Bloomberg News

Aereo Arguments at Supreme Court Put Cloud Tech in Hot Seat (1)

April 23, 2014

The Supreme Court, weighing the fate of Aereo Inc.’s online-TV service, is confronting a broader question that affects consumers and the technology providers they use, from Apple Inc. to Google (GOOG:US) Inc.

The debate: Who owns the stuff in the cloud?

The justices were weighing whether Aereo’s recording of broadcast programming from an off-site antenna and delivery via the Internet to a single customer violates federal copyright law. Justices including Stephen Breyer questioned whether a ruling against Aereo would more broadly imperil cloud-computing technologies that allow consumers to remotely store content such as video and access it through the Web.

The law gives copyright owners the exclusive right to perform their works “publicly.” If Aereo is deemed to be a public rather than private performance, the fear is that cloud storage offerings from companies like Google, Dropbox Inc., Apple, Amazon.com Inc. and Box Inc. also would be considered in violation of the law when users download pictures, videos or documents.

“If you have too expansive an interpretation of what is the public performance right, you are consigning them to potentially ruinous liability,” David Frederick, Aereo’s lawyer, said in court yesterday. “That’s why the cloud computing industry is freaked out about this case.”

Cloud computing is the delivery of applications and content, like video and music, through the Internet. The information isn’t stored on-site with the user; instead, it’s held remotely in servers managed by a cloud provider.

Barry Diller

While broadcasters including CBS Corp. (CBS:US), Walt Disney Co.’s ABC and 21st Century Fox Inc. say the startup is illegally distributing content, Aereo contends that it’s delivering the same service as a TV antenna in an easier way.

Aereo, which is backed by Barry Diller, lets customers in 11 cities watch live and recorded broadcast programs for as little as $8 a month by collecting over-the-air signals through thousands of dime-sized antennas. A federal appeals court last year said Aereo’s service is legal because the separate antennas let each customer create a distinct copy of a broadcast program for viewing, so no public transmission takes place.

After that video is collected, the equipment works similarly to cloud-storage companies: The information is stored and can be accessed via the Web through an array of customers’ devices like computers, smartphones and tablets.

Technology Impact

The issue may be pivotal if Aereo is to emerge victorious, though the hourlong hearing didn’t clearly indicate the likely outcome. Chief Justice John Roberts suggested he viewed Aereo as violating broadcaster copyrights, asking if there was no other technological reason to have thousands of antennas other than to get around copyright laws.

As the Supreme Court prepares to rule in the case by early July, other justices expressed concern over the broader implications for the cloud industry.

“I don’t understand what the decision for you or against you when I write it is going to do to all kinds of other technologies,” Justice Breyer said.

Cloud software revenue increased 25 percent to $35 billion in 2013, and may more than double to $76 billion by 2017, according to researcher IDC.

The broadcasters’ lawyer, Paul Clement, said cloud storage companies shouldn’t be affected because those businesses store content that the users upload themselves. Clement argued that there is a “fundamental difference” between customers uploading their own files and the dissemination of information that is new to the customer.

He compared it to the difference between a car dealership and valet parking.

Car Dealership

“If I show up at the car dealership without a car, I’m going to be able to get a car,” he said. “If I show up at the valet parking service and I don’t own a car, it’s not going to end well for me.”

While Clement argued that Aereo’s delivery of programming through the cloud is a delivery of copyrighted material, he then went on to ask Justice Elena Kagan not to resolve the cloud computing issue because “not all cloud computing is created equal.”

After the arguments yesterday, Aereo’s lawyer Frederick said the case is fundamentally about consumers’ rights to have an antenna and DVR to record over-the-air TV signals, and that shouldn’t change by moving the antenna and DVR to the cloud.

“We’re confident, cautiously optimistic, based on the way the hearing went today that the court understood that a person watching over-the-air broadcast television in his or her home is engaging in a private performance and not a public performance that would implicate the Copyright Act,” he said.

‘Breathing Room’

Communicating content from one physical place to another is “at the heart of Internet-based technologies,” the Computer and Communications Industry Association and Internet company Mozilla Corp. wrote in an April 2 amicus brief supporting Aereo.

“The dramatic expansion of the cloud computing sector, bringing with it real benefits previously imagined only in science fiction, depends upon an interpretation of the Copyright Act that allows adequate breathing room for transmissions of content,” the group said.

To contact the reporter on this story: Alex Barinka in New York at abarinka2@bloomberg.net

To contact the editors responsible for this story: Sarah Rabil at srabil@bloomberg.net Stephen West


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