WNET THIRTEEN v. Aereo, Inc. – the United States Supreme Court (U.S.S.C.) Verdict.

June 26, 2014

 

In April, we presented a brief summary of the Aereo case, its history, and some of the issues, laws, and policies at stake,[1] as the case awaited a final judicial opinion from the United States Supreme Court (U.S.S.C.). Now, the U.S.S.C. has ruled,[2] and the result for Aereo, was bad.

 

WHO (which side or what) WON?

The broadcaster won, as Aereo was found to have infringed their exclusive copyrights in making near-simultaneous “transmissions”[3] of the copyrighted works at issue through its record-and-stream service, to any subscriber “personal computer, tablet, smart phone, Internet-connected television, or other Internet-connected device.”[4]

 

The Judges

Six Judges formed the majority opinion (Holding) – delivered by Breyer, J, and joined by Roberts, C.J., and Kennedy, Ginsburg, Sotomayor, and Kagan, JJ. Three Judges felt and would have ruled otherwise (Dissent), which Scalia, J, delivered, and Thomas and Alito, JJ, joined.

 

WHY?

Each transmission (under the Aereo service “watch” function)[5] was deemed to be a performance (with viewer initiation deemed an insufficient intervening issue to render Aereo akin to a copy shop that could not be held liable for patron copyright infringement),[6] and each such performance was deemed to be a performance to the public (with no weight given to the fact that they received their performances individually).[7] In its Holding, however, the Court noted that it was not issuing any opinion on the copyright status of transmitting the pre-recorded programming that an Aereo customer had recorded for later playback through the service[8] (the “record” function).[9] Neither, for that matter, was it passing issue on any other technologies that had not been brought before it:

We agree with the Solicitor General that “[q]uestions involving cloud computing,[remote storage] DVRs, and other novel issues not before the Court, as to which ‘Congress has not plainly marked [the] course,’ should await a case in which they are squarely presented.[10]

 

Similarly, the availability of additional action from Congress, was also acknowledged:

And we note that, to the extent commercial actors or other interested entities may be concerned with the relationship between the development and use of such technologies and the Copyright Act, they are of course free to seek action from Congress.[11]

 

WHAT NEXT?

 

In the Case

The verdict below (denying the injunction) was reversed, and the case was remanded to the United States Court of Appeals for the Second Circuit for further proceedings accordingly.

For Aereo:

Now, Aereo must shut down under a temporary injunction pending final disposition of the additional issues on remand. It can then:

(a) never re-open;

(b) re-open under a new business model that (it might claim) does not infringe copyright;

(c) re-open after negotiating mutually-acceptable copyright licensing fees with the broadcasters (which will be unlikely, as the rates requested will likely make Aereo subscriber-fees equal to or higher than cable rates in order for good cost-recovery and preservation as a going concern);

(d) re-open, as led by a “rogue element” or in the form of a copycat/knock-off, in a jurisdiction that has a different view of United States and international copyright laws – and perhaps other laws, as seems the norm in the current climate, but with varying results (as with Bitcoin, Mega Upload, proponents of online gambling, and others); or

(e) pursue a fifth, as yet undetermined path.

 

In Congress:

The United States Congress is, as always, free to consider amending or clarifying any law that might jeopardize or impinge negatively, upon existing or proposed business ventures.

 

For Everyone Else:

In the meantime, other cases may be brought (citing this ostensibly limited Aereo precedent), by and between competitors who want to shut each other down. The field (and courts) may become quite crowded as the level and depth of “artful pleading” on the topic progresses.

(…) [T]hen (assuming one shares the majority’s estimation of right and wrong) what we have before us must be considered a “loophole” in the law. It is not the role of this Court to identify and plug loop­holes. It is the role of good lawyers to identify and exploit them, and the role of Congress to eliminate them if it wishes.[12]

 

THE DISSENT

The dissenting opinion also deserves some further consideration. Justice Scalia found that Aereo made no performance whatsoever – whether public or private – and he championed the copy shop analogy in his opinion, [13] as earlier stated.

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.[14]

 

Further criticising the Courts “guilt by resemblance regime”,[15] Justice Scalia notes that there is a lack of any “volitional conduct” by Aereo:

(i) as contemplated by the language of the Copyright Act and legal authorities on the Copyright Act;[16]

(ii) that has been upheld by every United States Circuit Court that has opined on the issue (an upon which the Supreme Court still had yet to rule);[17] and he further finds –

(iii) that Aereo is essentially neither like a video-on-demand service nor a pure and simple copy shop; “[r]ather, it is akin to a copyshop that provides its patrons with a library card[18] (in the form of those Aereo antennae that customers can use to call-up programming that may either be in the public domain already, or still remain copyright-protected).

 

Ironically, even though Justice Scalia appears to have concurred in the practical result (reversal and remand) but not the process, his dissent is not captioned as so concurring, and he goes to great lengths to critique the legal result (bifurcation into 2 separate tests for primary infringement: the traditional volitional act standard, and the new Aereo lookalike standard).

