1 THE FCC S RESPONSE TO AMERICAN BROADCASTING COMPANIES, INC. V. AEREO, INC. February 20, 2015 Intellectual Property Litigation in Texas: Video Games, Damages, Patents and the Supreme Court Presented by the Intellectual Property Litigation Regional CLE Committee of the ABA Section of Litigation Tracy J. Willi Willi Law Firm, P.C. Austin, Texas Main (512) Fax (512)
2 The FCC s Response to American Broadcasting Companies, Inc. v. Aereo, Inc. Page 1 of 6 In American Broadcasting Companies, Inc. v. Aereo, Inc. the Supreme Court held that Aereo, Inc. infringed the copyright holders exclusive right to perform by selling its subscribers a technologically complex service that allows them to watch television programs over the Internet at about the same time as the programs are broadcast over the air. 1 Focusing on the 1976 amendments to the Copyright Act and the sections of the Act addressing cable companies, the Court found that Aereo s activities were substantially similar to those of the CATV companies that Congress amended the Act to reach. 2 In an attempt to make lemonade out of a sour ruling, Aereo sought further consideration by the Second Circuit of the preliminary injunction issues in this case by this Court, specifically, whether Aereo is a cable system entitled to a statutory license. The request was denied in the mandate issued by the Second Circuit on August 21, 2014, We leave it to the district court to consider whether the issues are properly raised in these cases and, if so, to rule on the issues in the first instance. 3 On remand, Aereo pursued four arguments to avoid or narrow the scope of the proposed preliminary injunction. First, Aereo argued that in light of the Supreme Court s holding, it should be considered a cable system that is entitled to a compulsory license under 111 of the Copyright Act, 17 U.S.C Second, even if it is not a cable system for purposes of 111, Aereo argued that it should be considered a mere conduit entitled to the safe harbor protection of 512(a) of the Copyright Act, 17 U.S.C. 512(a). Third, even if it is not a cable system entitled to a compulsory license or a mere conduit entitled to a safe harbor, Aereo argued that a preliminary injunction should not issue because Plaintiffs presently are unable to show any imminent irreparable harm. Finally, the Plaintiffs seeking the injunction requested that the scope of the preliminary injunction should be expanded to cover all retransmissions of their copyrighted content, regardless of when those retransmissions occur, while Aereo argued that the scope of the preliminary injunction should be narrowed to a modest delay, such as ten minutes, following the commencement of a broadcast. 4 1 Am. Broadcast. Co. v. Aereo, Inc., 134 S.Ct. 2498, 2503 (June 25, 2014) (hereinafter Aereo III.) 2 at A copy of mandate was filed in Am. Broadcast. Co. v. Aereo, Inc., No. 2:12-cv AJN-HBP, Doc. 324 (S.D. N.Y. August 21, 2014). 4 Am. Broadcast. Co. v. Aereo, Inc., No. 2:12- cv ajn-hbp, Doc. 341 (S.D. N.Y. October 23, 2014). This October 23, 2014, opinion and order granting the preliminary injunction against Aereo after remand is hereinafter referenced as Aereo IV. The District Court refers to Aereo I as the District Court s opinion initially denying the
3 Aereo was unsuccessful on each of its arguments on remand to the District Court, except to limit Plaintiffs to their original request for an injunction against the retransmission of the copyrighted works while the works are still being broadcast. 5 After the preliminary injunction was issued against Aereo, Aereo filed for federal bankruptcy protection under Chapter 11 and all further proceedings were stayed. 6 The first of Aereo s arguments on remand, whether it should be considered a cable system that is entitled to a compulsory license under 111 of the Copyright Act, is the focus of this article. The District Court on remand determined that while all cable systems may perform publicly, not all entities that perform publicly are necessarily cable systems. The District Court relied upon Second Circuit binding precedent on the issue of, whether a service that streams copyrighted television programming live over the Internet constitutes a cable system under 111 of the Copyright Act, and concluding that Congress did not intend for 111 s compulsory license to extend to Internet transmissions. 7 Thus, Aereo was not entitled to the 111 compulsory license. 8 Another case had recently addressed the same issue after the Supreme Court s Aereo decision and came to the same conclusion. 9 In its discussion of 111, the District Court noted that Congress has created new statutes for other transmissions of technology similar to cable systems, such as the Satellite Home Viewer Act of 1988, which created an interim compulsory licensing scheme under 119 of the Copyright Act akin to the compulsory licensing scheme for cable systems under 111. In 1994, Congress expressly amended 111 to add microwave as an acceptable communications channel for retransmissions. The District Court found that the statutory amendments only further confirm that not all entities that perform publicly in ways preliminary injunction in 2012, Aereo II as the Second Circuit s opinion in 2013 affirming the District Court s opinion, and Aereo III as the Supreme Court s opinion in 2014 reversing the Second Circuit s opinion. See Aereo IV at 1. 5 Aereo IV at 16. The preliminary injunction issued to bar Aereo nationwide from retransmitting programs to its subscribers while the programs are still being broadcast. 6 Am. Broadcast. Co. v. Aereo, Inc., No. 2:12- cv ajn-hbp, Doc. 354 (S.D. N.Y. November 24, 2014). 7 Aereo IV at 7 (citing WPIX, Inc. v. ivi, Inc. 691 F.3d 275, (2d Cir. 2012). 8 Aereo IV at 8. 9 Aereo IV at 6, (citing CBS Broad., Inc. v. FilmOn.com, Inc., No. 10 Civ (NRB), 2014 U.S. Dist. LEXIS , at *11 (S.D.N.Y. July 24, 2014) ( FilmOn ) ( A series of statements that Aereo... is very similar to a cable system is not the same as a judicial finding that Aereo and its technological peers are, in fact, cable companies entitled to retransmission licenses under 111 of the Copyright Act. )).
