THE LEGAL LAG BEHIND EMERGING TECHNOLOGY: AEREO - INNOVATION OR EXPLOIT?

Transcription

1 THE LEGAL LAG BEHIND EMERGING TECHNOLOGY: AEREO - INNOVATION OR EXPLOIT? Ruchir Patel ABSTRACT The now defunct technology start-up Aereo was poised to revolutionize the live broadcast television model. However, after a three-year legal battle spanning several states that eventually led to the Supreme Court, Aereo was found in violation of the Copyright Act of [1] Broadcasters applauded the decision, while technologists worried the Court had not only failed to understand the technology behind Aereo, but had also created a dangerous legal precedent for all future cloud computing technologies. Aereo allowed users to stream and record broadcast television to any laptop or mobile device. Shortly after Aereo was announced, broadcasters filed for an injunction claiming Aereo was in fact a cable company, and as such needed to pay retransmission fees. [2] The heart of broadcasters argument focused on the definition of performance and to the public under the Transmit Clause of the Copyright Act, 17 U.S. Code section 101. [3] Aereo contested, stating that its service was acceptable both legally and technically because it simply provided users an alternative means to access free, over-the-air broadcasts. [4] Much of Aereo s legal argument rested on Cartoon Network LP, LLLP v. CSC Holdings, Inc. (hereinafter Cablevision ). [5] The Supreme Court ultimately held for broadcasters in a 6-3 decision favoring a legislative intent interpretation of the Copyright Act. [6] The Court agreed with the broadcasters argument that Aereo s technology, though functionally legal, exploited a loophole created by the Cablevision decision. Therefore, Aereo was retransmitting to the public, and as such was in violation of the Copyright Act. [7] The decision has had a polarizing effect. Technologists fear that this decision may have unintended consequences in the ever-growing cloud computing space, whereas proponents argue that this decision is narrowly limited to cable companies. The decision has already played a role in challenging the launch of new services, most notably satellite television provider Dish s release of Dish Anywhere a service that allows users to stream cable television to any device. [8] However, currently these ramifications are isolated to the broadcast industry and have yet to result in far reaching or significant consequences for the developing cloud computing technologies. 1

2 I. AEREO: HOW IT WORKS Unveiled with minor fanfare on February 14, 2014, Aereo quickly began to garner attention. [9] Aereo was financed in part by Barry Diller, former CEO of Paramount and the man responsible for creating the Fox Broadcasting Company. [10] He claimed Aereo was capable of transform[ing] television and how you receive it. [11] The system achieved this by giving users the ability to stream and record broadcast television on any laptop or mobile device. [12] Though heralded as a disruptive technology creating a new market, while disrupting an existing market Aereo was technologically akin to traditional rabbit-ear antennas. Aereo engineers designed miniaturized versions of antennas similar to over-the-counter antennas capable of picking up broadcast signals. These tiny antennas were aggregated into antenna farms and placed in remote locations throughout the host city. [13] Users would pay for a monthly subscription to rent an individual antenna, which gave them access to both stream and record programs. [14] However, Aereo was not without its nuances. To comply with regulations, Aereo delayed all live streams by a few seconds. Additionally, Aereo was careful to never tout itself as a broadcaster or media provider, but instead called itself an equipment supplier. In exchange for a monthly rate, the user would get access to an antenna and digital video recording capabilities. [15] From this antenna the user, and only the user, could turn the antenna on, tune in to a particular channel, and setup a recording. [16] These recordings were uniquely coded to match to the particular user one recording per user, accessible, and controlled by only said user. [17] Throughout this process, Aereo s involvement is entirely passive; Aereo claims that they simply facilitate the user s wishes. [18] Rather than individually purchasing, setting up, and operating a TV, antenna, and DVR, Aereo offered customers the access to rent all this equipment for a nominal fee accessible via an Internet connection on any mobile screen. [19] Aereo is functionally similar to an online radio by providing users the ability to tune in to broadcasts already publically available. II. PROCEDURAL HISTORY Petitioners WNET, THIRTEEN, Fox Television Stations, Inc., Twentieth Century Fox Film Corporation, WPIX, Inc., Univision Television Group, Inc., The Univision Television Network Limited Partnership, and Public Broadcasting Service initially filed in the Southern District of the United States. [20] The broadcast groups claimed Aereo was infringing upon their respective copyrights by publically performing and infringing their right to reproduce the content. [21] The reproduction claim was subsequently dropped. [22] Both the district court, and, on appeal, the Second Circuit ruled in favor of Aereo. [23] Both courts found Aereo s technology was functionally within the legal bounds established in the landmark Cablevision decision. [25] Subsequently, Petitioners filed and were granted a writ of certiorari to the Supreme Court of the United States on January 10, [26] Concurrently, Aereo was challenged in the District Court of Massachusetts, as well as the District Court of Utah both by separate, and unique Petitioners. [27] On October 8, 2014, the District Court of Massachusetts denied Aereo s motion for transfer to the Southern District of New York, and simultaneously denied Petitioners injunction motion and held in favor of Aereo. On February 19, 2014, the District Court of Utah granted a preliminary injunction, and stayed the remaining proceedings pending the decision of the Supreme Court of the United States. [28] III. PETITIONERS ARGUMENT: The heart of Petitioners argument focuses on the definition and interpretation of performance and to the public under the Transmit Clause of the Copyright Act, 17 U.S.C. section 101 (2010). The Petitioners claim the amendments made in 1976 to the Copyright Act were directly in response to previous cases Fortnightly Corp. v. United Artists Television, Inc. (hereinafter Fortnightly ) and Teleprompter Corp. v. Columbia Broadcasting System, Inc. (hereinafter Teleprompter ) in which the Supreme Court had held that a retransmission had not been a public performance. [29] The Petitioners claim that Aereo 2

