Clouds on the Horizon: The Supreme Court Hears Oral Arguments in Aereo

Last week, the Supreme Court heard oral arguments in American Broadcasting Companies, Inc., et al., v. Aereo, Inc., No. 12-451, a copyright action whose outcome could dramatically shape the future of television and cloud computing.

Aereo is an internet start-up that uses arrays of dime-sized, customer-specific antennas to stream and store on-demand, over-the-air television, likening its technology as an alternative to an individual using, for example, an antenna and DVR to legally capture and record over-the-air content for private viewing. Fearing the loss of their intellectual property rights and lucrative retransmission fees, a consortium of broadcasters promptly sued Aereo for copyright infringement in March 2012 in the Southern District of New York. The broadcasters sought a preliminary injunction against Aereo, arguing that Aereo’s service amounted to thinly veiled public performances, and therefore, constituted copyright infringement. The SDNY, and subsequently the Court of Appeals for the Second Circuit, both ruled in favor of Aereo, citing the 2008 Second Circuit Cablevision case (Cartoon Network LP, LLLP v. CSC Holdings, Inc., 536 F.3d 121 (2nd Cir. N.Y. 2008)), which established the legality of using hosted DVRs to store and replay content to individual subscribers.

Based on the dialogue during oral arguments, the justices appeared to view Aereo’s system of individual antennas and DVRs as technology specifically designed to sidestep copyright infringement issues, and seemed dubious about the legality of Aereo’s system. The justices also questioned why Aereo should not be subject to the same retransmission fees that cable and satellite providers are obligated to pay for over-the-air content. However, the justices further appeared to be concerned about ruling in a manner that could negatively impact other technologies and innovations, such as cloud-based storage.

A Supreme Court victory for Aereo could change the landscape of broadcast television, as some broadcasters have already threatened to halt broadcasts of over-the-air content if Aereo’s technology is ruled to amount to private performances. Conversely, a broad ruling in favor of the broadcast industry could unleash a “polar vortex” upon the cloud computing industry.

Gibbons will continue to monitor developments in this case. A decision is expected in June.