4 similarity to cable systems are entitled to the 111 license. 10 The opinion by the District Court entering the preliminary injunction against Aereo was entered on October 23, On October 28, 2014, Tom Wheeler, Chairman of the Federal Communications Commission (FCC), issued an Official FCC Blog stating: Specifically, I am asking the Commission to start a rulemaking proceeding in which we would modernize our interpretation of the term multichannel video programming distributor (MVPD) so that it is technology-neutral. The result of this technical adjustment will be to give MVPDs that use the Internet (or any other method of transmission) the same access to programming owned by cable operators and the same ability to negotiate to carry broadcast TV stations that Congress gave to satellite systems in order to ensure competitive video markets. 11 The FCC has rulemaking authority and can define what is an MVPD. 12 Currently, an MVPD is defined as a person such as, but not limited to, a cable operator, a multichannel multipoint distribution service, a direct broadcast satellite service, or a television receive-only satellite program distributor, who makes available for purchase, by subscribers or customers, multiple channels of video programming. 13 The Copyright Office, in comparison has limited rule-making authority. The Copyright Office establishes the requirements governing the submission of statutory royalty payments. If companies are classified as MVPDs, that does not mean that they are classified as cable companies, but it would allow them to negotiate with local broadcasters as an MVPD. If Internet content distributors, such as Aereo and FilmOn, obtain MVPD status, they would gain the rights and obligations that the cable and satellite MVPDs have, including access to content and local broadcast channels, and the ability to negotiate with broadcasters for carriage of their signals. On December 19, 2014, the FCC released a Notice of Proposed Rulemaking FCC (herein-after NPRM ). 14 This 57-page NPRM pro- 10 Aereo IV at Tom Wheeler, Tech Transitions, Video, and the Future, (Oct. 28, 2014), available at 12 See 47 C.F.R. pt , defining MVPD by referencing Section 602(13) of the Communications Act, 47 U.S.C. 522(13) FCC, MB Docket No , FCC , In the Matter of Promoting Innovation and Competition in the Provision of Multichannel Video Programming Distribution Services, Notice of Proposed Rulemaking (Dec. 19, 2014) ( NPRM ).
5 poses to extend the definition of MVPD to include distributors of scheduled linear programming over the Internet. The proposal includes discussion of the Supreme Court s Aereo decision and Aereo s status as a provider of online linear video programming. The NPRM notes that on October 23, 2014, the Federal District Court for the Southern District of New York granted certain broadcast stations request for a preliminary injunction to stop Aereo s live and near-live streaming of their broadcast signals over the Internet. However, the FCC interpreted the District Court s decision to leave open the possibility that Aereo could be entitled to a statutory copyright license if the Copyright Office and the FCC changed the interpretations of their respective statutes. 15 The NPRM summarized Aereo s efforts to obtain approval from the Copyright Office. After the Supreme Court found that Aereo violated certain copyright holders exclusive right to perform their works publicly as provided under the Copyright Act, Aereo then filed with the Copyright Office to pay statutory royalties to retransmit broadcast signals as a cable system. The Copyright Office accepted the filing on a provisional basis, pending further regulatory or 15 NPRM 11 n. 20 (citing Am. Broad. Co. Inc.. v. Aereo, Inc., Nos. 12 cv 1540, 12 cv 1543, 2014 WL , at *5, n.3 (SDNY Oct. 23, 2014)). judicial developments, including this Commission s interpretation of the term MVPD and the outcome of the case that was pending before the U.S. District Court for the Southern District of New York. 16 The NPRM references a letter from Jacqueline C. Charlesworth, General Counsel and Associate Register of Copyrights, U.S. Copyright Office, to Matthew Calabro, Director of Financial Planning & Analysis and Revenue, Aereo, Inc. (July 16, 2014). 17 The letter rejected Aereo s argument that it is a cable operator under the Copyright Act but indicated that the Copyright Office might revisit that conclusion if the Commission should find Aereo to be an MVPD under the Communications Act. 18 The NPRM also references a letter from Seth Greenstein, Counsel to Aereo, to Marlene H. Dortch, Secretary, Federal Communications Commission, MB Docket No , at 2 (filed Oct. 10, 2014) which stated, Particularly in the wake of adverse judicial and agency decisions over the last several years, linear online streaming services likely cannot attract the level of investment necessary to create meaningful competition to incumbent business models without a clear path of regulatory certainty NPRM NPRM 11 n NPRM 1 n. 3.
