CommLawBlog : Broadcast & Communications Lawyers & Attorneys : Fletcher Heald & Hildreth Law Firm : Telecommunications, FCC Regulation, Communications Act

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.

There are a number of factors to consider here. First, the Second Circuit’s decision – while densely analytical, thoughtfully reasoned, and ultimately favorable to Aereo – was not unanimous. The dissenting opinion, as it turns out, was also analytical (although somewhat less densely so than the majority’s) and thoughtfully reasoned. And anyway, the majority opinion was at most an interlocutory (i.e., intermediate) holding in one isolated piece of litigation in one federal circuit. That case has a long way to go before we can put it in the finito file. And there’s already at least one other case, involving Aereokiller, working its way through the federal courts in California (that would be in the Ninth Circuit), where at least one court hasn’t been kind to Aereo-like arguments.

So while the latest Second Circuit decision may not be the happiest of news to broadcasters, it’s far from the end of the line. Which makes Fox’s reaction to it a bit puzzling.

If you’re new to Aereo and other MVPD wannabes, take a minute and check out our previous posts about Aereo, ivi TV, FilmOn.com and Aereokiller. 

When last we left Aereo – a company which offers subscribers the opportunity to access over-the-air programming via the Internet – it had convinced a federal District Judge in New York not to enjoin it from continuing operation while copyright infringement lawsuits against it proceed. An injunction would likely have been a death sentence to the fledgling service, so the denial of the injunction was viewed as a set-back for the broadcasters who were looking to send Aereo to the showers in the early innings. The broadcasters appealed the decision to the Second Circuit, where they lost in the recent 2-1 decision.

The majority opinion in the Circuit, authored by Judge Christopher Droney (a relative newby on the Circuit, having joined the court in December, 2011), examined the tangled web of copyright laws, judicial decisions and technological developments at work here. Since the most recent overhaul of the Copyright Act happened back in the mid-1970s while technology has obviously advanced well beyond mid-1970s standards, trying to apply the former to the latter is not an easy task. 

In crafting his opinion, Droney was able to rely extensively on the Second Circuit’s 2008 decision in the Cablevision case. (Note the date: Cablevision was decided several years before Droney made it to the court; Droney did not participate in Cablevision.)   In Cablevision, the court had concluded that a cable system’s remote storage DVR service did not constitute copyright infringement. While the RS-DVR system is not perfectly analogous to Aereo’s technology, the earlier Cablevision decision provided Droney with at least some helpful guideposts for framing his analysis.

But hold on there. Judge Denny Chin, the dissenter, was no stranger to the Cablevision case. In fact, he had written the 2007 District Court decision that the Second Circuit had reversed in Cablevision. (Chin was elevated from the District Court to the Court of Appeals in 2010.) So it’s safe to say that he is familiar with the law in this particular area, including particularly the niceties of the Cablevision decision. It’s also safe to say that Judge Chin does not agree with Judge Droney’s analysis.

And the third judge on the panel? He happened to be another District Court judge, sitting “by designation”. While that doesn’t mean he’s dumb by any means, it does mean that he did not have the in-depth personal familiarity with the Cablevision case that Chin had.

As a result, it’s hard to view the most recent 2-1 panel decision as absolutely conclusive of anything. At most it reflects the complexity of the subject matter and the difficulty of resolving the issues presented by Aereo and its kin. Yes, the decision affords Aereo some breathing room in which to continue to try to get traction in the marketplace. But that’s about all.

Bear in mind, too, that the Second Circuit’s recent decision related only to the question of a preliminary injunction, i.e., an attempt to halt Aereo’s operation until the trial court can hear all the evidence and arguments and resolve the question of Aereo’s legality on its merits. The actual trial on the merits of the broadcasters’ claims of infringement has not yet happened. It’s at least theoretically possible that, having picked up some cues during the arguments relative to the preliminary injunction, the broadcast plaintiffs will be able to improve their arguments in the merits phase of the proceeding.

For example, at trial it may turn out that Aereo’s supposed system – i.e., one antenna per each subscriber – doesn’t work exactly as described. Within the analytical framework of Judge Droney’s analysis, that could be bad news for Aereo.

