Aereo Concedes Defeat – Bankruptcy was the Only Real Option.

December 3, 2014

Aereo has had quite an exciting ride since its advent on the business scene and unbridled challenge to incumbents in the media and broadcast space,[1] to its defense of several and serial legal and regulatory challenges that went as far as the United States Supreme Court,[2] its maneuvering to find some safe harbor that would permit continued operations,[3] and its eventual succumbing in filing for bankruptcy,[4] after losing the fight against a temporary injunction[5] that sounded the death knell of its business model.

 

Of course, if you subscribe to the “circle of life, death, and rebirth”, then an end may also be a beginning, as shown by regulatory hints or suggestions[6] that the copyright and broadcast rules may be changed or even go so far as to favour entities such as Aereo in the future.[7] However, we will only know and believe it when we can see, sell, order, download, and display it (and out of), prime time.

 

Whether the company was a little guy (with big funding), that was just too far ahead of its time,[8] or an upstart that flaunted the law and appropriately got slammed for it,[9] varies by audience. On that much, we can all continue to disagree. However, until such time as another Aereo rises, or the rules change to invite same, Aereo is a part of business and media history,[10] and rather unlikely to make a comeback.

 

In all corners of the media and infotainment space – both new and old, lessons have been taught, and hopefully learned.

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Author:

Ekundayo George is a lawyer and a sociologist.  He has also taken courses in organizational and micro-organizational behavior, and has significant experienced in business law and counseling, diverse litigation, and regulatory compliance practice.  He is licensed to practice law in Ontario and Alberta, Canada, as well as in New York, New Jersey, and Washington, D.C., in the United States of America.  See, for example: http://www.ogalaws.com.  A writer, blogger, and avid reader, Mr. George has sector experience in Technology (Telecommunications through work in the Satellite Policy Branch, International Bureau, at the Federal Communications Commission, eCommerce, Outsourcing, and Cloud contracts); Financial Services, Healthcare, Entertainment, Real Estate and Zoning; International/cross-border trade and other service industry sub-sectors; and Environmental Law & Policy.  A published author on the National Security aspects of Environmental Law, he has also represented clients in courts and before regulatory bodies in both the United States and Canada, and he enjoys complex systems analysis in legal, technological, and societal milieux.

 

As a Lead Consultant and founder of a consulting subsidiary, Mr. George is also an experienced negotiator, facilitator, team leader, and strategic consultant – sourcing, managing, and delivering on small, medium and large strategic projects with multiple stakeholders and multidisciplinary teams.  Our selected consulting 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 and Training; Law and Regulation; Policy and Plans; Statistics, Economics, and Evaluations including feasibility studies; Infrastructure; and Information Technology/Information Systems (IT/IS) – also sometimes termed Information Communications Technologies (ICT) in other parts of the world.  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.  Past results are no guarantee of future success, and specific legal advice should be sought for particular matters through counsel of your choosing, based on such factors as you deem appropriate.

 

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[1] See Ekundayo George. WNET, THIRTEEN v. Aereo, Inc.: Antennas Jousting in and at Clouds, in the Eye of a Global Storm. Posted April 28, 2014, on ogalaws.wordpress.com. 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/<

[2] See Ekundayo George. WNET THIRTEEN v. Aereo, Inc. – the United States Supreme Court (U.S.S.C.) Verdict. Posted June 26, 2014, on ogalaws.wordpress.com. Online: > https://ogalaws.wordpress.com/2014/06/26/wnet-thirteen-v-aereo-inc-the-united-states-supreme-court-u-s-s-c-verdict/<

[3] Aereo sought relief and an operating reprieve by way of the statutory licensing of cable transmissions through the below section of the Copyright Act; with itself to be deemed as a cable broadcaster in light of analysis within the United States Supreme Court’s ruling. However, the Copyright Office declined to grant it that status in a letter to Aereo of July 16, 2014, as the Aereo transmissions were not sufficiently “localized”. The Copyright Office did, however, accept the filing provisionally, pending further legislative or regulatory developments.

 

17 U.S. Code §111 – Limitations on exclusive rights: Secondary transmissions of broadcast programming by cable. See Jacqueline C. Charlesworth, General Counsel and Associate Register of Copyrights, United States Copyright Office. Letter to Aereo. Re Section 111 Statement of Account Filings, dated July 16, 2014. Posted on nab.org and visited November 25, 2014. Online: >http://www.nab.org/documents/newsRoom/pdfs/071614_Aereo_Copyright_Office_letter.pdf< See also Cornell Legal Information Institute (LII), 17 U.S.C. §111. Online: >http://www.law.cornell.edu/uscode/text/17/111<

 

Aereo also sought relief from the FCC, in having itself deemed a multichannel video program distributor (MVPD) over the internet. Noting a lack of clear legal rules that could assist new entrants in their challenge to incumbents, and their efforts at market expansion in favour of the consumer, Counsel for Aereo wrote in the letter, that:

 

“The Commission could provide such assurance to new market entrants like Aereo by defining or construing “MVPDs” to include systems that transmit linear channels of video programming to consumers via the internet—thereby securing to all MVPDs, in a technology-neutral way, the right to engage in timely, good faith negotiations to license channels by retransmission consent.”

 

After meeting with the FCC Commissioners and senior staffers to present its case and plea for an expedited notice of proposed rulemaking (NPRM) procedure, however, and before the Commission could issue a ruling on the matter, the New York Federal District Court made its adverse preliminary injunction ruling against Aereo.

