The Supreme Court on Friday announced that is has decided to review the decision of a US Appeals Court in New York finding that the Aereo service of retransmitting over the Internet the signals of local television stations, without permission from or payment to those stations, was legal. We wrote about the Second Circuit Court of Appeals decision in the Aereo case here. The Supreme Court’s decision to hear the case, which may signal that the case will be decided before the Court adjourns its term in June, was supported not only by the television stations who had sought to block the Aereo service and the program suppliers to those television stations (including many of the sports leagues), but also by Aereo itself. As Aereo and its copycat service FilmOn X were being sued in every jurisdiction where they started to do business, the desire to get a quick and final resolution of the legality of their services is a natural one. This is especially true as the Courts have been reaching different decisions, as demonstrated by the two cases decided only a month apart, one in Boston finding Aereo to be legal, and one in DC finding FilmOn X to be infringing on the copyrights of the TV stations who brought the lawsuit. So what issues will the Supreme Court be deciding?
One newspaper editorial, from the Los Angeles Times, has suggested that this is a Betamax case for the 21st century. The Betamax case, officially known as Sony Corp. v Universal City Studios, was the case that declared the VCR to be legal, and found that its original manufacturer, Sony, was not contributorily infringing on the copyrights held by Universal and other studios that brought the case. But that comparison really does not hold up, as the Betamax decision was premised on several findings that simply cannot be made here. First, the Court in the Betamax case found that the VCR was not in and of itself an infringing service, as it had substantial legal uses. In fact, there was testimony in the record that many copyright holders actually were not opposed to the use of a Betamax to copy their programs for time shifting and other purposes. In the Aereo cases, copyright holders are for the most part universally opposed to the service and, other than retransmitting copyrighted programs without consent, there does not appear to be another use for the service.
In Sony, the right of the Copyright holder that was allegedly being infringed was the copyright holder’s right to control the reproduction of its works. In the Aereo case, while there are some questions about reproduction, the principal focus is on the right of the copyright holder to control the public performance of its works. That distinction is important in highlighting the reasoning of the Court. In the Sony case, the Court undertook a relatively standard “fair use” analysis to conclude that, while the rights of a copyright holder may have been implicated by recordings using the Betamax, that use was “fair” under the copyright act. A fair use analysis, as we wrote just last week, looks at several factors, including the purpose of the use (for profit or not), the nature of the copyrighted work, the amount of the copyrighted work used, and the impact on the potential market or value of the copyrighted work. In the Sony case, the court concluded that the use of the Betamax was a nonprofit one by the consumers, and the impact on the value of the programming being time shifted was minimal (relying on the testimony of several program suppliers that they did not mind their programming being time shifted by consumers).
The analysis in the Aereo case is different. Aereo has not been arguing that the use of the television signal by consumers is a fair use, but instead that there is no violation of the right of the copyright holder at all – as there is no public performance. The crux of Aereo’s argument is that the consumer is the one making the performance by deciding to use the Aereo service, and by pressing the button on their computer that triggers Aereo’s tiny antennas to pick up the TV signals and transmit them to the consumer, they are making all the decisions about the transmission of the work. Thus, Aereo is claiming that the transmission by each individual is a private performance, not a public one. The copyright holder does not have a right to limit private performances of copyrighted works – so you can sing as many copyrighted works that you want in your living room to your family without paying a public performance royalty, or binge on TV shows or DVDs without paying a public performance right.
As we have written, that analysis essentially is one that contends that Aereo itself is not making the retransmission of the copyrighted works at all. While the Courts have disagreed on that argument (see our articles mentioned above where the DC and Boston Courts within a month disagreed, the DC Court finding that Aereo, just like a cable system, is making a retransmission of a copyrighted work which is covered under the public performance right, while the Boston court found that it was the individual who was making the transmission). The resolution of that issue will seemingly be crucial to Aereo’s case, as they would have a much tougher time meeting the fair use test used in Sony. If they are found to be the party doing the transmission, it will clearly be a for-profit endeavor, as they charge a subscription fee. The impact on the market and value of the copyrighted work will also be a hard argument for Aereo to win, as virtually all programmers and TV stations have opposed their plans, and there can be little doubt that the value of the copyrighted works (through the retransmission fees broadcasters currently collect for the retransmission of their programs by cable and other services that are really competitors of Aereo, especially as more and more retransmission deals include some sort of streaming component for the MVPDs that are signing them) would be impacted by a service that undercuts the retransmission marketplace.
So the issue will be who is doing the performance, not a fair use decision as in the Betamax case. We will all be watching to see the Court’s decision, perhaps later this year.