Courts

Supremes Rule Against Aereo

Broadcasters Argued That Aereo Victory Threatened Their Business Model 6/25/2014 10:15 AM Eastern

In a big win for broadcasters, the Supreme Court has reversed a lower court ruling denying broadcasters' injunction against the over-the-top streaming service Aereo.

 

The decision was 6-3, with Justice Stephen Breyer delivering the opinion. Justices Antonin Scalia, Clarence Thomas and Samuel Alito dissented.

 

“Today’s decision is a victory for consumers,” said Paul Clement, an attorney for broadcasters in the appeal. “The Court has sent a clear message that it will uphold the letter and spirit of the law just as Congress intended.”

 

We’re gratified the Court upheld important Copyright principles that help ensure that the high-quality creative content consumers expect and demand is protected and incentivized,” ABC parent Disney said. ABC was the lead broadcaster in the appeal.

 

The court ruled that Aereo provides a public performance, not a private one, as Aereo had asserted. "The statute makes clear that the fact that Aereo’s subscribers may receive the same programs at different times and locations is of no consequence. Aereo transmits a performance of petitioners’ works “to the public,” Breyer wrote for the majority.

 

The court went out of its way to say that the ruling was a narrow one that should not discourage technological innovation.

 

“We must decide whether respondent Aereo, Inc., infringes this exclusive right [of public performance] by selling its subscribers a technologically complex service that allows them to watch television programs over the Internet at about the same time as the programs are broadcast over the air,” said the court. “We conclude that it does.”

 

The court said Aereo was more like a cable company than the mere access-to-equipment provider it claims to be. "Areo is not simply an equipment provider. Rather, Aereo, and not just its subscribers, “perform[s]” (or “transmit[s]”). Aereo’s activities are substantially similar to those of the CATV [cable] companies that Congress amended the [Copyright] Act to reach.

 

The dissenting judges said the majority got it all wrong when they concluded that Aereo provided a public performance, similar to a cable operator, subject to copyright payments.

 

"Aereo does not 'perform' at all," they wrote in their dissent. " The Court manages to reach the opposite conclusion only by disregarding widely accepted rules for service-provider liability and adopting in their place an improvised standard (“looks-like-cable-TV”) that will sow confusion for years to come."

 

“The Court decided the Aereo case correctly," said David Wittenstein, a partner in law firm Cooley LLP's Technology Transactions practice who advises broadcast and cable clients. "Aereo has set itself up as the functional equivalent of a cable system, and it shouldn’t be able to create a commercial video distribution business without any of the obligations imposed on other commercial video distributors."

 

The court said its ruling should still allow for technological innovation--like the cloud storage regime some feared could get swept up in the decision.

 

“The Court largely resisted the temptation to address issues relating to cloud storage and network DVRs," he said. "The Court concluded that those issues weren’t squarely presented in this case.  It’s clear, however, that the Court is likely to more sympathetic to other cloud applications than it was to Aereo’s business model.”

 

To read the full opinion, click here.

 

Broadcasters claimed that Aereo was violating copyright by delivering TV station signals remotely over the Internet without compensating content providers.

 

The High Court upheld broadcasters challenge to a Second Circuit Court of Appeal's denial of a preliminary injunction against Aereo, which uses banks of remote mini-antennas and serviers to acquire and make available TV station signals and remote DVR functionality to subscribers for a monthly fee. The Second Circuit had signaled that the company's remote antenna system does not violate copyright.

 

The lower courts were split over whether that was legal or not, though there was not an actual split in the federal appeals courts, in part because decisions had been put on hold until the Supremes ruled. The broadcasters' case against Aereo could still go to trial in several lower courts--the Supremes reversed the Second Circuit and remanded for further proceedings "consistent with this opinion." But the opinion makes it clear that Aereo would lose those cases with the arguments it has used to defend not having to pay a copyright fee.

 

Broadcasters argued that allowing Aereo to operate without paying would undermine the value of advertising, their largest revenue stream; "impair" their ability to negotiate for their second-largest revenue stream, retrans fees; cause a migration of popular free, over-the-air network programming to pay platforms; and interfere with authorized online streaming.

 

Pro football and baseball leagues had warned that if Aereo were allowed to deliver and package TV station signals without paying copyright fees for the programming, the leagues would likely take their ball and go home, "home" being pay channels where they could be sure to get compensated, and where their own packages of games can't be trumped by a service that doesn't pay.

 

Aereo had argued that it was simply providing remote access to free TV and the fair ues recording right its subs are entitled to.

 

Broadcasters got some high-powered support for their argument when the Obama Administration weighed in on their side back in March, concluding that Aereo was illigally retransmitting broadcast content and infringing public performance rights. Aereo had argued it was not a public performance but a private one.

 

Kanoja signaled he was not throwing in the towel, though he did not say what his next step would be. “We are disappointed in the outcome, but our work is not done.  We will continue to fight for our consumers and fight to create innovative technologies that have a meaningful and positive impact on our world,” he said following the decision.

 

Kanojia and Aereo investor Barry Diller have said that if Aereo loses, the company may have to go out of business, although more recently there have been reports that Kanojia was considering the option of paying broadcasters, though, financial analyst Well Fargo points out that it could also pay for the content or continue to fight in the lower courts--the ruling was on an injunction, so the underlying case could still be argued, though with the Supreme Court's ruling, that would clearly be a tough sell.

 

Also adversely affected by the decision is FilmOn, which also delivers TV station signals online via remote antennas. A court decision on the fate of an injunction against that service, also sought by broadcasters, had been put on hold until the Supreme Court decided the Aereo case.

 

 

"This huge blow to net neutrality and consumer rights proves my mistrust of the courts is well founded and that the policies and agencies that are supposed to protect the public interest have failed," said FilmOn founder Alki David. "They are indeed mere tools of a handful of corporations intent on keeping the people in a stranglehold of bad cable service at extortionist fees."

 

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