 

“Finally, Aereo emphasized that timely Commission action is crucial to its ability to bring such a service to market. Issuing the proposed NPRM within the next several weeks, and adopting the proposed rule within several months thereafter, would support Aereo’s re-launch as a viable and sustainable new entrant in competition with incumbent MVPDs.”

 

See Seth Greenstein, Esq., of Constantine Cannon LLP, Counsel to Aereo. Letter to the Federal Communications Commission (FCC), Re: Ex Parte Presentation Notice, Interpretation of the Terms “Multichannel Video

Programming Distributor” and “Channel,” MB Docket No. 12-83, dated October 10, 2014. Published on apps.fcc.gov. Online: >http://apps.fcc.gov/ecfs/document/view?id=60000972464<

[4] On November 20, 2014, Aereo filed for protection from its creditors under Chapter 11 (reorganization) of the United States Bankruptcy Code, in the United States Bankruptcy Court for the Southern District of New York. The case number is 1:14-bk-13200. See Pacer for a fuller chronology of the petition. Online: >https://www.pacermonitor.com/public/case/5258727/Aereo,_Inc<

[5] See American Broadcast Companies, Inc., v. Aereo, Inc., 12-cv-1540, and WNET et al. v. Aereo, Inc., 12-cv-1543, October 23, 2014 temporary injunction Opinion and Order of The Honourable Alison J. Nathan, United States District Judge, in the United States District Court for the Southern District of New York. Posted on nab.org, visited November 25, 2014. Online: >http://www.nab.org/documents/newsRoom/pdfs/102314_Aereo_injunction.pdf<

 

“In light of the Supreme Court’s decision, Plaintiffs are now able to demonstrate a likelihood of success on the merits. The balance of hardships also now tips in their favor and, as previously held, an injunction would not disserve the public interest, Aereo I, 874 F. Supp. 2d at 403-404.”

Opinion and Order at page 16: III Conclusion.

 

The court in its ruling, soundly rejected both the Aereo’s arguments under 17 U.S.C. §111 (community antenna television system/cable broadcaster), and 17 U.S.C. §512(a) (innocent conduit). See also 17 U.S. Code §512 – Limitations on liability relating to material online. Published on Cornell Legal Information Institute (LII). Online: >http://www.law.cornell.edu/uscode/text/17/512<

[6] See T.C. Scottek. FCC considers backdoor rule change that could jumpstart the era of internet television. Posted May 23, 2012, on theverge.com. Online: >http://www.theverge.com/2012/5/23/3038777/fcc-rule-change-internet-tv-cable-mvpd< In 2012, conventional wisdom placed the FCC on the verge of re-interpreting the word “channel” under the Communications Act of 1934 (as amended by the Telecommunications Act of 1996), to be used both ““in a “container” sense, to refer to a range of frequencies used to transmit programming, and in a “content” sense to refer to the programming itself,”” which would have put internet television providers (online video distributors, or “OVDs”) such as Hulu and Netflix into the same category as mainstream cable and satellite companies – such as Comcast and TimeWarner, and forced the incumbent major networks to provide them with content as multichannel video programming distributors (MVPDs). However, the initiative did not hold its ground.

[7] Chairman Tom Wheeler, the United States Federal Communications Commission (FCC). Tech Transitions, Video, and the Future (Official FCC Blog). Posted October 28, 2014, on fcc.gov/blog. Online: >http://www.fcc.gov/blog/tech-transitions-video-and-future<

 

“The mantra “Competition, Competition, Competition” fits perfectly with consumers’ desires for video choices. That’s why I’m asking my fellow Commissioners to update video competition rules so our rules won’t act as a barrier to this kind of innovation. Specifically, I am asking the Commission to start a rulemaking proceeding in which we would modernize our interpretation of the term “multichannel video programming distributor” (MVPD) so that it is technology-neutral. The result of this technical adjustment will be to give MVPDs that use the Internet (or any other method of transmission) the same access to programming owned by cable operators and the same ability to negotiate to carry broadcast TV stations that Congress gave to satellite systems in order to ensure competitive video markets.”

 

“A key component of rules that spur competition is assuring the FCC’s rules are technology-neutral. That’s why the definition of an MVPD should turn on the services that a provider offers, not on how those services reach viewers. Twenty-first century consumers shouldn’t be shackled to rules that only recognize 20th century technology.” (Emphasis added).

 

[8] TMP Staff. Aereo bankruptcy: A visionary tech startup killed off by big media and courts? Posted November 22, 2014, on techmediapolitics.com. Online: >http://www.techmediapolitics.com/aereo-bankruptcy-a-visionary-tech-startup-killed-off-by-big-media-and-courts/<

[9] Joan E. Solsman. Aereo’s bankruptcy filing marks a fade to black: After months of “not dead yet” declarations, the streaming-TV startup files for Chapter 11 reorganization, the clearest sign that a Supreme Court ruling set it on a road to nowhere. Published November 21, 2014, on cnet.com. Online: >http://www.cnet.com/news/aereo-files-for-bankruptcy-protection/<

[10] See e.g. Aereo. The Next Chapter. Posted November 21, 2014, on blog.aereo.com. Online: >http://blog.aereo.com/2014/11/next-chapter/<

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