The Aereo of its Ways: The U.S. Supreme Court Rules in Favor of Broadcasters

In a 6 to 3 decision, the United States Supreme Court, in the case of American Broadcasting Cos., Inc., et al. v Aereo, Inc., has just ruled that Aereo, an Internet service that allows customers to watch free broadcast TV programs on mobile devices, violates U.S. copyright laws. This case was closely watched by those in both the broadcasting and technology industries. At issue for the Court was whether or not the Aereo service constituted infringing "public performances" of the Broadcasters' copyrighted content or, instead, was an innovative technological end run around existing copyright law.

Among the rights owned by copyright owners under the Copyright Act of 1976 is the "public performance right." The Act states that one of the ways to perform a work publicly is to "transmit…the work…to the public, by means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times."

Aereo, which started about two years ago and now offers its service in 11 cities in the United States, is a service that allows its subscribers to watch television programs over the Internet at about the same time the programs are broadcast over the air. While cable television providers pay very large licensing fees to broadcasters to allow their content to be provided to their cable subscribers, Aereo does not pay the broadcasters any license fees. This enables Aereo to sell the service to its subscribers for as little as $8 per month, far less than what the cable TV services charge.

Shortly after the service was launched, the nation's major broadcast networks filed a lawsuit claiming that Aereo illegally retransmitted their programs without paying for them. Lower federal courts issued contradictory rulings on Aereo's legality.

Aereo argued that it was not engaged in the unauthorized public performance of the works because of the unique way its system was designed (which Aereo executives admitted was designed to take a technological end run around the public performance provision of the Copyright Act). Essentially, Aereo works this way: when a user chooses a broadcast program to watch, a single micro antenna, about the size of a dime, is assigned to receive the chosen station. The signal then is sent to a sector of a video recorder dedicated to that choice and then streamed to the individual Aereo customer. Aereo claimed that this technological arrangement did not create "public performances" of the works. Aereo argued that even if thousands of users were watching the same program, it merely created thousands of individual performances, not a public performance.

In response to this, the broadcasters argued that the proper test of a "public performance" under Copyright Act was "whether an alleged infringer is transmitting a performance to the public, not whether multiple people are capable of receiving each transmission." They further argued that even if the use of thousands of individual antennas, as utilized by Aereo, might not clearly be a public performance, the clear intent of Congress when it enacted the copyright act was clear.

Prior to the enactment of the Copyright Act, community access television (CATV), the forerunner of today's cable TV systems, in a series of ruling by the Court, was held not to be publicly performing broadcast television programs. However, Congress made it clear, when the Copyright Act was revamped in 1976, that cable television providers were publicly performing works and would have to pay license fees. This statutory change negated the Court's prior rulings. The broadcasters in the Aereo case argued that the Aereo service, despite its technological distinction, is no different than the services offered by a cable television provider, which Congress clearly has stated must involve the payment of a license fee to the broadcasters.

The 6-3 majority of the Court agreed with the broadcasters and held that Aereo performs the works publicly within the meaning of the Copyright Act. The Court cited Congress' intent regarding CATV systems and said that "Aereo's activities are substantially similar to those of the CATV companies that Congress amended the [Copyright] Act to amend."

In a lengthy dissent, Justice Scalia argued that the Aereo service is, from a legal analysis standpoint, akin to a copy service where one takes materials to a place like Kinko's and chooses which copies to make, without the control of Kinko's. This, he argued, is different from a video-on-demand service (like Netflix, which pays licensing fees), which arranges and offers a menu of available content (and is considered to be "publicly performing" such works). Scalia stated that, while the Court may not like what Aereo is doing, it appears to fall within the technological loophole in the current Copyright Act which requires a "public performance" in order to be prohibited. As such, Scalia and the other two dissenting Justices felt that it is up to Congress, not the Court, to remedy that situation.

As a result of this decision, which the Court stated should be read narrowly (there was concern that a decision adverse to Aereo could impact the legality of other cutting edge technologies such as cloud storage services), Aereo likely will shut down. Justice Breyer, writing for the majority, stressed that it was a limited decision that will not "discourage the emergence or use of different kinds of technologies."

Billions of dollars were at stake in this case. For Aereo, it truly was a "bet the business" case. Its very future was at stake. Broadcasters feared a ruling in favor of Aereo could undercut the legal foundation that currently obligates cable and satellite services to pay very substantial copyright fees to carry network programs, a key source of revenue for the broadcasters.

Had the decision gone the other way, the broadcasters had threatened to remove much of the content that is now available as free over the air broadcasts (such as major sporting events) and would have moved broadcasts exclusively to pay cable services.

This decision shows that it is never a safe bet to assume how this Court will rule on any case before it.

To learn more about the intersection of law, technology and media, please visit this author's blawg, Gurwin's Keyboard.