Aereo Update: Next Stop, En Banc?

Broadcasters ask full Second Circuit to review panel’s decision allowing Aereo to continue to operate pending trial of infringement claim

We told you the Aereo saga wasn’t over. 

Having lost the most recent (but certainly not the last) round in their litigation war with Aereo, the broadcast plaintiffs have filed a “petition for rehearing en banc” with the U.S. Court of Appeals for the Second Circuit. In that petition, the broadcasters are asking the full 13-member court to review the 2-1 decision of a three-judge panel that affirmed a lower court ruling allowing Aereo to continue to operate while the trial of the case moves ahead.

[Before we get into the nitty-gritty of the petition, let’s take a brief introductory side trip into the world of appellate procedure. Each of the 13 federal courts of appeals consists of between six (in the First Circuit, covering New England) and 29 (in the Ninth Circuit, which sprawls across nine western states and a couple of territories) judges. When an appeal is filed, it is normally heard by a panel consisting of three judges from the particular circuit court where the appeal is filed. 

After the panel issues its decision, if the losing party believes that that decision was wrong, the loser has three options. It can ask: (1) the three judges to re-think their disposition of the case; (2) all the judges in the circuit, sitting “en banc”, to review the panel’s decision; or (3) the Supreme Court to look the case over. Supreme Court review is usually the longest of long shots. Similarly, since the panel has just deliberated over the issue and come up with the result at hand, it’s usually a pretty good bet that the panel won’t be eager to reverse itself. But en banc review brings a bunch of different judges into the mix, so it presents at least some source of hope to the party unhappy about the panel decision.

But the rules are set up to make en banc review hard to get.

You’ve first got to argue with a straight face that en banc review is necessary either to maintain “uniformity of the court’s decisions” or to address a “question of exceptional importance”. If you can get past that hurdle, you’re still not home. The court isn’t obligated to give you the time of day unless at least one judge calls for a vote as to whether or not the case should be heard en banc. If such a call is made, then all the judges vote and, if a majority supports en banc review, the en banc process kicks in. That process entails another round of briefs and oral argument presented to all the judges on the particular circuit in question. Usually, but not invariably, the panel’s judgment gets vacated once the full court decides to review it en banc.]

According to the broadcasters’ petition, the decision allowing Aereo to keep operating “will wreak commercial havoc by allowing new and existing distributors to design around [the requirement to get a license] and profit from the delivery of copyrighted programming while paying nothing for it.” If that’s not dire enough for you, they also claim that the decision could cause “the entire retransmission licensing regime” to be “swallow[ed]”.   The swallowing (according to the petitioners) will occur thanks to Aereo-like set-ups supposedly being contemplated by Time Warner Cable and Dish Network, and the recent statements made by one of their own – Newscorp COO Chase Carey’s threat to convert the Fox Network to a subscription-based cable channel.

The broadcasters’ petition presents a two-fold attack. 

First, it argues that the panel’s 2-1 ruling misinterprets the Copyright Act. This argument depends to a great degree on linguistic subtleties, like whether the terms “transmission” and “performance” were intended by Congress to mean the same thing. According to the petition, the Act clearly contemplated that “‘transmissions’ and ‘performances’ are not the same thing” – “the ‘performance’ is the thing that is communicated and the transmission is the means of communicating it.” This, of course, is a distinction made by dissenting Judge Denny Chin in the earlier Aereo decision. (Oh yeah, it’s also a distinction made by the United States District Court for the Central District of California in the AereoKiller case.) It is likely to be the predominant legal issue when the case is ultimately resolved (with the predominant – and only – factual issue being whether Aereo can actually do what it claims with just one antenna per subscriber).

But the challenged interpretation of the Copyright Act itself derived from the Second Circuit’s 2008 Cablevision decision on which Aereo relies to justify its operations as legal. So in a separate section the broadcasters’ petition takes dead aim on the rationale of the Cablevision decision as well.

