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Supreme Court Hears Arguments in Aereo Copyright Infringement Case




by:
Seth A. Davidson
Arthur H. Harding
Edwards Wildman Palmer LLP - Washington Office

 
April 28, 2014

Previously published on April 24, 2014

On Tuesday, April 22, 2014, the United States Supreme Court heard oral arguments in the broadcast industry’s copyright infringement case against Aereo, the Internet-based “antenna/DVR” service. Both the Southern District of New York and the Second Circuit had concluded, in reliance on the Cablevision RS-DVR case, that Aereo’s retransmissions of broadcast programming to subscribers were “private” rather than “public” performances and thus non-infringing. The Justices expressed doubts about Aereo’s legality, but also appeared concerned that a ruling against Aereo could adversely impact “cloud” services. The prevailing view among observers seems to be that the case could go either way, but more likely than not will go against Aereo with the Court deferring any decisions about the status of cloud services until a case involving cloud storage technology arises.

Discussion. As often occurs when the Supreme Court faces a case that involves an innovative technology, the Justices struggled to understand the lawyers’ arguments, which were largely based not on case law, but on the application of a 1976 statute to a technology unknown by Congress when it enacted the law. The lawyers, for their part, did not particularly shine either, seeming at times to be confused by or not fully informed about the facts or legal issues they were discussing. All in all, most observers viewed the argument as a disappointment in that it failed to clearly define and discuss some of the pertinent issues addressed in the parties’ briefs.

The following is a summary of the main topics raised at the oral argument: whether and how Aereo differs from cable television; the relationship between Aereo and cloud computing and how the Court’s decision regarding the former might impact the legal status of the latter; whether it is the “volitional” conduct of Aereo’s users, not Aereo itself, that causes the reproduction and transmission of broadcast programming over the Internet; and the significance and status of the Cablevision RS-DVR case.

Aereo and cable television. The very first question directed to the broadcasters’ counsel at the start of the argument, asked by Justice Sotomayor, was why Aereo wasn’t a cable television system subject to the compulsory license? Surprisingly, the broadcasters’ counsel seem mystified by the question, mistakenly suggesting at one point that it was a matter to be determined under the Communications Act (not the Copyright Act) when, in fact, the Copyright Act has its own definition of the term cable system that differs from the Communications Act definition. Broadcasters’ counsel also seemed to be unaware that the Supreme Court itself had already refused to review a Second Circuit decision holding that an Internet-based broadcast signal retransmission service, ivi.com, was not a cable system for purposes of the Copyright Act.

Because their attorney apparently was unprepared for this question, the broadcasters lost the opportunity to explain to the Court (as they had in their brief) that Congress had made it clear in the 1976 Act that the retransmission of a performance of a copyrighted work embodied in a broadcast signal to members of the public “by means of any device or process” was a public performance for which a license was required. They also lost the opportunity to emphasize that while some retransmission services had been given a statutory license, a service like Aereo that was not covered by that license had two options: seek individual licenses from the copyright owners or convince Congress to give it the benefit of an existing or new statutory compulsory license.

Justice Breyer echoed Justice Sotamayor’s question and even went so far as to suggest that maybe the case should be remanded so the question of why Aereo isn’t a cable system could be expressly addressed. He noted that what is disturbing everyone is that Aereo appears to be seeking to escape a constraint placed on cable while offering a functionally similar service. For its part, the Solicitor General’s office, appearing on behalf of the broadcasters, did a somewhat better job of addressing the question, arguing that while no one contended that Aereo was a cable system entitled to the compulsory license, it should be regarded as offering the functional equivalent of cable television and, like cable television, should be regarded as engaging in public performances. He conceded that it was plausible to look at Aereo as merely providing equipment for use in receiving private performances but for the fact that such an argument is precluded by the statutory reversal of the Fortnightly and Teleprompter cases by Congress. Aereo’s counsel also weighed on the difference between Aereo and cable, arguing that the latter “pushed down” content to the subscriber, while Aereo merely provided access to equipment that did not do anything until activated by the viewer. Several of the Justices seemed unconvinced by this alleged distinction.

Over the course of the argument, there were a number of additional exchanges between members of the Court and the parties’ lawyers comparing cable and satellite on the one hand and Aereo on the other. In particular, Chief Justice Roberts and Justices Scalia and Ginsburg were interested in whether Aereo had any reason for using multiple antennas other than as a way to “get around the law.” Aereo’s attorney responded that Aereo was designed to replicate what viewers could do at home but at a lower cost (i.e., the viewer could rent equipment and use it to make a “private” performance via the Internet without having to invest in an antenna, DVR, and equipment to make the signals accessible over Internet-enabled devices).

