Aereo Armageddon Ahead?

Warring parties agree on one thing: the Supreme Court should intervene ASAP – but will the Supremes agree to take the case now?

The Aereo War rages on, fought (like most wars) on several fronts, but always with an eye toward that epic battle destined to change the face of the conflict entirely. Yorktown. Waterloo. Gettysburg. Normandy.

Possibly soon to be added to that list: Washington, likely site of the Aereo Armageddon. More specifically, One First Street, N.E. – where the U.S. Supreme Court sits.

And it could happen sooner than many expected. That’s because the major broadcast networks, having lost their bids to shut Aereo down in New York and Boston, have sought Supreme Court review of the New York decision. And, in an interesting gambit, Aereo has taken the unusual step of agreeing with its adversaries. Aereo says that the Supreme Court should take the case. While that is no guarantee that the Court will agree that the issues are now ripe for resolution at the highest level, such unanimity among the parties certainly doesn’t hurt.

Before we get ahead of ourselves, a bit of history.

Aereo, of course, is the innovative service that captures over-the-air broadcast signals with dime-sized antennas and then makes those signals available to subscribers via the Internet device(s) of their choice. Aereo does this without the consent of, or any royalty payments to, the broadcasters whose signals are re-transmitted. Broadcasters feel Aereo’s service constitutes a “public performance” of content inconsistent with the broadcasters’ exclusive rights under the Copyright Act. (You can find lots of reporting on Aereo’s litigation here.)

Aereo began operating in March 2012 in New York. The major broadcast networks promptly filed a lawsuit in the U.S. District Court for the Southern District of New York alleging copyright infringement. They also asked the court to preliminarily enjoin Aereo from operating during the pendency of the trial. Judge Alison Nathan, the presiding judge, denied that request. Her ruling was upheld, 2-1, by a three-judge panel of the United States Court of Appeals for the Second Circuit; the full Second Circuit sitting en banc  declined to review the matter. So Judge Alison’s denial of the preliminary injunction remains in place and Aereo has continued operating in New York. Technically, the Second Circuit’s affirmance of her order is what is now knocking on the Supreme Court’s door.

But that’s just one front in the Aereo War.

Aereo has since commenced service in Boston, Atlanta, Salt Lake City, Miami and Houston.

It has been sued by broadcasters in Boston (in July 2013) and Utah (twice, in October 2013). Aereo has tried – so far unsuccessfully – to narrow the battlefield by asking the judges in Boston and Utah to transfer their respective cases back to the seemingly Aereo-friendly courtroom of Judge Nathan in New York. The Boston judge denied that request; the Utah court has not yet acted on the request pending before it.

The denial of the Boston transfer motion was not really a loss for Aereo, though. The Boston judge, following the path blazed by Judge Nathan in New York, denied the broadcaster-plaintiff’s request for a preliminary injunction, leaving Aereo up and running there. (A similar request filed in Utah has yet to be ruled on.) An appeal of the Boston ruling has recently been filed with the First Circuit.

So far, so good for Aereo. It’s 2-0 in the district courts and 1-0 on appeal in the Second Circuit.

But Aereo has a doppelganger of sorts. Shortly after Aereo appeared on the scene, a company called FilmOn X (née  “Aereokiller”) began offering a service similar to Aereo’s in Los Angeles. (Some might say that FilmOn X is a copycat of Aereo – dime-sized antennas and all – but FilmOn X claims that its technology is actually superior to Aereo’s.)

FilmOn X was sued by broadcasters in Los Angeles in 2012 and again in Washington, D.C., where it began operating in 2013. In the former case, Judge George Wu of the U.S. District Court for the Central District of California agreed with the broadcaster-plaintiffs and granted their motion for preliminary injunction, thereby ordering FilmOn X to stop operating in L.A. Judge Wu’s order is currently on appeal to the Ninth Circuit, which heard oral argument in late August, 2013, but has yet to issue a decision.

Meanwhile, in Washington, U.S. District Judge Rosemary M. Collyer also preliminarily enjoined FilmOn X from operating for the time being. But she went further than Judge Wu in L.A. and barred FilmOn X from operating anywhere in the country other than the states within the Second Circuit’s jurisdiction (i.e., New York, Connecticut and Vermont). She carved the Second Circuit out in deference to the Aereo decision. An appeal filed by FilmOn X with the D.C. Circuit is in its early stages.

So unlike Aereo, FilmOn X isn’t doing so well: 0-2 in the district courts.

Where does that leave us? Five distinct lawsuits in five different venues, producing (so far) four distinct District Court rulings: the defendant streaming service avoids preliminary injunctions in New York and Boston, but gets enjoined in L.A. and D.C., with the D.C. judge upping the ante by extending the injunction almost nationwide. On the appellate side, only one U.S. Court of Appeals – the Second – has yet weighed in, but a decision out of the Ninth Circuit could come out any time now, and appeals have been started in the First and D.C. Circuits as well.

Which brings us to Supreme Court. 

Ordinarily, the Court is reluctant to agree to review a case unless it reflects a “circuit split”, that is, a situation in which inconsistent decisions have been reached at the Court of Appeals stage. In such a circumstance, the Supremes can step in a resolve the inconsistency and restore uniformity to the law. Here, even though only one Court of Appeals – the Second – has technically taken a position, the divergent decisions reached thus far in the various venues do seem to reflect a pretty clear split. That’s one of the primary reasons that the broadcasters in the Second Circuit case have petitioned the Supreme Court to review the Second Circuit’s ruling in favor of Aereo.

In their petition (full legal name: “petition for writ of certiorari”), the broadcasters home in on the dangers presented by the Second Circuit’s decision. They argue that the Court’s intervention is “urgently needed” both because: (a) Aereo’s business model is built on the unauthorized for-profit exploitation of others’ copyrighted works, a practice for which the Supremes have historically shown little tolerance; and (b) the “viability of over-the-air broadcast television” is threatened. 

The detailed substantive arguments largely track those advanced by the broadcasters in the lower courts, arguments that were accepted by Judge Denny Chin (a Second Circuit judge who strongly disagreed with his colleagues) and the District Courts in the L.A. and D.C. FilmOn X cases. To summarize briefly: The Copyright Act gives the copyright holder the exclusive right to make “public performances” of their copyrighted works. The Act’s definition of “public performance”, and Congress’s intent underlying that language, are clear: “performance” refers to the copyrighted broadcast program. 

That definition was enacted by Congress in direct response to the Supreme Court’s decision in the Fortnightly case in which the Court said that cable television systems were not engaged in separate performances when retransmitting broadcast programming. The key is not, as the Second Circuit believes, how many people can receive a particular transmission of a broadcast; rather, the crucial question is how many can receive the broadcast itself. In essence, the Second Circuit has confused “transmission” with “performance”. 

These are not clear-cut semantic distinctions. Clarifying the confusion will be the Supreme Court’s main task.

The broadcasters also argue that the Second Circuit’s misreading of the Copyright Act will cause the broadcast industry significant harm. It is a “direct assault” on a “well-established and statutorily protected” business model. As the broadcasters note, Aereo – emboldened by the Second Circuit decision – has already expanded to several other cities, with plans to enter 20 more in 2013 alone. And presumably in response, major cable and satellite companies appear to have altered their business practices with regard to retransmission consent. That poses a clear financial threat to broadcasters. And beyond retransmission consent, there is also a danger to the broadcasters’ ratings which underpin advertising rates: the Nielsen ratings system will not reflect Aereo viewers.

So will the Court grant the broadcasters’ petition? 

When I first sat down to write this post, I didn’t think so. The Supremes are notoriously reluctant to decide an issue – especially a difficult one – until they have to. (Recent example: The current court reviewed the FCC’s indecency rules not once, but twice, in a matter of three years but they still declined to decide whether those rules violate of the First Amendment.) 

