A multitude of new technologies has changed the way in which broadcast television signals can be transmitted to viewers. Aereo, Inc., provides its paid subscribers the ability to receive local television signals directly over the Internet. It provides this service in areas of New York, Boston, Atlanta, and a growing list of other cities. Aereo uses micro-antennas housed in its own facility to receive the signal locally and then retransmits that signal to the subscriber using the Internet. Under the Aereo confirmation process, a customer must have a credit card with a valid billing address in the city where the customer wishes to enroll. So although the technology would allow for a person to use the service nationally (or even globally), the Aereo business policies focus on territorial restrictions. FilmOn X offers a similar service in other parts of the country.
At stake is the legal question as to whether the retransmission to thousands (and eventually millions) of viewers using individual antennas constitutes a public or private performance of the television broadcast. If the broadcast is entirely private, then Aereo, FilmOn X, and other Internet redistributors need no license and the television stations have no legal basis to claim the retransmission fees they would earn if the subscribers watched through a cable provider.
In July 2013, the Second Circuit upheld the position of Aereo that its use of individual remote antennas represents a private performance. WNET, Thirteen v. Aereo, Inc., 712 F.3d 676 (2d Cir. 2013). In October 2013, the district court in Massachusetts came to the same conclusion in a preliminary hearing. Hearst Stations v. Aereo, 13-cv-11649, (D.C. Mass, Oct. 2013). In contrast, in September 2013, the U.S. District Court for the District of Columbia ruled against FilmOn X (Fox TV Stations, Inc. v. FilmOn X LLC, CIV.A. 13-758 RMC, 2013 WL 4763414 (D.D.C. 2013)) in its attempt to employ similar technology, and the Central District of California ruled against that company in its attempt to use analogous technology in California (Fox TV Stations, Inc. v. BarryDriller Content Sys., PLC, 915 F. Supp. 2d 1138 (C.D. Cal. 2012)).
To many, this may be an arcane debate over vestigial technologies. Approximately 82.2 percent of Americans no longer use television antennas, though this number dropped from 85 percent in the previous year. Today most of the public receives its broadcast television through cable retransmission. But as the small dip in cable subscription suggests, consumers are looking to the Internet and other alternatives for their broadcast television content. Broadcasters, in turn, are looking to cable retransmission fees as an increasing source of non-advertising revenue. The recent month-long blackout of CBS on the Time Warner Cable system retransmission fees highlighted the significance of the revenue battle between broadcasters and cable systems. If Internet companies are able to avoid the licensing fees paid by cable companies, then television and sports broadcasting could be upended.
To determine the obligation to pay for the retransmission rights, the courts must define the meaning of public performance under the Copyright Act. Aereo and FilmOn X believe the one-to-one correlation between the micro-antennas and viewers means each viewer receives a private signal. Broadcasters stress that the system of micro-antennas broadcasts to the general public.
The Supreme Court answered precisely this issue under the 1909 Copyright Act. In Fortnightly Corp. v. United Artists Television, Inc., 392 U.S. 390 (1968), the Supreme Court addressed the question of whether use of a distant commercial antenna to retransmit broadcast signals constituted a public performance. The Court said it did not. “If an individual erected an antenna on a hill . . . he would not be ‘performing’ the programs he received on his television set. . . . The only difference in the case of CATV is that the antenna system is erected and owned not by its users but by an entrepreneur.” The Court then extended this view to rebroadcasts in distant markets, giving rise to cable superstations and the modern cable landscape. Teleprompter Corp. v. CBS, Inc., 415 U.S. 394, 94 S.Ct. 1129, 39 L.Ed.2d 415 (1974). See United Video, Inc. v. F.C.C., 890 F.2d 1173, 1176 (D.C. Cir. 1989).
The executive branch, however, did not agree. “Even before the Fortnightly decision validated this practice against copyright claims, the FCC decided that it was an unfair form of competition.” United Video at 1177. The FCC mandated protections to protect “broadcasters from the importation into their markets of distant signals that duplicated signals to which they had purchased exclusive rights.”
Like the FCC, Congress itself intervened. Congress rejected the interpretation of the Supreme Court through specific legislative changes in what became the 1976 Copyright Act. Congress added Section 106 (4) to make “public performance” an exclusive right of the copyright holder and added the Transmit Clause to the definition to make explicit that the copyright holder has the exclusive right “to transmit or otherwise communicate a performance or display of the work . . . 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 times.” 17 U.S.C. §101 (2013).
In the Second Circuit decision upholding the right of the Internet provider to offer a distant signal as a service to the consumer, the philosophy of Fortnightly can be readily seen. In the decisions upholding the right to control the exclusive public performance of the broadcasts, the congressional purpose of the Copyright Act is more heavily stressed.
