What the Aereo Case May Mean to You

Aereo LogoLate last week, the Supreme Court announced that it was going to hear the Aereo case.

The move surprised many copyright watchers, including myself, not because the court took the case, but because it took the case so quickly.

Aereo was only founded in February 2012, making it less than two years old as of this writing. The case itself is even younger, though not by much, and it has only reached one Circuit Court, the 2nd Circuit. Furthermore, no trial has been started, much less completed, all of the legal wrangling so far has been about preliminary injunctions, and no judge has ruled definitively on the service’s legality (denying injunctions is not the same as saying a service is legal).

Yet the Supreme Court has decided that the case is important enough and divisive enough to take up and, in doing so, seems likely poised to greatly shake up the way we view television.

But many will wonder: What is exactly at stake with the Aereo case and how can it impact me?

To answer that, we first have to explore the case itself, why the Supreme Court likely took it up and what the possible outcomes of it are.

Aereo’s Background

Aereo AntennasAereo is a TV streaming service that uses a series of tiny antennas (see right), one per customer, to capture broadcast television where it is then recorded on a DVR and/or streamed to users over the Internet.

Broadcasters, including NBC, CBS, ABC and Fox, have not been very happy about Aereo’s business model. They view it as an infringement, saying that Aereo’s service amounts to a retransmission of their signal. Cable companies, for example, pay a fee for the benefit of retransmitting a broadcast signal, something Aereo doesn’t do.

Aereo, however, argues that since each user has their own antenna and, therefore, the content isn’t copied. Furthermore, they argue that since each stream is sent to one customer, the use is private, not public. With all of that in mind, they claim that no retransmission fees are owed and no copyright infringement has taken place.

The lawsuit began not long after Aereo’s opening in New York City. Broadcasters sued and sought an injunction preventing Aereo from operating. They were denied that and eventually appealed that ruling. The Second Circut Court of Appeals ruled on the matter last year, also siding with Aereo, prompting the broadcasters to appeal again, this time to the Supreme Court.

By that time Aereo was facing similar lawsuits in other jurisdictions including Boston and Salt Lake City. However, none of the lawsuits have been victories for the broadcasters, with judges refusing to grant injunctions at every turn.

But while Aereo has been successful in the courtroom, their competitor and similar service FilmOn has not. They’ve faced injunctions in both California and Washington D.C., the latter of which barred them from operating anywhere in the country other than the Second Circuit.

Faced with multiple lawsuits and a competitor that was making the legal climate more difficult, Aereo filed a motion in favor of the Supreme Court review, even though it was a review seeking to overturn their previous victories.

But despite the legal troubles, Aereo has had no issues finding money, having recently received $34 million in new funding to help it expand to new markets.

But with the Supreme Court agreeing to take the case, that investment is, quite literally, betting on an Aereo victory, which many feel is far from certain.

Looking Back to Cablevision

The Aereo case, like most cases, hinges on a previous rulings. In this case, the main decision of interest is the Cartoon Network, LP v. CSC Holding Inc. case, often simply called the “Cablevision ruling”.

The Cablevision case pitted a variety of content creators against Cablevision, a cable company. Cablevision sought to provide a remotely-hosted DVR service to its customers, dubbed RS-DVR, one that would allow users to record and play back content without the need for a set top box in their home.

The lower court sided with the copyright holders, ruling that the service was infringing and enjoined Cablevision from operating it. However, the case was appealed to the Second Circuit and the Circuit Court overturned that ruling, saying that the service was non-infringing.

Specifically, the Circuit Court found three things.

  1. Buffering is Not Copying: The lower court had ruled that buffering of content as part of the streaming was tantamount to making a copy of the content. However, the Circuit Court ruled that buffering was merely “transitory” and that any copies made were just temporary and non-infringing.
  2. Cablevision Was Not a Direct Infringer: Copyright holders argued that the unauthorized copies on Cablevision’s DVRs were a direct infringement. Even though the copying was done at the direction of users, Cablevision’s providing of the equipment, according to copyright holders, made them an infringer. The Circuit Court disagreed, likening Cablevision’s product to a VCR.
  3. Remote DVR is Not a Public Performance: Finally, the Circuit Court ruled that, since each playback went to a single subscriber, the transmissions were not public and, therefore, were non-infringing.

