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2nd Circuit Affirms in Aereo Copyright Cases

April 1, 2013. The U.S. Court of Appeals (2ndCir) issued its divided opinion [62 pages in PDF] in WNET v. Aereo and ABC v. Aereo affirming the order of the U.S. District Court (SDNY) denying Aereo's motion for a preliminary injunction.

The majority held that Aereo's service, which captures, stores, and almost immediately retransmits broadcasters' programming, without license, to its own customers, for a fee, via a multitude of antennas, is not a public performance with the meaning of the Copyright Act, and hence, does not infringe the exclusive rights of broadcasters.

The dissent argued that Aereo's system is a sham, functionally equivalent to a cable system, constructed solely to exploit a perceived loophole in the Copyright Act, that must be viewed as a public performance in violation of the exclusive rights of broadcasters.

Outline of this Article.

Introduction. The District Court issued its opinion [52 pages in PDF] in WNET v. Aereo and ABC v. Aereo on July 11, 2012.

This is a pair of copyright infringement cases involving the Aereo online retransmission service. The two cases are substantially similar, but not consolidated. The District Court and Appeals Court have considered the two cases simultaneously, and issued opinions that span both cases.

The key issue in these cases is how to apply broadcasters' public performance right to Aereo's service. While the public performance right is not important for many types of works subject to copyright, it is critical for the holders of entertainment video programming.

Both the District Court and the Court of Appeals held, relying upon the Second Circuit's 2008 opinion in Cartoon Network v. CSC Holdings, that Aereo's service, since it retransmits using a large number of antennas, is not a public performance, and thus is not an infringement of broadcasters' exclusive right to public performance.

Statute. 17 U.S.C. § 106 sets forth the exclusive rights of copyright. Subsection 106(4) provides that a copyright owner has the exclusive right "to perform the copyrighted work publicly".

17 U.S.C. § 101 provides pertinent definitions, written before development of the IT based technologies at issue in this and other recent cases. The term "perform" means "to recite, render, play, dance, or act it, either directly or by means of any device or process".

The term "publicly" means to "to perform ... it at a place open to the public or at any place where a substantial number of persons outside of a normal circle of family and its social acquaintances is gathered" or "to transmit or otherwise communicate a performance ... of the work to a place" specified by the previous clause, "or to the pubic, by means of any device or process, whether the members of the public capable of receiving the performance ... receive it in the same place or in separate places and at the same time or at different times".

Proceedings Below. WNET and other broadcasters filed their original complaint [36 pages in PDF] in the U.S. District Court (SDNY) on March 1, 2012, alleging copyright infringement by Aereo.

The WNET plaintiffs alleged that Aereo offers an unlicensed subscription service that streams television programming over the internet to paying subscribers' computers, smart phones and tablets in violation of the broadcaster's exclusive rights of copyright (pubic performance right and reproduction right).

ABC and other broadcasters filed a second complaint (alleging violation of reproduction, distribution, and public performance rights) against Aereo on March 12, 2012, in the same District Court.

The District Court issued an opinion [PDF] on July 11 denying the plaintiffs' motions for a preliminary injunction on the public performance right claim. That opinion is also reported at 874 F. Supp. 2d 373.

The District Court relied on the 2nd Circuit's 2008 opinion in Cartoon Network v. CSC Holdings, 536 F.3d 121. See, story titled "2nd Circuit Reverses in Remote Storage DVR Copyright Case" in TLJ Daily E-Mail Alert No. 1,806, August 5, 2008.

Judge Denny Chin wrote the District Court opinion that was overturned by that 2008 opinion. He is now a Court of Appeals Judge. He wrote the dissent in the present case.

That opinion is also sometimes referred to as the "Cablevision" opinion, because the defendant, Cablevision Systems Corporation (CSC), provided the Remote Storage Digital Video Recorder (RS-DVR) system at issue in that case. The Court of Appeals held that that DVR service does not infringe the rightholders' (Cartoon Network and others) exclusive rights of reproduction and public performance.

Judge Droney's Majority Opinion. Broadcasters in both cases brought the present appeals. The 2nd Circuit considered the two cases together, and ordered expedited briefing and oral argument.

Broadcasters argued that reliance upon the Cablevision opinion is misplaced, that the Aereo service provides public performance, and that it violates their exclusive rights to provide public performances. Aereo urged reliance upon the Cablevision opinion, and affirmance of the District Court. See, story titled "2nd Circuit Hears Oral Argument in Aereo Case" in TLJ Daily E-Mail Alert No. 2,482, December 4, 2012.

