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 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, – 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 folks have launched, 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.