Aereo, seemingly, based much of its business model on this ruling. Being careful to avoid copying the copyrighted materials (thus the use of separate antennas) and only transmitting a single work to a single subscriber.

However, the ruling has been controversial among copyright observers, in particular the public performance aspect. Terry Hart from CopyHype once said that:

Cablevision — at least that portion that addressed the public performance issue — was decided incorrectly. The Second Circuit committed a number of logical errors that culminated in a conclusion that doesn’t follow from the plain meaning of the statutory text and stands in opposition to the clear intent of Congress when it drafted the public performance provisions of the 1976 Copyright Act.

But while the Cablevision case seemed destined to reach the Supreme Court, it never did. With Aereo though, many of the same issues are re-raised, giving the Supreme Court a chance to visit them.

So What is At Stake?

What’s actually at stake is, unfortunately, unclear. The Supreme Court has a history of unpredictable rulings that have impacts far beyond their original case. Theoretically, the Supreme Court could rule very narrowly, in a way that only impacts Aereo and services directly like it, or, as with the Grokster ruling, rule more broadly and have impacts far and wide.

What is most directly at stake is the Cablevision ruling. Though Cablevision has tried to make the argument that Aereo is illegal and the Cablevision ruling is valid, the core issues of the case seem to pass straight through the Cablevision ruling, in particular whether a remote DVR service like Aereo or Cablevision’s RS-DVR are creating infringing copies, who is creating those copies if they are and if their transmission counts as a public performance?

Obviously, cable and satellite providers will be watching this closely, including both television and radio companies. Copyright holders will be watching closely as well with several TV networks saying that they will consider stopping free over-the-air broadcasting if Aereo ultimately wins.

However, one group that will likely NOT be impacted, at least not directly, are existing cloud service providers and other web hosts. Web hosting companies are covered under the Digital Millennium Copyright Act (DMCA), which protects them from copyright liabilities if they host content at the request of third parties. In those cases, they are safe so long as they meet a set of basic criterial and work expeditiously to remove infringing material after being notified.

In short, Your Dropbox account or music locker service, most likely, are safe and that is easily noted because they existed well before the Cablevision ruling.

Instead, the ruling is most likely going to impact services that capture content directly, such as Aereo and Cablevision, which makes sense.

However, the court will likely be looking at the three issues in the Cablevision ruling and may offer its opinions any or all of them.

While the buffering question is an interesting one, the more important questions to be asked are:

  1. Is a Performance to One Person a “Public Performance”?
  2. Is a Service that Provides the Means for Infringement a Direct Infringer?

Though the ruling won’t likely touch sites and services already protected by the DMCA, it could definitely impact new cloud services and companies that want to build products that stream content, in particular multimedia content, to users as an intermediary.

Though, like I said, the impact won’t be known until we see what the ruling is and how broad it is, the ruling could easily be a guiding ruling for the Web for the next decade as people work to build new services that stream or otherwise transmit copyrighted content.

Bottom Line

As Mark Rogowsky at Forbes noted, even if Aereo wins, it still might lose. The broadcast TV market is not very large for the major networks and it’s far more lucrative to protect retransmission fees than it is to cater to the few people who depend on antennas to access television.

In short, broadcasters very likely will make good on their threat to “go dark” and make their signal cable-only, at least in part.

But, in the end, that’s what this case is really about for broadcasters. It isn’t about shutting down a tiny startup that has a small user base, it’s about protecting their retransmission fees, which make up a large percentage of their income.

If Aereo is allowed to retransmit signals for free, cable and satellite providers would likely do the same thing and those retransmission fees would, pretty quickly, disappear.

But while Aereo may be in a corner regardless of the outcome, the rest of the Internet, especially future content intermediary services, could have their futures hinge on this outcome.

So definitely stay tuned and pay close attention to what’s happening. A ruling is likely sometime later this year.

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