American Broadcasting Companies v. Aereo, Inc., Nos. 12–cv–1540, 12–cv–1543, 2014 WL 5393867 (Oct. 23, 2014)
On October 23, 2014, the United States District Court for the Southern District of New York (the “district court”) held that Aereo, Inc. (“Aereo”) was not entitled to the compulsory license under Section 111 of the Copyright Act, effectively putting an end to the tech startup’s arguments that its near-simultaneous streaming of broadcast television programming fell within the Copyright Act.
As discussed in our September 2014 Information Letter, the Transmit Clause of the Copyright Act of 1976 gives copyright owners the “exclusive right” to “perform the copyrighted work publicly.” 17 U.S.C. § 106. In June 2014, the United States Supreme Court determined that Aereo engaged in a public performance in violation of the Transmit Clause by streaming broadcasters’ copyrighted works to the public without paying license fees.
Following the Supreme Court ruling, Aereo continued its legal fight, raising a new argument on remand to the district court that because the Supreme Court found Aereo similar to a cable system, Aereo could operate under the compulsory license, which allows cable systems to retransmit broadcast programming for a fee. See 17 U.S.C. § 111. On the broadcasters’ motion for a preliminary injunction against Aereo, Judge Alison J. Nathan of the Southern District of New York rejected this theory, finding that “Aereo’s argument suffers from the fallacy that simply because an entity performs copyrighted works in a way similar to cable systems it must then be deemed a cable system for all other purposes of the Copyright Act.” American Broadcasting Companies v. Aereo, Inc., Nos. 12–cv–1540, 12–cv–1543, 2014 WL 5393867, at *3 (S.D.N.Y. Oct. 23, 2014).
As the district court noted, the United States Court of Appeals for the Second Circuit had already found that “Congress did not . . . intend for § 111’s compulsory license to extend to Internet transmissions.” See id. at *4 (quoting WPIX, Inc. v. ivi, Inc., 691 F.3d 275, 282 (2d Cir. 2012) (“ivi”)). Because the Supreme Court did not overrule ivi in its Aereo decision, to find that Aereo was entitled to the compulsory license of a cable system would fly in the face of binding Second Circuit precedent. Id.
The district court also rapidly disposed of Aereo’s secondary argument, introduced on remand, that its streaming qualified as a “transitory digital network communication” and thus should be permitted to continue under the “safe harbor” provision of the Digital Millennium Copyright Act (“DMCA”), 17 U.S.C. § 512. See id. at *6. As the United States Court of Appeals for the Eighth Circuit has explained, Section 512(a) “limits the liability of an [Internet service provider] when it merely acts as a conduit for infringing material without storing, caching, or providing links to copyrighted material.” Recording Indus. Ass’n v. Charter Commc’ns., Inc., 393 F.3d 771, 776 (8th Cir. 2005). In reviewing this definition and Aereo’s arguments, the district court found that Aereo had failed to explain how or why it satisfied the eligibility requirements for the Section 512 safe harbor, and therefore did not consider or evaluate Aereo’s argument under the DMCA. See id. at *7.
Finally, the district court upheld its earlier ruling that Aereo’s services posed a likelihood of irreparable harm to the broadcasters, see Am. Broad. Cos., Inc. v. Aereo, Inc., 874 F. Supp. 2d 373, 397-403 (S.D.N.Y. 2012) valid. Aereo, 2014 WL 5393867, at *7. Aereo, on the other hand, after being found infringing by the Supreme Court, could not argue “about the loss of ability to offer its infringing product.” Id. Accordingly, the balance of hardships tipped in favor of the broadcasters. See id. at 7.
After finding that Aereo neither qualified for a compulsory license nor fit within the DMCA safe harbor, and reaffirming its prior holding on irreparable harm, the district court preliminarily enjoined Aereo’s near-simultaneous streaming services, “barring Aereo from retransmitting programs to its subscribers while the programs are still being broadcast.” Id. at *10. Because the Supreme Court did not rule on the question of whether Aereo’s provision of time-shifted content fit within the Copyright Act, the district court deferred questions on the legitimacy of that service for later briefing and argument on the scope of a potential permanent injunction against Aereo. See id. at *9.
Following this ruling, Aereo could not offer streaming services. However, on October 28, 2014, just five days after issuance of the district court opinion, the chairman of the Federal Communications Commission (“FCC”) proposed a rule change that would classify online live television providers as “multichannel video programming distributors” like cable and satellite providers. See Tech Transitions, Video, and the Future, See Tech Transitions, Video, and the Future (Oct. 28, 2014). This potential change in classification could prohibit broadcasters from refusing to license their content to Internet television services and thus allow services like Aereo to bring over-the-air television to the Internet. For Aereo, any such legitimacy would come too late, as the company filed for bankruptcy protection on November 21, 2014. While Aereo lost its battle with the broadcasters, it may have helped win a war for consumers interested in Internet streaming services. Spurred in part by the growth of unauthorized services like Aereo, broadcasters and cable companies themselves have been wading into the online television business. CBS, for example, recently announced that it would start Internet streaming. See Joan E. Solsman, Watch out, HBO: CBS Launches Standalone Web TV Service, CNET (Oct. 16, 2014). Univision quickly followed suit. See Janko Roettgers, Make That Three: Univision Wants to Stream to Cord Cutters As Well, Gigaom (Oct. 16, 2014). Ultimately, it appears that Internet television is here to stay, whether offered through streaming services like Aereo or content creators like CBS and Univision.