I share the Court’s evident feeling that what Aereo is doing (or enabling to be done) to the Networks’ copyrighted programming ought not to be allowed. But perhaps we need not distort the Copyright Act to forbid it. As discussed at the outset, Aereo’s secondary liability for performance infringement is yet to be determined, as is its primary and secondary liability for reproduction infringement.

 

Justice Scalia feels that the Aereo ruling has opened a can of worms, but the majority feels that it has effectively kicked the ball back into the Congressional corner for much needed clarification through amendments that accord to the modern (and fast-changing) technological landscape. Sadly enough, I think that both sides of the Court may be right in their predictions, and the amendment process will be hard-fought with many more related cases in the interim.

 

So, did the public interest win, as I had originally hoped? I would say no, because a broader or more comprehensive ruling would have settled more issues, saved on judicial resources (in future cases re-biting this apple), and clarified the landscape for those related current businesses such as the cloud, proposed or potential future businesses, and of course, Aereo itself. As things now stand, the United States Court of Appeals for the Second Circuit may still be second-guessed by the United States Supreme Court on the matter of Aereo’s secondary liability for performance infringement, primary and secondary liability for reproduction infringement, or related matters; as may other Circuit courts if there are glaring or highly technical splits in their opinions on copyright law and related matters going forwards.[19]

 

Clearly, this issue has not been fully, effectively, or finally settled.[20]

 

*********************************************************************

 

Author:

Ekundayo George is a sociologist and a lawyer. He has also taken courses in organizational and micro-organizational behavior, and has significant experienced in business law and counseling (incorporations, business plans, contracts and non-disclosure agreements, teaming and joint venture agreements), diverse litigation, and regulatory compliance practice. He is licensed to practice law in Ontario, Canada, as well as in New York, New Jersey, and Washington, D.C., in the United States of America (U.S. business advising, outsourcing and cross-border trade, technology contracts, and U.S. financing). See, for example: http://www.ogalaws.com. A writer, blogger, and avid reader, Mr. George has sector experience in Technology (Telecommunications, eCommerce, Outsourcing, Cloud), Financial Services, Healthcare, Entertainment, Real Estate and Zoning, International/cross-border trade, other Services, and Environmental Law and Policy. He is a published author on the National Security aspects of Environmental Law, has represented clients in courts and before regulatory bodies in both Canada and the United States, and he enjoys complex systems analysis in legal, technological, and societal milieux.

 

Mr. George is also an experienced negotiator, facilitator, team leader, and strategic consultant- sourcing, managing, and delivering on large, strategic projects with multiple stakeholders and multidisciplinary teams. Our competencies include program investigation, sub-contracted procurement of personnel and materiel, and such diverse project deliverables as business process re-engineering, devising and delivering tailored training, and other targeted engagements through a highly-credentialed resource pool with several hundred years of combined expertise, in: Healthcare; Education & Training; Law & Regulation; Policy & Plans; Statistics, Economics, & Evaluations including feasibility studies; Infrastructure; and Information Technology/Information Systems (IT/IS) – sometimes also termed Information Communications Technologies, or ICT). See, for example: http://www.simprime-ca.com.

 

Hyperlinks to external sites are provided to readers of this blog as a courtesy and convenience, only, and no warranty is made or responsibility assumed by either or both of George Law Offices and Strategic IMPRIME Consulting & Advisory, Inc. (“S’imprime-ça”) including employees, agents, directors, officers, successors & assigns, in whole or in part for their content, accuracy, or availability.

 

This article creates no lawyer-client relationship, and is not intended or deemed legal advice, business advice, the rendering any professional service, or attorney advertising where restricted or barred. The author and affiliated entities specifically disclaim and reject any and all loss claimed, no matter howsoever resulting as alleged, due to any action or inaction done in reliance on the contents herein.

 

[1] See Ekundayo George. WNET THIRTEEN v. Aereo, Inc.: Antennas Jousting in and at Clouds, in the Eye of a Global Storm. Published on ogalaws.wordpress.com, April 28, 2014. Online: > https://ogalaws.wordpress.com/2014/04/28/wnet-thirteen-v-aereo-inc-antennas-jousting-in-and-at-clouds-in-the-eye-of-a-global-storm/< The case is actually 2 cases: WNET Thirteen et al. v. Aereo Inc.; and American Broadcasting Companies, Inc., et al v. Aereo, Inc.  The Supreme Court decision uses the latter case caption.

