Norman P. "Norm" Leventhal is a Partner in our Washington, D.C. office.
For almost a year now, representatives of two major industries have been in a judicial face-off concerning the rights of the on-line community to retransmit broadcast network programs without paying for them. Sounds unlikely? It's happening and the industries are locked in a courtroom war on two coasts over its legality.
One recent battle began last March when Barry Diller's Aereo service began operations in New York City. Subscribers were to be charged $12 per month to receive Internet transmission of network programs broadcast to thousands of micro-antennas located at Aereo facilities in NYC -- the same broadcasts that went to thousands of home antennas as well as the master antennas of all of the cable systems serving the region. In Aereo, each subscriber downloads an app which assigns a single antenna to that subscriber and provides a typical DVR-like interface.
Almost immediately, all of the major broadcast companies in the NY market filed lawsuits seeking injunctions and damages under the Copyright Act. Their claim was that Aereo was taking their programming -- for which they paid producers -- without consent and without compensation. Doesn't particularly sound right, does it?
The principal issue boils down to whether the transmission from the micro-antenna to the Aereo subscriber is considered a "private" or "public" performance under the Copyright Law. If the latter, Aereo requires consent from, and hence payment to, the broadcasters. Aereo alleged, however -- based on a 2008 decision by the U.S. Court of Appeals for the Second Circuit -- that there was no public performance. The NY broadcasters vehemently disagreed.
In the 2008 case (see Cartoon Network LP v. CSC Holdings, Inc., 536 F.3d 121 ("Cablevision")), the Second Circuit reversed a lower District Court and concluded that the Copyright Act -- granting exclusive rights to public performances of works -- requires an analysis of the recipients of the particular transmission (and not the number of potential recipients of the work itself). And, since in the case then under consideration, "each RS-DVR playback transmission is made to a single subscriber using a single unique copy produced by that subscriber" at the Cablevision host servers, the Court held that such "transmissions" are not public performances. In doing so, however, the Second Circuit noted that its ruling* "does not generally permit content delivery networks to avoid all copyright liability by making copies of each item of content and associating one unique copy with each subscriber to the network, or by giving their subscribers the capacity to make their own individual copies...," explaining that other forms of copyright liability might attach (e.g., for unauthorized reproduction or contributory infringement).
Based on this decision, the lower court in Aereo denied the injunction sought by the broadcasters finding that the remote antenna delivery had the same basic elements as existed in the Cablevision case. (See American Broadcasting Companies v. Aereo Inc., No. 12-1540 (S.D. N.Y. July 11, 2012)) The broadcast plaintiffs appealed to the Second Circuit arguing that Cablevision is distinguishable because (i) the cable company at least licenses the primary transmission from the broadcasters (whereas Aereo does not) and (ii) the RS-DVR employed by Cablevision was a "storage" service not a "retransmission" service. The appeal is pending.
Meanwhile, thousands of miles away in a Los Angeles court, the same issue was being addressed. This time, many of the same broadcast companies were challenging the legality of a copy-cat service tentatively called Aereokiller, rolled out in several major cities late in the third quarter of 2012. Finding that the Ninth Circuit Court of Appeals precedent is at odds with both the Cablevision and recent lower court Aereo rulings (both in the Second Circuit), a California federal district court issued an injunction holding that the law in the 9th Circuit focuses on whether the "work" is publicly performed, and not whether the particular "transmission" of the work is a public performance.
So, which circuit is right? Here is our preliminary take on the issue:
- The Second Circuit may have analyzed the law thoroughly, but its refusal to focus on the broad availability of the "work" seems to go against the work-centric Copyright Law and, in our opinion, the outcome of its ruling cannot be sustained politically.
- Indeed, the Second Circuit's admonishment in Cablevision (see above*) appears to us to recognize the practical difficulties arising from its holding.
- The California lower court's evaluation of Ninth Circuit precedent may be unconvincing to some, but its holding better reflects national policy and the economic realities on which the American video marketplace has been constructed.
Aereo has since announced plans to expand beyond NYC and, for now, Aereokiller is on hold. And, notwithstanding that the copyright issue needs to be resolved -- by either the Supreme Court or the Congress -- a more likely critical factor in the outcome of the video wars is not judicial at all; it is whether there is even a market for a limited channel distribution service at $8-$12 a subscriber and whether Aereo and Aereokiller will themselves be killed off by competition from local stations transmitting authorized network programming over the Internet in each of their respective communities.
We will provide updates as new information becomes available.
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