When Congress last completely overhauled the Copyright Act in 1976, disco topped the charts, Charlie’s Angels was making its television debut, and fax machines were revolutionizing how people communicated.  But it was this same Copyright Act that the Supreme Court had to interpret when addressing the copyright implications of watching TV over the Internetin American Broadcasting Companies Inc. v. Aereo, Inc.  The Supreme Court concluded that Aereo’s service of streaming TV over the Internet violated copyrights in the streamed TV shows.

The technology at issue is what makes the Aereo decision so interesting.  Aereo maintains thousands of dime-sized antennas in a centralized location to pick up free over-the-air broadcast TV.  Aereo’s service allows its individual subscribers to watch TV on Internet-connected devices by selecting a show from a menu on its website.  When a subscriber selects a show, one of Aereo’s antennas is assigned exclusively to the subscriber and tunes to the appropriate over-the-air broadcast.  The broadcast is saved in a subscriber-specific folder on Aereo’s servers, creating a personal copy of the program.  The personal copy is then transmitted to that subscriber alone over the Internet once several seconds of the broadcast have been saved.

Why does Aereo use thousands of individually-assigned antennas?  There is no technological reason to do so.  Instead, it is a system explicitly intended to avoid violating the Copyright Act, which grants copyright holders the exclusive right to “perform the copyrighted works publicly.”  17 U.S.C. § 106(4).

To “perform” an audiovisual work under the Copyright Act is to “show its images in any sequence or to make the sounds accompanying it audible.”  17 U.S.C. § 101.  To perform a work publicly includes to “transmit or otherwise communicate a performance or display of 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.”  Id.

Aereo argued that it didn’t “perform” or “transmit” the TV signals at all because its system only responds to requests by the subscriber: the subscriber selects the television program to be viewed, and, unlike cable TV, Aereo does not transmit anything until a selection is made.  By this logic, the subscriber is the one who performs.  Also, because Aereo uses thousands of individually-assigned antennas, creating individual recordings of broadcast TV, Aereo argued that it did not transmit the TV signals to the “public” in violation of the Copyright Act because each transmission was a private one to the assigned subscriber.  Aereo contended that it shouldn’t matter where an individual’s antenna is located (e.g. on the roof or in a warehouse) to pick up free TV signals, so long as the signals received by that antenna are routed only to that individual’s TV, and not to the “public.”

The Supreme Court disagreed with both of Aereo’s arguments, starting its analysis with the Congressional purpose of the 1976 Copyright Act.  A principal purpose of the Act was to overturn the Court’s previous decisions that community antenna television (CATV) systems, which were precursors to modern cable TV, were outside the scope of the Act.  Those decisions held that the CATV companies did not “perform” the works at all because viewers of works do not “perform,” and the CATV providers fell “on the viewer’s side of the line.”  In 1976, Congress amended the definition of to “perform” an audiovisual work to mean “to show its images in any sequence or make the sounds accompanying it audible.”  In other words, both the broadcaster and the viewer of a TV program “perform.”  The amendments also stated that a public performance included a transmission of a performance to the public; transmitting a performance meant “to communicate it by any device or process whereby images or sounds are received beyond the place from which they are sent.”  There is no dispute that CATV companies “transmitted” performances to the public.  Therefore, they fell within the scope of the amended act.

The Court in Aereo reasoned that because Aereo looks a lot like a cable company, it also “performs” the works.  The Court found that the difference between selecting a channel on a cable box to access a constantly transmitted signal (like cable) and selecting a program on Aereo’s website with a mouse-click to initiate an individual transmission that wasn’t active before the click was unimportant in the context of the Act.

The Court also rejected Aereo’s argument that because each antenna was individually assigned, and each copy of broadcast TV was individually streamed, any transmission was “private” and not “public.”  The Court reasoned that an Aereo subscriber would not care whether the TV shows she was watching were delivered from a large, multi-subscriber antenna or one small dedicated antenna.  The Court asserted that an entity could “transmit” a performance “through multiple, discrete transmissions” and still be covered by the Act because the Transmit Clause provides that a performance can be transmitted to the public “whether the members of the public capable of receiving [it] receive it in the same place or in separate places and at the same time or different times.”  In other words, lots of “private” transmissions can amount to a “public” transmission under the Act.

In short, the Supreme Court concluded that because Aereo transmits copyrighted works to the public, it infringed the plaintiffs’ copyrights.  After the Court rendered its decision, Aereo suspended service, although it hasn’t shut down entirely.

At first glance, the Aereo decision looks like it could be an Internet TV killer, but there is hope.  First, the court left open the question of “whether the public performance right is infringed when the user of a service pays primarily for something other than the transmission of copyrighted works, such as the remote storage of content.”  That is, the Court did not close any doors on data storage “in the cloud.”  Second, the same amendments that brought CATV companies within the scope of the 1976 Copyright Act also established a compulsory licensing scheme that permits cable companies to retransmit broadcasts in exchange for set licensing fees.  A 2012 Second Circuit decision had held that an Internet TV provider was not a cable company that could take advantage of the compulsory licensing scheme.  But the Supreme Court’s decision in Aereo gives Internet TV providers an argument that they should be entitled to use this compulsory licensing scheme to provide their services to their customers.  In fact, Aereo is now making this argument to the lower court.  Obtaining (and paying for) a compulsory license will almost certainly affect consumer pricing for Internet TV services, since the providers will no longer be able to pull broadcast signals off the airwaves for free, but it shouldn’t be the death-knell for new technologies that some have feared.

For further information about this or related matters, please contact Scott Atkinson at 650.342.9600 or satkinson@carr-mcclellan.com