3 through the public performance of the Petitioners copyrighted content breached their exclusive right under the amended Copyright Act, section 106. Fortnightly held that a local community antenna placed atop a hill could legally retransmit for a fee broadcast networks to the community located at the base of the hill where the broadcast reception had been lacking prior to the satellite s installation. [30] The Teleprompter decision expands on Fortnightly and holds that the retransmission of broadcasts not normally found in an area are still acceptable. [31] Teleprompter reasons that when a broadcaster makes a transmission publicly available, the broadcaster has forfeited the ability to prevent reception or rechanneling irrespective of distance. [32] Congress 1976 amendment of the Copyright Act modified the definitions for performance and to the public under the Transmit Clause of the Copyright Act, section 101. The terms became defined as following: To perform or display a work publicly means (1) to perform or display it at a place open to the public or at any place where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered; or (2) to transmit or otherwise communicate a performance or display of the work to a place specified by clause (1) or 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. [33] The Petitioners claim that under these definitions, Aereo is clearly performing via streaming through the cloud the Petitioners copyrighted content to the public in violation of their exclusive rights under section 106 of the Copyright Act. IV. RESPONDENT S ARGUMENT: Aereo contested, stating that its service was acceptable both legally and technically because it simply provided users an alternative means to access free, over-the-air broadcasts. [34] Combining the bedrock principles established in Sony Corp. of America v. Universal Studios, Inc. (hereinafter Sony ) with the more recent Cartoon Network LP, LLLP v. CSC Holdings, Inc. (hereinafter Cablevision ), Aereo argued its service was well within the lines of acceptable conduct. [35] Sony has long established the fundamental principles of users rights in time-shifting broadcasts via equipment. [36] In Sony, the Supreme Court held that the use of Betamax players the main rival at the time to the video home system (VHS), but, for all intents and purposes identical to VHS to record and playback over the air broadcasts was within the bounds of the Copyright Act. [37] Replacing video recorders for digital video recorders (DVRs), the second circuit court held in Cablevision that viewing content via a DVR located in a remote location did not violate the public performance portion of the Copyright Act and as such did not violate the rights of the copyright holder. [38] In Cablevision, a user was able to record and playback programming via a remotely located DVR. [39] The experience to a user, however, was akin to traditional DVR located inside the user s home only the user was capable of setting up, viewing, and deleting recordings. [40] In this case, the broadcasters claimed Cablevision s transmission of the copyrighted material constituted a public performance, violating the Copyright Act, section 101. The Second Circuit s holding hinged on whether Cablevision transmits a performance of a work to the public. [41] The answer was found by viewing who was capable of receiving the performance under the statute. [42] Finding for Cablevision, the court held that because each copy was unique to a specific user with the user alone making the copy, as well as the intended viewer of the copy the transmission by Cablevision was not a, public performance. [43] By extending the Cablevision decision, Aereo argued that its service was well within conduct already deemed lawful based on three facts of Aereo s service: (1) each time a user records a program, a 3