Judge Christopher Droney wrote the opinion of the Court, in which Judge Gleason joined.

Judge Droney wrote that "Aereo transmits to its subscribers broadcast television programs over the internet for a monthly subscription fee. Aereo is currently limited to subscribers living in New York City and offers only New York area channels. It does not have any license from copyright holders to record or transmit their programs."

"The details of Aereo’s system are best explained from two perspectives. From its subscribers’ perspective, Aereo functions much like a television with a remote Digital Video Recorder (``DVR´´) and Slingbox. Behind the scenes, Aereo’s system uses antennas and a remote hard drive to create individual copies of the programs Aereo users wish to watch while they are being broadcast or at a later time. These copies are used to transmit the programs to the Aereo subscriber."

"The outcome of this appeal turns on whether Aereo’s service infringes the Plaintiffs’ public performance right under the Copyright Act."

He continued that the "Plaintiffs claim that Aereo's transmissions of broadcast television programs while the programs are airing on broadcast television fall within the plain language of the Transmit Clause and are analogous to the retransmissions of network programing made by cable systems, which the drafters of the 1976 Copyright Act viewed as public performances. They therefore believe that Aereo is publicly performing their copyrighted works without a license."

But, Judge Droney wrote, there is the Cablevision opinion.

He stated that "Cablevision's holding that Cablevision’s transmissions of programs recorded with its RS-DVR system were not public performances rested on two essential facts. First, the RS-DVR system created unique copies of every program a Cablevision customer  wished to record. ... Second, the RS-DVR’s transmission of the recorded program to a particular customer was generated from that unique copy; no other customer could view a transmission created by that copy. Id. Given these two features, the potential audience of every RS-DVR transmission was only a single Cablevision subscriber, namely the subscriber who created the copy. And because the potential audience of the transmission was only one Cablevision subscriber, the transmission was not made ``to the public.´´"

He reasoned that "The same two features are present in Aereo's system. When an Aereo customer elects to watch or record a program using either the ``Watch´´ or ``Record´´ features, Aereo's system  creates a unique copy of that program on a portion of a hard drive assigned only to that Aereo user. And when an Aereo user chooses to watch the recorded program, whether (nearly) live or days after the program has aired, the transmission sent by Aereo and received by that user is generated from that unique copy. No other Aereo user can ever receive a transmission from that copy. Thus, just as in Cablevision, the potential audience of each Aereo transmission is the single user who requested that a program be recorded."

Judge Droney then proceeded to reject the plaintiffs' other arguments, including that discrete transmissions should be aggregated to determine whether they are public performances, and that the Aereo system is functionally equivalent to a cable television provider.

And, he declined to overturn the Cablevision opinion.

Judge Chin's Dissent. Judge Denny Chin wrote in dissent that "by transmitting (or retransmitting) copyrighted programming to the public without authorization, Aereo is engaging in copyright infringement in clear violation of the Copyright Act." (Parentheses in original.)

He explained that Aereo's technology platform is "a sham".

"The system employs thousands of individual dime-sized antennas, but there is no technologically sound reason to use a multitude of tiny individual antennas rather than one central antenna; indeed, the system is a Rube Goldberg-like contrivance, over-engineered in an attempt to avoid the reach of the Copyright Act and to take advantage of a perceived loophole in the law."

He continued that "After capturing the broadcast signal, Aereo makes a copy of the selected program for each viewer" using a multitude of antennas. However, "These are very much public performances."

Judge Chin did not argue that Cablevision should be overturned. However, he argued that it is distinguishable.

Judge Chin wrote that "there are critical differences between Cablevision and this case. Most significantly, Cablevision involved a cable company that paid statutory licensing and retransmission consent fees for the content it retransmitted, while Aereo pays no such fees.

Moreover, wrote Judge Chin, "the subscribers in Cablevision already had the ability to view television programs in real-time through their authorized cable subscriptions, and the remote digital video recording service at issue there was a supplemental service that allowed subscribers to store that authorized content for later viewing. In contrast, no part of Aereo's system is authorized. Instead, its storage and time-shifting functions are an integral part of an unlicensed retransmission service that captures broadcast television programs and streams them over the Internet."

Hence, "Aereo is doing precisely what cable companies, satellite television companies, and authorized Internet streaming companies do -- they capture over-the-air broadcasts and retransmit them to customers -- except that those entities are doing it legally, pursuant to statutory or negotiated licenses, for a fee."

He concluded that "the majority elevates form over substance. Its decision, in my view, conflicts with the text of the Copyright Act, its legislative history, and our case law."

Judge Chin has substantially experience with copyright law, both as a trial court judge and as an appeals court judge.

