Aereo: Signaling Television’s New Frontier

Earlier this month, the Second Circuit Court of Appeals issued a ruling in favor of Aereo, a groundbreaking company providing live and time-shifted streaming of free, over-the-air television channels to paying Aereo customers. To provide this service, Aereo relies on its use of tiny antennae – none of which is used at the same time by more than one user. The signal received by each antenna creates an individual copy of the program in each customer’s individual directory; that is, the same copy can never be distributed to more than one user. The technology of these individual copies played a major role in Aereo’s success in the Second Circuit: the company relied upon this technology to create a business model in which they avoid paying fees to stations for the rights to transmit the stations’ signals.

The Court of Appeals stated that a preliminary injunction could only have been granted to the Plaintiffs if they could demonstrate that Aereo infringed upon their public performance right under the Transmit Clause (17 U.S.C. § 101) of the 1976 Copyright Act. The Defendants relied on the Cablevision analysis of the Transmit Clause, which the Court used in its analysis as precedent for what it found to be a “similar factual context.”  In Cablevision, the question was whether the company’s newly-designed Remote Storage Digital Video Recorder infringed copyright holders’ public performance and reproduction rights. In Cablevision, it was held that “unless a transmission itself is public, the transmitter does not infringe the public performance right.”  Since each subscriber is assigned a unique antenna in the Aereo business model, the transmissions were found to be private performances and did not violate the Plaintiffs’ copyrights.

The Court of Appeals decision fully affirmed the District Court’s denial of all motions for a preliminary injunction against Aereo. In a press release on April 1, 2013, Aereo’s CEO and founder Chet Kanojia declared that the Court of Appeals decision confirmed “that Aereo’s technology falls squarely within the law and that’s a great thing for consumers who want more choice and flexibility in how, when and where they can watch television.”

Mr. Kanojia’s statement may be partially true – the Aereo decision does indeed appear to be a “great thing for consumers” – but other courts already disagree with the Second Circuit on whether or not the technology is “squarely within the law”. In the Ninth Circuit, in Fox Television Stations Inc. v. BarryDriller Content Systems PLC, Plaintiffs were granted a preliminary injunction because the court found a likelihood of success on the merits. The court in BarryDriller rejected the reasoning in Cablevision, stating that in any event its holding was at odds with Ninth Circuit precedent set in On Command Video Corp. v. Columbia Pictures Industries (which held that transmissions from a hotel system to private rooms were public performances).

Unsurprisingly, several of the Plaintiffs in the Aereo case have announced their intention to continue fighting for damages and to “protect [their] copyrights …” (CBS and Fox have even threatened to become pay-for-cable channels, possibly paving the way for the other networks). The networks may be expecting the law to move in the Ninth Circuit’s direction, further motivated by the fact that even Aereo’s likely natural allies – such as Cablevision itself – are speaking out against the startup, criticizing the company’s decision not to pay for licensing and retransmission consent. The fight may not be over, but for now, Aereo and its investors are confident enough in their case to expand the service to a total of at least 23 cities across the United States.

In a niche where consumers and even certain experts feel that cable companies are running a “monopoly”, or at the very least an oligopoly, business models providing more consumer choice do meet a growing market demand. Aereo provides its services at costs much lower than those charged by cable companies – at rates starting at $1/day or $8/month. The goal of its founder is to give consumers the choice to “unbundle” packages, paying only for what they want to see (such as news or movies), when they wish to see it. However, providing a service that makes consumers happy does not resolve questions of legality, and in an online world where the east and west coasts are drawn ever closer together, it seems that the differing opinions presented by the Second and Ninth circuits will have to be reconciled before this new frontier of television can attract more conservative settlers.



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