And let’s also not forget that, once the trial is over, the losing party will be entitled to appeal – to the Second Circuit and, ultimately, possibly even to the Supreme Court. That process is likely to take several years and will obviously afford plenty of opportunities for all parties to make all conceivable arguments. Need we point out that, once a case gets to the Supreme Court, anything can happen?

Meanwhile, the Aereokiller litigation is likely to be chugging along in California. Aereokiller, of course, is a video delivery system very similar to Aereo’s. But as we have previously reported, in the California case (where broadcasters have sued Aereokiller), the trial judge has granted a preliminary injunction. If the tide in the California litigation continues to run in that pro-broadcaster direction, we could easily find ourselves with the classic “circuit split” – i.e., a situation in which two federal circuit courts of appeals (in this case, the Second Circuit in New York and the Ninth Circuit in California) stake out inconsistent positions relative to a particular set of legal questions. A circuit split often leads the Supreme Court to step in to resolve the circuits’ differences.

And the Ninth Circuit may not be the only one eventually involved here.  Aereo has announced plans to roll out its service in 22 other markets across the country.  Broadcasters in each of those markets might also opt to get in on the litigation fun by filing their own infringement actions.  The more the merrier!  And the more different federal circuits that get involved, the greater will be the likelihood of a circuit split.

One other wild card prospect: Congressional intervention. The source of much of the controversy here is the Copyright Act, which Congress could amend, if it wants to.

The bottom line here, then, is that the Second Circuit’s recent decision is clearly not the bottom line here. While it does constitute, for broadcasters, the undesirable loss of an arguably important skirmish, it is not the loss of the battle, much less of the war.

Which brings us back to Fox and its dramatic reaction to the Second Circuit’s decision. What are we to make of that? Was it an over-reaction? An attempt to rally the broadcasting troops (think Mel Gibson in Braveheart, or maybe John Belushi in Animal House)? A calculated effort to disguise, as a frustrated response to the Second Circuit’s decision, some already-in-the-works  strategy to exit over-the-air broadcasting? We have no idea. But we are confident that the folks at Fox are no dummies, and they appear to have some very definite notions of where they’re going here. For sure, the suggestion that Fox might bail out of the OTA universe sparked a firestorm of interest in Aereo, copyright, and the Second Circuit. We’ll try to keep on top of developments. Check back here for updates.

Now that the U.S. Supreme Court has denied ivi’s bid for “certiorari” (the high-falutin, legalese term for an appeal to the High Court), it’s looking more like ivi may be exiting the marketplace.  Granted, the Courts to this point have ruled only on the issue of the preliminary injunction, so the case is technically not done – thus far ivi has been told only that it can’t operate pending the outcome of the full lawsuit on the merits.  But things aren’t looking good and that’s usually the death knell for many start-up companies. 

Let’s be clear that I am not reveling in any of ivi’s misfortune.  I distinctly appreciate and support innovation and have argued that Congress and the Copyright Office should consider changing the relevant laws to create a place at the video distribution table for ivi and its brethren. But let’s face facts.  ivi hasn’t operated in about two years, and it’s hard to see how ivi could have raised revenue to keep the fight going; one also has to wonder whether it’s been able to attract funders to its cause in the face of repeated judicial defeats.

Lacking the nutrients necessary for any business to survive, and facing the toxicity of multiple losses on the judicial front, ivi may simply wither away like so many innovators before it.

But even if ivi does wither, other contestants remain in the video-delivery-by-Internet race.  Ivi’s legal theory was, for instance, distinct from the theory underlying approach taken by Aereo and its quasi-twin, AereoKiller. As our readers know, though, that latter approach has received mixed reactions in court, with Aereo preliminarily succeeding while AereoKiller not so much.

We could be on a direct path to the Supreme Court.  (Quick, someone get the Swami! Oh, wait, that’s me!).

