Billions of dollars may be at stake in the final round of the legal dispute between broadcast networks and the online streaming service Aereo, but the case will come down to the interpretation of two words: public performance.
Aereo, a two-year-old startup funded by Barry Diller’s IAC (IACI), charges viewers in about a dozen U.S. markets $8 a month to record or stream live broadcast TV signals to their PCs, smartphones, and tablets using dime-size antennas. On April 22, the Supreme Court is slated to hear arguments about whether Aereo’s distribution of broadcasts infringes copyright law, which says that the rights holder controls the public performance of art—music, plays, TV shows, films.
Performances are considered public if given before, or transmitted to, an audience that extends beyond close friends and relatives. As interpreted under the 1976 Copyright Act, this gives TV networks the right to charge cable companies to retransmit their shows. Broadcast TV retransmission fees totaled about $3.3 billion last year, according to research firm SNL Kagan, which expects fees to reach $7.6 billion by 2019.
The networks argue that Aereo’s antenna streaming is essentially stealing their programming. Fox (FOX) and CBS (CBS) have publicly threatened to shift to a cable model to make sure they get paid, though the service may also make it easier for cable subscribers to cut the cord. (Aereo has struck a deal to carry one cable channel: Bloomberg TV, which is owned by Bloomberg LP, the parent of this magazine.)
A dissenting judge called Aereo “a Rube Goldberg-like contrivance” designed to get around the spirit of the law
Aereo contends that its retransmission isn’t a public performance because each viewer’s Aereo antenna can only receive a particular signal—meaning there are a thousand audiences of one, rather than a public audience of a thousand—and because the viewer’s choice of when to stream a broadcast or play back a recorded program is similar to the legal use of a DVR or VCR. The company’s argument relies largely on a 2008 federal appellate court holding that Cablevision (CVC) didn’t infringe network copyrights by letting customers save shows on its servers. Aereo argues that a court decision against it would threaten a broad range of cloud computing services, because depending on how broad the decision is, it might restrict personal storage of media that users stream themselves. “You’d be asking the consumer to restrict their conduct to the consumer’s premises if any transmission becomes a public performance,” says Aereo Chief Executive Officer Chet Kanojia.
The broadcasters first sued Aereo in New York in March 2012, seeking a preliminary injunction; it was denied in federal district court and on appeal. A Massachusetts federal district court also denied an injunction, but a Utah federal district court granted one. FilmOn, an Aereo rival that works in a similar manner, lost cases in California and the District of Columbia. Both Aereo and the broadcasters asked the Supreme Court to take the upcoming case.
In the federal appellate case, a dissenting judge called Aereo “a Rube Goldberg-like contrivance” designed to get around the spirit of the law. Yet it’s hard to draw a clear technical line between the technology used by Aereo and that of Cablevision’s DVR, or between that of Aereo and Apple’s (AAPL) iCloud. Apple lets consumers stream music, TV, and movies they’ve already purchased, and Aereo argues that its own service offers access to broadcast programming that would be free anyway. “The problem the court faces is that if they want to say that Aereo is violating the law, they have to explain how it’s different from Cablevision or, more generally, cloud computing,” says Christopher Sprigman, a professor at the New York University School of Law, who isn’t involved in the case.
The high court’s decision, expected by the end of June, will almost certainly have to draw the kinds of fine distinctions that show why copyright has been called the metaphysics of the law. “I tend to think this is a simple and narrow question,” says Neal Katyal, a former acting U.S. solicitor general advising the networks in the case. He points out that the U.S. Department of Justice submitted an amicus brief urging a narrow decision in favor of the broadcasters. “Aereo has tried to make this about the future of the Internet,” Katyal says, “but this is a court that’s really reluctant to make big pronouncements in the realm of technology and the law.”