Aereo, Scareo: the #IPnerdvigil Ends in Disappointment

Today, the United States Supreme Court handed down its highly anticipated opinion in ABC v. Aereo. The decision reverses the Second Circuit’s ruling, which had held that Aereo’s transmissions constitute private performances in line with its previous holding in Cartoon Network LP, LLLP v. CSC Holdings, Inc. (“Cablevision”). In addition to being the wrong outcome, this opinion leaves much to be desired.

The primary thing missing from the Court’s opinion is an applicable standard. The Court relied so heavily on the fact that Aereo looks like a cable service and the historic battle over broadcast programming retransmission that it completely failed to give any guidance to future actors. This has the unfortunate result of chilling future innovation, as the risk of litigation has just substantially increased.

The Court did not explicitly touch the Second Circuit’s opinion in Cablevision, but it appears as though today’s opinion effectively eviscerates the long-relied upon rule. As the Computer & Communications Industry Association pointed out in their amicus brief, the Cablevision decision had created certainty in the industry that led to approximately a billion dollars of additional incremental investment in the American cloud computing industry over two and a half years, which some have estimated is the equivalent of “$2 to $5 billion in traditional R&D investment.”

Perhaps the most offensive part of the Court’s ruling is the assertion that technological distinctions don’t matter.Screen Shot 2014-06-25 at 10.42.26 AMThe very essence of the inquiry the Court was faced with was a technological question: does Aereo transmit anything and, if so, to whom do they transmit? To say that it is feasible to answer this question without exploring the technological distinctions is naive at best. The transmissions at issue here are the result of a complicated technological process, and determining the recipients of a given transmission requires a thorough investigation into the inner workings of the technology at issue.

One of the more perplexing parts of the opinion is the Court’s assertion that Aereo’s viewers have no pre-existing relationship to the content.
Screen Shot 2014-06-25 at 5.28.09 PMSetting aside the unfortunate fact that the valet parking analogy raised at oral arguments actually made it into the opinion, this section raises a puzzling conflict with the Court’s prior precedent in Sony Corp. of America v. Universal City Studios (the Betamax case). While in Sony this discussion arose in a different legal and factual context (a fair use analysis of private time-shifting), it was still significant that this was content the public was freely invited to view.
Screen Shot 2014-06-25 at 2.31.54 PMOur communications law is premised on the fundamental principle that the spectrum licensed to broadcasters belongs to the public, for their benefit. In return for the license, broadcasters are obligated to provide, among other things, free, over-the-air programming. How is it possible then, as the Court suggests, that the viewing public has no pre-existing relationship to this content? Answer: it’s not. By virtue of its status as content transmitted over the publicly owned airwaves, all viewers have a pre-existing relationship to the content.

The Court’s attempts to allay concerns about the impacts of this ruling beyond Aereo-like services are similarly unconvincing. The Court’s adoption of an “it’s not going to be a problem because we say it won’t” approach is troublesome and does little to shelter existing and future actors from being sued out of existence. The Court’s discussion does little to distinguish Aereo from other services, such as cloud storage lockers, beyond stating that they “have not considered” the issue.
Screen Shot 2014-06-25 at 3.41.28 PMAdditionally, as Ali Sternburg points out, the Court’s pointing to fair use as a possible means to salvage some part of Aereo’s service does little to minimize the blow, because “services should only have to rely on that doctrine when they are actually infringing copyright.”

Overall, the opinion reads like the Court simply couldn’t get past the bad feeling they had about Aereo in trying to “circumvent” the law, as Chief Justice Roberts noted at oral arguments.
Screen Shot 2014-06-25 at 3.54.48 PMWhile Aereo may feel wrong to the Justices, this opinion sure feels wrong to many of us who have been following this case closely. This decision is lacking in clarity and does little more than create confusion moving forward.

Hopefully, this won’t chill innovation for web-based services for years to come. But, as with everything, there are no guarantees. The Court does note that parties are free to seek Congressional intervention, and Aereo CEO Chet Kanojia hinted that he may be ready to take up that fight.

*Many thanks to Ali Sternburg for all of her help editing this post and inspiring the title!

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Aereo Oral Argument Recap

[Originally posted on the Legislation & Policy Brief Blog on April 22, 2014]

Today, the U.S. Supreme Court heard oral arguments in ABC v. Aereo. As I wrote exactly one year ago, Aereo dynamically assigns individual dime-sized antennas to subscribers so they can stream local market over-the-air broadcast programming. A long series of litigation in multiple circuits led the Supreme Court to grant certiorari in January.

Yours truly spent the night outside One First to attend oral arguments this morning. While making predictions based on oral arguments is always risky, a few common themes emerged.

Perhaps the most important take-away from today’s arguments is the importance of the cloud. While this had been emphasized by multiple amici, including CDT and CCIA (which counts Aereo as a member), the broadcasters and the Solicitor General’s office argued that a holding against Aereo “need not threaten” cloud computing. Paul Clement, arguing on behalf of the broadcasters, asked the Court “not to decide the cloud computing question once and for all today, because not all cloud computing is created equal.” However, the Justices were not convinced. Justices Breyer and Sotomayor expressed concern that the Court’s ruling could have substantial negative effects for the cloud industry.

The Court also appeared unreceptive to the argument that a ruling in favor of Aereo would likely put us in violation of our international agreements. The argument, put forth primarily by the musical and international amici, appeared to gain some traction with Justice Ginsburg, but received very little attention otherwise. When asked, Malcolm Stewart, arguing on behalf of the United States, rejected Justice Ginsburg’s suggestion that Aereo’s view of the public performance right is incompatible with international obligations.

Some other arguments appeared in this morning’s arguments as well. Justice Sotomayor began questioning by asking Clement why Aereo isn’t, and shouldn’t be, considered a “cable system” under Section 111 of the Copyright Act. Additionally, Aereo’s longstanding argument that they are simply a hardware company leasing otherwise lawful equipment out to consumers garnered considerable attention, particularly from Justice Kagan. Interestingly, Chief Justice Roberts posited that Aereo’s “technological model is based solely on circumventing legal prohibitions,” adding that this “is fine. I mean, that’s—you know, lawyers do that.”

Ultimately, it’s uncertain how the Court will decide. The only shred of clarity today’s arguments provided was that the Court is acutely aware of the broad implications their decision will have.

A transcript of today’s arguments is available here.