He presided in the trial court in Google books cases brought by publishers and the Authors Guild, in which he rejected the proposed class action settlement.

He also wrote the 2007 opinion of the District Court in Cartoon Network v. CSC Holdings, 478 F. Supp. 2d 607. Although, the Court of Appeals reversed in its 2008 opinion [PDF].

He also wrote the opinion [38 pages in PDF] of the Court of Appeals in WPIX v. ivi, holding that a business that streams copyrighted broadcast TV programming over the internet without consent is not a "cable system" within the meaning of 17 U.S.C. § 111 that is entitled to a compulsory license. In that opinion, released on August 27, 2012, Judge Droney joined in the unanimous opinion. See also, story titled "2nd Circuit Rules Internet Streaming of TV Programming is Not a Cable Service" in TLJ Daily E-Mail Alert No. 2,439, September 3, 2012.

Impending Circuit Split. The just released opinion of the 2nd Circuit is in conflict with a District Court opinion in the 9th Circuit. That other case is on appeal to the 9th Circuit. If the 9th Circuit affirms, then two circuits will be in conflict.

Circuit splits are a key criteria for the Supreme Court in deciding whether or not to grant petitions for writ of certiorari.

The defendant in that other case is different, but it also captured and retransmitting broadcast programming using a multitude of mini antennas. The U.S. District Court (CDCal) rejected its argument that this is not a public performance.

Thus, a District Court in another circuit has reached the opposite conclusion in a case involving the same legal claim and very similar facts. See also, story titled "District Court in California Enjoins Aereokiller" in TLJ Daily E-Mail Alert No. 2,500, December 31, 2012.

That other case is Fox Television Stations, Inc., et al. v. Aereokiller, LLC, et al., U.S. District Court for the Central District of California, D.C. No. 2-12:cv-06921-GW, Judge George Wu presiding. It is one of two very similar actions pending in the same court. The other is D.C. No. 2-12:cv-06950.

Reaction. Dennis Wharton of the National Association of Broadcasters (NAB) stated in a release that the "NAB is disappointed with the Second Circuit's 2-1 decision allowing Aereo to continue its illegal operations while broadcasters' copyright actions are heard. We agree with Judge Chin's vigorous dissent and, along with our members, will be evaluating the opinions and options going forward."

Ed Black, head of the Computer and Communications Industry Association (CCIA), stated in a release that "This case was not just about broadcast television; it was a test of the legitimacy of the cloud computing industry. Today, the Second Circuit agreed with us that users should be able to access their own, lawfully-acquired content in the cloud without the fear of being branded pirates". The CCIA and Internet Association (IA) also filed an amicus curiae brief in support of Aereo.

The Public Knowledge (PK) stated in a release that this opinion is a "victory for consumer choice and video innovation". The PK, Electronic Frontier Foundation (EFF), and Consumer Electronics Association (CEA) also filed a amicus curiae brief in support of Aereo.

More Case Information. This opinion was issued in two cases, American Broadcasting Company, Inc., et al. v. Aereo, Inc., and WNET, et al. v. Aereo, Inc., U.S. Court of Appeals for the 2nd Circuit, App. Ct. Nos. 12-2807 and 12-2786, appeals from the U.S. District Court for the Southern District of New York, D.C. Nos. 1:12-cv-01540-AJN and 1:12-cv-01543-AJN, Judge Alyson Nathan presiding. The District Court has not consolidated the two cases.

Judge Christopher Droney wrote the opinion of the Court of Appeals, in which Judge John Gleeson (USDC/EDNY sitting by designation) joined. Judge Denny Chin wrote a dissenting opinion.

Both Judge Droney and Judge Chin were appointed to the District Court by former President Clinton, and elevated to the Court of Appeals by President Obama. Judge Droney served in the District of Connecticut, while Judge Chin served in the Southern District of New York.

See also, stories titled "Obama Nominates Judge Chin to 2nd Circuit" in TLJ Daily E-Mail Alert No. 1,998, October 7, 2009, and "Obama Nominates Droney for 2nd Circuit" in TLJ Daily E-Mail Alert No. 2,233, May 5, 2011.

Judge Gleason was appointed to the District Court by former President Clinton.

The law firm of Jenner & Block represented the WNET plaintiffs. The law firm of Debevoise & Plimpton represented the ABC plaintiffs. The law firms of Winston & Strawn and Constantine Cannon represented Aereo.

The Court of Appeals received numerous amicus curiae briefs.

(Published in TLJ Daily E-Mail Alert No. 2,544, April 2, 2013.)