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Corporate Counsel Connect collection

July 2014 edition

Aereo ruling stifles technological innovation

Jeremy Byellin, JD

Jeremy ByellinIt's not often that I find myself quoting an opinion of Justice Scalia in complete agreement, but I now find myself in that situation.

[The claim that Aereo violates the Networks' 'exclusive righ[t]'to 'perform' their programs 'publicly'] fails at the very outset because Aereo does not 'perform' at all. The Court manages to reach the opposite conclusion only by disregarding widely accepted rules for service-provider liability and adopting in their place an improvised standard ('looks-like-cable-TV') that will sow confusion for years to come.

The excerpt is obviously from the Supreme Court's ABC v. Aereo ruling handed down at the end of last month, in which Justice Scalia dissented.

If you haven't been following the case or if you aren't familiar with the ruling, the quotation may seem a jumbled, confused mess. So, I'll give a quick rundown of the case first (you could also read either of these posts on the Legal Solutions Blog for more in-depth coverage).

The case

Aereo is an online service provider that allows subscribers to view live and time-shifted streams of broadcast television on Internet-enabled devices. Aereo facilitates this by "renting" an antenna to its subscribers to receive and record (via DVR) over-the-air broadcast TV, which is then streamed over the Internet to their mobile device.

According to Aereo, all it does is rent equipment to its subscribers. It provides no content as a video-on-demand service would.

According to the group of television networks that sued Aereo, the company's practices violate their exclusive right to "publicly perform" their copyright-protected works (i.e. their broadcast television programs).

Public performance of a work is defined by the 1976 Copyright Act as transmitting "or otherwise communicat[ing] a performance" to, well, the public. As Justice Scalia noted in his dissent, Aereo doesn't perform at all. It is the broadcasters that transmit the performances, and it is Aero's subscribers that choose where and when to receive those broadcasts (each Aereo subscriber had his or her own individually-rented antenna during any given viewing session).

New standard

By all measures, Aereo strictly complied with the text of the Copyright Act (at least as it pertains to the "public performance" issue – the only issue that was appealed to the high court). So why is it, then, that Aereo is now staring at the business end of an adverse Supreme Court ruling?

Well, frankly, because the six justices in the majority (written by Justice Breyer and joined by Chief Justice Roberts and Justices Kennedy, Ginsburg, Sotomayor, and Kagan) didn't seem to like the fact that Aereo exploited what they viewed as a loophole in copyright law, and (to paraphrase Justice Scalia) decided to create a new standard.

And what is this "looks-like-cable-TV" standard? Through Congress' amendments to the 1976 Copyright Act, it established that cable systems made "public performances" that required them to pay licensing fees. Even though the majority itself admits that Aereo's system operates very differently from a cable system, it "looks" similar enough to cable that the amendments must apply to Aereo because that's what Congress would have intended.

Aside from the logical fallacies that plague the majority opinion, this standard may create new liabilities for cloud-based services.

Creating confusion and stifling innovation

Now, your basic cloud-based storage services are likely to be unaffected. But what about those services that allow subscribers to move hardware off-site while maintaining access to it via the Internet? If that hardware is used to receive a third party's public performance, wouldn't liability for copyright infringement attach to the renter of the hardware?

Beyond these direct similarities to Aereo's systems, what about any Internet service – current or future – that "looks like a cable system," but doesn't actually operate like one such that there is no statutory need to pay licensing fees?

It's this kind of uncertainty created by Aereo that will stifle technological innovation going forward.

After all, if statutory text no longer is a reliable guide to complying with the law, how could any new technologies venture into the marketplace without knowing where they stand legally?

About the author

Jeremy Byellin is a practicing attorney in the state of Minnesota and a writer for the Westlaw Insider blog. His articles for the blog cover a wide range of legal topics, with a specific focus on major legal developments and cyberlaw.