Courts

Justices Get Tough on Aereo Argument

Impact On Cloud Storage Appears A Key Concern (UPDATED) 4/22/2014 1:30 PM Eastern

The Supreme Court Tuesday heard oral argument in the case of ABC [and many other broadcasters] v. Aereo, with the fate of the over-the-top TV station delivery service, and perhaps the future of broadcast TV and cloud storage, hanging in the balance.

 

The time was evenly divided, with Paul Clement, a partner at Bancroft PLLC and former solicitor general, getting 20 minutes to make the case for broadcasters and deputy solicitor general Malcolm Stewart getting 10 minutes to buttress that case. David Frederick had 30 minutes to make Aereo's argument. Frederick is a partner with Kellogg, Huber, Hansen, Todd, Evans & Figel, and was himself once an assistant to the solicitor general.

 

The Justices hammered both sides with tough questions. Justice Stephen Breyer appeared particularly concerned about the impact of the decision on cloud computing and the First Sale doctrine. One veteran broadcast attorney, who has argued before the court, called the potential outcome a coin flip but said the Justices were clearly struggling with the impact of that decision on cloud computing.

 

Justice Elena Kagan jumped in early with a question about why Aereo was not essentially a cable system. Other Justices appeared also to be wrestling with the distinction. Frederick said Aereo was clearly not a cable service because it provided technological access to private performances by its users while cable pushed content to its subs. Frederick suggested this was a case about reproduction rights, as in the fair use right to make copies, masquerading as a copyright case.

 

Clement said it came down to a business model where strangers paid to watch tv online. David Frederick, picking up on the concern over cloud computing, said that a decision against Aereo was definitely a threat to cloud storage.

 

Chief Justice John Roberts repeatedly expressed concerns that the Aereo technology had no other justification other than to get around copyright laws. Frederick argued that they were simply trying to reproduce the user experience at home. The technological regime was a way to scale up modularly the way cloud businesses do. He said Aereo was simply providing technology that users access for their own private performances, distinct from cable, which pushes video to the customer.

 

Justice Breyer asked why Aereo was not like a record store sending out copies of phonograph records. If that is a performance, he said, then there is no more first sale doctrine, which allows for secondary distribution of copyrighted works. Clement said the difference was that clearly the record store was not providing a performance, while Aereo was.

 

Justice Kagan was looking for the distinction between cloud storage and Aereo. Clement used the analogy of a car dealership (Aereo) and valet parking (cloud storage), where one was selling you a product and the other was storing your property.

 

Chief Justice Roberts asked why Aereo should not be likened to a public garage, where they rent the remote space that can be used as needed.

 

At one point Kagan asked Clement what the consequences of a decision against Aereo would be and whether that would mean it would go out of business. Clement said that if Aereo was providing innovative technology, it could license content. If not, it would go out of business and "no one should shed a tear."

 

“We’re very happy to be in court today and we’re pleased with the way the court considered the arguments," Clement said after the argument. "The justices understood the technology. They understood the stakes in the case. And they were focused principally on the interpretation of the statute. We conveyed to them a relatively straightforward position, which is that a service cannot provide live TV over the internet to thousands of paying strangers without engaging in a public performance. The statute protects public performance rights and the issue here is that Aereo’s technology and service clearly violates those public performance rights. It’s as simple as that.”

 

Following the argument, Frederick said Aereo was confident in its argument and ”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.”

 

Gary Shapiro, head of the Consumer Electronics Association, whose members include Aereo, said he thought the questions were perceptive and said that “the fact that the broadcasters and Solicitor General effectively admitted you would have to reverse the Cablevision decision rationale in  order to find for them was important.”

 

He said that the Justices clearly were “struggling with Aereo as a service compared to cable.” Justice Kagan probed extensively on that point, jumping into Clements argument within only a few seconds to suggest that Aereo seemed like a cable service.

 

“On the other hand,” said Shapiro, “even if they found against Aereo they were struggling for a way that they could not reverse the Cablevision case [the finding that accessing remote DVR’s are not public performances], not reverse the Sony Betamax case and also not have a definition which encompasses cloud computing. So, they have a tough decision ahead of them.”

 

Shapiro said there appeared to be different takes on the court, some concerned more about choking off innovation and others concerned about broadcaster signals being taken without compensation.

 

Both the broadcasters and Aereo supported the Supreme Court weighing in to resolve the dispute, which revolves around whether Aereo is providing subscribers remote (Internet) access for a fee to free TV signals and recording functions they are entitled to and with which they create their own unique, private, performances, or whether it is delivering a TV signal and a public performance of copyrighted material without compensation in violation of copyright.

 

Broadcasters—most notably ABC, Fox, CBS, NBC and PBS—had sought the appeal after the Second Circuit Court of Appeals, citing its earlier ruling in the Cablevision case, refused to block Aereo from operating while a district court heard the underlying copyright challenge.

 

Other, lower courts, have upheld injunctions, setting up the court split the Supremes will be looking to resolve. No lower court has yet weighed in on the underlying merits of the case and are now holding off until the Supreme Court weighs in. When it does that will be the controlling decision to the degree that it reaches those merits.

 

Aereo has tied its case to the Second Circuit Court of Appeals’ 2008 Cablevision decision, in which the court ruled that providing a transmission to a single subscriber using a unique copy via remote DVR functionality—produced only for that sub—is not a performance and therefore does not infringe on the performance right. But the appeals court also said that its decision did not “generally permit content delivery networks to avoid all copyright liability by making copies of each item of content and associating one unique copy with each subscriber to the network.”

 

Cablevision actually argues that Aereo is a violation of copyright, but says broadcasters' argument against the service is “overreaching and damaging” because it could erode the legal underpinnings of Cablevision’s remote-storage DVR (RS-DVR) and other cloud-based storage services. Broadcasters say they can win without it being a threat to cloud storage.

 

The Obama Administration's Justice Department backed broadcasters in an amicus brief, calling Aereo a copyright-infringing business model but saying the infringement could be stopped without putting the cloud at risk.

 

Aereo investor Barry Diller has said that a defeat in the High Court would likely spell the end of Aereo.

 

Not every broadcaster opposes Aereo. A handful of owners of small and independent TV stations, mostly low-power stations, including Block Communications, Cocola Broadcasting, and Soul of the South, filed an amicus brief in support of Aereo. Those are stations that almost certainly wouldn't be in a position to demand payments from Aereo even if it were paying stations but do like the idea of the additional reach and profile Aereo's online service gives them.

 

The D.C. Federal Appeals court has also delayed a decision on an injunction against FilmOn, which also provides TV station signals online using remote antenna technology. Like Aereo, FilmOn argues it does not have to pay a copyright fee for broadcast programming because it is not transmitting a performance, but instead providing technology that allows users to remotely access a recording of broadcast TV station signals that they are free to access without payment.

 

A decision from the court is expected in early summer.