether the Copyright Act needs an upgrade.”

Justice Breyer’s majority opinion addressed a major concern which surfaced ahead of the ruling—that a decision finding Aereo’s service illegal would endanger other emerging and as yet to be invented technologies, particularly cloud computing services on which individual users may store copyrighted content. “We have not considered whether the public performance right is infringed when the user of a service pays primarily for something other than the transmission of copyrighted works, such as the remote storage of content," Justice Breyer wrote. The Court went on to state that “[g]iven the limited nature of this holding, the court does not believe its decision will discourage the emergence or use of different kinds of technologies.”

Although it would appear the ruling is a death knell to Aereo’s current business model, its CEO, Chet Kanojia, has vowed to “continue to fight” to provide new technologies to consumers.

The Supreme Court case comes at a crucial time in the media industry, where broadcasters and content owners are facing vast technological changes and rapid shifts in viewer habits. As a result, the economics of television financing and distribution are changing. The Court’s decision leaves the current broadcast model intact, but perhaps not for long; as the Court noted, “other novel issues not before the Court, as to which ‘Congress has not plainly marked [the] course’ . . . await a case in which they are squarely presented.”