Like Aereo, Aereokiller was sued by virtually every major broadcast network soon after it began streaming signals of the network affiliate stations in Los Angeles. Using the same approach they had tried, unsuccessfully, in the NYC litigation against Aereo, the networks sought a preliminary injunction, asking Judge Wu to stop Aereokiller from retransmitting the networks’ over-the-air broadcasts until the litigation had been concluded. 

As we learned in the Aereo preliminary injunction post, the networks could win their motion for preliminary injunction only if they could show:

• A likelihood of succeeding on the merits of the case itself;
• That they would suffer irreparable harm in the absence of preliminary relief;
• That the balance of equities tips in their favor;
• That an injunction is in the public interest.

In both the Aereo and Aereokiller cases, the broadcasters were able to satisfy three of those four criteria. But you need all four, and in the Aereo case in New York, the judge was not convinced that the broadcasters were likely to prevail on their central infringement claim – because the Second Circuit’s Cablevision decision posed an insurmountable obstacle to that claim. So Aereo was allowed to continue to operate.

Aereokiller was not so lucky. Judge Wu in Los Angeles concluded that the broadcasters are likely to prevail. 

First, and foremost, he reminded everyone of basic geography: California is in the Ninth Circuit, not the Second Circuit. Therefore, he is not bound by either the Aereo decision or the Second Circuit’s Cablevision decision. 

More importantly, Judge Wu surmised that the Ninth Circuit – whose decisions are binding on Wu – would have come out differently in the Cablevision case. His disagreement with the Second Circuit is based on an alternate interpretation of the Copyright Act. In his densely reasoned opinion, Judge Wu parsed the meaning of terms such as “transmission”, “copy”, “work”, “performance” and “performance of a performance”. He concluded that, in Cablevision, the Second Circuit placed too much importance on whether the end user (i.e., the Aereo subscriber/viewer) was ultimately receiving a public performance of a transmission; the key issue should have been whether the end user is receiving a public performance of a copyrighted work “irrespective of which copy of the work the transmission is made from”. 

As the Judge explained:

Very few people gather around their oscilloscopes to admire the sinusoidal waves of a television broadcast transmission. People are interested in watching the performance of the work. And it is the public performance of the copyrighted work with which the Copyright Act, by its express language, is concerned. Thus, Cablevision’s focus on the uniqueness of the individual copy from which a transmission is made is not commanded by the statute.

Judge Wu also cited a law review article by the esteemed (by some) Judge Richard Posner (from the U.S. Court of Appeals for the Seventh Circuit), who proposed this analysis of the considerations relevant to the assessment of copyright infringement claims:

A rational resolution of the issue requires discerning the purpose of giving the owner of a copyrighted work the exclusive right to perform it. The purpose is to prevent the form of free riding that consists of waiting for someone to spend money creating a valuable expressive work and then preventing him from recouping his investment by copying the work and selling copies at a price below the price the creator of the work would have to charge to break even.

As Wu sees it, in Judge Posner’s terminology, Alki David and (presumably) Barry Diller are in effect free riders. 

All of which puts the Aereo decision (from a District Judge in the Second Circuit) and the Aereokiller decision (from a District Judge in the Ninth Circuit) on course for a collision in the Supreme Court.

If both the Second Circuit and the Ninth Circuit affirm their respective lower courts’ views as to what constitutes a public performance, the result will be a classic “circuit split” that could be resolved only by the Supreme Court (unless Congress were to intercede with legislation addressing the problem). In my mind, it’s dead-on certain that the Supreme Court would agree to resolve the split in Circuit law, should such a split develop. The Supremes would have to resolve that split because avoiding it would result in a nationwide service being treated differently according to region, with similar parties treated in vastly distinct manners under the law.

In that case the Supremes would likely consider not only how the statutory language itself must be read, but also what Congress intended and how much weight that perceived intention should be accorded. That, in turn could, lead to Congressional revision of the definition of “public performance”, should Congress disagree with the Court’s decision. In which case, there is still the possibility that David, Diller and innovators everywhere win in the end (and for that, from a strictly legal-nerd perspective, I love them . . . because this will be fascinating to watch). 

