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IP Alert: Supreme Court Holds Startup Aereo Violates Copyrights Under "Public Performance" Theory

July 23, 2014

As reported earlier, on June 25, 2014, in American Broadcasting Cos., Inc., et al. v. Aereo, Inc., the U.S. Supreme Court ruled that Internet startup Aereo infringed copyrights by providing customers with a real-time television viewing system. The Court held that Aereo’s technology for streaming copyrighted televisions shows constituted a “public performance” under the Copyright Act.

Using Aereo’s technology, an individual subscriber visited Aereo’s website and selected a television program from a menu that listed locally available over-the-air digital broadcasts. Aereo assigned the subscriber a unique antenna for the duration of the broadcast. Using this antenna, Aereo tuned into the requested broadcast channel and set up a folder on a server where the program was recorded. The subscriber received a slightly delayed streamed program for viewing on a computer or other device. The Aereo system did not transmit data saved in one subscriber’s folder to any other subscriber. The subscriber also could choose to view the program at a later time, but issues concerning this aspect of the Aereo service were not before the Court.

A group of copyright holders in television content and related entities brought suit against Aereo for copyright infringement. They argued that Aereo was infringing their right to “perform” their works “publicly” under the Transmit Clause of the Copyright Act. That clause grants copyright owners the exclusive right to “transmit or otherwise communicate a performance . . . of the [copyrighted] work . . . to the public, by means of any device or process, whether the members of the public capable of receiving the performance . . . receive it in the same place or in separate places and at the same time or at different times.”

The district court denied the broadcaster’s motion for a preliminary injunction, and a divided panel of the Second Circuit affirmed. The Second Circuit reasoned that Aereo did not transmit to “the public,” but rather sent a private transmission to each customer. Accordingly, the court reasoned, the Transmit Clause of the Copyright Act was inapplicable. The broadcasters sought a writ of certiorari, and the Supreme Court agreed to hear the case.

On appeal, the Court addressed two questions, first, whether Aereo “performed” any of the copyrighted works, and second, whether Aereo did so “publicly.” Answering these questions in the affirmative, the Court reversed. Regarding the first question, Aereo argued that that it only supplies a subscriber with equipment that emulates a home antenna and digital video recorder. Aereo argued that it is the individual subscriber who alone “performs” by selecting a broadcast program when the subscriber uses the Aereo system.

In rejecting Aereo’s arguments, the majority decision reviewed 1976 amendments to the Copyright Act enacted to make the activities of community antenna television (CATV) operators subject to compulsory licensing payments to copyright owners. Before these amendments, earlier court decisions had held that the operation of a community antenna service did not constitute a “performance” under the Copyright Act. In the 1976 amendments, Congress changed the definition of “perform” relating to audiovisual works to mean “to show its images in any sequence or to make the sounds accompanying it audible.” Separately, Congress enacted the Transmit Clause, which sets out that to perform a work “publicly” also means “to transmit or otherwise communicate a performance . . . of the [copyrighted] work . . . to the public, by means of any device or process, whether the members of the public capable of receiving the performance . . . receive it in the same place or in separate places and at the same time or at different times.”

The Court held that Aereo’s system is substantially similar to the community antenna systems that Congress targeted with the 1976 amendments, such that when Aereo’s activities are considered relative to the purposes of the amendments, Aereo “performed” the copyrighted works publicly. It discounted technical differences, such as the unique antenna assigned to the subscriber, observing that these technical differences were meaningless to the subscriber and to the copyright owner under the language and intent of the Copyright Act.

Turning to the second question, whether the performance could be deemed “public,” the Court again reviewed the 1976 amendments to the Copyright Act. The Transmit Clause includes in the “public” people who are in separate places or receiving the performance at different times. The Court held that this definition “suggests that an entity may transmit a performance through multiple, discrete transmissions,” and concluded that therefore Aereo’s performance was indeed “public.” The Court again found technical differences between Aereo’s system and cable television systems to be irrelevant to the copyright analysis, and that “the subscribers to whom Aereo transmits television programs constitute ‘the public.’”

Having found that Aereo performs copyrighted works publicly, the Court reversed the Court of Appeals’ judgment and remanded the case for further proceedings consistent with the decision. The Court was careful to limit the scope of its decision to the Aereo systems and functionally similar products. It agreed with the Solicitor of the United States, who stated in an amicus brief that “[q]uestions involving cloud computing, [remote storage] DVRs, and other novel issues not before the Court, as to which ‘Congress has not plainly marked [the] course,’ should await a case in which they are squarely presented.”

The Court’s decision applied only to the near-simultaneous transmission of the broadcasted content.  An earlier Second Circuit decision, Cartoon Network LP v. CSC Holdings, Inc., had permitted a cable company to provide a remote DVR system to subscribers. The recording of unique copies initiated by an individual viewer, and only accessible to that viewer, did not result in a public performance because “playback transmission is made to a single subscriber using a single unique copy produced by that subscriber.” The Aereo decision expressly declined to address technologies not before the Court, such as DVR or cloud computing systems. The development of the “public performance” doctrine relating to such other technologies remains for another day.

Three Justices dissented. The dissent argued that Aereo does not perform the copyrighted work and criticized the majority’s “improvised standard (‘looks-like-cable-TV’),” stating that it “will sow confusion for years to come.” The dissent went on to argue that Aereo provided a user-controlled system and that Aereo does not select the content viewed by any one of its users—in the words of the opinion, “The key point is that subscribers call all the shots.” In this regard, the dissent asserted, Aereo had not itself committed a “volitional act” such as would be necessary to trigger copyright liability. The dissent analogized Aereo to an Internet service provider, which generally is not liable for patent infringement if one user sends copyrighted content to another user via the facilities of the Internet service provider.

While limited in scope, the Aereo decision provides some guidance to copyright holders and others in the field of transmission of copyrighted content. Aereo also appears to contrast with the Court’s patent cases this term, in which the Court has generally come out against the owner of the asserted intellectual property.

If you have questions on the Aereo decision, please contact Fitch Even partner John E. Lyhus, the author of this alert.

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