Aereo “Performs Publicly” and Therefore Illegally

We have previously posted our analysis of the oral arguments held before the Supreme Court in American Broadcasting Companies, Inc., et al., v. Aereo, Inc., No. 12-451, this past April. On June 25, 2014, the Supreme Court announced its decision in the case, holding that Aereo performs the television broadcasting companies’ copyrighted works publicly through the function of their service/system within the meaning of the Transmit Clause of the Copyright Act of 1976. The Court tried to carefully limit its holding to only the facts particular to Aereo’s system in order to avoid precluding the development of “cloud computing,” a still burgeoning field of technological and economical promise.

Aereo offers its customers use of remotely stored dime-sized antennas and cloud storage of recorded programming to permit customers to stream and store on demand television. The case was mainly focused on the customers’ ability to watch television programming in near real time viewing. Aereo has consistently presented its business model as, in essence, permitting customers to remotely store miniaturized, personal rabbit ears and a hard drive, which are accessible through cloud computing and therefore do not violate copyright laws. This technologically oriented focus on the precise mechanism won over both the district and circuit courts below.

In the Southern District of New York, Aereo handily defeated the television broadcast companies’ request for a preliminary injunction. District Judge Allison Nathan held that the movants were unable to demonstrate the case fell outside of Cartoon Network LP, LLLP v. CSC Holdings, Inc., 536 F.3d 121, 139-40 (2d Cir. 2008). The Court of Appeals for the Second Circuit affirmed the district court’s denial of the preliminary injunction. Both courts relied heavily on Cartoon Network’s holding that the focus of the Transmits clause is centered on determining who is capable of receiving a particular transmission of a performance, i.e., whether the universe of the “public” capable of receiving that particular transmission of the performance is limited to the subscriber who recorded it. If the answer to the inquiry is they are one and the same, then no public performance occurs.

Aereo had carefully developed the record through expert analysis in the trial court that explained the functioning of its technology. By applying the Cartoon Network precedent to the closely examined technology that Aereo had created, the lower courts determined that the service did not violate the copyright holders’ right to public performance because only an individual customer was able to direct an antenna to gather a broadcast, a copy of which was then separately stored for only that customer to receive.

The Supreme Court disagreed with the lower courts by redefining the service to read out this technologically based distinction: “whether Aereo transmits from the same or separate copies, it performs the same work; it shows the same images and makes audible the same sounds.” Slip Op. at 14. Thus, by so defining the performance, the audience becomes the public: “a large number of people who are unrelated and unknown to each other”. Id.

The Supreme Court attempted to blunt the effect of its opinion on cloud computing by pointing to the difference between performance and distribution of others’ performance, as well as fair use. However, this may represent but a shallow hope to the many amici who wrote in support of Aereo’s position and against an overbroad interpretation of how performance of content could implicate copyright liability. Aereo’s CEO and Founder Chet Kanojia spoke out against the decision as likely to have chilling effects on cloud computing and the technology industry as a whole. Justice Scalia dissented from the majority’s opinion, joined by Justices Thomas and Alito, noting that the technology should be more central to the legal analysis and that the Court’s new “looks like” test for performance to capture Aereo’s business model could lead other novel technologies being similarly punished for acts that merely resemble but do not constitute infringement. Indeed, commentators have predicted that Congress may yet eventually act to limit the Transmit Clause in order to ensure such innovation will not be chilled.

Gibbons will continue to monitor how the Aereo case develops as the lower courts execute the Supreme Court’s holding.

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