Another question that touched on the relationship between cable and satellite broadcast retransmissions and Aereo’s operations concerned the delivery of distant broadcast signals. Responding to an inquiry from Justice Scalia, Aereo’s counsel stated that Aereo’s customers only had access to local signals, but he hedged on whether Aereo could lawfully extend that service to cover distant signals. In a rather muddled response, Aereo’s counsel seemed to suggest that while Aereo might be able to offer viewers the ability to get distant signals under the theory that it is the viewer, not Aereo that initiates the retransmission, the reproduction of the distant signal via the DVR component of Aereo’s service might not constitute fair use because the Sony case only involved taping of local signals. Given that VCRs and DVRs have been used for decades to copy not only local signals, but distant signals and non-broadcast signals, it is not clear what Aereo’s counsel was thinking.

Aereo’s counsel also stumbled (and was later corrected by the broadcasters’ counsel) in arguing that it was relevant that Aereo only offered local signals because the retransmission of local signals by cable and satellite were “exempt” from the copyright regime created by the 1976 Act. That is simply untrue: the retransmission of local signals by satellite and cable is only non-infringing if the requirements of the compulsory license are satisfied (including, in the case of cable, the payment of a minimum fee even if no distant signals are carried). Aereo’s counsel also raised eyebrows by suggesting that the reason that there was no payment required for retransmission of local broadcast content was that the broadcasters themselves did not want to have to deal with the burden of divvying up the royalties that would otherwise be due to individual stations and copyright owners - a rather novel argument that appears to have been created out of whole cloth.

Cloud Computing. An exchange between Justice Breyer and Aereo’s counsel provided what many observers regard as glimpse into how the case may be resolved. Taking exception to a statement by Aereo’s counsel that the “length of the cord” that delivers broadcast content to a consumer is not significant, Justice Breyer stated that the length of the cord was very significant in that Aereo was claiming, in effect, the right to send any broadcast signal from anywhere in the world to a viewer’s Internet-connected device. To Justice Breyer, that sounded a lot like what cable systems do (albeit with the programming delivered to a television rather than a computer). However, while Justice Breyer thus appeared ready to find that what Aereo does is infringing, he was concerned about how such a decision might impact other technologies, particularly “cloud” computing, and how a decision could be written that drew a distinction between Aereo and cloud technologies.

The Justices and the lawyers devoted a substantial part of the argument to a discussion of this issue, often creating more confusion than clarity. For example, Justice Breyer wanted to know why a record store that sold 10,000 records was not engaging in a public performance, suggesting a lack of understanding on his part of the difference between a “distribution” and a “performance.” Justice Sotomayor followed by asking a similarly odd question: if Aereo is held to be engaged in a public performance, how does the Court avoid sweeping into that ruling a person who merely sells coaxial cable to the resident of a building where television service is received. Again, the broadcasters’ attorney attempted to explain that providing equipment is fundamentally different from providing an on-going service and that Congress sought in the 1976 Act to address the latter, not the former.

Justice Kagan got into the act as well, posing a hypothetical in which a business sold consumers an antenna and hard drive. Counsel for the broadcasters responded that the use of this equipment by the end user consumer to perform the works embodied in a broadcast signal was a private performance and the sale of the equipment itself was simply the sale of equipment, not the provision of an on-going service. This led Kagan to ask whether it thus mattered where the hardware was located. The broadcasters’ counsel answered that it did matter - that the geographical aspect was effectively built into the statute by the “transmit” clause. This led to a question by Sotomayor as to whether that meant Roku was paying license fees unnecessarily (since it is hardware located in her home). The broadcasters’ counsel could only say that he didn’t know the details of how Roku operated.

After these preliminary skirmishes, the focal point of the argument regarding cloud services narrowed to the difference between a “locker” service which stores and plays back content that the user has lawfully acquired and a cloud service that streams content to users who have not otherwise acquired the right to access such content. A series of analogies used to explain this distinction included a comparison between a car dealer and a valet service. According to broadcasters’ counsel, both provide cars to the public, but on closer inspection only one is really providing a car, the other is providing a parking service. The broadcasters’ counsel came back to this example when Justice Breyer asked whether it would be a public performance if 1,000 people stored the same song in a cloud locker service and individually retrieved their copy at different times. According to the broadcasters’ counsel, it would not be infringing because, like the parking valet, a locker service only allows the user to get back what they already have a right to possess.

Finally, Aereo’s counsel argued that the Court could not and should not ignore the impact of the broadcasters’ argument on cloud technologies. According to Aereo’s counsel, if the Court accepts the broadcasters’ position that Aereo is transmitting infringing public performances, anytime a copyrighted work is made perceptible through the private playback of a recording of that work, that playback will become a public performance because the work is separately played back to another member of the public. Thus, if one song is stored by two people in the cloud, the act of one person receiving their copy would implicate the public performance right.

Ultimately, the solution that the broadcasters’ counsel and Solicitor General’s office advocated for the “what to do about cloud technology” question was for the Court not to attempt to draw lines involving cloud technology at all until it has specific facts involving cloud services in front of it. Many observers think this is how the Court will handle the issue.