In WNET, Thirteen v. Aereo (Aereo), the Second Circuit begins its analysis by acknowledging that “[t]he legislative history shows that the Transmit Clause was intended in part to abrogate Fortnightly and Teleprompter and bring a cable television system's retransmission of broadcast television programming within the scope of the public performance right.” Despite this, the Second Circuit relied on its earlier interpretation of the Transmit Clause in Cartoon Network LP v. CSC Holdings, Inc., 536 F.3d 121 (2d Cir. 2008), cert. denied, ___ U.S. ___, 129 S.Ct. 2890, 174 L.Ed.2d 595 (2009) (Cablevision). There, the court held that a licensee cable system did not need additional permission to provide a remote DVR to its customers. Importantly, it held that each separate recording and retransmission was not an additional public performance. “Each transmission of a program could be received by only one Cablevision customer, namely the customer who requested that the copy be created. No other Cablevision customer could receive a transmission generated from that particular copy.”
The Aereo opinion embraces Cablevision and extends it to its furthest possible extent. Many academics have criticized the poor statutory interpretation. Professor Jane Ginsburg, for example, highlights the failure to use the phrase “members of the public” in the analysis and to conflate performance with transmission. WNET v. Aereo: The Second Circuit Persists in Poor (Cable)Vision, Media Inst., Apr. 23, 2013, www.mediainstitute.org/IPI/2013/042313.php. “Reading the statute to equate ‘transmission’ with ‘performance’ reads ‘different times’ out of the statute. . . . [W]hat makes a transmission, whether simultaneous or individualized on-demand, and whatever the number of source copies, ‘public’ is its communication to ‘members of the public.’” The interpretation also fails to give legal consequence to the phrase “in separate places.”
The Cablevision assumption of individual streams also mischaracterizes what constitutes a public performance elsewhere on the Internet. In actuality, every Internet distribution is uniquely identified to a particular individual. A publicly available stream of content is actually distributed when a specific viewer requests that a copy of a file made available by the streaming service be downloaded to that viewer. The difference between a stream and a download is that the stream sends only a fraction of the file at any time. If Cablevision were correct, then each such copy would be a private performance. Under this view, there would never be any performance and everything would be a distribution only.
Numerous courts have rejected the view that streaming does not constitute public performance, including the Second Circuit. E.g., WPIX, Inc. v. ivi, Inc., 691 F.3d 275 (2d Cir. 2012) cert. denied, 133 S. Ct. 1585 (U.S. 2013). So the notion that streaming is equivalent to broadcast has now been interpreted in two fundamentally incompatible methods within the Second Circuit. This was one of the concerns raised by Second Circuit Judge Denny Chin in his Aereo dissent and his dissent in the denial of rehearing en banc.
Judge Chin contrasted the concerns over unauthorized Internet broadcasts in WPIX, Inc. v. ivi, Inc. with the holding of Aereo. “‘[S]treaming copyrighted works without permission . . . would drastically change the industry, to plaintiffs’ detriment. . . . The quantity and quality of efforts put into creating television programming, retransmission and advertising revenues, distribution models and schedules – all would be adversely affected.’ . . . These concerns apply with equal force here.”
Also interesting in the Aereo decision are the facts not relied upon in the decision. Aereo provides a very careful business plan – unlike that of WPIX, Inc. v. ivi, Inc. – by limiting access to its local television rebroadcast to customers who have a credit card billed to the market in which the person subscribes. This local reproduction feature is not relied upon by the Second Circuit, but it provides a significant protection from claims the Aereo broadcast violates the non-duplication or exclusivity rules of the FCC. These are the rules that result in a local station having priority over a national cable broadcaster from airing the same show. By transmitting only to the audience that is technically within the market of the over-the-air broadcasters, no other broadcaster can claim to have its non-duplication rights impacted.
The geographic limitations of Aereo do not seem to be relevant to the Second Circuit. As a result, Aereo could choose to expand its coverage to a subscriber living anywhere in the country. And of course, the mailing address for a customer’s credit card bill does not necessarily equate with the actual residence of that customer. Sports fans, for example, may find the cost to acquire a P.O. box in the home of their favorite franchise is a trivial expense to then stream local broadcasts wherever the fans happen to reside.
Although the courts have arrived at very different conclusions, the D.C. District Court in FilmOn x noted that FilmOn X’s technology closely mirrors that of Aereo.
FilmOn X readily admits that its technology is “similar . . . in every relevant way” to the technology at issue in Aereo. . . . FilmOn X installs an array of “mini antennas, each no larger than the size of a dime and spaced inches apart.” A large number of mini-antennas are aggregated on a circuit board, which also contains other electronic components essential to FilmOn X's Internet broadcast system. An antenna may be assigned to a specific individual user (“static”). More generally, an antenna is available for “dynamic” allocation by the tuner server – that is, a specific antenna is assigned to one specific individual user only when that user is watching television via FilmOn X and is assigned to a different user when the first user is done. No single antenna is used by more than one user at a single time, and all dynamic antennas are shared.
