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.