But District Court decision could be key to a return to the Supreme Court for Aereo-related issues

filmon-rejection-1FilmOn X’s fortunes have taken a turn for the worse. But for FilmOn X, that might not be a totally bad thing.

Longtime readers will be familiar with FilmOn X, the Aereo doppelganger. When Aereo burst on the scene several years ago with its Internet-based, tiny-antenna approach to the delivery of over-the-air television programming, FilmOn X followed suit with its own, near-identical system. Parallel copyright litigation ensued, Aereo duking it out with broadcasters in New York while FilmOn X faced off against broadcasters in Los Angeles and elsewhere.

Aereo started strong, winning key victories (in both the U.S. District Court for the Southern District of New York and the Second Circuit), while FilmOn X didn’t. But in 2014 Aereo’s streak ended in the Supreme Court, which reversed the Second Circuit’s decision upholding Aereo’s approach. The Supremes seemed swayed by the fact that Aereo looked for all the world like a cable TV operation – not a mere equipment provider (as Aereo urged) – and, accordingly, the Court concluded that Aereo was retransmitting copyrighted content, for which it needed a license that it didn’t have.

In response, Aereo shifted gears and argued (to the District Court following remand from the Supremes) that it would simply be the cable system the world wanted it to be: Aereo would pay royalties and comply with all the other rules and regulations imposed upon cable systems. In turn, Aereo would be entitled to retransmit over-the-air broadcast programming as a cable system pursuant to Section 111 of the Copyright Act.

That didn’t work and Aereo is no more.

FilmOn X’s litigation on the West Coast, which had not been going FilmOn X’s way anyway, had been stayed pending the Supreme Court’s decision in Aereo. Once the Supremes had ruled, FilmOn X did the same as Aereo, claiming to be, in effect, a cable system within the meaning of Section 111. In its West Coast litigation, FilmOn X surprisingly found a receptive ear in Judge George Wu, who concluded that FilmOn X is at least potentially entitled to a Section 111 compulsory license. (That decision is currently on hold pending review by the Ninth Circuit.)

Meanwhile, FilmOn X had also been sued in Washington, D.C. Back in 2013 Judge Rosemary M. Collyer, concluding that the broadcast plaintiffs were likely to prevail in the infringement claims, had enjoined FilmOn X from operating anywhere other than the Second Circuit. Following the Aereo decision, the parties before Judge Collyer filed cross-motions for summary judgment. In its papers, FilmOn X again argued that it is entitled to a Section 111 compulsory license because it is, in effect, a cable system.

And now Judge Collyer has flatly rejected that argument.

She starts by parsing the actual language of Section 111, breaking it down into the five component elements that define “cable system”: (1) a facility (2) located in any State, Territory, Trust Territory, or Possession, that (3) in whole or in part receives signals transmitted or programs broadcast by one or more television broadcast stations licensed by the Federal Communications Commission and (4) makes secondary transmissions of such signals or programs by wires, cables, microwave, or other communications channels to (5) subscribing members of the public who pay for such service.

In Judge Collyer’s view, FilmOn X fails to meet this definition because the Internet is not a “physical facility located in any State.” In fact, it’s not even a “physical or tangible entity”, which demonstrates just how different an Internet-based system is from a cable system.

She finds this “plain language” interpretation to be supported by other factors as well. For example, while satellite carriers bear much the same resemblance to cable systems as FilmOn X does, Congress created a distinct license for satellite folks. And the Copyright Office revised its regulations implementing the Section 111 compulsory license to specifically exclude satellite carriers, in part because they are not “localized retransmission services.” As Judge Collyer notes, neither are Internet-based systems. Like a satellite system, an Internet-based system “happens to employ wires and cables as a mere part of its transmission path” which is not sufficient to qualify as cable system.

Along the same lines, she rejected FilmOn X’s suggestion that its service is akin to AT&T U-verse or Verizon FIOS, which use Internet protocol technology (IPTV) to deliver programming to subscribers. Unlike FilmOn X, those two services don’t stream video programming over the Internet; rather, they “deliver content to local communities through closed and managed networks that were built for this precise purpose.”

The legislative history of the Copyright Act doesn’t help FilmOn X, either. As Judge Collyer reads it, that history indicates that the exclusive rights granted to the copyright owners (including the right to publicly perform copyrighted content) are to be interpreted broadly, while any exceptions (like the Section 111 Cable Compulsory License) are to be construed narrowly to preserve the copyright owners’ rights.

She also observes that the Copyright Office – the agency presumed to have the most expertise in this area – has repeatedly rejected applications by Internet-based operators seeking to be cable systems going back 15 years. Indeed, in shifting gears in 2014 and claiming to be, in effect, a cable system, FileOn X advanced a royalty payment to the Office. The Office in turn accepted that payment on a provisional basis, but in so doing went out of its way to note that it did not believe that an Internet-based system like FilmOn X would qualify as a cable system. Judge Collyer feels that that statement was entitled to deference.

But didn’t the Supreme Court (or at least a couple of Justices) compare Aereo to a cable system? Perhaps, but those comparisons don’t sway Judge Collyer because: (1) Aereo hadn’t argued that it was a cable system entitled to a statutory license, so it’s not like that issue had been framed for full consideration by the Court; (2) the comparisons arose mainly during oral argument and it’s well-established that comments made from the bench at oral argument have no legal effect; and (3) the Justices’ comments in any event undermine FilmOn X’s claim because they show that the Justices were fully aware of a potential Section 111 defense and yet chose not to mention it in the Court’s opinion.

FilmOn X also suggested that Judge Collyer might want to hold off on acting until the FCC has completed its ongoing MVPD proceeding, since the FCC’s action there could affect the issues before the Court. Collyer isn’t buying that, though, because the issues before the FCC and those before the Court are “apples and oranges”. The FCC is looking only to define MVPD’s for the purposes of the communications regulatory regime. By contrast, the issue before Judge Collyer – i.e. the basic definition of “cable system” under Section 111 of the Copyright Act – is a threshold inquiry which, if satisfied, then requires the cable system operator to qualify under the FCC’s rules. In other words, the FCC’s definition doesn’t really come into play until after the Section 111 question is resolved. So the FCC proceeding really has no bearing here.

Judge Collyer’s bottom line: FilmOn X is not entitled to a compulsory license under Section 111 and, lacking such a license, it is on the hook for copyright infringement.

So that’s bad news for FilmOn X, right? Maybe not. Remember that Judge Wu out in Los Angeles reached a contrary decision earlier this year. An appeal of his decision is pending before the Ninth Circuit. If the Ninth Circuit affirms Wu’s decision and the D.C. Circuit affirms Collyer’s, that would sure look like a circuit split – and we all know what that could mean. In other words, we probably shouldn’t count FilmOn X out just yet.