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.