A federal court judge ruled Thursday that upstart streaming service FilmOn is potentially entitled to a compulsory license to stream content from broadcasters over the Internet, which if held up under appeal could force CBS, Fox, ABC and NBC to sell programming at below-market rates.
U.S. District Court Judge George Wu’s opinion comes less than a year after Aereo shut down in the wake of a debilitating Supreme Court ruling. In that case, the Court said Aereo, which streamed broadcast signals via a series of tiny antennas leased to subscribers, provides a public performance, not a private one as the company had asserted and was more like a cable company than the equipment provider it claimed to be. Aereo had argued that it merely leased antenna space to subscribers who used that equipment to access content and therefore was not subject to the regulations multichannel video programming distributors are held to.
The most recent ruling is surprising because it counters a Second Circuit Court of Appeals ruling against streaming service Ivi, which had been seeking to access the compulsory licensing system. In that ruling, the court said “Continued live retransmissions of copyrighted television programming over the Internet without consent would...threaten to destabilize the entire industry."
A compulsory license forces a copyright or patent owner to sell its intellectual property to a third party at a price that is either set by law or determined through arbitration. In general, under a compulsory license a company can use someone else’s intellectual property without the rights holder’s consent and at a set price. In the broadcasting realm, FilmOn would technically be able to retransmit a broadcaster’s signals without paying a retransmission consent fee.
Broadcasters were understandably up in arms about the ruling.
According to several reports, Fox Networks said in a statement that the ruling “contravenes all legal precedent,” and vowed an appeal.
Wu is aware of the controversial nature of his ruling – he immediately authorized an automatic appeal to the Ninth Circuit Court of Appeals because the legal issues involved have a “significant commercial importance.” He also upheld a previous injunction on FilmOn prohibiting them from airing broadcast content pending the appeal.
FilmOn was started by Internet entrepreneur Alki David and primarily streams Internet video, old TV series like The Lucy Show and the Andy Griffith Show, sports from around the world and music. The service boasts that viewers can watch more than 200 Live TV channels, 500 VOD channels and 45,000 Web TV titles for free over the Internet.