The D.C. District Court carefully reviewed the analysis of the California and New York judicial decisions before turning to the legislative history of the 1976 Copyright Act. District Judge Rosemary Collyer looked to the House Report to better understand the definition of “publicly perform” under the Copyright Act. As she noted, “[t]he House Report for the 1976 Act clarified: ‘Under the definitions of “perform,” “display,” “publicly,” and “transmit” in section 101, the concepts of public performance and public display cover not only the initial rendition or showing, but also any further act by which that rendition or showing is transmitted or communicated to the public.’”
Reviewing this section and many other similar provisions of the legislative history, the D.C. District Court found that FilmOn X performs the copyrighted works publicly when it transmits a performance of the work by means of a device. Judge Collyer found the language of the statute compelling and that any possible ambiguity in favor of FilmOn X was decisively answered by the legislative history which explained both that the definition of “publicly perform” was to capture all possible performances and the methods were intended to capture all devices when known or later created. Given the broad sweep of congressional intent and statutory language, the distribution of the unauthorized signals to members of the public constituted an infringing performance.
The District Court for the Central District of California addressed a different conflict with the Aereo decision. In addition to focusing on an alternative reading of the statute and legislative history, the court emphasized a split between the Second Circuit and Ninth Circuit on the practice of DVD rentals in hotels. In On Command Video Corp. v. Columbia Pictures Industries, 777 F.Supp. 787 (N.D.Cal.1991), a federal court in California had earlier held that a hotel provided a public performance when it played individual videotapes to its hotel rooms, even though no tape could be viewed by more than one room at a time. Since the analogy between Aereo’s transmission and that of the hotel operator was quite close, the Second Circuit declared On Command wrongly decided. But Judge Collyer noted the Ninth Circuit never rejected the On Command understanding of public performance and by extension the limitation on Aereo and FilmOn X within the circuit.
The nature of the split and the economic consequences provide a compelling case for Supreme Court review. Four circuits have made different determinations regarding the public performance rights. But the judicial branch is not the only voice to be heard. The Department of Commerce has added a cautionary voice on the subject. In a July 2013 green paper on copyright, the Department of Commerce Internet Policy Task Force addressed the developing Aereo case law. Copyright Policy, Creativity, and Innovation in the Digital Economy, Dept. of Comm. Internet Policy Task Force, July 2013, www.uspto.gov/news/publications/copyrightgreenpaper.pdf.
Courts are grappling with this issue and it remains to be seen how it will be resolved. And while the answers may require careful parsing of statutory language and legislative history, the underlying policy question is which businesses will benefit to what extent from new technologies that meet the consumer’s desired enjoyment of content. The result of these cases could affect, for example, the viability and scope of new licensed business models such as online video subscription services. To the extent that judicial decisions undermine a meaningful public performance right, Congressional action may be needed.
The last sentence of the Commerce Department review emphasizes that Congressional action may be needed if the public performance right is undermined. The statement appears to suggest the Department of Commerce prefers the position of the broadcasters, but only to the extent consumer interests are also taken into account. Under this reading, the green paper might be suggesting that Internet retransmissions require a license but also that any license should include the convenience and services extracted under Cablevision. Whether such a balance can be found through a court decision is unclear. As with Fortnightly and Teleprompter, it is likely the final word will be that of Congress.
Reading the advice by the Department of Commerce that public performance rights may require new balancing, the Supreme Court may prefer to leave this controversy among the list of topics for Congress to address when it tackles copyright reform more broadly. Moreover, given the intersection between copyright and FCC regulation which addresses non-duplication rules and other policies not properly before the Court, the Supreme Court could well defer any decision on Aereo to Congress.
Whether the conflict is reviewed at the Supreme Court or on Capitol Hill, the delays incumbent in any decisional process will result in the growth of unlicensed Internet services and increasing opportunities for the public to “cut the cord” by leaving cable for Internet television reception. The imperative by cable companies to reverse this trend and the greater ability to control Internet retransmission may shift more original content to cable channels and away from broadcast channels. Broadcast television remains highly lucrative, but the opportunity to control broadcast exclusivity through cable may make the cable stations the primary source of content in the future.
The result of this shift would be a further disenfranchisement of the minority of viewers who rely on free television through the public airwaves. It would also shift economic power to the content distributors because the cable operators would get less value for their rebroadcast fees. The shift would undoubtedly create an opportunity to increase consumer costs for television content but increasing competition from non-broadcaster content and the fragmentation in the television marketplace would be strong countervailing pressure to remain price competitive.
Ultimately, the split between the courts on the meaning of “publicly perform” copyrighted works must be resolved and the judicial resolution is likely only the backdrop for legislative reform. The process, however, will be lengthy. The changes to broadcaster’s reliance on over-the-air transmissions as their first run venue of choice may permanently shift well before the conflict is resolved.