But that’s all a bit speculative – we probably won’t get to that point for a year or two, if ever.

In the meantime, the situation will have to remain geographically muddled. In the Second Circuit, Aereo may still operate its service (although the legal momentum Aereo had been enjoying may be diminished some thanks to Judge Wu’s contrary analysis). But in the Ninth Circuit, Aereokiller – although offering a service extremely similar to Aereo’s – may not

retransmit[ ], stream[ ], or otherwise public perform[ ] or display[ ] within the geographic boundaries of the [Ninth Circuit], directly or indirectly, over the Internet (through websites such as filmonx.com or filmon.com), via web applications (available through platforms such as the Windows App Store, Apple’s App Store, the Amazon Appstore, Facebook or Google Play), via portable devices (through applications on devices such as iPhones, iPads, Android devices, smart phones, or tablets), or by any means of any device or process, the Copyrighted Programming.

For purposes of the injunction, “Copyrighted Programming” refers to all broadcast TV programming in which any of the plaintiff broadcasters holds an exclusive right under the Copyright Act. The plaintiffs include NBCUniversal, Telemundo, ABC/Disney, CBS, Open 4 Business Productions and Big Ticket Television, Inc.

The Second Circuit encompasses New York, Connecticut and Vermont. The Ninth Circuit covers Alaska, Arizona, California, Guam, Hawaii, Idaho, Montana, Nevada, the Northern Mariana Islands, Oregon and Washington – and Guam and the Northern Mariana Islands, too! 

That leaves a huge chunk of America’s heartland in which Aereo and/or Aereokiller may or may not be deemed legal. For now, the Swami will remain silent on where he sees this going. . . .

This result is not unexpected. ivi TV was trying to stretch some statutory language beyond its seemingly natural meaning. There’s no harm in trying such a gambit, especially when technological change is occurring so fast that legislation can’t keep up. If existing laws don’t specifically address the latest technologies, it makes sense for the proponents of those technologies to do what they can to try to squeeze their ideas into the existing regulatory pigeonholes.

Such efforts, however, are not guaranteed to succeed. That’s especially true when, as here, the innovative approach would threaten the interests of others (in this case, broadcasters and other copyright-holding video content providers).

According to one published report, an ivi TV spokesperson has said that this is “not the final chapter” to the ivi TV story. It’s not clear what ivi TV might have in mind, but one might imagine that it might be thinking about re-casting its legal theory along the lines of Aereo.

Readers will recall the Aereo system, which allows subscribers online access to over-the-air programming through dime-sized antennas, each of which is allocated to a single subscriber. Rather than stretch the definition of “cable system”, as ivi TV unsuccessfully tried to do, Aereo pitched its system as nothing more than a modern-day equivalent of a VCR. Back in the 1980s, the Supreme Court had held (in the famous Betamax case), that private use of a VCR does not involve copyright infringement. And in 2008 the Second Circuit itself had extended that notion to include a “remote storage” DVR system provided by Cablevision to its customers. 

So far Aereo’s approach has survived the same type of broadside legal assault mounted by the networks against ivi TV. That probably frosts ivi TV’s cookies, particularly because Aereo has succeeded in the same jurisdiction – the federal district court in the Southern District of New York – where ivi TV has struck out. And objective observers might raise an eyebrow at the notion that broadcast programming might legally be made available online to subscribers by Aereo but not by ivi TV. After all, if the end result is the same – i.e., Joe and Loretta Six-Pack can view broadcast programming on their desktops or mobile devices – why should the law differentiate between the ivi TVs and the Aereos of the world?

ivi TV may try to make such an argument to the Second Circuit, or possibly even the Supreme Court. And maybe one of the two, or some other court (such as the Ninth Circuit, which may be the site of the next dust-up between BarryDriller.com and the broadcast networks), might eventually agree, although we wouldn’t recommend holding your breath until that day comes.