Plus, there are a lot of potential “outs” regarding this case: the Ninth Circuit and the D.C. Circuit could side with their Second Circuit confrères and reverse the L.A. and D.C. district court rulings, effectively undermining any notion of a circuit split.  Perhaps more importantly, all these cases – even the Second Circuit case – are still in their infancy. They involve only motions for preliminary injunction at this point. That means that no trial has yet occurred in any of the cases, so no court has yet compiled a full evidentiary record on which the Supreme Court may confidently rely.

So I was figuring the broadcasters’ petition would be denied.

But then Aereo, in response to the broadcasters’ petition, urged the Justices to take the case. 

Ordinarily, parties in Aereo’s position, having won in the lower court, are not inclined to risk taking points off the board like that. When you think about it, though, Aereo’s move makes perfect sense because Aereo has at least a couple of reasons for wanting to accelerate this case to closure now.

First, the broadcasters are obviously willing to litigate their arguments anywhere and everywhere possible, which gives rise to the prospect of extended litigation in courts across the country. That imposes a direct financial burden on Aereo, and also creates uncertainty that “undermines Aereo’s efforts to expand its footprint and further develop its business.”

Second, the factual record now in front of the Supremes is the factual record that led the Second Circuit to come down on Aereo’s side. The record in the L.A. and D.C. cases didn’t work so well for Aereo’s counterpart there, FilmOn X. Why wait around and risk having other facts crop up that might not be helpful to Aereo?

Third, technology changes fast. While the Supreme Court might traditionally be inclined to sit back and wait to see how things shake out over the long haul, that approach doesn’t work as well in an age of rapid technological development. Parties in high tech industries often cannot as a practical matter wait three years to determine whether every new technology is legal or not. 

And while Aereo’s decision to support Supreme Court review now rather than later may be motivated more by Aereo’s own strategic self interest than by altruism, it caused me to do a 180 – I think it’s very likely the Court could take this case, possibly as early as mid-January (which might get us a decision on the merits by July, if everything falls into place just right).

Cablevision apparently thinks so too.  I’m deducing that from a “white paper” it released entitled “Aereo and the Public Performance Right”.

Cablevision essentially channels Marshall McLuhan in Annie Hall, slamming people who think, wrongly, that they fully grasp another’s theories. Here, Aereo’s legal theory derives largely, if not entirely, from the Second Circuit’s 2008 decision in Cablevision (which involved the copyright implications of Cablevision’s Remote DVR service), so Cablevision may rightly claim some parental rights to the theory underlying that decision. Cablevision’s White Paper reads something like a paraphrase of McLuhan (reading Woody Allen’s script): “We’ve read what you were arguing! You know nothing of our work! How you were able to transmit anything is totally amazing!”

The White Paper tries to put distance between the Cablevision case and Aereo’s. That’s not surprising.  Cablevision stands to lose a lot no matter which side ultimately wins before the Supreme Court. If Aereo wins, Cablevision, the cable company, will have a new competitor. If the broadcasters win, Cablevision’s ability to innovate could greatly be curtailed; its current Remote DVR service, blessed at this point only by the Second Circuit, could be shut down.

Cablevision argues the broadcasters’ interpretation of the Copyright Act is wrong. The broadcasters try to differentiate between a “performance” and a “transmission” but those are actually the same thing, in Cablevision’s view, so the broadcasters are wrong and should lose. 

But, Cablevision says, Aereo is wrong, too. Aereo’s service is completely unlike Cablevision’s Remote DVR service (and most cloud services available today) because Aereo’s hard drive copies are not even lawful in the first place: “Subscribers have no fair use right to make copies merely so they can receive programming over an unlicensed television delivery service”. This is something many have wondered as well: yes, Aereo is simply taking over-the-air signals with an antenna like anyone else could and yes, Aereo is simply helping its subscribers play that content back via an Internet device, but is it legal to combine the two?

We can expect to see the arguments set out in the White Paper show up in an amicus brief from Cablevision when the Aereo case ultimately gets to the Supreme Court. In which case we will have three key players, each weighing in with its view of the law, with just one thing in common: each of the three players – Aereo, broadcasters, Cablevision – is convinced that the other two are wrong, so it’s time for the Supreme Court to decide who is right. 

I agree.

AereoKiller Cuffed Nationwide

U.S. District Judge in D.C. enjoins Aereo-like service everywhere but the Second Circuit.

Score a big one for the broadcasters! A federal district judge in the District of Columbia has enjoined FilmOn X (that would be the folks formerly known as “Aereokiller” who operated at “BarryDriller.com”) from operating its dime-sized wannabe-MVPD service, much like a judge did in Los Angeles late last year.

But get this – the D.C. judge went way further than the L.A. judge by extending the injunction NATIONWIDE (except for New York, Vermont and Connecticut).

To say that this complicates matters in the overall Aereo/Aereokiller universe would be an understatement.

First things first. The latest decision was issued by Judge Rosemary M. Collyer, of the U.S. District Court for the District of Columbia. FilmOn X had cranked up its service in the D.C. area last spring, which prompted D.C. broadcasters to ask the D.C. federal court to shut it down – essentially the same scenario that had already played out in New York (with Aereo’s similar service) and L.A. (where FilmOn X, but not Aereo, was the defendant). As our readers already know, the Second Circuit judges in NYC declined to enjoin Aereo’s operation, but a U.S District Judge in the Ninth Circuit in L.A. did enjoin FilmOn X. (We’re still awaiting a decision from the three-judge panel of the Ninth Circuit reviewing that latter decision.)

Both the NYC and L.A. decisions were based on the same facts and underlying precedent presented to Judge Collyer, so she had two flatly inconsistent model approaches (in her words, “a binary choice”) that she could use as guidance. She opted to go West Coast, but with a couple of twists.

First, instead of simply citing Judge Wu’s decision in the initial FilmOn X case and chiming in “me too”, Judge Collyer undertook her own detailed analysis of the Copyright Act and its legislative history. Her conclusion: the FilmOn X operation clearly infringes the plaintiffs’ copyrights. In so doing, she tipped her hat to Judge Chin’s dissents in the Second Circuit litigation and Judge Wu’s analysis in the L.A. case. But she went further than either of those by (among other things) directly challenging the claim that the Aereo/FilmOn X mini-antenna approach creates a cute little “one-to-one relationship” between a single mini-antenna and a single viewer/subscriber. Characterizing that as a “charitable description”, Judge Collyer offered a far more critical assessment:

[W]hile each user may have an assigned antenna and hard-drive directory temporarily, the mini-antennas are networked together so that a single tuner server and router, video encoder, and distribution endpoint can communicate with them all. The television signal is captured by FilmOn X and passes through FilmOn X’s single electronic transmission process of aggregating servers and electronic equipment. This system, through which any member of the public who clicks on the link for the video feed, is hardly akin to an individual user stringing up a television antenna on the roof.

Her take on the technology skewered the Aereo/FilmOn X theory of the case.

Not stopping there, she also found considerable support in the Copyright Act for the notion that Congress intended to extend copyright protection to transmissions through “all kinds of equipment”, including the innovative mini-antennas deployed by FilmOn X.

Having determined that the broadcaster plaintiffs are likely to win on the merits of the case and would suffer irreparable harm if FilmOn X is permitted to continue its operation pending the trial of the case, Judge Collyer had no problem concluding that an injunction should be issued.

But then came the next twist.

