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November 25, 2015 Practice Points

FilmOn and the Copyright Act Section 111 Compulsory Licensing

Web-based television streaming services have been dealt another blow in their campaign to transmit large broadcasters' copyrighted programs.

By Dmitry Dymarsky

Web-based television streaming services have been dealt another blow in their campaign to transmit large broadcasters' copyrighted programs. In the latest decision on the issue, a federal judge rejected FilmOn X LLC's claims that the company could stream protected broadcasts without committing copyright infringement. Fox Television Stations, Inc. v. FilmOn X LLC, No. 13-758-RMC (D.D.C. Nov. 12, 2015) (opinion under seal). This ruling follows the Supreme Court's 2014 decision in American Broadcasting Cos. v. Aereo, Inc., which held that Aereo (a provider of over-the-air television service to Internet-connected devices) was unlawfully publicly performing copyrighted works by providing its subscribers access to television programs over the Internet at about the same time as the programs were broadcast over the air.

More recently, FilmOn, an Internet-based television provider and one-time competitor of Aereo, argued that if the umbrella of traditional cable services covers Web-based services offering similar products, then these companies should also have the right to the benefits of the "cable system" classification and be treated like other cable service providers. On November 12, Judge Rosemary M. Collyer of the U.S. District Court for the District of Columbia granted partial summary judgment against FilmOn. Judge Collyer not only found FilmOn liable for copyright infringement, but also dismissed FilmOn's counterclaim seeking declaratory relief affirming that they are entitled to a statutory license as a "cable system," under Section 111 of the Copyright Act.

Section 111 establishes a compulsory licensing system that allows cable companies to make secondary transmissions of copyrighted works. The FilmOn case addressed the question of whether Web-based providers could utilize this compulsory licensing system. FilmOn argued that if Web-based services could be held to violate copyright laws as if they were cable companies, per Aereo,then they should also have access to the perks offered to traditional cable services, specifically section 111's compulsory license. Judge Collyer, however, interpreted section 111 to not encompass Internet streaming companies within the meaning of "cable systems." This interpretation is consistent with the Second Circuit's view that "Congress did not…intend for § 111's compulsory license to extend to Internet transmissions." WPIX, Inc. v. ivi, Inc., 691 F.3d 275, 282 (2d Cir. 2012).

FilmOn achieved a different result in a separate case pending in the Central District of California, however. Fox TV Stations, Inc. v. AereoKiller, 2015 U.S. Dist. Lexis 97305 (C.D. Cal. July 16, 2015). In July 2015, District Judge George H. Wu held that because Section 111 of the Copyright Act does not itself draw a distinction between traditional cable services and Internet-based services, the plain language of the statute does not require that courts differentiate between the two when determining whether a provider qualifies as a "cable service." Judge Wu certified the case for immediate appeal, and the Ninth Circuit subsequently granted the plaintiffs' petition seeking interlocutory appeal. A decision is expected sometime in spring 2016, potentially setting the stage for a circuit split.

The divergence in authority illustrated by FilmOn's different outcomes in two different cases may be resolved by federal regulation. The Federal Communications Commission could classify Internet streaming providers as multichannel video programming distributors, which would apply to any service that delivers television channels (regardless of the technology used to do so). This is how cable and satellite companies are treated under the current regulatory scheme. This would, in turn, open Section 111's compulsory licensing system to qualifying Web-based video providers. While smaller and newer streaming services would likely benefit from such a change, traditional cable and satellite companies would lose ground in the war to retain customers, as more and more people rely exclusively on Internet streaming for their television needs.

Keywords: intellectual property, litigation, FilmOn, Copyright Act, streaming services, Fox Television, Fox TV

Dmitry Dymarsky is with BakerHostetler in Philadelphia, Pennsylvania.

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Dmitry Dymarsky – November 25, 2015