Whether the law will eventually adopt a coherent approach to the online delivery of video programming – an approach that might accommodate the ivi TVs and the Aereos of the world, as well as others yet to be identified – is uncertain at this point. But that doesn’t mean that the players already on the field can’t adjust their playbook to the law as it currently stands. As we recently reported, FilmOn.com – an online quasi-cable service relying on a very ivi TV-like approach to the law – has reportedly agreed to a permanent injunction prohibiting it from retransmitting certain broadcast content. But at the same time, the FilmOn.com folks have launched BarryDriller.com, an Aereo look-alike. While ivi TV might continue to fight for its interpretation of Section 111 in the courts, it would seem that switching to the Aereo model might be a better strategy, at least in the short run.

The real question, though, is where the long run will take all of this. As my colleague Kevin Goldberg has cogently (and persuasively – to me, at least) argued, what we really need here is a fundamental change, a change that brings the various copyright and cable-regulation laws into line with the viewing habits of 21st Century television watchers. Kevin has noted that there have been inklings that such changes may be in the early stages at both the FCC and the Copyright Office. In view of the speed (think glacial, but with a flat tire) with which the government has thus far reacted to such things, it’s probably unrealistic to expect near-term change. But we can at least hope that the process has started.

Though ivi TV may be on its last legs, it still technically exists. ivi TV initially sought (in federal court in the State of Washington) a declaratory judgment that its service does not violate the Copyright Act. It lost. Meanwhile, ivi TV was sued by the major broadcast networks, who won. They sought – and received – a preliminary injunction against ivi TV from the U.S. District Court for the Southern District of New York. Not one to be stopped by a little injunction, ivi TV has appealed that decision to the U.S. Court of Appeals for the Second Circuit. (Oral argument was held in late May. A decision could come down any time now.)

FilmOn.com is very similar to ivi TV. Started in 2010, it’s an online system claiming to fall within the Copyright Act’s definition of “cable system”. Like ivi TV, FilmOn.com was almost immediately sued by the major broadcast networks and, like ivi TV, it was quickly on the back foot. Within a couple of months of its launch in late 2010, Filmon.com was hit with a Temporary Restraining Order prohibiting it from infringing “by any means, directly or indirectly” any copyrighted material. That slowed the service down, but did not stop it immediately. 

And now – almost two years later – FilmOn.com has reportedly agreed to a permanent injunction that will apparently require it to stop streaming the signals of the four major networks – at least until FilmOn boards BarryDriller.com (more on that in a moment). Oh, yeah, according to trade press reports, FilmOn.com will also be ponying up about $1.6 million to settle the case.

But that’s not the end of the story. After all, when you’re funded by billionaire Alki David, you’re not going to go away simply because a federal court tells you to. (Possibly instructive anecdote: David is the gentleman who reportedly offered $1 million to the first person who would streak in front of President Obama with “Battlecam.com” – another David enterprise – written across the streaker’s chest.) So, like a phoenix rising from the ashes, “BarryDriller.com” has emerged. BarryDriller.com is David’s new project (which is reportedly being funded by a related company called “AereoKiller, LLC”). BarryDriller.com is said to be “Aereo-like”. Though there are differences (BarryDriller.com will charge subscribers about half of what Aereo charges and claims that it will pay broadcasters for their content), BarryDriller.com is certainly like Aereo in one sense: it’s been in business for just a few days and has already been sued by Fox.  

If nothing else, the BarryDriller.com suit is interesting for one reason: its locale. The suit was filed in the U.S. District Court for the Central District of California (because BarryDriller.com was retransmitting KTTV, the Fox affiliate out of Los Angeles). Different city = different court = different governing precedent. While Judge Allison Nathan of the U.S. District Court for the Southern District of New York was bound by the Second Circuit’s Cablevision DVR decision in ruling for Aereo last month, the Cablevision decision doesn’t have the same weight in the wild, wild west. I’ve said from the start that the endpoint for the Aereo case would be the United States Supreme Court if at least one federal court outside the Second Circuit were to reject the rationale of the Cablevision decision. Such a ruling would set up a “circuit split” that might induce the Supremes to wade into the thicket and sort things out. If nothing else, BarryDriller.com may have accelerated that process by giving the networks the opportunity to sue David and company in California, where the Ninth Circuit is the top federal dog.

