US Supreme Court Hears High Stakes Aereo Copyright Case

The United States Supreme Court heard oral arguments today (22 April) in a contentious copyright suit that could affect the continued viability of broadcast television, cable TV, and cloud-storage services like DropBox, Box and Apple’s iCloud. And it is far from clear how the court will rule in American Broadcasting Companies v. Aereo, Inc. 

The lawsuit was brought by the nation’s major TV broadcasters, in an attempt to protect their business model from a high-tech rival offering a new and disruptive technology. Aereo combines TV antennas and remote DVRs in a manner that allows customers to record broadcast TV shows and watch them at their convenience. By combining Aereo with online services like Netflix or Amazon Prime, consumers can watch a huge variety of programs without paying the high prices needed to subscribe to cable or satellite TV.

The TV broadcasters, however, assert that Aereo can charge its customers so little only because the company is engaging in massive copyright infringement. Aereo is taking the copyrighted broadcast programs and publicly distributing them to its customers without authorisation. That, according to the broadcasters, is infringement.

Aereo has a very different take on the situation. The company insists it is not engaging in the public distribution of any copyrighted works, but is merely providing technology that allows each of its customers to privately receive, record and play back broadcast programs.

The Supreme Court has previously held, in the 1984 case of Sony Corp. v. Universal City Studios, that consumers do not commit copyright infringement by recording broadcast programs and watching them later. And so Sony, which manufactured the Betamax video recorders used by consumers for time-shifting, was not liable for infringement.

In 2008, the 2nd Circuit Court of Appeals applied Sony’s reasoning to protect a new type of recording technology. Cablevision’s remote DVR service allowed customers to individually select programs for recording. The program would then be recorded on a hard drive owned by Cablevision but allocated to the specific customer. The customer would then play back this recording at his or her convenience. Instead of buying a video recorder to use at home, the consumer was in essence renting a video recorder from Cablevision, which kept the recorder on its premises. The 2nd Circuit held in Cartoon Network v. CSC Holdings that this remote DVR service was not a public performance because each individual customer was making his own recording, and this private time-shifting was allowed under Sony.

Cablevision did pay the broadcasters a hefty amount of money for the right to retransmit the broadcast shows over its cable TV service. However, thanks to the 2nd Circuit, Cablevision didn’t have to pay additional fees in order to provide its customers with a remote DVR service.

Aereo is different. It is not a cable TV service, so it doesn’t pay a dime to broadcasters. The company just provides each customer with a dime-sized antenna that is linked to Aereo’s remote DVR service. The customer thus receives a TV broadcast on his own antenna, records it on his remote hard drive, and plays it back for viewing at his own home.

This scheme is too clever by half, according to the TV broadcasters, who allege that Aereo is trying to use its forest of tiny antennas to disguise the fact that it is publicly distributing broadcasts to many viewers. This argument seemed to resonate with Chief Justice John Roberts. During oral argument, he indicated that Aereo was using multiple antennas and making numerous copies of the same broadcast programs simply in an attempt to skirt the restrictions of copyright law.

None of the other Justices expressed much sympathy for Aereo, but two of them worried about what would happen if the court ruled in favor of the broadcasters. Justices Stephen Breyer and Sonia Sotomayor said a ruling against Aereo might harm other services that allow users to store and retrieve music, movies and more from the cloud.

Broadcasters, on the other hand, assert that a ruling in favor of Aereo could force them to drop many popular programs from their broadcast channels and show them only on their cable stations. But there is already a trend in this direction that has nothing to do with Aereo. Broadcasters have moved many baseball, football and basketball games onto subscription or cable channels in recent years. In Los Angeles, for instance, where Aereo does not operate, Dodgers and Lakers games are no longer shown on free broadcasts; they are available only on Time Warner Cable-owned regional sports networks. Another example: starting in 2016, the NCAA men’s basketball championship will be telecast only on cable.

If the court rules in favor of Aereo, broadcasters may not be the only ones who are hurt. Cable and satellite TV companies might lose customers who drop their expensive TV services in favor of a much cheaper combination: Aereo plus an internet-based streaming service like Netflix or Hulu.

The cable companies could respond by setting up their own version of Aereo, using lots of little antennas to receive broadcasts instead of paying retransmission fees to broadcasters. That would be very bad news for broadcasters, who receive a significant percentage of their revenues from retransmission fees.

The Supreme Court is expected to issue its ruling in Aereo before the court’s term ends in June.

Steven Seidenberg is a freelance reporter and attorney who has been covering intellectual property developments in the US for more than 15 years. He is based in the greater New York City area and may be reached at info@ip-watch.ch.