|October 16, 2013|
Previously published on October 10, 2013
In the latest in a series of copyright infringement cases arising out of the deployment of “antenna/DVR” services such as that offered by Aereo and FilmOn, Judge Gorton of the United States District Court for the District of Massachusetts has denied a motion for preliminary injunction filed against Aereo by Hearst Stations Inc., the licensee of Boston television station WCVB-TV. Judge Gorton’s decision essentially adopted the reasoning of an earlier decision by the Southern District of New York that was affirmed by the Second Circuit and rejected the reasoning of federal district court decisions in California and the District of Columbia granting injunctions with respect to an Aereo-like service currently known as FilmOn. While the Massachusetts District Court decision allows Aereo to continue to operate in Boston, it was not a complete victory. Judge Gorton denied Aereo’s request that Hearst’s complaint be transferred to the Southern District of New York. Thus, Aereo still faces a trial, and the prospect of an adverse decision, with respect to its Boston operations. The decision also increases the likelihood that the issues raised with respect to antenna/DVR services such as Aereo ultimately will be resolved by Congress and/or the Supreme Court.
Background. As described in our Client Advisory of July 12, 2012, Aereo is a self-described “technology platform” that uses an array of miniature antennas and associated signal processing, recording and transmitting equipment to provide over-the-air broadcast programming to paying subscribers via the Internet. Subscribers are assigned temporary, but exclusive, use of an antenna that receives the over-the-air signal and transmits it to a location on Aereo’s hard drive assigned to the subscriber. It is then recorded, at the user’s direction, for either near-live viewing or for delayed viewing and converted to an Internet-based streaming format. As in previous cases involving antenna/DVR technology, Hearst alleges that Aereo is infringing on Hearst’s exclusive rights to publicly perform, reproduce, distribute and prepare derivative works based on its copyrighted content.
Decision. Judge Gorton noted at the outset of his 20-page opinion that the First Circuit (in which the District of Massachusetts is located) has not considered whether a service such as Aereo is “publicly performing” broadcast content, but that the issue has been addressed by the Southern District of New York and the Second Circuit as well as by the federal district courts in the District of Columbia and the Central District of California, with conflicting results.
Specifically, the Southern District of New York, as affirmed by the Second Circuit, found that because the Aereo antenna/DVR service uses individually assigned antennas to create copies unique to each user and only at the user’s request, the transmissions that it makes to users are “private” performances that do not create any copyright liability. The Central District of California and District of Columbia decisions, both of which involved an Aereo “copycat” service known as FilmOn, reached the opposite conclusion on the grounds that the proper focus under the Copyright Act’s “transmit clause” is whether the users of the service receive the same content, not the same transmissions. (A dissenting judge in the Southern District has adopted the same interpretation of the Copyright Act as the judges in the FilmOn cases).
In his opinion, Judge Gorton disposed of the public performance issue without a great deal of discussion or analysis. He found that while the transmit clause was not a model of clarity, Hearst’s interpretation of the transmit clause (and that of the District of Columbia and Central District of California courts) ignores the words “a performance or display” in the statutory phrase “to transmit or otherwise communicate a performance or display of the work.” Citing the familiar rule of construction that all of the words of a statute should be given meaning, Judge Gorton found that Hearst therefore was less likely to prevail on the merits of the issue than Aereo.
Judge Gorton next addressed and rejected Hearst’s assertion that its exclusive reproduction, distribution, and derivative work rights were being infringed by Aereo. With respect to reproduction, Judge Gorton concluded the copying done in connection with the operation of Aereo’s service appears to be the result of a volitional act by the user, and thus could not be the basis of a finding of liability against Aereo. Notably, however, Judge Gorton stated that the issue of whether Aereo is creating unauthorized reproductions is a “closer question than the issue of public performance” and that it might be possible for Hearst, through discovery, to uncover facts that would establish that Aereo is in fact guilty of making infringing copies of broadcast programming.
Judge Gorton was less equivocal in his rejection of Hearst’s distribution and derivative works claims. He concluded that Aereo’s service, which only allows streaming not downloading, “is more aptly described as ‘performing’ than ‘distributing’ copyrighted works.” And he pointed out that Hearst had failed to cite any legal authority that would support the proposition that merely converting programs from their original digital format to a different digital format constitutes the creation of a “derivative” work.
Having found that Hearst had failed to establish that it was more likely than Aereo to succeed on the merits of its infringement claims, Judge Gorton turned to the three remaining prongs of the test used to decide motions for preliminary injunction. He found that the “balance of hardships” and “public interest” factors did not favor either side over the other. More importantly, however, he concluded that Hearst had failed to make a showing of irreparable harm sufficient to warrant injunctive relief. According to Hearst, Aereo threatened Hearst’s ability to profit from retransmission consent fees, advertising and new over-the-top revenue streams. Judge Gorton rejected this argument, concluding that Hearst had shown only that there was a “prospect” of harm to its ability to generate retransmission consent revenue and that it was more likely that the case would be resolved before such harm would materialize. Similarly, the judge found Hearst’s prospects of profiting from online distribution of its programs was insufficiently developed to meet the standard of irreparable harm and that its concerns about harm to its advertising revenue were rebutted by the fact that Nielsen has announced that it is beginning to include online viewership in its survey results.
Finally, Judge Gorton’s decision denied a request made by Aereo that Hearst’s complaint be transferred from the District of Massachusetts to the Southern District of New York. According to the judge, there is a strong presumption in favor of the plaintiff’s choice of forum. Aereo’s arguments, which focused on the familiarity of the Southern District with the issues and on Hearst’s alleged “forum shopping” were insufficient to overcome that presumption, particularly since (i) the proceedings in the Southern District are already quite advanced and transfer would delay the litigation or unfairly burden Hearst and (ii) Hearst is a “hometown” plaintiff who had based its infringement claim solely on its local programming and not on national network programming.
Analysis. Despite having won a major victory in the Second Circuit earlier this year, Aereo’s prospects for ultimately prevailing against the broadcasters had been cast into doubt by the injunctions entered against FilmOn in the Central District of California and the District of Columbia. The District of Massachusetts decision in favor of Aereo suggests that the battle is far from over. A number of appeals are teed up to be heard and decided and additional complaints are likely. Indeed, earlier this week, Fox, Sinclair and Local TV filed a complaint against Aereo in the District of Utah.
As more of these cases are heard and decided, the likelihood that the Supreme Court will be called on to resolve the matter grows. For example, the District of Columbia stated that its injunction against FilmOn was effective nationwide (except for in the Second Circuit where the court had reached a decision that was inconsistent with such an injunction). But Judge Gorton’s decision casts doubt on the applicability of that injunction in Massachusetts. It also increases the pressure on the broadcasters to consider whether to take their case to Congress as well as to the courts by seeking an amendment to the Copyright Act, possibly as part of the legislation to extend beyond 2014 the Satellite Television Extension and Localism Act.