6 Specifically, the FCC proposes to interpret the term MVPD to mean all entities that make available for purchase, by subscribers or customers, multiple streams of video programming distributed at a pre-scheduled time. In reaching this conclusion, the FCC understands that the market for Internet-based distribution of video programming is nascent and that companies continue to experiment with business models. The current business models include, but are not limited to, the following types of Internet-based video service offerings, including combinations of these offerings: (1) Subscription Lin-ear (includes, for example, Aereo s services as it existed before the Supreme Court decision); (2) Sub-scription On- Demand (includes, for example, Amazon Prime Instant Video, Hulu Plus, and Netflix); (3) Transaction On- Demand (includes, for example, Amazon Instant Video, CinemaNow (by Best Buy), Google Play, itunes Store (by Apple), Sony Entertainment Network, Vudu (by Walmart), and Xbox Video (by Microsoft); (3) Ad-based Linear and On-Demand (includes, for example, Crackle, FilmOn, Hulu, Yahoo! Screen, and YouTube as they exist today); and (4) Transactional Linear (includes, for example, Ultimate Fighting Championship s UFC.TV pay-per-view service. 20 In addition to other amendments to incorporate the new definitions, the NPRM proposes that 47 C.F.R part 76.5 be amended to include the following definitions: (rr) Linear Video. A stream of video programming that is prescheduled by the programmer. (ss) Multichannel Video Programming Distributor. A person such as, but not limited to, a cable operator, a multi-channel multipoint distribution service, a direct broadcast satellite service, or a television receiveonly satellite program distributor, who makes avail-able for purchase, by subscribers or customers, multiple channels of video programming. As used in this paragraph, channel means linear video without regard to the means by which the programming is distributed. 21 The FCC seeks comment on the proposed interpretation of the definition of the term MVPD and on alternative interpretations. It also seeks comment on the public policy ramifications of these alternatives and any other alternatives commenters may suggest. The FCC notes that an entity that uses IP to deliver cable services does not alter the classification of its facility as a cable system and does not alter the classification of the entity as a cable operator. Finally, the FCC seeks comment on how to treat Internet- 20 NPRM NPRM app. A.
7 based linear video programming services that cable operators and DBS providers may choose to offer in addition to their traditional services. 22 The NPRM contains statements of the chairman and the commissioners. The concurring statements of commissioners, Ajit Pai and Michael O Reilly, reflect a concern that the structure proposed may stifle rather than encourage innovation if new entities seek to fit into the rubric suggested rather than creating new ways of communication. 23 While the Aereo case did not begin the discussion on re-defining the term MVPD, 24 the Supreme Court s Aereo decision and the resulting bankruptcy filing of an entity built on innovative communications technology served to demonstrate to the FCC that competition and innovation could be thwarted if a change is not made. December 19, 2014 NPRM nor does it contain the separate statements issued by the chairman and the commissioners, 26 so it is a little less inform-ative. However, the comments periods run from the date of publication in the Federal Register. Thus, comments on the NPRM are due on or before February 17, 2015, and reply com-ments are due on or before March 2, If entities have an interest in the outcome or innovative communication methods that are not addressed in this NPRM, now is the time to participate in this meaningful regulatory process. The NPRM was issued on December 19, 2014, but it was not published in the Federal Register until January 15, The official Federal Register version is a summary and does not contain many of the footnotes in the 22 NPRM NPRM at Each paragraph of the body of the NPRM is numbered, but the statements of the chairman and commissions do not contain numbered paragraphs. 24 In 2012, for example, the Media Bureau of the FCC sought comment on the interprettation of the terms MVPD and Channel. See FCC, MB Docket No , Pub. Not. DA , Media Bureau Seeks Comment on Interpretation of the Terms Multichannel Video Programming Distributor and Channel as Raised in Pending Program Access Complaint Proceeding (Mar. 30, 2012). 25 Promoting Innovation and Competition in the Provision of Multichannel Video Programming Distribution Services, 80 Fed. Reg (proposed Jan. 15, 2015) (to be codified at 47 C.F.R. pt. 76). 26