Supreme Court Update: ABC v. Aereo (13-461)

June 26, 2014 Supreme Court Update

Greetings, Court fans!

For those of you not currently glued to your TV set or other screen watching US v. Germany in the World Cup, here's a special treat: a deep dive into ABC v. Aereo (13-461) by a guest writer who worked on the case below. Of course, if you are watching the game, we welcome you to save this Update for future viewing…

In ABC v. Aereo (13-461), the Court considered whether Aereo, an internet service that allows its subscribers to watch nearly live and recorded broadcast TV programs over the internet, infringed broadcast TV networks' exclusive right to "publicly perform" these copyrighted works under the 1976 Copyright Act. Aereo's system works as follows: For a monthly fee, subscribers gain access to Aereo's website, which shows them a schedule of programs being broadcast over-the-air in the subscriber's metro area (akin to a TV Guide channel). If the subscriber selects a program currently being broadcast, Aereo assigns that subscriber a unique antenna, which tunes to the frequency of the channel broadcasting the program. The antenna then transcodes the signal and creates a unique digital copy of the program on Aereo's servers. Once a few seconds of this copy have been created, Aereo begins streaming that specific copy to the subscriber, which the subscriber can watch on any internet-connected device. Importantly, Aereo subscribers never share antennas or copies: if two subscribers wish to watch the same program, Aereo would assign them separate antennas and create two unique copies of the program. Aereo's system also allows subscribers to watch these recorded programs later, long after the initial broadcast, the legality of which was not at issue in the present decision but likely will be on remand.

If this system sounds unnecessarily complex, that's because it was designed by lawyers reading the Second Circuit's decision in Cartoon Network LP v. CSC Holdings (2004), commonly known as "Cablevision." In Cablevision, various TV networks sued Cablevision, arguing that its Remote Storage Digital Video Recorder ("RS-DVR") infringed their exclusive public performance right. The RS-DVR was more or less like a standard DVR, except that instead of storing recorded programs on the customer's home DVR box, it saved a copy of the customer's chosen program remotely on Cablevision's servers and then transmitted that copy to the customer via the customer's cable box. The Second Circuit concluded that since Cablevision created a unique copy of the program for the customer and transmitted it only to that customer, Cablevision was not "publicly" performing anything: each transmission of a recorded program had a maximum potential audience of one.

Soon after Aereo launched, a group of local and national TV broadcasters sued Aereo for copyright infringement. Although their suit alleged several theories of infringement, the broadcasters sought a preliminary injunction based exclusively on the theory that Aereo "publicly performed" the broadcasters' copyrighted works when it allowed its subscribers to watch programs at the same time these programs were being broadcast over the air. Based largely on Cablevision, the district court denied the networks' request for an injunction, since like Cablevision's RS-DVR, Aereo's system created unique subscriber-associated copies of each program that only that subscriber could watch. A divided panel of the Second Circuit affirmed, concluding that, like it or not, Aereo's system fell within the rule of Cablevision.

But the Supreme Court disagreed in a 6-3 decision written by Justice Breyer. Both the majority and the dissent agreed that the case raised two questions under the 1976 Copyright Act: whether it was Aereo or the Aereo subscriber who "performed" the programs transmitted by Aereo's system and, if the former, whether Aereo performed these works "publicly." In the majority's view, both of these questions were largely resolved by the legislative history of the 1976 Copyright Act. In two decisions preceding the Act, the Court had held that community antenna television ("CATV") providers, precursors of modern cable providers, did not "perform" any of the programs they transmitted for the purposes of copyright law. In those early cases, the Court found that the CATV providers – who placed large antennas on hills with good reception, then used coaxial cables to transmit the signals to the TV sets of their subscribers – were more akin to viewers of TV programs than broadcasters, providing nothing more than a beefed-up version of the rooftop antenna most TV viewers of the time used to receive network broadcasts in their homes. In response, Congress amended the Copyright Act in 1976, redefining performance of an audiovisual work to mean "show[ing] its images in any sequence or to make the sounds accompanying it audible." The 1976 Act also created something called the Transmit Clause, which provides that an entity performs a copyrighted work publicly if it "transmit[s] . . . a performance . . . to the public," which in turn the Act defines as "to communicate [the work] by any device or process whereby images or sounds are received beyond the place from which they are sent."