As the broadcasters see it, Cablevision was based on a “false premise” and the earlier decision in Aereo compounds the error in several ways.

The three-judge Cablevision panel’s decision was based in large measure on the notion of a hypothetical “hapless customer” who wanted to use the Cablevision remote DVR service to record a program in his den but play it back in his bedroom. The Cablevision panel concluded that that consumer wasn’t engaging in a public performance.  Within the context posited by the panel, the broadcasters agree with its conclusion: “a subscriber who records a program in his den and watches it in his bedroom is not transmitting the program to the public; he is transmitting it to himself”.   

But, say the broadcasters, that’s not the case with Aereo’s system, which doesn’t simply involve one person retransmitting to himself. Rather, third parties are involved; it’s important to focus on who transmits and who receives a given performance.

The Petition also homes in on Cablevision’s notion that aggregation of individual transmissions could create a public performance only if they came from a single master copy. But, the broadcasters observe, the all-important Transmit Clause in Section 117 of the Copyright Act says nothing about master copies. The broadcasters argue that “a far better reading of the Transmit Clause would aggregate all transmissions of the same performance of a work by the same transmitter to members of the public, treating them collectively as a public performance regardless of whether the source is one or many copies.” Under this interpretation, Aereo, ivi, cable systems, and satellite services would all require a license. 

Having thoroughly beaten up on the Cablevision rationale, though, the broadcasters stop short of arguing that that decision should be discarded.  In a deft pirouette, they urge that “[w]hile the reasoning of Cablevision . . . needs to be rejected, that does not mean there cannot be private performances.” In other words, the petitioners are willing to concede that the result in Cablevision was correct – that is, the “hapless customer” should be permitted to record a program in his den and watch it in his bedroom without incurring the wrath of the Copyright Police. But the path by which the Cablevision court reached that result was flawed. We’re guessing that this delicately crafted argument is intended to attract the broadest possible support across all the Second Circuit’s judges, including those who would prefer not to overrule the Cablevision case.

So, what now? We sit back and wait to see whether the Second Circuit agrees to en banc review. If it doesn’t, the case stays in its current posture: Aereo can continue to operate while the trial of the broadcasters’ claims proceeds before the district court. If the Second Circuit takes the en banc appeal, in all likelihood Aereo’s operation will be stopped pending the outcome of that process. 

But regardless of how any of this turns out, we still think it’s likely that the underlying copyright issue here will eventually be resolved either by the Supreme Court or by Congress. The issue is already in play in both the Second Circuit, with the Aereo case, and the Ninth Circuit, with the AereoKiller case. And, since Aereo is promising to roll its service in more markets in the near future, it’s entirely possible that other cases will be brought in other circuits as well. Obviously, the issue has national implications demanding a uniform, national, resolution. Check back here for updates.

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Comments (2) Read through and enter the discussion with the form at the end
Neal McLain - May 22, 2013 5:11 PM

This case bears a remarkable similarity to the battles that the cable
TV industry fought 50 years ago. At the time, a number of program
suppliers had sued various cable TV companies on grounds that the
systems had "performed" their copyrighted works. The then-current
copyright law -- the Copyright Act of 1909 -- clearly did not provide
much guidance for the courts.

One of these cases, Fortnightly Corp. v. United Artists (1968),
reached the Supreme Court. In this case, United Artists Television,
as owner of the copyright on several motion pictures, had sued
Fortnightly Corporation, a cable television operator, alleging that
Fortnightly had "performed" several of United Artists' motion pictures
without permission. United Artists won the first round in District
Court. Fortnightly appealed; United Artists won again in the Court of
Appeals. Finally, Fortnightly appealed to the United States Supreme
Court; in a divided opinion, the Supreme Court reversed the Court of
Appeals and ruled for Fortnightly.