The injunction would be effective not just in D.C., but rather NATIONWIDE, with the limited exception of states within the Second Circuit’s jurisdiction – i.e., New York, Vermont and Connecticut. That limited carve-out was a matter of “comity” in recognition of the fact that the Second Circuit has thus far declined to enjoin Aereo from operation there. But since there is no precedent in any other circuit contrary to Collyer’s decision, she figured that the Copyright Act “commands a nationwide injunction”, so she could and should enjoin FilmOn X everywhere but the Second Circuit.

So how does this affect the overall battlefield?

First, Collyer’s decision will almost certainly be appealed to the D.C. Circuit, but even if it is, we probably won’t see a Circuit decision for a year at least. So her injunction will likely remain in effect for the foreseeable future. That means that FilmOn X’s operations will be in check for the time being everywhere but in the Second Circuit.

Second, Collyer’s decision should buoy the spirits of broadcasters everywhere outside the Second Circuit, all of whom are facing the continuing roll-out of Aereo’s service. While Aereo is not itself subject to Judge Collyer’s injunction (since Aereo is not a party to that proceeding), the fact that an Aereo-like system has been enjoined from operation nationwide may prompt other judges in other circuits to similarly enjoin Aereo. There’s already a parallel copyright infringement suit pending in U.S. District Court in Boston (that would be in the First Circuit); the broadcast plaintiff there has already requested an injunction. (A hearing on the broadcaster’s motion is currently scheduled for September 18.) And Aereo is now up and running in Atlanta and Utah as well, so we won’t be surprised to see new lawsuits filed there (for readers keeping score, those would be in the Eleventh and Tenth Circuits, respectively.)

Third, the likelihood of a “circuit split” – and consequent Supreme Court review – has increased. Yes, we’re still waiting to hear what the Ninth Circuit will do in its review of Judge Wu’s FilmOn X decision and no, we won’t know for a while where the D.C. Circuit stands, but having yet another federal judge weigh in against FilmOn X clearly adds heft to the anti-Second Circuit position. That’s especially true to the extent that the nationwide scope of Collyer’s injunction may induce other courts to adopt her approach with respect to Aereo.

So while the seemingly inexorable roll-out of Aereo’s service may have dispirited broadcasters, the cavalry may just have arrived, thanks to Judge Collyer. The next few months should prove interesting. Check back here for updates.

Aereokiller in the Ninth Circuit

May it please the court? Maybe, maybe not. YOU be the judge.

Even those practiced in the art of appellate advocacy have trouble correctly guessing, on the basis of oral arguments, how a court will ultimately rule. (Doubt that? Just ask the Swami.)

The post-argument guessing game is particularly hard for the Great Unwashed because appellate arguments tend to be somewhat intimate affairs, not widely publicized beforehand, seldom recorded for extensive public consumption. Any press accounts of arguments tend to shed only limited light on precisely what was said, making it hard for the reader to draw any conclusions.

But things are different in the U.S. Court of Appeals for the Ninth Circuit which, as it turns out, posts audio recordings of its arguments on its website within 24 hours of each argument. Who knew?

So if you’ve got about 45 minutes and want to try to figure out what’s going to happen next in the Aereokiller case, click on this link. (Note: Aereokiller has since re-named itself FilmOn X, even though it’ll always be Aereokiller to us.) Clicking on that link will allow you to download and open the recording of the August 27 oral argument before a three-judge panel of the U.S. Court of Appeals for the Ninth Circuit (sitting in Pasadena).  See if you can figure which way the court’s going to go.

The argument, of course, concerns whether the injunction issued against FilmOn X’s operation in the Los Angeles area should be lifted. Our readers will recall that U.S. District Judge George Wu granted the request of a number of broadcasters and program producers last December and put the kibosh on FilmOn X, whose program distribution service (based on individualized mini-antennas) is supposedly nearly identical to that of Aereo. FilmOn X has appealed that decision to the Ninth Circuit.

The outcome of the case will be of more than passing interest to the TV industry.   The Ninth Circuit’s sister circuit in New York – the Second Circuit – has at least preliminarily held, in the Aereo litigation, that the Aereo/FilmOn X system of program distribution does not constitute copyright infringement even though the over-the-air stations whose programs are being distributed don’t consent to that distribution. Judge Wu’s decision on the West Coast went in the opposite direction. As we have observed, if the Ninth Circuit affirms Wu’s decision, we’ll have a “circuit split” that could lead the Supreme Court to wade in.

So that’s the set-up. Give a listen to the arguments before the Ninth Circuit and see how you think the court’s going to rule. It’s particularly tough in this case because, unlike other courts, this particular panel isn’t especially chatty. Often, judges seem to dominate the conversation in appellate arguments; that doesn’t really happen in this case. 

For our money, though, the most interesting exchanges occur at around 8:30-10:00 and then again around the 25:00 mark. There, one of the judges – we suspect it’s Judge Diarmuid O’Scannlain, but we’re not 100% sure – suggests that the bottom line issue may be one for Congress, not the courts, to resolve.  In other words, if FilmOn X is merely availing itself of a loophole in the Copyright Act, shouldn’t it be up to Congress to close that loophole? (If the court goes in that direction, of course, it could be Bad News for broadcasters.)  In the later colloquy, Robert Garrett, counsel for a number of the broadcaster/appellees in the case, does his best to persuade Judge O’Scannlain and his colleagues that they, and not Congress, can and should deal with the problem.

How well did Mr. Garrett do? Take a listen and let us know what you think. We’ll let you know as soon as we learn of the court’s decision (which may take a couple of months to get cranked out).

Aereo Update: Second Circuit Nixes En Banc Review

Procedural rejection does not resolve merits of broadcasters’ case.

Put another one in the “W” column for Aereo. The Second Circuit has denied the petition for en banc review filed by the broadcast plaintiffs last April. 

It may be some comfort to the broadcasters that the Court’s decision technically did not address the merits of the case. That’s because of the nature of en banc procedures. As we previously summarized that process, when a petition for en banc review is filed, the petition is circulated to all the active judges on the Circuit. If any of them asks for a vote to be taken on whether or not to grant en banc review, then all the active judges are polled. Note that they’re not polled on the bottom line substantive issue(s) involved; rather, they’re just polled on the limited question of whether the Court should agree to let the parties slug it out before the full Court.

In this case, one active judge (we’re guessing that was probably Judge Chin) did ask for a vote, and the bottom line was 10-2 in favor of not reviewing the earlier panel decision. So there will be no en banc review.

It should come as no surprise to folks who have been following the Aereo case that the two judges who dissented – that is, the two who wanted the Court to take on the case en banc – included Judge Denny Chin. (The other dissenter was Judge Richard Wesley.) Judge Chin, of course, is the judge who dissented from the panel decision in the Aereo case in April. And before that, Judge Chin presided over the trial of the Cablevision case. He held for the broadcasters/program producers in that case, but was reversed by the Second Circuit in 2008, in a decision that his two colleagues on the Aereo panel relied on extensively.

Judge Chin’s 30-page dissent provides the broadcast plaintiffs yet another road map to the Supreme Court. He again takes pains to lay out, in detail, all the reasons why Aereo’s arguments don’t, or shouldn’t, hold water. The fact that he has thus far been unable to persuade any of his colleagues (other than Judge Wesley) of the soundness of his views does not appear to have weakened his commitment to those views.

So where do we go from here?

The broadcasters have a choice. Bear in mind that the Second Circuit’s April decision concerned the trial court’s denial of preliminary injunctive relief. That means only that Aereo was permitted to continue to operate while the trial itself went ahead. The trial is indeed going ahead – it’s still in the discovery phase (which is currently set to wrap up at the end of October) – although Aereo has sought summary decision. In other words, at this point the parties are still probably months away from any disposition on the merits of the broadcasters’ claims in the trial court. 

That being the case, the broadcasters might opt to take no further action in response to the denial of their initial en banc effort, and instead press forward in the trial court, seeking perhaps to assemble a stronger factual showing than before.

