Technological advances are stressing the seams of existing copyright law, forcing yet another industry to grapple with the prospect of disruption. At the nexus of this tension is AEREO, Inc. (“Aereo”), a streaming service that allows consumers to watch and record over-the-air broadcast television programming over the Internet. Entangled in a major battle against the broadcast networks who own the copyrighted content, Aereo recently scored a significant victory: the Second Circuit affirmed the denial of the networks’ bid for an injunction and held that Aereo likely did not infringe the networks’ copyrights1. As this ruling reverberates and the highly publicized dispute moves forward, broadcast networks fear the possibility of an upending of their long-existing business model, while cable companies and other key industry players closely monitor the outcome.

Aereo’s technology is key to the legal analysis in this case. On the front end, Aereo’s system is simple. An Aereo subscriber logs in to her account and choses either to watch or record over-the-air broadcast television programming from a list of available channels. If she chooses to “watch,” after a brief period of buffering, she is able to view live programming. If she chooses to “record,” the programming will be recorded for her to watch at a later time, similar to a home DVR system.

The core of this case rests on the Aereo system’s back end, comprised of an Antenna Server and a Streaming Server. When the user chooses to watch or record programming, a request is sent to Aereo’s Antenna Server. The Antenna Server contains many dime-sized antennas, which, according to Aereo (and accepted by the Court), operate independently from one another. The Antenna Server allocates one antenna and a transcoder to the user who made the request for receipt of the broadcast signal. Importantly, no two users are ever assigned a single antenna at the same time. The Antenna Server then sends a request to the Streaming Server, and the Streaming Server creates a unique user directory to store the data from the user-specific antenna and transcoder. This data is then accessible by the Aereo subscriber to watch “live” or at a later time.

Copyright law provides copyright owners six exclusive rights2. One of those rights, at issue in this case, is the exclusive right to publicly perform the copyrighted work3. Both to “perform” and to perform “publicly” are statutorily defined, with the second prong of the “publicly” definition, known as the “Transmit Clause,” meaning:

to transmit or otherwise communicate a performance or display the work to a place specified by clause (1) or to the public, by means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times4.

The Transmit Clause was first incorporated into the 1976 Copyright Act, in response to the emergence of cable television systems and a desire to bring the retransmission of broadcast television programming under the umbrella of the public performance right.

The plaintiffs in this case argue that Aereo’s transmissions of broadcast programs fall within the Transmit Clause’s definition and that they are analogous to the retransmissions of network programming made by cable companies. Hence, they argue, Aereo is violating their public performance right without a license.

The Second Circuit confronted a similar set of issues in 2008 when it held that Cablevision’s Remote Storage – Digital Video Recorder (“RS-DVR”) system did not infringe public performance rights of copyrighted works5. Cablevision’s RS-DVR system allowed users to watch recorded programming by creating a copy of the program for that individual user on a user-specific portion of a remote hard drive. That meant that if 500 users wanted to record the same program, 500 different copies would be created, one for each user on the user’s dedicated portion of the remote hard drive, which no other user would have access to. The Cablevision court held that this transmission of recorded programming to an individual user was not a public performance. Since no other user could receive a transmission generated from that particular copy, the transmission was not made “to the public.”

The Aereo Court derived four “guideposts” from Cablevision with which to analyze the current case:

  1. If the transmission is capable of being received by the public, the transmission is a public performance; if the potential audience is only one subscriber, it is not a public performance.
  2.  Private transmissions should not be aggregated – meaning it is irrelevant that the public could receive the same underlying work by means of many transmissions.
  3.  But when private transmissions are generated from the same copy of the work, aggregation should apply in such cases, and if the aggregated transmissions from a single copy enable the public to view that copy, it qualifies as a public performance.
  4.  Any factor that limits the potential audience of a transmission is relevant to the Transmit Clause analysis.

The Court rejected all of the plaintiffs' attempts to distinguish Aereo’s system from Cablevision using the Cablevision guideposts, and concluded that Aereo’s transmissions of unique copies of broadcast programming created at the users’ requests were not public performances.

Judge Chin offered a sharp dissent, accusing Aereo of creating a “Rube Goldberg-like contrivance, over-engineered in an attempt to avoid the reach of the Copyright Act and to take advantage of a perceived loophole in the law.” He distinguished this case from Cablevision by stating that Cablevision involved a cable company paying statutory licensing and retransmission consent fees for the content it retransmitted, while Aereo does not pay any such fees. Moreover, the Cablevision subscribers already had the ability to view programming in real-time through their authorized cable subscriptions with the DVR service acting as a supplement. Aereo’s service, he said, does what cable companies do except that cable companies do so legally, pursuant to licenses.

The feud continues as the broadcasters have since requested the Second Circuit rehear the appeal en banc, while Aereo has announced its plans to launch in other major markets, including Atlanta and Boston in the very near future. CBS has threatened to sue Aereo “wherever Aereo attempts to operate” in response to this news, which inturn prompted Aereo to file a declaratory judgment action against CBS6.

This case encapsulates the increasing tension that such technological advances – likely not contemplated in 1976 – are putting on current copyright law. While Congress wanted retransmissions of network programs by cable systems to be considered “public performances” when it drafted the 1976 Copyright Act, it also intended that some transmissions, such as home recordings, be considered private. These sorts of adverse interests might ultimately prove to be irreconcilable by the courts, which may prompt Congress to listen to the growing chorus for an update of our copyright laws.