Justice Breyer conceded that the language of the 1976 Act did not clearly indicate whether Aereo or its subscribers "performed" the copyrighted works transmitted by Aereo's system to its subscribers. But Congress's manifest intent (stated repeatedly in the legislative history of the 1976 Act) to make CATV providers subject to copyright liability meant that Aereo must "perform" works for copyright purposes when it transmits a program to one of its subscribers, since such transmissions are substantively similar to the transmissions by CATV providers. Turning to the second question, the Court rejected Aereo's argument (and the lower courts' holding) that it did not "publicly" perform these works. Whether Aereo enabled its subscribers to view broadcast television by means of many unique transmissions generated by unique antennas or whether it did so through one shared antenna and a common transmission made no difference from the viewers' perspective. In the Court's view, Congress could not have intended anything to turn on technological distinctions such as this: since Congress intended the 1976 amendments to provide that CATV providers were publicly performing works when they transmitted them to their customers, Aereo's similar service must be a public performance as well.

The majority tried to assuage the fears of amici that a decision in favor of the broadcasters would call into question the legality of a wide range of cloud computing and other internet services that remotely store copyrighted content and transmit it to users via the internet. The Court noted that its "limited" holding was heavily informed by the history of cable broadcast transmissions leading to the 1976 Copyright Act and did not determine whether different kinds of providers in different contexts also perform copyrighted works, though the Court did not explain how this different treatment of cable-like services was manifested in the text of the statute. The Court also stated that the analysis of whether a transmission of copyrighted material is a public performance may be different when the user of a service is paying primarily for something other than the transmission of copyrighted works, such as remote storage of content, though again this distinction is not apparent in the statutory text. And the Court noted that fair use could prevent "inappropriate or inequitable applications" of the Transmit Clause in certain circumstances. Thus the Court punted on the question of what the Transmit Clause says about the copyright implications of transmitting copyrighted works over the internet generally, reserving questions involving cloud computing and other remote storage applications to a case in which such questions are squarely presented.

Justice Scalia, joined by Justices Thomas and Alito, dissented, accusing the majority of distorting well-established caselaw to plug a perceived loophole in the statute. In Justice Scalia's mind, it was Aereo's subscribers, and not Aereo, who "performed" the copyrighted works. He noted that copyright law generally recognizes a distinction between direct and secondary liability for infringement. The former exists when a defendant's own actions infringe another's copyright; the latter when a defendant is responsible for infringement by third parties, say because the defendant knowingly profited from third parties' infringement and took no steps to discourage or limit it (think Napster). Several Courts of Appeals (and the Supreme Court in dicta) have previously held that a defendant can only be directly liable if it engaged in some volitional conduct directed toward the copyrighted work; otherwise its liability is governed by the principles of secondary liability. As examples, Justice Scalia compared a video-on-demand service (such as Netflix) with a copyshop. The former exercises control over what programs its viewers can watch (by choosing what programs to make available on its service), and by doing so it is directly liable for any infringement. But a copyshop does not give its customers anything to copy; it only makes the copy machines available. Since the copyshop does nothing directed toward specific copyrighted material, it cannot be directly liable, but only (at most) secondarily liable if it knowingly allows its customers to violate copyright law. The dissenters saw Aereo as more akin to the copyshop than Netflix, since Aereo's subscribers chose what, when, and where to watch on Aereo's system, with Aereo transmitting nothing to its subscribers independent of their requests. Thus if Aereo was liable for copyright infringement (and it may well be, according to Justice Scalia), it could only be secondarily liable. But the networks had only sought a preliminary injunction on a direct liability theory. The appropriate course, according to the dissenters, was therefore to affirm the lower courts and allow the parties to litigate the secondary liability question.

In Justice Scalia's view, the majority had abandoned this clear standard in favor of outcome-based reasoning. While Congress may have intended the 1976 Act to cover CATV systems and Aereo looked like a CATV system, Congress did not enact a statute saying that operations similar to CATV are subject to copyright liability. It was difficult for the majority to explain why Aereo was "performing" copyrighted works under the language of the statute as written, particularly in light of the direct/secondary liability caselaw. Given the majority's reliance on the legislative purpose of the 1976 Act rather than its plain text, Scalia predicted decades of headaches for lower courts as they decide whether some new technology's transmissions of copyrighted works are sufficiently analogous to CATV or Aereo to constitute public performances. Such issues are likely to be litigated soon in this very case, as the lower courts on remand must decide whether Aereo's other features, such as its ability to record and replay broadcast programing that has long finished airing, violates copyright law. And beyond that, it seems inevitable that the Court will have to confront similar issues in the future, as new technologies push the boundaries of a copyright act written with the cutting-edge technologies of the 1970s in mind.

Aereo is just one of the eight decisions the Court has issued so far this week. So, as we like to say … (wait for it) … stay tuned!

Kim, Jenny & Tadhg