Alternatively, the broadcasters might decide to seek Supreme Court review of the Second Circuit’s April decision. While they cannot now claim any “circuit split” on the underlying copyright issues, they could certainly point to the decision of the Federal judge in Los Angeles in the Aereokiller case as an indication that the Ninth Circuit may disagree with the Second Circuit. (By the way, Aereokiller’s appeal of that lower court ruling has now been fully briefed in the Ninth Circuit; oral argument is currently scheduled for late August.) And Judge Chin’s dissents – both to the April panel decision and to the denial of en banc review – also identify issues and arguments that might get the Supremes’ attention.

Petitions seeking Supreme Court review (we call them cert petitions, or petitions for certioriari – feel free to use the technical term to impress your friends) are due within 90 days of the entry of judgment in the Second Circuit, so the broadcast plaintiffs have some time to decide how they want to line up this particular shot. With the Ninth Circuit set to hear the Aereokiller appeal before September, the possibility still looms that a head-on conflict between the Second and Ninth Circuits will indeed materialize. Check back here for updates.

We should also note in passing that at least one broadcaster has sued Aereo in U.S. District Court in Boston – First Circuit territory. But that case is in its earliest stages, and it seems unlikely that we’ll be seeing any decisions out of the Boston court that might influence the immediate decisions of the Second Circuit parties. But you never know.

[Blogmeister's Update: Since the above was posted, we have confirmed that oral argument in the Aereokiller case in the Ninth Circuit has been set for Tuesday, August 27.  The Court has allotted a whopping 20 minutes per side -- a near-eternity when it comes to arguments in the court of appeals.]

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.

Aereo in the Second Circuit: Wha' Happened?

Fox seems to think that the Second Circuit’s decision was a Big Deal. We’re not so sure.

So Aereo recently kept its winning streak alive with a favorable ruling from the U.S. Court of Appeals for the Second Circuit . . . and the next thing you know, the Fox Network is making noises about kissing good-bye to its over-the-air operations and moving to some alternative delivery system, possibly as a subscription service.

If you were to buy into Fox’s over-the-top reaction, you might get the impression that the Second Circuit’s decision marks a major, and possibly irreversible, turning point in the struggle between broadcasters and the proponents of various Internet-based programming systems. But that’s why you read CommLawBlog, right?

 As Mike LaFontaine might say, “Wha’ happened?”

Correct answer: Very little, at least as far as we can tell from the Second Circuit decision.

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.

Will ivi Wither on the Vine?

Supreme Court rejection may be the end of the road for the upstart, Internet-based MVPD wannabe.

It looks like the Supreme Court may have dumped a final, fatal treatment of Roundup on ivi, Inc.  In a standard nine-word order (“The petition for a writ of certiorari is denied.”), the Supremes unceremoniously rejected ivi’s last-gasp effort to get out from under the preliminary injunction imposed by the federal District Court in NYC two years ago.  As a result, ivi is still barred from operating in the Second Circuit, and its future prospects are decidedly dim.

We’ve reported on several occasions on ivi.  It’s one of a handful of companies seeking to revolutionize television viewing by making broadcast signals available to viewers via the Internet.  ivi’s approach involves a liberal interpretation of the Copyright Act that would allow it to stream television programming directly to your computer, tablet or smartphone.  

ivi claims that its Internet-based streaming operation is the equivalent of a cable system as defined in Section 111 of the Copyright Act.  Under that theory, it has argued that it’s entitled to retransmit broadcast programming without the prior consent of the broadcasters as long as it pays applicable copyright royalties.  The broadcast industry has disagreed, naturally; in 2010, even before ivi started operation, broadcasters peppered ivi with cease and desist letters.  Undaunted, ivi went on the offensive, filing a lawsuit in the U.S. District Court for the Western District of Washington seeking a declaratory judgment that ivi is a cable system under the Copyright Act.  The broadcasters promptly countered with their own suit (alleging copyright infringement) in New York.

ivi’s Washington case was tossed by the judge there in January, 2011.  The following month, the broadcasters convinced the judge in the New York case to preliminarily enjoin ivi from operating pending the outcome of the case.  ivi appealed that ruling to the Second Circuit, to no avail.  In its trip to the Supreme Court it was trying to get the Supremes to lift the injunction.

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.

Judge Puts the Cuffs on AereoKiller

Disagreeing with the Second Circuit, a district judge in the Ninth Circuit has enjoined Aereokiller from transmitting its opponents’ over-the-air programming.

Remember Aereo, the Barry Diller-backed startup seeking to revolutionize the way we watch television? (Hint: It’s the video delivery service that uses rooms full of dime-sized antennas, each assigned to a different subscriber, enabling said subscriber to watch broadcast television via any mobile, Internet-based device.) As we reported last summer, Aereo won a key legal battle in New York in July, when a federal judge OK’d the continued provision of Aereo’s service at least temporarily. (Technically, the judge refused to issue a preliminary injunction requiring Aereo to shutter its service while it’s being sued by a number of broadcasters claiming that the Aereo service infringes their copyrights.) 

You may also recall Alki David, the owner of several services providing online distribution of over-the-air television (and other) programming. The most relevant for our purposes are FilmOn.com and Aereokiller

David’s Aereokiller service seems to have drawn inspiration (not to mention its name) from Aereo’s service. While not absolutely identical to Aereo, Aereokiller rests on the same general technology and the same basic legal principles as Aereo. (In its court filings, Aereokiller argues that it is not only technologically analogous to Aereo but, in fact, “better and more legally defensible”). And further highlighting the influence of Diller’s Aereo service on David’s Aereokiller service, the latter was originally launched via a website found at www.barrydriller.com (though it has now migrated to David’s FilmOn.com site and is available via an Aereokiller app); it appears to be operated by the David-owned “Barry Driller Content Systems, PLC”. At least I think I’ve got that corporate structure right (there’s clearly a lot going on here). 

In any event, it’s easy to suppose that David may have Aereo and Barry Diller in his sights, at least competitively. But a recent decision by a federal judge in Los Angeles could deep-six both Aereokiller and Aereo: Judge George Wu from the United States District Court for the Central District of California has issued a preliminary injunction against at least some aspects of Aereokiller’s operation.

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. . . .

ivi TV Loses Round Two

Second Circuit affirms injunction preventing would-be online “cable system” from carrying over-the-air content.

ivi TV, the company that burst onto the video delivery scene two years ago with a business plan based on an innovative reading of Section 111 of the Copyright Act, has suffered a major setback at the hands of the U.S. Court of Appeals for the Second Circuit. The court has upheld a lower court’s order enjoining ivi TV from infringing the copyrights of the broadcast networks that sued ivi TV back in 2010. 

The lower court’s injunction effectively put ivi TV’s operation on life support. The Second Circuit’s decision may have pulled the plug entirely.

ivi TV’s idea was relatively simple, if outside the box. ivi TV wanted to stream broadcast stations online in real time. It wasn’t a cable company in the traditional sense: no headend, no wires, no set top box. But according to ivi TV, it was entitled to retransmit over-the-air broadcast signals, without the broadcasters’ permission, because ivi TV’s operation was essentially a “cable system” as that term is used in Section 111. Section 111 gives “cable systems” the statutory right to such retransmission, provided they pay governmentally-established royalties (which ivi TV said it was willing to pay).

The district court disagreed with ivi TV’s reading of Section 111 back in 2011. And now the Second Circuit has piled on, concurring with the district court that Congress “did not intend for § 111 licenses to extend to Internet retransmissions”. That conclusion largely guts ivi TV’s claims.

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.

FilmOn.com Is Dead (or so it appears). Long Live BarryDriller.com!