[2] American Broadcasting Cos., Inc., et al v. Aereo, Inc., 573 U.S. ______ (2014). No. 13–461, Slip Opinion, argued April 22, 2014—Decided June 25, 2014, Supreme Court of the United States (U.S.S.C.). Online: >http://www.supremecourt.gov/opinions/13pdf/13-461_l537.pdf<

[3] See Cornell Legal Information Institute (LII). U.S. Code: Title 17 – Copyrights. Online: >http://www.law.cornell.edu/uscode/text/17<

 

17 U.S.C. §101 – Definitions.

To perform or display a work “publicly” means-

(1) to perform or display it at a place open to the public or at any place where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered; or

(2) to transmit or otherwise communicate a performance or display of the work to a place specified by clause (1) or 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. (Emphasis added).

[4] Supra note 2.  American Broadcasting Cos., Inc., et al v. Aereo, Inc., 573 U.S. ______ (2014), Slip Op. (Holding) at 2.

[5] Justice Scalia discussed the “watch” and “record” functions in his dissent.  See Id. Slip Op. (Dissent) at 11.

[6] Id. Slip Op. (Holding) at 10.

In other cases involving different kinds of service or technology providers, a user’s involvement in the operation of the provider’s equipment and selection of the content transmitted may well bear on whether the provider performs within the meaning of the Act. But the many similarities between Aereo and cable companies, considered in light of Congress’ basic purposes in amending the Copyright Act, convince us that this difference is not critical here. We conclude that Aereo is not just an equipment supplier and that Aereo “perform[s].”

See also Infra, note 13 and accompanying text.

[7] American Broadcasting Cos., Inc., et al v. Aereo, Inc., 573 U.S. ______ (2014). No. 13–461, Slip Op. (Holding) at 15, argued April 22, 2014—Decided June 25, 2014, Supreme Court of the United States (U.S.S.C.). Online: >http://www.supremecourt.gov/opinions/13pdf/13-461_l537.pdf<

Similarly, an entity that transmits a performance to individuals in their capacities as owners or possessors does not perform to “the public,” whereas an entity like Aereo that transmits to large numbers of pay­ing subscribers who lack any prior relationship to the works does so perform. (…) In other words, “the public” need not be situated together, spatially or temporally. For these reasons, we conclude that Aereo transmits a performance of petitioners’ copyrighted works to the public, within the meaning of the Transmit Clause.

[8] Id. Slip Op. (Holding) at 17.

We cannot now answer more precisely how the Transmit Clause or other provisions of the Copyright Act will apply to technologies not before us.

[9] Id. Slip Op. (Dissent) at 11. Legality of the “record” function is one of the matters set for resolution on remand.

[10] Id. Slip Op. (Holding) at 17, citing to the Brief for United States as Amicus Curiae 34 (itself quoting Sony, supra, at 431 (alteration in original)).

[11] Id.

[12] See e.g. American Broadcasting Cos., Inc., et al v. Aereo, Inc., 573 U.S. ______ (2014). No. 13–461, Slip Op. (Dissent) at 12, argued April 22, 2014—Decided June 25, 2014, Supreme Court of the United States (U.S.S.C.). Online: >http://www.supremecourt.gov/opinions/13pdf/13-461_l537.pdf<

[13] Id. Slip Op. (Dissent) at 4.

[T]he customer chooses the content and activates the copying function; the photocopier does nothing except in response to the customer’s commands. Because the shop plays no role in selecting the content, it cannot be held directly liable when a customer makes an infringing copy.

[14] Id. Slip Op. (Dissent) at 1.

[15] Id. Slip Op. (Dissent) at 10.

[16] Id. Slip Op. (Dissent) at 2-3.

The Networks’ claim is governed by a simple but profoundly important rule: A defendant may be held directly liable only if it has engaged in volitional conduct that violates the Act. See 3 W. Patry, Copyright §9:5.50 (2013). This requirement is firmly grounded in the Act’s text, which defines “perform” in active, affirmative terms: (…).

[17] American Broadcasting Cos., Inc., et al v. Aereo, Inc., 573 U.S. ______ (2014). No. 13–461, Slip Op. (Dissent) at 3, argued April 22, 2014—Decided June 25, 2014, Supreme Court of the United States (U.S.S.C.). Online: >http://www.supremecourt.gov/opinions/13pdf/13-461_l537.pdf<

Every Court of Appeals to have considered an automated-service provider’s direct liability for copyright infringement has adopted that rule. See Fox Broadcasting Co. v. Dish Network LLC, 747 F. 3d 1060, 1066–1068 (CA9 2014); Cartoon Network, supra, at 130–131 (CA2 2008); CoStar Group, Inc. v. LoopNet, Inc., 373 F. 3d 544, 549–550 (CA4 2004).1 Although we have not opined on the issue, our cases are fully consistent with a volitional-conduct requirement.

[18] Id. Slip Op. (Dissent) at 5, 6.

[19] If, due to this very narrow ruling, additional issues are raised by the Aereo case, the parties may well return to the United States Supreme Court for a second bite at this apple. The Court may well have inadvertently created for itself, a serial visitor.

[20] Please stay tuned!

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