4 unique copy is saved to DVR storage accessible only to that user; (2) each transmission is made from such a copy; and (3) each transmission from a unique copy is made solely to the subscriber who requested it- no other subscriber is capable of accessing that copy and no transmissions are made from that copy except to that subscriber. [44] The user, and only the user, is capable of recording and watching his or her own unique copy, and as such Aereo s transmission is not to the public but instead to the specific, unique end user. [45] V. DISCUSSION A. Supreme Court: Innovation or Loop Hole In American Broadcasting Companies, Inc. v. Aereo, Inc. (hereinafter Aereo ), the Supreme Court ultimately held for the broadcasters in a 6-3 decision, favoring the petitioner s legislative intent interpretation of the Copyright Act. [46] The Court agreed with the broadcasters argument that Aereo s technology, though functionally legal, exploited a loophole created by the Cablevision decision. [47] Aereo was retransmitting to the public, and as such was in violation of the Copyright Act. [48] Justice Breyer, writing for the majority, held that Aereo (1) performed similar to Fortnightly and Teleprompter (2) to the public, regardless of the technological differences. [49] Disregarding Aereo s argument that it was simply an equipment provider, the Court held that Aereo s services were substantially similar to those Congress choose to legislate against in enacting the Copyright Act. [50] Functionally, Aereo was equivalent to Fortnightly and Teleprompter in the eyes of the subscriber. [51] This holding is similar to Second Circuit Judge Chin s comment: the system [Aereo] is a Rube Goldberg-like contrivance, over-engineered in an attempt to avoid the reach of the Copyright Act and to take advantage of a perceived loophole in the law. [52] The Court next found these performances were in fact to the public because though each individual performance may not be to the public, the entire set of performances satisfied the text of the clause. [53] Justice Scalia s dissent vehemently opposed the Court s looks-like-cable-tv test. [54] The dissent highlighted the majority s deference to the significant difference between Aereo and the Fortnightly and Teleprompter cases Aereo could not perform because, unlike Fortnightly and Teleprompter which continually broadcasted, Aereo did not make the choice, only the user selected content. [55] The dissent warned that: It is not the role of this Court to identify and plug loopholes. It is the role of good lawyers to identify and exploit them, and the role of Congress to eliminate them if it wishes. Congress can do that, I may add, in a much more targeted, better informed, and less disruptive fashion than the crude looks-like-cable-tv solution the Court invents today. [56] The majority ultimately limited their decision to include only the narrowest of material mainly the Transmit Clause analyzed through the lens of cable broadcast television to prevent a decision impacting future technologies, involving cloud computing, [remote storage] DVRs, and other novel issues not before the Court, at to which Congress has not plainly marked [the] course, should await a case in which they are squarely presented. [57] B. Ramifications: Aereo s Future The decision has had a polarizing effect. Technologists fear that this decision may have unintended consequences in the ever-growing cloud computing space, whereas proponents argue that this decision is narrowly limited to cable companies. In the immediate, the decision resulted in Aereo s bankruptcy, despite its best efforts. [58] Interpreting the Supreme Court decision as requiring a license prior to retransmission, Aereo choose to apply to the Copyright Office for recognition as a cable network. [59] As a cable company, Aereo could qualify for a compulsory license and operate within the established regulatory framework 4

5 similar to Cablevision. [60] However, if recognized as a cable network, Aereo, as well as broadcasters, would be held to the accompanying statutory provisions. Section 111(d) of the Copyright Act outlines the government-regulated rates broadcasters may charge cable companies in royalties. [61] In effect, by achieving recognition as a cable company, Aereo would be able to force negotiations with broadcasters for content. In a catch-22 situation, however, Aereo was barred from receiving recognition as a cable company because it was an Internet based company. [62] Under section 111(e)(3), a cable system is defined as a facility that retransmits signals via wires, cables, microwave, or other communication channels. [63] Previous cases have found when applied to the Internet where there is no centralized facility and various wired and wireless distribution channels the statutory text is unclear, and as such does not qualify Internet retransmission for recognition as a cable company. [64] The Supreme Court had held that though technologically unique, Aereo was functionally equivalent to a cable company and as such was in violation of the Copyright Act. [65] This technological difference, which had been insufficient to differentiate Aereo in the eyes of the Court, was now preventing Aereo from gaining recognition by the Copyright Office. [66] Faced with no viable business alternative, Aereo was forced to declare bankruptcy on November 21, [67] C. Ramifications: Streaming Services The decision has already played a role in challenging the launch of new services, most notably satellite television provider Dish s release of Dish Anywhere. [68] Similar to Aereo, the Dish Anywhere service allowed Dish subscribers to stream live and recorded broadcast content to a range of digital devices. Fox Broadcasting Company sued, claiming Dish s new service violated the Copyright Act by publicly performing and cited the Aereo decision as corroborating precedent. [69] The District Court of California distinguished the Dish Anywhere service from the Aereo case by finding Dish, unlike Aereo, had the initial license required for the content and as such was legally authorized to retransmit. [70] Heeding the Supreme Court s caution and applying the Aereo decision narrowly, the California court applied the Cablevision reasoning rather than attempting to distinguish the technological nuances between Aereo and Dish Anywhere. [71] Similar to Cablevision, the Dish Anywhere user alone is in complete control of what programs are recorded or streamed, and further the streaming is happening only to the unique individual; the user of the activity is neither performing to the public, nor infringing on the original copyright. [72] Dish has both successfully defended against an application of Aereo, as well as successfully argued a case using Aereo. [73] In Dish Network L.L.C. v. TV Net Solutions, LLC., Dish asserted that TV Net an online Arabic channel provider had violated Dish s right to publicly perform the copyrighted content. [74] Dish had exclusive broadcast rights to publicly perform several Arabic channels in the United States. [75] Akin to Aereo s online streaming, TV Net allowed access to these Arabic channels via the Internet. [76] The court granted a default judgment for Dish finding TV Net s streaming constituted a public performance. [77] VI. CONCLUSION In the end, Aereo s transmission of over the air broadcasting was found to be in violation of the Copyright Act. Aereo s transmission was found to constitute a performance, and more importantly a performance to the public a violation of the Copyright Act. Currently, Aereo s ramifications have been isolated to the broadcast industry and have yet to result in far reaching or significant consequences for cloud computing technologies. In a recent notice, the F.C.C proposed an expansion of the multichannel video programming distributors (MVPD) definition to include internet-based distributors. [78] If enacted, this expansion may provide future companies the ability to work within the established regulatory framework of the Copyright Act. Until further notice, Aereo will continue to be a limit in the courts recognition of new technologies. 5