Out of the ashes of one MVPD wannabe rises another.

To paraphrase T.S. Eliot, this is the way the MVPD wannabe ends, not with a bang but a whimper. . . and a $1.6 million settlement payment.

You remember FilmOn.com. They’re the folks who were going to revolutionize the video biz by legally delivering broadcast signals via the Internet . . . until they got immediately sued for copyright infringement by the major broadcast networks. 

“Oh, you mean Aereo, right?”, you reply. 

That would be the Barry Diller-financed entity that captures broadcast signals via a series of individual antennas, stores them on individually assigned remote DVRs and allows subscribers to watch programming in (almost) real time or via delay over the Internet. But, no, they’re not who we’re talking about here. Aereo still exists and has even won the first round in its legal battle against the broadcasters, surviving a motion for preliminary injunction.

“Oh, right . . . you’re talking about ivi TV?”, you protest, referring to the wannabe “first online cable system”. No, not them either (but you’re close).

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.

Update: Aereo Allowed to Continue Operation During Copyright Challenge

 Judge denies broadcasters’ request for injunction.

In the Aereo v. the Broadcasters smackdown, Round One has gone to Aereo. In a thorough 52-page opinion, Judge Alison Nathan, U.S. District Judge in the Southern District of New York, has rejected efforts by the broadcaster plaintiffs (i.e., the major broadcast networks) to get the court to enjoin Aereo’s operation. That means that Aereo can continue to serve its subscribers while the broadcasters’ various substantive claims against Aereo (consisting of claims of various flavors of copyright infringement) are litigated.

That’s bad news for the broadcasters. But what’s worse is how Judge Nathan got to that result. 

(If you’re fuzzy on just what the Aereo litigation is all about, take a look at our initial post about the case.)

Judge Nathan concluded that Aereo’s system is, for purposes of copyright law analysis, essentially the same as the Remote Storage DVR (RS-DVR) system that, according to the U.S. Court of Appeals for the Second Circuit, does not infringe copyrights. While her opinion grants a number of points to the broadcasters, her conclusion about the similarities between Aereo and the RS-DVR system deals the death blow to the broadcasters’ injunction request – and, looking down the line, very likely also to its overall claims of infringement.

We’ll delve into Judge Nathan’s decision a bit more below. But first, a brief primer on litigation procedure may give readers not versed in the Litigation Arts an understanding of what has happened thus far and what it means going forward.

When one party (i.e., the plaintiff) sues another party (i.e., the defendant), the result is an evidentiary trial (assuming, of course, that the parties don’t settle beforehand, or one of the two parties isn’t able to convince the judge that the issues are so clear that no trial is necessary). Preparing for and then actually trying the case takes months, maybe even years. Because of that, plaintiffs who are attacking defendants’ ongoing conduct often ask the court to put a halt to – or “enjoin” – that conduct pending conclusion of the trial.

When a plaintiff asks for an injunction, the court is called upon to consider a number of factors. Among those factors is the likelihood that the plaintiffs’ substantive charges will ultimately stick at trial. After all, if the plaintiffs’ case on the merits is weak, why should the defendants be ordered to stop what they’re doing? But on the other hand, if the plaintiffs can demonstrate that they’ve got a seriously kick-butt case, why should the defendants be permitted to continue to engage in their alleged misconduct?

So when an injunction is requested, long before the trial itself occurs, the court conducts a hearing (like a mini-trial) to determine whether or not to grant the requested injunction. Judge Nathan’s decision resolves that preliminary question in the Aereo case.

And while a decision on a stay request does not necessarily determine resolve the issues to be addressed in the main trial, in this instance the denial of the stay may indeed resolve the case itself.

The gist of Judge Nathan’s decision is that the broadcasters are unlikely to prevail on their infringement claims. And that’s because the Second Circuit (whose rulings are binding on the U.S. District Courts in New York, including Judge Nathan) has already ruled, in 2008, that use of technology akin to Aereo’s does not constitute copyright infringement. The 2008 ruling – in Cartoon Network LLC, LLLP v. CSC Holdings, Inc. – involved Cablevision’s RS-DVR system. The Second Circuit figured that that system was functionally equivalent to the type of private video cassette recorder that the Supreme Court had blessed way back in 1984, in the Betamax case

In the view of the Second Circuit, when a system for delivering video programming involves a “single subscriber using a unique copy produced by that subscriber”, that system is not providing transmissions “to the public”, but rather to that single subscriber. Since transmissions “to the public” are an essential element of “retransmission” for copyright infringement purposes, a “single subscriber” system does not infringe.

It’s pretty clear that the folks who devised the Aereo system used the blue print provided by the Second Circuit as a guide to the design of their system. As presented to Judge Nathan through a number of technical witnesses, the Aereo system looked just like its earlier infringement-free counterparts – technologically distinct, of course, but functionally the same as the RS-DVR and the Betamax, as far as copyright law is concerned. In fact, the judge seemed to conclude that Aereo’s system is even more legal than its precursors. That’s because, as she saw it, Aereo invariably provides only a single data stream to a single user throughout its process, while the RS-DVR system started with multiple data streams from which it then created individual user streams. If the latter didn’t constitute an infringing use, the former certainly didn’t.

Judge Nathan was not unsympathetic to the broadcasters. She agreed that the operation of Aereo could cause the broadcasters irreparable harm, and she seemed to view the relative harms that would be suffered by the broadcasters, on the one hand, and Aereo, on the other, as reasonably equivalent. And, surprisingly, she even said that an injunction “would not disserve the public interest” – which, when you unwind the double negative, seems to say that the public interest would be served by an injunction.

It's worth noting too that Judge Nathan clearly did not intend to open the door to any number of other technical innovations in the future. Broadcasters, who might fear her ruling as a massive expansion of the concept of "public performance", will presumably read her opinion with suspicion in this regard.  But in assessing the public interest considerations, she specifically rejected the exceedingly broad claim advanced by Aereo and Electronic Frontier Foundation (an amicus on Aereo's side), i.e., that free access to and reception of broadcast television by any medium is necessarily in the public interest. 

That claim echoes a theme espoused by new media innovators everywhere. They assert that copyright owners have some obligation to share their works with the public because that’s just the way the electronically interconnected world operates now.  (The corollary: anyone who tries to stifle innovation is a dinosaur (or worse).)  For the record, we're on board with Judge Nathan when she observes that, taken to its logical extension, that notion would lead to the conclusion that the public interest favors no copyright restrictions at all, since "unrestrained piracy" of content would also increase public access to that content.

But none of those points arguably favorable to broadcasters could override the fact that Judge Nathan did not believe that the broadcasters are likely to prevail on the merits.

That doesn't necessarily mean that the broadcasters can’t prevail on the merits. The trial process is a long one, often with lots of unexpected twists and turns. One possible scenario: to support their injunction request, the broadcasters relied on a report from an expert witness who did not personally testify at the hearing (the broadcasters offered his written report instead). In his view, the Aereo system is not the functional equivalent of the RS-DVR approach. But Aereo offered live testimony from its experts to counter that view, and the Judge found Aereo’s witnesses to be “highly credible and persuasive”. It’s at least possible that, if the broadcasters were to put their experts on the witness stand at trial, they might be able to undermine the persuasive showing advanced by Aereo during the injunction hearing. That’s particularly so in view of the fact that the Judge has now explained why she believes that Aereo’s system (at least as she understands it) doesn’t infringe. If the broadcasters’ experts could convince her that her understanding is incorrect in any respect, they might be able to turn things around.