But if you’re paying attention, you’ll realize that 2011 - 1992 ≠ 14. That’s because the FNOI relates to the 2007 proceeding. Why the holdup? Turns out the Commission has reviewed the “way in which it uses data” for reports like this, and it has concluded that the data previously submitted are “insufficient to produce an adequate report” – so the Commission is now asking for more data. 

But what’s interesting here is that, in making that request, the Commission notes the recently “increased availability of video programming over the Internet, made available by online video distributors (‘OVDs’)”. And, more importantly, the Commission specifically requests data on OVD-related data “in light of the growing importance of online video distribution to consumers” (apparently for the first time). So the Commission is trying to play a little catch-up in terms of assessing competition in the video market in light of the rise in OVDs.

In other words, the FCC sees OVDs as a significant separate element in the video distribution process, and wants to ascertain their effect on that marketplace. According to the Commission, “for most consumers [OVDs] are not a substitute for MVPD service today, but rather an additional method for viewing video programming”. Perhaps OVDs aren’t big enough to warrant regulatory change, but we seem headed in that direction – at least the FCC is now standing up and taking notice.

I see this recognition of the rising importance of OVDs as more significant than any substantive information likely to be elicited in response to the nearly 200 separate questions posed in the FNOI. Comments in response to the FNOI are due by June 8, 2011; reply comments are due by July 8.

Meanwhile, over at the Copyright Office, here’s a quick update on that Office’s investigation of the future of video delivery, i.e., the inquiry into the continued need for the cable and satellite compulsory licenses.   Comments were due on April 17. I’ve had a chance to review the comments received from 17 parties ranging from the NAB to outcast cable wannabe ivi, Inc. to the “Canadian Claimants Group”. Here’s what stands out:

Most commenters from all sectors – including cable provider AT&T, program provider NPR, a group of rural MVPDs, Dish Network, a group of “Devotional Claimants”, the NCTA, the Independent Film and Television Alliance, the TVMLC, Verizon, PBS, APTS and WGBH – opposed repeal of the compulsory licenses. A common concern: direct licensing or collective licensing alternatives would be too expensive and burdensome to provide a diversity of programming to the public.   

The NAB urged retention of the compulsory licenses enabling local carriage of stations. But it suggested terminating those allowing carriage of distant signals except for markets with unserved households or a shortage of signals, or in the case of nationally distributed superstations. 

ivi, Inc., opposed the phasing out of the compulsory licenses because that would “disincentivize” folks outside the TV industry from developing new distribution technologies, because  “there is no way to monetize that technology is to sell or license it [sic] to the gatekeepers of content that have every reason to keep their legacy distribution systems in place.” ivi, Inc. seeks extension of the compulsory licenses to online video distributors – no surprise there.

Dish Network recommended transitioning to a single compulsory license with “bright line rules for the carriage of digital broadcast TV signals applicable to cable and satellite, as well as online video distributors.” 

The Canadian Claimants Group cautioned that elimination of the compulsory licenses would likely result in the inability to retransmit an entire broadcast signal.

“Program Suppliers”, including the MPAA and other producers, went entirely in the other direction, claiming that compulsory licenses harm copyright owners. They advocated a combination of licensing approaches (e.g., direct, collective, or sublicensing). The Commissioner of Baseball agreed, urging that “any system replacing the statutory licenses replicate[ ] as closely as possible the marketplace-based system that has provided, and continues to provide, the public with a vast array of Baseball telecasts on terms and conditions that all affected parties have considered to be fair and reasonable.”

Some entities, including Rural MVPDs, called for reform of the retransmission consent process. Others, such as the NCTA, Dish Network, DirecTV, and Verizon noted that repeal of the compulsory licenses would require reform of the FCCs rules.

BMI and ASCAP, as one might guess, viewed collective licenses as striking a proper balance between free market and regulatory approaches.

Reply comments are due on May 17.  We'll keep you posted.

