Media and Entertainment Law Newsletter, June 2014

06/20/2014

Supreme Court to Determine Legality of TV Retransmissions Over the Internet
by Jason Bloom and Tyler Beas

Earlier this year, the U.S. Supreme Court agreed to hear American Broadcasting Companies Inc., et al., v. Aereo, Inc. to determine whether television retransmissions over the Internet violate copyright law. The ruling, which should come out this month, is expected to have a profound impact on the television industry, affecting such issues as retransmission fees, advertising revenue, the use of cloud-based content, and consumer control over content.

Aereo, Inc., an online television service, charges its users a monthly fee to watch "live" or recorded broadcast television on cell phones, computers, and other mobile platforms. Aereo utilizes "farms" of miniature antennas (with an individual antenna assigned to each of its subscribers) that capture local over-the-air television transmissions, create an individual DVR-like recording, and then re-broadcast that recording over the Internet to Aereo's users in the same local area. Importantly for the broadcasters, Aereo does not pay the broadcasters a fee or license the use of these over-the-air transmissions.

The dispute began when the four major television broadcast networks—ABC, CBS, NBC, and Fox—brought suit against Aereo alleging that its retransmission system violates their copyrights in television content and represents a threat to their ability to generate advertising revenue and control subscription fees. Specifically, the plaintiffs claim that Aereo's unauthorized retransmission of their copyrighted material to its subscribers is a public performance in violation of copyright law. Aereo counters that its service is perfectly legal—as some lower courts have found—and allows its subscribers to obtain content they could already access legally with a personal TV antenna. Aereo asserts that the retransmissions are not public performances, but rather enable private performances that are allowable under copyright law.

The District Court denied the plaintiffs' request for an injunction, and allowed Aereo to continue broadcasting while the case moved forward. It noted that the retransmissions to Aereo's subscribers came from the unique copies that were created specifically for each customer, and not from the original broadcast signal sent out by the broadcasters; thus, the retransmissions were private performances in compliance with the Copyright Act. The Second Circuit then affirmed the District Court's denial of the injunction, following its prior decision in Cartoon Network LP, LLP v. CSC Holdings, Inc., 536 F.3d 121 (2d Cir. 2008)(also known as Cablevision). The plaintiff broadcasters appealed the Second Circuit's decision to the Supreme Court, and in a somewhat unusual move, Aereo also urged the high court to hear the case, even though it won at the appellate court level. This is likely because Aereo desires one definitive ruling, and does not want to jump from circuit court to circuit court re-litigating these same issues. A Utah federal court, for example, recently held that Aereo's system was an illegal public broadcast. And, a similar system run by Aereo rival FilmOn X LLC has been temporarily enjoined from operating by Courts in the Ninth Circuit and Washington, D.C.

In their initial brief with the Supreme Court, the plaintiff broadcast networks emphasized that they have spent billions of dollars creating and disseminating programming based on the current copyright legal regime, and that Aereo's circumvention of the copyright law threatens this long-established model. They warned that if Aereo is allowed to continue operating, they will be forced to move over-the-air content to their pay-channels, which would have the effect of ending free over-the-air television.

The Supreme Court's decision has the potential to impact the balance of power between network broadcasters and cable and satellite providers, as well as to affect technological development in the content delivery realm. If the Supreme Court affirms the Second Circuit's decision, the networks could lose considerable bargaining power when negotiating retransmission agreements with cable and satellite providers, which could simply threaten to bypass the networks by adopting Aereo-type systems to provide over-the-air content to their customers. If, on the other hand, the networks prevail before the Supreme Court, Aereo and rival FilmOn would essentially be put out of business, and the networks would continue to carry considerable leverage when negotiating high-dollar retransmission agreements.

At the end of the day, regardless of the outcome, the Supreme Court's decision will not likely be the final word on the ultimate legality of Aereo-type systems. It can be expected that the loser will take the fight to Congress, requesting that it amend the Copyright Act of 1976 to address Aereo-type technologies, which begs the ultimate question: whether the 38-year-old Copyright Act should be interpreted to apply to (and perhaps stifle) technologies that were not even dreamed of at the time of its enactment, or whether Congress should be required to periodically amend the Act to address newly-developed technologies. 

For more information contact Laura Lee Prather at laura.prather@haynesboone.com or 512.867.8476 and Tom Williams at thomas.williams@haynesboone.com or 817.347.6625.

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