Another possible line of attack to explore: the front end of the Aereo system, in which Aereo first acquires and records the over-the-air programming for later transmission to Aereo’s subscribers. Judge Nathan’s opinion focuses on the back end of the Aereo system, i..e., the process by which the subscriber accesses and retrieves the programming. Since it doesn’t appear to have been fully explored in the injunction hearing, the front end of the Aereo system -- and the transition from the front end to the back end -- may be susceptible to effective challenge at trial.

In her opinion Judge Nathan went to some lengths to emphasize that her conclusions as to the broadcaster’s likelihood of success were intended to be narrow. Nevertheless, her decision doubtless reassures Aereo that its approach is solid: keep yourself well within the wake of the RS-DVR and Betamax precedent and you should be able to avoid copyright problems.

According to the opinion, the broadcasters have signaled that they’re probably going to appeal this interlocutory decision. That appeal would go to the Second Circuit – so if Judge Nathan is reading the Circuit’s Cartoon Network opinion incorrectly, the Circuit can set everybody straight sooner rather than later. But in the meantime, it looks like Aereo will remain up and running for the foreseeable future.

Aereo vs. the Broadcasters

Another day, another way to move video to the Internet . . . and another set of lawsuits.

Welcome to the latest bout in the Alternate Video Delivery System Smackdown Series. In this corner, the upstart challenger, Aereo (formerly known as Bamboom Labs, Inc.); in that corner, pretty much every major broadcast network.

Aereo is the latest innovator seeking to bring video content from one source (in Aereo’s case, over-the-air broadcasting) to subscribers in some alternate fashion – a fashion that ideally makes it attractive enough to cause consumers to fork over $12/month to Aereo. Aereo plans to deliver a full (or at least nearly full) array of over-the-air broadcast programming to you through the Internet. That, of course, means that you would be able to access that programming through whatever Internet-accessible device you might choose – tablet, smartphone, desktop, big screen TV in your living room, etc. The programming could be streamed as it is being broadcast, or it could be accessed on a delayed basis, just like shows you might otherwise save on a DVR.

And that’s Aereo’s angle: as Aereo sees things, its service “enables consumers to access broadcast television via a remote antenna and DVR”. Actually, make that “cloud DVR”, a term Aereo slips into its on-line response to the two lawsuits brought against it by the major TV networks.

What exactly is a “cloud DVR”? It’s a quasi-imaginary device – actually, a combination of devices – that affords the user the ability to access streamed or recorded content from broadcast stations through the Internet. A crucial element of the technology is a teeny-weeny antenna – about the size of a dime (see illustration, above, taken from the Aereo website) – that Aereo uses to receive OTA broadcasts. When you subscribe to Aereo, you are assigned one such antenna – it’s yours and (supposedly) nobody else’s. It’s hooked to “massive amounts of storage and super-fast Internet connections”. You are then given an “elegant interface” with which to “control your antenna”. You can pick a channel to watch or you can tell it to record for later viewing.

So it’s just like sitting in your living room, fiddling with your cable remote, right?

Not really, at least according to a cadre of broadcasters who have claimed, in two separate suits, that Aereo’s system infringes on their copyrights by illegally reproducing and publicly performing copyrighted programs.  (Read the complaints here and here.) The broadcasters also argue that Aereo’s operation would violate New York unfair competition law. Their theory is that Aereo is commercially exploiting the programming and the broadcast infrastructure without authorization in a way that “undermines [the broadcasters’] substantial creative and financial investment in their audiovisual works” as well as the broadcasters’ "efforts and labor". (If we may paraphrase that latter claim, it seems to us to be something like: “Look, there’s a system in place that allows broadcasters to be paid by cable and satellite systems in exchange for carriage of their signals. It’s existed for many, many years. You, Aereo, are unilaterally threatening that system”.)

As the broadcasters see things, Aereo is engaging -- or, more accurately, will engage in , since Aereo's system isn't slated to launch until March 14 -- in the “retransmission” of OTA broadcast signals. Under the copyright laws, of course, the “retransmitter” ordinarily needs to get permission from the copyright owner of the “retransmitted” material before any “retransmission” can lawfully occur. Aereo doesn’t have such permission, so it’s infringing – hence the lawsuits.

Hold on there, says Aereo. Aereo doesn’t “retransmit” the signal in a way that violates the law. Rather, they’re simply a company that rents antennas to subscribers. Those antennas pick up a broadcast signal within the local area; the fact that the antenna doesn’t happen to be in the subscriber’s home isn’t legally significant. I think everyone would agree that, at least up to this point in the analysis, what Aereo has done is completely legal.

But Aereo’s service doesn’t just deliver the OTA signals from an antenna to a TV set. It makes them available on the Internet. Does that constitute a direct retransmission of content that was lawfully received at each individual antenna? Or does it just make it easier for consumers to do what they are otherwise entitled to do anyway?

That, of course, is the $20 million dollar question for Aereo ($20 million being the approximate level of financing it’s rounded up). 

The problem is that there are two lines of precedent potentially at work here – and they lead to different results.

On the one hand, you have the Betamax/Cablevision model. Old-timers will recall the 1984 Betamax case, in which the Supreme Court concluded that use of a VCR by individual consumers for the purpose of “time-shifting” the viewing of programming did not constitute copyright infringement. (All you kids, “VCR” stands for “videocassette recorder” – ask your parents.)

That theory was expanded somewhat in 2008, when the U.S. Court of Appeals for the Second Circuit concluded that Cablevision’s “remote storage” DVR system similarly did not infringe on copyrights. Under that system, Cablevision subscribers no longer had a separate VCR or DVR recording unit in their homes; instead, Cablevision took care of the recording – at the subscriber’s request – within its own system. The subscriber could then access the recorded programming by using its remote control device, just as if the subscriber was using a set-top recording unit. The Second Circuit held that this did not constitute infringing retransmission. The court focused in particular on the fact that each playback transmission went to a “single subscriber using a unique copy produced by that subscriber” – and, therefore, such transmissions were not made “to the public”, an essential element of “retransmission”.

On the other hand, you have the ivi TV and FilmOn.com cases. Those involved companies claiming that they were entitled to retransmit OTA broadcast signals to subscribers over the Internet. As our readers should recall, that claim ran into a brick wall – actually, a couple of brick walls. At least two courts weren’t willing to buy into the notion that an on-line operation should be entitled to compulsory carriage rights under the copyright laws.

Aereo is probably planning to rely on the reasoning in the Cablevision case: Aereo is, after all, providing its service to one subscriber at a time through one antenna at a time. As a result, so the argument goes, any transmission of programming that occurs is not “to the public”, but rather to the individual subscriber. No copyright infringement there, right?

But what of the fact that each retransmission occurs over the Internet, providing access to the programming not just in the comfort of the subscriber’s living room, but anywhere? The Cablevision case did not involve that Internet component; the ivi TV and FilmOn.com cases did. Does that make a difference? Should it?

Which brings us back to the $20 million question. I really have no clue how this is likely to end up, and I will be as interested as anyone to see how the courts will react. Interestingly, the broadcasters have sued Aereo in the U.S. District Court for the Southern District of New York, the court which dealt Filmon.com and ivi TV major setbacks. Bad news for Aereo? Maybe, maybe not: decisions from that court get appealed to the Second Circuit, source of the Cablevision decision. 

Should we read something, then, into the fact that Aereo is launching in the New York market first?  Perhaps, because if Aereo can convince either the District Court or, failing that, the Second Circuit court that it is like Cablevision, it should win. But what about the planned launches elsewhere? I can see further lawsuits, one in each city until a “circuit split” is created on this issue. From there, it could be on to the Supreme Court, source of the Betamax case. There may be some method to Aereo’s madness. This could get interesting.  

