The U.S. Supreme Court agreed to hear arguments in American Broadcasting Companies, Inc. v. Aereo, Inc. sometime in April 2014. The online streaming copyright infringement case has been watched closely by many in the entertainment and technology industries, as the Supreme Court’s ruling may change the way broadcast companies do business.
Originally filed in New York in 2012, several broadcasters, including ABC, NBC, CBS and Fox, sued Aereo for copyright infringement. Aereo is an online streaming subscription service that functions much like the infrastructure in the landmark Cablevision decision. Aereo owns thousands of standard television antennas, just like the ones an average person would use to receive broadcast stations. Aereo then assigns customers an individual antenna for a fee of $8-$12 a month. Customers can record and stream live broadcasts through the internet and view on his or her computer, tablet or smartphone.
Although a customer could use an antenna the same way as Aereo without legal implications, the plaintiff broadcast companies argue Aereo is guilty of copyright infringement because it is retransmitting performances in violation of the plaintiffs’ public performance rights. The plaintiffs sought a preliminary injunction two weeks before Aereo was set to launch in the New York area. The district court denied the injunction, holding that while the broadcasters would likely suffer irreparable harm if Aereo was allowed to launch, they did not show a likelihood of success on the merits of their copyright claims. The court relied on its prior decision in Cablevision, which held that a system where customers could record television broadcasts on a remote hard drive assigned to each individual customer was not a retransmission because the potential viewing audience was limited to that specific customer. The 2nd Circuit Court of Appeals upheld the district court’s decision in April 2013.
While Aereo was being appealed in New York, two other cases involving nearly identical subscription streaming services reached the courts in Los Angeles and Washington, D.C. The broadcasters were successful in both of those cases, and the courts held the streaming companies violated the broadcasters’ public performance rights when they did not pay to retransmit the broadcasts. As a result of these conflicting opinions among the circuits, Aereo was ripe for the Supreme Court.
Impacts of Supreme Court’s decision
The road to the Supreme Court was unusual because typically, the party who won in the appellate court fights a petition for certiorari. Here though, Aereo joined the petition so that the case could be resolved on the merits and Aereo would know once and for all if other suits could be brought against it in other jurisdictions. Other parties are more concerned by the underlying issues of the case and filed briefs in support of the petition for certiorari. Some of the parties that filed amicus curie briefs in support of the broadcasters include the National Football League and National Baseball League; the American Society of Composers, Authors and Publishers (ASCAP); Broadcast Music Inc. (BMI); Time Warner; Metro-Goldwyn-Mayer; and the Screen Actors Guild. While no briefs have been filed yet in support of Aereo, the Computer Communications Industry Association, which includes members Yahoo, Google, Facebook and Amazon, initially filed a brief supporting Aereo with the Court of Appeals.
The broadcasters believe a verdict upholding the 2nd Circuit decision will destroy the business models of all broadcasting companies. Fox went so far as to threaten that the company would convert to a cable pay-tv channel if Aereo was not forced to shut down. The underlying problem for the broadcasters is that a significant portion of their revenue comes from retransmission fees paid by cable and satellite providers to rerun shows. The 2nd Circuit’s ruling opens the floodgates for other services to use an Aereo-like infrastructure to avoid paying the broadcasters. Therefore, the broadcasters fear that soon, no one will pay to retransmit copyrighted shows and the broadcasters will lose a significant portion of their revenue.
Aereo argues that the case is about the right of every American to use a television antenna. In so doing, it frames the issue around putting the control and choice back into customers’ hands as to what television programming the customer wishes to watch. Significantly, Aereo also raises the argument that customers have a right to use new technology, which includes the cloud, to access broadcasts through an antenna and DVR.
The Court’s decision will likely have far reaching implications. If the Court upholds the 2nd Circuit’s ruling that the broadcasters are unlikely to prevail on their infringement claims, broadcasting companies will have a strong incentive to abandon their free-to-customer business model in favor of pay-tv stations, just to recapture the lost retransmission fee revenue. While this will reduce the free content available to the public, a Forbes article reporting a recent SNL Kagen statistic shows that of the 114 million homes with a television in the United States, 103 million already pay for cable or satellite services. Therefore, a very small percentage of TV’s would be affected.
From the other side, companies that rely on cloud technology are following the case closely as a decision overturning the Second Circuit may impact how companies can offer cloud-based services to customers. Specifically, the Court has the opportunity to overrule Cablevision, which may alter a company’s ability to use the cloud without violating copyright laws.
The Court will hear arguments in April and is expected to reach a decision this year.
This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.