As we have since reported, at Congress’s direction the Copyright Office has instituted a proceeding that could dramatically alter the copyright compulsory licenses applicable to cable television and satellite television.  In particular, the Copyright Office is looking at the possible elimination of such licenses (which are currently found in Sections 111, 119 and 122 of the Copyright Act). 

Our call for legal reform – or at least a very thorough review of this area of law – is further buttressed by two separate, but related, developments involving one of the more popular content delivery systems going today: the Apple iPad. 

In one instance, News Corporation (let’s call them Fox for short) has told Time Warner Cable (TWC) to stop streaming the various Fox channels to the iPads of TWC subscribers. (Scripps Network Services Interactive (Scripps) has reportedly joined Fox in this effort.) TWC is apparently the first cable company to create an “app” that allows its subscribers to view programming via an iPad (Cablevision has since released a similar app with similar pushback). Seems pretty simple right? You’re a TWC subscriber, you pay TWC to provide you access to programming in your home, you would like to use your iPad to watch TV in and around your home, TWC can make that happen – where’s the problem? After all, you’re already paying to get those channels, and TWC is also paying for the right to get you those channels – so why should it matter whether you’re watching on a full TV screen or an iPad?   (This would be especially true if TWC’s app happens to include some form of geographic restriction to prevent video viewing “out of market”. Note that I don’t know whether the app does feature such a restriction.)  

But that’s not how Fox and Scripps see it – and I suspect that they’re not alone.

And there’s another instance involving an iPad App – this time the Zite news reader, which describes itself as “a personalized iPad magazine that gets smarter as you use it”. The Washington Post, AP, Gannett, Getty Images, Time, Dow Jones and many other media organizations have sent Zite a cease-and-desist letter telling it to stop providing their content.  This is admittedly different from the Fox/TWC situation, as you’re now talking about aggregation of news content regardless of subscription, which is a big problem for news entities. But, again, if there is some way to ensure that subscribers have greater access to the content they’ve paid for, you’d think that the actual manner of delivery is a minor concern, right? 

And that’s the common thread here: new, highly popular content delivery systems that don’t fit comfortably into any existing licensing scheme. And that lack of fit is not because the folks who designed the existing licensing schemes considered but rejected inclusion of the new delivery systems. Au contraire, the folks who drafted the existing copyright laws had no idea that such delivery systems would ever exist.

Now let’s be clear: I am not against – in fact I’m very much in favor of – protection of the rights of copyright owners. But I think that these cases demonstrate that the current compulsory licensing system is failing to keep up with the times. The result is resistance, induced by out-dated laws, to innovation of new products, services and technology. The results of such innovation  can deliver content from a copyright owner to the consumer and – in theory at least –  the concept of compulsory licenses is designed to facilitate the legal delivery of that content to the consuming public.  But the existing legal scheme was not designed to, and thus cannot easily accommodate, this fastest growing area of content delivery. As a result, whenever a good product is created, the content owners move quickly to restrict its easy implementation. It’s not just the iPad, but other popular products as well: think, for example, of Apple TV, GoogleTV and Roku, all of which have been hamstrung in terms of available content. 

One might, wonder, of course whether content owners fully appreciate the long-term effects of their heavy-handedness.   But I won’t go there. I recognize that they have to do everything they can to protect their most valuable asset. 

Instead, I think the finger should be pointed elsewhere – at the legislators and regulators who need to take notice of these developments and figure out a way to bring all parties together to discuss this . . . especially before the tension between antiquated laws and unstoppable technological innovation throws everything so far out of whack that it can’t be righted.  (Though I and my colleagues represent many different media entities on all sides of the equation, we are particularly concerned for broadcast television stations, since they don’t create much of their content, relying instead on networks or syndicated programming producers; I strongly believe that broadcasters would be the most likely to be cut out of any individual side deals.) 

I don’t know what the future holds for television delivery. But I am increasingly sure that TV delivery will – and should – look vastly different tomorrow than it did yesterday or than it does today. It’s in everybody’s interest – the content creators’, the content distributors’ and the content consumers’ – that the copyright laws that underlie and provide structure to the delivery process be designed to accommodate and facilitate technological innovation.