But, even if the Supreme Court doesn’t resolve the issue, I know one thing and I’m going to sound like a broken record saying it (Problem understanding that metaphor? Ask your parents, again): there needs to be a significant overhaul of all Copyright Laws, or at least some form of compulsory license to allow on-line transmission of broadcast programming so that the many innovators who actually want to save broadcast television programming can do just that.

Some More Observations About Copyright, Content Distribution And Technological Innovation

More signs of the need for a fresh approach to copyright licensing for audiovisual content

In recent months I’ve suggested – here and here, for example – that changes in the video delivery landscape around us demand a good, hard look at the various laws which govern transmission and, especially, retransmission of audiovisual content usually seen on television.   It’s fair to say that, while I don’t advocate any particular approach, I support change that brings the various laws in this area into line with the viewing habits of an increasing amount of television watchers.   

But that would entail a herculean effort involving potential changes to the regulations of two major government agencies: the FCC and the Copyright Office. The FCC would be looking, or re-looking, at such things as the definition of an MVPD as well as rules governing must carry, retransmission consent, fin/syn and program exclusivity. The Copyright Office would have to examine its regs covering cable and satellite compulsory licenses. Changes there and elsewhere would have to be justified in light of actual evidence that the media delivery landscape is changing.  (I’m sold on this, but – if you can believe this – the Administrative Procedure Act requires more than my personal stamp of approval).

So that’s why I’m happy to see signs of serious inquiry on two fronts.

 One such sign is the FCC’s Further Notice of Inquiry in the Matter of Annual Assessment of the Status of Competition in the Market for the Delivery of Video Programming (FNOI), released on April 21.   On its face, this is a pretty mundane request by the FCC for information relating to competition in the video marketplace. In fact, it’s the Commission’s 14th annual review since Congress first directed the FCC to conduct such reviews back in the 1992 Cable Act.

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.

Copyright, Content Distribution And Technological Innovation: The Need To Re-Think The Compulsory Licensing System

Signs point to tensions between the laws of the past and the technology of the present and future

Not to go all chicken little on you, but the world may be coming to an end – the world of copyright and compulsory licensing as we have known it for the past several decades, that is. I’ve been following the evolution of content delivery across all platforms (including the legal systems which underlie content delivery), and have in recent months noted a recurring theme: the legal rules governing delivery of content – and audiovisual programming, especially – are falling farther and farther behind the state of the technological art. Traffic rules developed during the horse-and-buggy days don’t really help anybody in an age of superhighways and high-performance cars. So maybe it’s time for legislators and regulators to roll up their sleeves and get to work developing a copyright licensing system for the 21st Century.

Examples? How about online streaming providers ivi, Inc. and Filmon.com, who have been trying to cram the square peg notion of an “on-line cable system” into the round hole system of traditional compulsory licensing. They’re clearly outliers making long shot attempts to revolutionize television viewing. From a legal standpoint they’re still on the outside looking in, as both have been told by federal courts that they are not acting within the boundaries of the Copyright Act. Yet, as we reported on these cases, we prophesied that ivi.Inc and Filmon.com may simply be ahead of their time.

Our predictions weren’t far off the mark.

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.

TRO Slows FilmOn.com Down

But (some of) the show still goes on at Internet cable operation

Bad news for FilmOn.com. On November 22, a federal judge in New York ordered it not to “infring[e] by any means, directly or indirectly”, any copyrights owned by CBS, NBC, ABC or Fox. Judge Naomi Reice Buchwald made sure that the scope of her order included (but wasn’t limited to), the “streaming over mobile telephone systems and/or the Internet of any of the broadcast television programming in which any plaintiff [that would be any of the networks] owns a copyright”.

The order – technically termed a Temporary Restraining Order or (among the cognoscenti) a TRO – will be in effect pending a full hearing on the nets’ related request for a preliminary injunction against FilmOn.com.

This isn’t necessarily the end of the road for FilmOn.com, though.  As we pointed out when we first described FilmOn.com to our readers last month, there are many moves to be made on the various litigation chessboards already in play.  And even in this particular case, a TRO is just a first step in the process. The networks have asked for more permanent relief – in the form of an injunction – against FilmOn.com’s allegedly infringing activities. But before an injunction can issue, the court will let all the parties submit written arguments and then hold a hearing. The hearing date hasn’t been set yet, but the judge’s order specifies that all papers must be filed by December 13, so it doesn’t look like there’s going to be much foot-dragging here.

Nor does the fact that a TRO has issued necessarily mean that the court will issue an injunction. It just means that the judge was satisfied that the networks had a good enough case to warrant putting a hold on FilmOn.com’s activities until a hearing could be held to sort everything out.

According to a statement issued by FilmOn.com, it has “temporarily ceased retransmission of free network television” on its service. It’s still “open for business”, though, relying on its own “library of content” along with several independent broadcasters who have apparently signed up with it. Check back here for updates.

Another Online Service Hoists "Cable" Flag Of Convenience

FilmOn.com joins ivi TV in claiming status as cable carrier, streams OTA broadcast content online 

Online service = cable company? The concept has yet another proponent – FilmOn.com, Inc. (FilmOn).  Launching an online service featuring over-the-air content (in late September, just in time for the start of the new TV season), FilmOn has joined ivi TV in the fray over the alleged right of the upstart online companies to webcast broadcast programming to subscribers. And already FilmOn is on the wrong end of a lawsuit brought by folks looking to nip that claim in the bud.

The result could accelerate a final and authoritative disposition of the issue, one way or the other.

When I wrote about the ivi case recently, I tried to be clear that ivi’s approach to copyright could radically alter the broadcast carriage landscape. It’s not that ivi’s approach is a sure-fire winner – far from it. But in its request for a declaratory order (filed in a Federal court in Washington State), ivi has squarely posed an important question: is an online video delivery system the legal equivalent of a cable company for purposes of retransmission rights under the Copyright Act? 

Earlier this month, broadcast networks (i.e., ABC, CBS, Fox, NBC) and other content providers opened their own offensive: they sued FilmOn for copyright infringement in Federal court in New York. (The networks have sued ivi in New York as well.) Their claim is essentially the polar opposite of ivi’s: according to the broadcasters, online streaming of over-the-air television programming without the specific consent of the copyright holders constitutes infringement.

The legal issues may be the same as in ivi’s Washington case, but the roles have changed. In the FilmOn litigation, the broadcasters are the ones who are affirmatively seeking the court’s blessing of their position – as well as an injunction preventing FilmOn from continuing its service and an award of damages and attorneys’ fees. 

There may be some differences between the services ivi offers and those that FilmOn offers, but those differences are essentially trivial. Basically, we’ve got two companies each charging a subscriber base for access to copyrighted broadcast network programs being streamed over the Internet. Though they may ultimately advance different legal arguments in support of their respective claims, each company’s business model will ultimately depend on their obtaining some governmental imprimatur – from the courts, or the Copyright Office, or Congress – that online distribution is the functional equivalent of a cable system. 

If either ivi, or FilmOn, or both succeed in getting such an imprimatur, the result will have far-reaching repercussions for the redistribution of broadcast programming.

And even if both ivi and FilmOn end up striking out, that’s not likely to put an end to the argument. More and more television is being consumed online. As a result, even if ivi and FilmOn both bite the dust, I won’t be surprised to see other pop-up entrepreneurs – or even cable companies themselves – adopt similar online delivery methods under the general “cable system” rubric. And if either ivi or FilmOn eventually prevails with its position, it’s an odds-on mortal lock that other companies will be jumping on the bandwagon.  

In other words, the bell announcing the ivi/FilmOn approach has been rung, and it’s impossible to un-ring it.  The argument that online distribution is the equivalent of a cable system for copyright purposes is not likely to go away unless and until it is finally resolved in some manner.   Such resolution could possibly be achieved, or at least jump-started, by negotiation among the various interest-holders – programmers, broadcasters, would-be online services, etc. Such private resolution would, however, require major league moves by all parties away from their currently dug-in positions. It might happen – particularly if the general video audience continues to embrace Internet delivery of programming – but for now all sides have staked out their positions in their respective court cases, and they’ll probably be inclined to let those ride for a while.