6 [1]. Am. Broad. Cos., Inc. v. Aereo, Inc., 134 S. Ct. 2498, 2511 (2014). [2]. Complaint Am. Broad. Cos., Inc. v. AEREO, Inc., 874 F. Supp. 2d 373 (S.D.N.Y. 2012) (No. 12 Civ. 1540). [3]. Brief of Petitioner at 19-20, Am. Broad. Cos., Inc. v. Aereo, Inc., 134 S. Ct. 2498, 2511 (2014). [4]. Brief of Respondent at 1-2, Am. Broad. Cos., Inc. v. Aereo, Inc., 134 S. Ct. 2498, 2511 (2014). [5]. See id. at 14-15; Cartoon Network LP, LLLP v. CSC Holdings, Inc., 536 F.3d 121 (2d Cir. 2008) [6]. See Am. Broad. Cos., Inc., 134 S. Ct at [7]. See id. [8]. See Fox Broadcasting Co. v. Dish Network LLC, No. CV DMG (SHx), 2015 WL , (Cal. Dist. Ct. Jan. 20, 2015). [9]. Barry Diller Wants To Transform Television With Aereo, A DVR In The Cloud, TECHCRUNCH. (Feb. 14, 2012), [10]. Barry Diller, IAC, (last visited March 24, 2015). [11]. Barry Diller Wants To Transform Television With Aereo, A DVR In The Cloud, TECHCRUNCH. (Feb. 14, 2012), [12]. See id. [13]. Aereo Shows Off Their Rooftop Antenna Farm Ahead Of Supreme Court Ruling, TECHCRUNCH. (Apr. 16, 2014), [14]. Aereo pricing grid, TECHCRUNCH, (last visited March 24, 2015). [15]. Founder Stories: Aereo s Chet Kanojia on How His Company is Putting a Wedge in Video Delivery, TECHCRUNCH. (Aug. 8, 2012), [16]. See id. [17]. See id. [18]. See id. [19]. See id. [20]. Am. Broad. Cos., Inc., 874 F. Supp. 2d. [21]. See Am. Broad. Cos., Inc., 874 F. Supp. 2d. at 376. [22]. See id. [23]. WNET, Thirteen v. Aereo, Inc., 712 F.3d 676 (2d Cir. 2013); Am. Broad. Cos., Inc., 874 F. Supp. 2d. [24]. See Cartoon Network LP, LLLP v. CSC Holdings, Inc., 536 F.3d. [25]. Petition for Writ of Certiorari, Am. Broad. Cos., Inc, 134 S. Ct (No ). [26]. Cmty. Television of Utah, LLC v. Aereo, Inc., 997 F. Supp. 2d 1191 (D. Utah 2014); Hearst Stations Inc. v. Aereo, Inc., 977 F. Supp. 2d 32 (D. Mass. 2013). [27]. Hearst Stations Inc., 977 F. Supp. 2d. [28]. Cmty. Television of Utah, LLC, 997 F. Supp. 2d. 6

