We’ve written extensively about copyright issues for audio services, but the big copyright decision that recently made headlines is a TV issue, though one that could have an impact on audio as well. That was the Second Circuit decision in the Aereo case – upholding a lower court decision allowing a company to retransmit over-the-air TV signals to consumers over the Internet – without any royalties to the TV broadcasters or television program producers. The decision looked at the issue of what defines a “public performance” that would require the consent of the copyright owner. The Court found that there is no public performance of television programming where the service is set up so that the programming is streamed to the viewer individually, at their demand, rather than transmitted all at once to multiple consumers – as by a cable system or a  satellite television service. The decision is a controversial one – decided by a 2 to 1 vote with the dissenting judge issuing a strong dissent arguing that the Aereo service was nothing more than a “sham” designed to evade the royalty obligations or copyright permissions that would be necessary if the service were deemed a cable system or other type of multichannel video provider. What does this decision really mean for television stations, and could it have broader implications for the reuse of all sorts of broadcast content on the Internet?

The decision focused on the question of whether the Aereo service “publicly performs” the programming that it sends to its subscribers. Under the Copyright Act, a copyright owner has a bundle of rights which it has the exclusive ability to exploit. This includes the right to copy the copyrighted work, to distribute it, to make a “derivative work” (a work that uses the copyrighted material and changes it in some way - like putting new words to the melody of a copyrighted song), and the right to publicly perform it. The definition of a public performance includes any transmission or retransmission of a performance to multiple individuals at the same time or at different times. This language was added to the Copyright Act at the time of the advent of cable television, to make clear that services like cable, that take an existing performance (like that of a broadcast television station) and then further transmit it to other people (even people who could theoretically pick up the original performance) were themselves making a public performance that needed the consent of the copyright holder or a government-imposed statutory license (which allows the performance as long as the party making the performance pays the copyright holder an amount set by the government). From a cursory look, it would appear that Aereo is retransmitting the signal of the TV station to all of its customers. Why, then, did the Court rule that no public performance was involved?

The Court looked at Aereo’s novel technology to assess whether the performance (the transmission of the programming from an over-the-air television station over the Internet) was in fact a “public” performance. To be considered a public performance, a performance has to be to the “public” – more than simply to a single individual or to a close circle of friends and family. If you “transmit” a program within your own home, e.g. you make a DVR copy in one room that you or someone else in your family watches in another room, you may have a performance, but it probably isn’t a public one. By contrast, if you take a whole bunch of TV signals and send them all at once to a bunch of paying customers, like a cable system or even a SMATV system, you are making a public performance. Where does Aereo fall in this continuum? That was the decision before the Court.

Aereo designed its system to allow it to present to the court the contention, which was adopted by the Court, that the delivery of the television signals to the ultimate viewer was one that was directed not by Aereo, but instead by the viewer himself. The system has thousands of little antennas, that are individually used by the subscriber, and the signal is then directed to a digital storage system where it is stored until the user decides to play the signal – either right away (in substantially real time) or on a delayed basis (as would be the case with a DVR). So Aereo argued, and the Court agreed, that it was doing nothing more than what a consumer would do on its own with a DVR and a Slingbox – recording an over-the-air TV signal and placeshifting the signal by sending it to the viewer, at his or her own request, over the Internet. Thus, the Court determined that the transmission of the television signals was not a public performance by Aereo, but a private one at the direction of the ultimate user.

Of course, the television broadcasters, who are appealing the decision by asking for a rehearing by the entire Second Circuit, disagree with the Court’s interpretation. If you look at the Aereo system from a different perspective, you don’t see a viewer-directed system but instead one that really is little different from any multichannel video provider – a system that picks up broadcast TV signals and charges a premium to retransmit those signals to a viewer – exactly the same thing that any cable system does. While Aereo claims that the user has its own antenna used for picking up the over-the-air signal, in fact it is admitted that the antenna assignment will vary so that a user won’t be watching all of its programs from the same antenna – and it may not even be a single antenna that picks up the signal sent to the viewer. It may be a number of antenna that actually receive the signal. This dynamic reception system, argue the TV stations, really is functionally the same as the single antenna at a cable system’s headend that picks up TV signals and retransmits them to consumers – the only difference is that the cable systems don’t go to the trouble of trying to break their antenna into bunches of tiny antennas “assigned” to individual users but functioning as a single system.

The impact of the decision, were it to be adopted nationwide, could lead to a significant reexamination of the concept of a public performance. You could see cable systems changing their receive-antennas for over-the-air stations to adopt an Aereo model to try to cut down on retransmission consent fees to TV stations – or radio antennas set up to stream signals on demand to single users to avoid the public performance obligation for music royalties. If you redefine a public performance as the Court did in this case, one can imagine many other systems, not involving broadcast signals, where the transmission of content on demand to individual users is not seen as a public performance but instead as a private one – in attempts to avoid paying public performance royalties or licensing obligations.

The television industry has reacted aggressively against this decision (a decision which was also contrary to a similar case in California finding that an Aereo copycat did infringe on copyrights), even including statements by some heads of broadcast networks that, if the decision is upheld, the networks might move to a subscription model. But there remains many miles to go before such a dramatic change in the TV landscape takes place, as this case may yet be reviewed by the full court of appeals in the Second Circuit, or the conflict between the Second Circuit and the California Court could end up in the Supreme Court. The issue could also be resolved by Congress, just as it did when cable first came on the scene, by passing legislation to redefine a public performance. So, as we have said many times before on developing legal issues, stay tuned