But the Court made it clear that it was not ruling on the merits of
the case; instead, it was merely refusing to write new laws. Justice
Potter Stewart delivered the opinion of the Court as follows:

"We have been invited ... to render a compromise decision
in this case hat would, it is said, accommodate various
competing considerations of copyright, communications,
and antitrust policy. We decline the invitation. That
job is for Congress. We take the Copyright Act of 1909
as we find it. With due regard to changing technology,
we hold that the petitioner did not under that law
'perform' the respondent's copyrighted works. The
judgment of the Court of Appeals is reversed."

The Court's decision was far from unanimous: five Justices voted for
reversal, three abstained, and one dissented. The lone dissenter,
Justice Abe Fortas, noted that the Court was not only reversing two
lower courts; it was also reversing a precedent which it itself had
set 40 years earlier in the case of a hotel which distributed radio
signals by wire to its guests:

"... the Court, speaking unanimously through Mr.
Justice Brandeis, held that a hotel which received
a broadcast on a master radio set and piped the
broadcast to all public and private rooms of the
hotel had 'performed' the material that had been
broadcast. As I understand the case, the holding
was that the use of mechanical equipment to extend a
broadcast to a significantly wider public than the
broadcast would otherwise enjoy constitutes a
'performance' of the material originally broadcast.
I believe this decision stands squarely in the path
of the route which the majority today traverses. If
a CATV system performs a function 'little different
from that served by the equipment generally furnished
by a television viewer,' and if that is to be the
test, then it seems to me that a master radio set
attached by wire to numerous other sets in various
rooms of a hotel cannot be distinguished."

Congress eventually enacted a new copyright law, the Copyright Act of
1976. This act imposed copyright liability on cable television
systems that carry radio or television broadcast stations. Copyright
liability applies to any tier of programming which includes one or
more broadcast stations.

The Act created a legal construct known as the "compulsory license"
for cable television systems. The compulsory license did two things:

- It guaranteed that cable systems had the right to "secondarily
transmit" broadcast stations without having to obtain copyright
clearance from the individual stations or from any program supplier.

- It established a system for collecting royalties from cable
operators and disbursing them to "claimants". The Copyright Office
identified the following groups of claimants: Program Suppliers
(movies, reruns, and specials); Sports; Public Television (PBS,
affiliates, and programmers); Broadcast (commercial networks and
stations); Devotional; Canadian; Noncommercial Radio (NPR and
affiliates); and Music (ASCAP, BMI, and SESAC).

Two government agencies were charged with the responsibility for
collecting and disbursing royalties:

- The Copyright Office, a unit of the Library of Congress, was
assigned the job of collecting the royalty fees and depositing them
into a trust fund in the United States Treasury.

- An independent federal agency known as the Copyright Royalty
Tribunal (CRT) received two assignments: establishing the fee schedule
and allocating the proceeds among the claimants. In the years since
1976, the CRT has been reorganized twice; its functions are now
performed by the Copyright Royalty Board (CRB), another branch of the
Library of Congress.

The cable TV industry has operated pursuant to this law ever since.
Under the regulations established by the Copyright Office, every cable
television system is required to submit a Cable Statement of Account
Form, accompanied by the royalty payment, semiannually.

How the Supreme Court eventually rules in the Aereo case is anybody's
guess. But it seems to me that the Second Circuit's panel has
assigned another job to Congress. Congress could, of course, simply
extend the existing compulsory license procedure to Aereo.

But if the cable TV proceeding is any guide, it'll be a decade before
the Aereo case is final.

Further reading:
- Fortnightly Corp. b. United Artists, 392 U.S. 390 (1968)
- WNET v. Aereo Inc., 2d Cir., No. 12-2786, 04/01/13

Neal McLain

Kevin Goldberg - May 22, 2013 5:27 PM

EXCELLENT comment Neal. Thanks so much for putting together an extensive, yet remarkably concise history of how copyright law evolved and was adapted to address the cable issue.

If you've read my previous posts on this case and related cases, you'll probably notice that I think: (a) Congress will ultimately have to step in to address online deliver of television programming but (b) that will not occur for a long, long time.

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