There is one intriguing aspect of the ivi and FilmOn lawsuits, though, which could move things along some. Recall that the ivi-initiated suit for declaratory relief was filed in Washington State – in the Ninth Circuit – while the broadcasters’ suits again ivi and FilmOn were filed in New York, i.e., the Second Circuit. If both cases wend their way through the trial and appellate processes in the ordinary course, we are looking at the likelihood of two separate Circuit Court decisions on essentially the same issue.

Imagine, just for a moment, that one of those circuit courts rules for the broadcasters while the other circuit says that the online service does qualify as a cable system under Section 111 of the Copyright Act, just like ivi and FilmOn claim. With that you would have the classic “circuit split” situation that often justifies Supreme Court review. In fact, I think the Supreme Court would have to resolve this split – 100% lock that they take the case in my mind – because of the nationwide (indeed, ubiquitous) reach of online webcasting. And, regardless of how the Supremes might rule in such a case, the losing industry would probably seek some legislative reversal through amendment of the Copyright Act (as happened in the case of satellite carriage of broadcast programming).

There are potential endgames aplenty here. Expect to see them played out in the near term.

[Interesting factoid: FilmOn is the brainchild of Alki David, who is reportedly a “billionaire heir” who offered $1 million to the first person who would streak in front of President Obama with “Battlecam.com” written across the streaker’s chest. Battlecam.com is a “video-sharing community” linked to FilmOn.com. At least one contestant has attempted the stunt so far.]

Poison ivi?

Would-be Internet cable service causes irritating rash among broadcasters and programmers

A Seattle-based Internet company – ivi TV (ivi) – has popped up with a novel theory: ivi thinks that its online-only service is the functional equivalent of a cable TV system. Relying on that theory, ivi is claiming that it has a statutory right to retransmit over-the-air broadcast programming. Suffice it to say that, if validated, that theory could radically alter the broadcast carriage landscape as contemplated by the Copyright Act.

Coming out of nowhere with a bold stance, a strong message and, it seems, at least moderate funding, ivi has managed thus far to irritate major networks, broadcasters and even sports leagues. Not surprisingly, it has found itself on the receiving end of several “cease and desist” letters. 

But rather than fold, ivi has upped the ante. It has effectively gone “all in”, asking a Federal District Court in Washington State for a declaratory judgment that ivi hasn’t infringed anybody’s copyrights and that it is, in fact, entitled to retransmit over-the-air programming. 

The question is whether the company can cash out even if it wins this hand.

According to ivi’s court filing, ivi’s operation is “permissible under the statutory licensing provisions of the Copyright Act”, referring to Section 111 of that Act. ivi’s pleading is a tad short on analysis. In fact, it contains no analysis – just the simple assertion that what ivi is doing is “permissible”.

Section 111 of the Copyright Act is pretty detailed. Often called the “Cable Compulsory License”, it allows cable systems to engage in “secondary transmissions” of broadcast stations’ “primary transmissions” in certain defined instances and with payment of the proper copyright royalties.   The outer parameters of the license have not been tested too often over the years because the broadcast/cable dynamic has generally worked well, thanks in no small part to the must carry and retransmission consent rules. Those rules have established a framework that, while not perfect, ensures widespread carriage of broadcast stations.

Enter ivi. It is not a cable company in the traditional sense: no headend, no wires, no set top box. ivi streams broadcast stations online in real time (according to its website program listings, it’s currently streaming the local network affiliates based in Seattle and New York City). 

ivi claims that it falls within the Cable Compulsory License because it is engaging in a secondary transmission of a primary transmission and paying the required royalties.   I could try to contrive a detailed legalistic explication of that claim – and who knows, the claim might actually be valid – but since ivi hasn’t bothered to provide more detail about its own argument, I’ll pass on the opportunity for just now. Section 111, of course, is much more detailed, technical and involved than ivi’s terse claim lets on. 

Without further details I’m skeptical about how this will all turn out for two reasons. First, ivi isn’t the first to test the limits of Section 111 – and prior attempts haven’t been all that successful.   Second, even if it wins, ivi may see itself squeezed out of the market anyway.

Section 111 of the Copyright Act allows retransmission of a broadcast signal in only very limited circumstances. Other non-cable claimants to the protections which Section 111 affords to cable systems have been notably unsuccessful. 

Satellite carriers, for example. Almost 20 years ago, they argued that Section 111 justified their carriage of local broadcast stations. While they got one court to agree with them, the Copyright Office later announced unequivocally that satellite carriers were not “cable systems” under the Act. (Upshot: the satellite guys had to get Congress to enact a separate section of the Copyright Act – through the “Satellite Home Viewer Act” and its progeny, SHVERA and STELA – which cleared the way for satellite carriage of broadcast stations.)

Similarly, ten years ago a Canadian Internet company, iCraveTV, attempted to redefine television viewing by streaming the live broadcast signals of American broadcast television affiliates, from Canada, to anyone accessing its website . . . but not for long. That operation was enjoined by a federal court in 2000, and ultimately caved under the pressure of mounting litigation costs and the prospect of $100 million or more in damages if that litigation went the wrong way in the end. (Interestingly, in 1999 Congress declined to insert into the Copyright Act a provision expressly putting the kibosh on the notion that an online operator might be deemed a cable operator for copyright purposes. That fact doesn’t really strengthen ivi’s claim now, but it also doesn’t hurt it, since it at least suggests that the Act did not preclude ivi’s interpretation.)

And the FCC, in a decision issued by the Media Bureau earlier this year, held that provision of about 80 offerings of audio and video programming via Internet Protocol Television (IPTV) is unlikely to qualify the provider as a “Multichannel Video Programming Distributor” because each stream of programming did not clearly constitute a “channel” – at least as the Bureau uses the term “channel”. 

None of these is exactly on point with ivi’s situation, but each represents an attempt by a new video distribution service to classify itself as a cable system for Section 111 purposes – and each of those attempts failed.

But, more importantly, what if iviTV does win? Will the broadcasters and cable systems take this lying down? Hard to envision that. Frankly, this might be one of those “litigation isn’t fair situations” where the richer, more powerful broadcasters and cable companies bleed ivi dry by dragging this out in court. They definitely feel threatened and will almost certainly act to defend their still-lucrative turf.  And sure enough, that defense has started: the four major commercial TV networks and PBS have filed their own lawsuit, in New York, alleging that ivi has infringed their copyrights.

Even if ivi were to prevail in the end, the cable companies would then take advantage of the ivi-identified loophole. Through sheer size and usual enhancements (such as bundling), an existing cable operator could offer, to a ready-made subscriber base already in place, the same service as ivi but at a lower price. 

So winning one round might result in ivi being killed with its own sword. 

It’s also easy to imagine that the Copyright Office might step in again, as it did with satellite television. In fact, it might not be a bad idea for the Office to get involved sooner rather than later, maybe even now. Online television viewing is only growing and it’s probably in everyone’s best interests to have the agency with the most expertise on copyright law address the topic. Could all this lead to yet another new section of the Copyright Act applicable to online carriage of broadcast television?

It’s unclear whether ivi can or will win its fight. Given their unwillingness thus far to flesh out their legal theory, I find it hard to believe they’ll succeed. But there’s nevertheless something curiously inspiring about their effort. ivi identified a potential loophole and has tried to exploit it as fast and as far as it could. They may be going down one way or another but, man, they’ll probably be going down in a blaze of glory.