In a decision released this week, the 9^th Circuit Court of Appeals overturned a District Court decision (about which we wrote here) that had found that a video service provided by Aereokiller was a “cable system” as defined by Section 111 of the Copyright Act. That decision had held that, as a cable system, Aereokiller was entitled to retransmit the programming broadcast by a television station under a statutory license, without specific permission from the copyright holders in that programming. The Court of Appeals, while finding that the wording of Section 111 was ambiguous, determined that the consistent position taken by the Copyright Office, finding that cable systems as defined by Section 111 had to be local services retransmitting TV programming, with some fixed facilities to a defined set of communities was determinative of the issue. The Copyright Office’s interpretation was given particular deference as Congress had been well-aware of this interpretation of the statute in other contexts, had in the past amended the Copyright Act to accommodate other new technologies that the Copyright Office found to be outside its definition of a cable system, and had taken no action to amend the statute to include Internet-based video transmission services.

The issue in the case is whether the broad definition of a cable system included in Section 111 would include an over-the-top system such as that offered by Aereokiller. The definition contained in Section 111 is:

A “cable system” is a facility, located in any State, territory, trust territory, or possession of the United States, that in whole or in part receives signals transmitted or programs broadcast by one or more television broadcast stations licensed by the Federal Communications Commission, and makes secondary transmissions of such signals or programs by wires, cables, microwave, or other communications channels to subscribing members of the public who pay for such service. For purposes of determining the royalty fee under subsection (d)(1), two or more cable systems in contiguous communities under common ownership or control or operating from one headend shall be considered as one system.

The question of whether this definition includes Internet-based video systems has been raised many times since the Supreme Court’s Aereo decision (about which we wrote here), which found that the retransmission of television signals by such systems were “public performances” that needed a license. After the Supreme Court’s determination in Aereo, which had language comparing these over-the-top systems to cable systems that need a statutory license to cover their public performances, these services argued that they were in fact cable systems entitled to rely on the Section 111 statutory license to cover their public performances of the TV station’s programming. These systems argued that they made “secondary retransmissions” of television signals “by wire, cables, microwave or other communications channels” – the Internet argued to be one of those other communications channels. While most courts have rejected this argument (see our articles here and here), a District Court in California was an exception, finding that the statutory language was broad enough to cover these Internet-based systems.

In its decision, the 9^th Circuit closely analyzed the arguments of the parties as to the meaning of the statutory language defining a cable system. While finding that the language was not entirely clear, the Court focused on the interpretations of the Copyright Office, the actions of Congress, and the legislative purposes of the Section 111 statutory license in determining that Aereokiller was not a cable system.

In particular, the Court noted that the Copyright Office, since 1992, has issued a series of statements concluding that a cable system had to be a localized service offering service to local communities through fixed facilities. While that definition has not itself been specifically adopted by Congress, Congress has acted in ways that indicated its assent to that definition. For instance, when the Copyright Office determined that satellite television did not fit the definition of a cable system (which, if the broad reading advocated by Aereokiller had been correct, satellite television would be covered under Section 111 as a “cable system”), Congress amended the Copyright Act to include new sections dealing with a satellite compulsory license (a separate license which it has continually amended, see for instance our article here about one recent amendment). When the Copyright Office concluded in the 1990s that MDS systems transmitting by microwave did not fit the definition of a cable system, Congress added the word “microwave” to the Section 111 license. These actions clearly signaled Congress’ assent to the Copyright Office’s interpretation of the definition of a cable system.

In contrast, Congress has not moved on any changes to the language of the Copyright Act to accommodate over-the-top systems, even though it was well aware that the Copyright Office did not consider them to be cable systems. The Copyright Office has in several orders stated that it did not believe that over-the-top systems were cable systems, and has even initiated proceedings to look at whether Congress should adopt a statutory license to cover such systems (see, for example, our article here about one such proceeding). Despite these statements, Congress has never moved to change its definition of a cable system to explicitly cover over-the-top systems.

The Court looked at the history of the adoption of Section 111, and found that the history and purpose of the section were consistent with the Copyright Office’s interpretation. Section 111 was adopted when cable systems were first developed to bring television services to rural communities that had bad over-the-air reception. Congress agreed that such uses did implicate the public performance rights of copyright holders, but recognized that the service provided by cable was a public good – so it adopted the statutory license to make it easier for cable systems to carry TV signals without having to negotiate rights with each copyright owner in every program carried by a TV station. But that statutory license was limited geographically – hence the statutory references to headends and contiguous communities. As an Internet transmission presents a potentially different service, not confined by geography and potentially impacting copyright owners differently than does the local retransmission of TV programs by a cable system, the Court found the Copyright Office’s interpretation to be reasonable, and adopted it in its decision.

Note that the decision never even looks at the retransmission consent- must carry rules of the FCC – instead focusing solely on the Copyright issues. This decision, being consistent with that of the Courts elsewhere in the US, may well signal the end to these Internet-based systems – which are actually gradually being replaced by fully licensed over-the-top services offered by cable providers, television networks and other companies that secure rights to programming and don’t try to get a deal too good to be true. The 9^th Circuit’s decision is now one more in a line of decisions now consistent in holding that there is no right to free or almost free programming to be rebroadcast by these Internet-based services.