Volitional conduct. Although it quickly became clear during the argument that the Court’s principal concern was with the potential impact a ruling against Aereo could have on the cloud computing industry, Aereo’s counsel shifted his focus from the cloud issue to the argument that Aereo itself wasn’t “performing” the works in question at all. Rather, according to Aereo, all it did was provide equipment that lay dormant until the user activated it by picking a channel from the user guide provided by Aereo. Thus, it is the user’s volitional conduct, not anything done by Aereo that matters. A contrary conclusion, Aereo argued, would mean anyone providing equipment that could be used to receive content would be considered a content provider. The broadcasters’ counsel argued back that Aereo is not a “hapless bystander” that does nothing more than respond to the consumer’s push of a button.

Several of the Justices also pushed back against Aereo’s volitional conduct argument. Justice Ginsburg suggested that Aereo, by providing the menu, was playing an active role. She also stated that cable systems provide a menu of programming but no one would contend that because the cable customer presses a button to select the channel being retransmitted, that retransmission is a private performance. After an odd and very confused discussion of music licensing in which the Justices and lawyers seemed to conflate the “mechanical license” for distributing copies of musical compositions with the absence of a public performance right covering the broadcast of sound recordings by radio stations, Justice Sotomayor questioned why Aereo’s volitional conduct argument wouldn’t mean that Netflix, Hulu and other Internet-streaming services are not engaging in public performances. Aereo’s counsel answer focused on the fact that those services do not exclude anyone from receiving the transmissions, while Aereo’s customers can only gain access to the particular user-specific, user-created copy that is transmitted to them.

The Cablevision RS-DVR Case. Despite the fact that the courts below relied heavily on the Second Circuit’s decision upholding the Cablevision RS-DVR in finding that Aereo is engaged in private, not public performances, there was very little discussion of that case. Justices Alito and Kennedy asked the broadcasters’ counsel to assume that the Cablevision case was binding precedent and explain the difference between the RS-DVR and Aereo. In response, the broadcasters’ counsel suggested that while the result in the RS-DVR case was correct, the Second Circuit’s rationale was “profoundly wrong.” The Solicitor General’s office took a similar position, agreeing with the broadcasters’ attorney that what distinguishes the RS-DVR case from Aereo is that Cablevision had a license to make the initial retransmission to the public and that the RS-DVR was just a playback/time-shifting feature. Aereo, on the other hand, is what the RS-DVR would have been if Cablevision had decided to stop getting licenses while continuing to offer the RS-DVR service with respect to the unlicensed content. In short, the RS-DVR case involved a recording/time-shifting service that was ancillary or supplemental to the licensed transmissions and, viewed as such, the playback of the recordings constituted a fair use, private performance.

Miscellaneous Issues. Several additional issues came up briefly during the argument. For example, Justice Ginsburg asked the Solicitor General’s office for its view of the broadcasters’ contention that a ruling in favor of Aereo could place the United States in breach of certain international treaty obligations. The Solicitor General downplayed this argument, stating that a decision in favor of Aereo would not necessarily be viewed as automatically putting the United States in breach of the country’s treaty obligations. Questions also arose concerning the distinction between Aereo and video-on-demand services, which indisputably involve public performances even though the transmissions are individualized. Aereo’s counsel claimed that the distinction was that video-on-demand providers have a master license that allows them to use one copy in providing access to the programming to any subscriber ordering it. In contrast, Aereo emphasized that it has the “right to exclude” in the sense that it only can provide a subscriber with access to content using the unique copy made at the direction of that user. Finally, Justice Kennedy asked a hypothetical about a company that supplied viewers with access to equipment that could be used not only to record and playback broadcast content, but also to delete all of the advertising. This hypothetical appeared to be based, in part, on the Dish “Auto-Hop” ad-skipping DVR, which is the subject of ongoing litigation in California. Aereo’s counsel largely ducked the question, choosing to concede that it probably would constitute a violation of the reproduction right but would not convert the playback of the user-specific, user generated copy from a private performance into a public performance

Forecast. As indicated above, the quality of the Justice’s questions and the lawyers’ responses was disappointing to many observers. Some commenters suggested that was good for Aereo and improved their chances of prevailing. Nonetheless, the prevailing view appears to be that the most likely outcome is for Aereo to lose in a narrowly written decision that expressly disavows making any judgments about the status of other technologies. If Aereo does win, it likely will be based on the “unique copy” theory with a remand to the lower court to determine more conclusively after trial whether Aereo’s antennas actually operate individually or only operate when part of a shared array. A decision in the case is expected from the Court in late June or early July.



 

The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.
 

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Seth A. Davidson
Arthur H. Harding
Edwards Wildman Palmer LLP
 
Washington Office
 
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