7 [29]. Teleprompter Corp. v. Columbia Broadcasting System, Inc., 415 U.S. 394 (1974); Fortnightly Corp. v. United Artists Television, Inc., 392 U.S. 390 (1968). [30]. See 392 U.S. at [31]. See 415 U.S. at [32]. See id. at 410. [33]. 17 U.S.C 101. [34]. Brief of Respondent in opposition at 1-2, Am. Broad. Cos., Inc. v. Aereo, Inc., 134 S. Ct (2014) No (responding to Petition for Writ of Certiorari). [35]. See Brief of Respondent at 41-42, Am. Broad. Cos., Inc. v. Aereo, Inc., 134 S. Ct (2014) No ; Sony Corp. of America v. Universal Studios, Inc., 464 U.S. 417 (1984); Cartoon Network LP, LLLP v. CSC Holdings, Inc., 536 F.3d 121 (2d Cir. 2008). [36]. See Sony Corp. of America, 464 U.S. 417 at 446. [37]. See id. at 456. [38]. See Cartoon Network LP, LLLP, 536 F.3d 121 at 141. [39]. See id. at [40]. See id. at 125. [41]. See id. at 134. [42]. See id. [43]. See id. at 139. [44]. See Brief of Respondent at 14-15, Am. Broad. Cos., Inc. v. Aereo, Inc., 134 S. Ct (2014) No [45]. See id. at 30. [46]. See Am. Broad. Cos., Inc., 134 S. Ct at [47]. See Brief of Petitioner at 11, Am. Broad. Cos., Inc. v. Aereo, Inc., 134 S. Ct (2014) No [48]. See Am. Broad. Cos., Inc., 134 S. Ct at [49]. See id. at 2506, [50]. Main Aereo case. [51]. See id. at [52]. See WNET, Thirteen v. Aereo, Inc., 712 F.3d at 697. [53]. See Am. Broad. Cos., Inc., 134 S. Ct at [54]. See id. at [55]. See id. at [56]. See id. at [57]. See id. at [58]. In Re: Aereo, Inc., No SHL, (Bankr. S.D.N.Y.). [59]. See In the Matter of Promoting Innovation and Competition in the Provision of Multichannel Video Programming Distribution Services, 29 F.C.C.R at 4 (proposed Dec. 19, 2014) (to be codified at 47 C.F.R. 76.5). 7

8 [60]. See Cartoon Network LP, LLLP, 536 F.3d 121 at 124. [61]. 17 U.S.C 111(d). [62]. See Max Hsu, Private Performances for the Public Good: Aereo and the Battle for Broadcast s Soul, 67 FED. COMM. L.J. 57, 84 (2014). [63]. 17 U.S.C 111(e)(3). [64]. See WPIX, Inc. v. ivi, Inc., 691 F.3d 275 at 280 (2d Cir. 2012). [65]. See Am. Broad. Cos., Inc., 134 S. Ct at [66]. See In the Matter of Promoting Innovation and Competition in the Provision of Multichannel Video Programming Distribution Services, 29 F.C.C.R at 4 (proposed Dec. 19, 2014) (to be codified at 47 C.F.R. 76.5). [67]. Chet Kanojia, The Next Chapter, (Nov ) [68]. See Fox Broadcasting Co. v. Dish Network LLC, No. CV DMG (SHx), 2015 WL , at *10 11 (Cal. Dist. Ct. Jan. 20, 2015). [69]. See id. at *9. [70]. See id. at *12. [71]. See id. at *20. [72]. See id. at *11. [73]. See Fox Broadcasting Co. v. Dish Network LLC, No. CV DMG (SHx), 2015 WL , (Cal. Dist. Ct. Jan. 20, 2015); Dish Network L.L.C. v. TV Net Solutions, LLC, No. 6:12-cv-1629-Orl-41TBS (M.D. Fla Oct. 10, 2014). [74]. See Dish Network L.L.C. v. TV Net Solutions, LLC, No. 6:12-cv-1629-Orl-41TBS at 9 (M.D. Fla Oct. 10, 2014). [75]. See id. at 1. [76]. See id. at 9. [77]. See id. at 9,11. [78]. See In the Matter of Promoting Innovation and Competition in the Provision of Multichannel Video Programming Distribution Services, 29 F.C.C.R at 4 (proposed Dec. 19, 2014) (to be codified at 47 C.F.R. 76.5). 8

9 Media Components for the Article Caption: An Aereo antenna. Hundreds of these antennas are aggregated to create antenna farms and placed in units atop buildings throughout host cities to capturing over the air signals. Source (use this image, as it is higher res): Placment: Within the, Aereo: How it Works Video: Caption: How does Aereo work? Placment: Within the, Aereo: How it Works or whereever you think is best 9