The Second Circuit released an important opinion yesterday ruling that Aereo’s New York based Internet streaming service does not infringe the US public performance right. In WNET, Thirteen v. Aereo, Inc 2013 WL 1285591 (2nd.Cir.Apr, 1, 2013), by a two to one majority, the Court ruled that the technical architecture of the service which is based on “renting” mini-antennas and transcoders to members of the public that are used to stream over the air live broadcasts renders the service non-infringing.
Central to the Court’s ruling was it prior decision in the Cablevision case which according to the Court established the following: .
We discuss Cablevision’s interpretation of the Transmit Clause in such detail because that decision establishes four guideposts that determine the outcome of this appeal. First and most important, the Transmit Clause directs courts to consider the potential audience of the individual transmission. See id. at 135. If that transmission is “capable of being received by the public” the transmission is a public performance; if the potential audience of the transmission is only one subscriber, the transmission is not a public performance, except as discussed below. Second and following from the first, private transmissions-that is those not capable of being received by the public-should not be aggregated. It is therefore irrelevant to the Transmit Clause analysis whether the public is capable of receiving the same underlying work or original performance of the work by means of many transmissions. See id. at 135–37. Third, there is an exception to this no-aggregation rule when private transmissions are generated from the same copy of the work. In such cases, these private transmissions should be aggregated, and if these aggregated transmissions from a single copy enable the public to view that copy, the transmissions are public performances. See id. at 137–38. Fourth and finally, “any factor that limits the potential audience of a transmission is relevant” to the Transmit Clause analysis. Id. at 137.
The majority concluded that Aereo’s service was not distinguishable from what was in issue in the Cablevision case. According to the majority:
As discussed above, Cablevision’s holding that Cablevision’s transmissions of programs recorded with its RS–DVR system were not public performances rested on two essential facts. First, the RS–DVR system created unique copies of every program a Cablevision customer wished to record. 536 F.3d at 137. Second, the RS–DVR’s transmission of the recorded program to a particular customer was generated from that unique copy; no other customer could view a transmission created by that copy. Id. Given these two features, the potential audience of every RS–DVR transmission was only a single Cablevision subscriber, namely the subscriber who created the copy.FN12 And because the potential audience of the transmission was only one Cablevision subscriber, the transmission was not made “to the public.”
The same two features are present in Aereo’s system. When an Aereo customer elects to watch or record a program using either the “Watch” or “Record” features, Aereo’s system creates a unique copy of that program on a portion of a hard drive assigned only to that Aereo user. And when an Aereo user chooses to watch the recorded program, whether (nearly) live or days after the program has aired, the transmission sent by Aereo and received by that user is generated from that unique copy. No other Aereo user can ever receive a transmission from that copy. Thus, just as in Cablevision, the potential audience of each Aereo transmission is the single user who requested that a program be recorded.
Circuit Judge chin wrote a powerful dissent in which he would have found Aereo’s service in clear violation of the public performance right. According to Judge Chin:
Aereo’s “technology platform” is, however, a sham. The system employs thousands of individual dime-sized antennas, but there is no technologically sound reason to use a multitude of tiny individual antennas rather than one central antenna; indeed, the system is a Rube Goldberg-like contrivance, over-engineered in an attempt to avoid the reach of the Copyright Act and to take advantage of a perceived loophole in the law. After capturing the broadcast signal, Aereo makes a copy of the selected program for each viewer, whether the user chooses to “Watch” now or “Record” for later. Under Aereo’s theory, by using these individual antennas and copies, it may retransmit, for example, the Super Bowl “live” to 50,000 subscribers and yet, because each subscriber has an individual antenna and a “unique recorded cop[y]” of the broadcast, these are “private” performances. Of course, the argument makes no sense. These are very much public performances…
Aereo is doing precisely what cable companies, satellite television companies, and authorized Internet streaming companies do—they capture over-the-air broadcasts and retransmit them to customers—except that those entities are doing it legally, pursuant to statutory or negotiated licenses, for a fee. By accepting Aereo’s argument that it may do so without authorization and without paying a fee, the majority elevates form over substance. Its decision, in my view, conflicts with the text of the Copyright Act, its legislative history, and our case law.
Judge Chin also expressed the opinion that Aereo’s service was factually and legally distinct from what was in issue in Cablevision:
With this concept in mind, it is clear that Aereo’s system is factually distinct from Cablevision’s RS–DVR system. First, Cablevision’s RS–DVR system “exist[ed] only to produce a copy” of material that it already had a license to retransmit to its subscribers, Cablevision, 536 F.3d at 131, but the Aereo system produces copies to enable it to transmit material to its subscribers. Whereas Cablevision promoted its RS–DVR as a mechanism for recording and playing back programs, Aereo promotes its service as a means for watching “live” broadcast television on the Internet and through mobile devices. Unlike Cablevision, however, Aereo has no licenses to retransmit broadcast television. If a Cablevision subscriber wanted to use her own DVR to record programming provided by Cablevision, she could do so through Cablevision’s licensed transmission. But an Aereo subscriber could not use her own DVR to lawfully record content received from Aereo because Aereo has no license to retransmit programming; at best, Aereo could only illegally retransmit public broadcasts from its remote antennas to the user. See, e.g., Fortnightly Corp., 392 U.S. at 400, overruled by statute as recognized in, Capital Cities Cable, 467 U.S. at 709;ivi, Inc., 691 F.3d at 278–79; see also U.S. Cablevision Amicus Br., supra, at 21 (arguing that the legality of a hypothetical unlicensed system that only allowed subscribers to copy and playback content “would be suspect at best, because [the subscriber] would be … copying programs that he was not otherwise entitled to view”). Aereo’s use of copies is essential to its ability to retransmit broadcast television signals, while Cablevision’s copies were merely an optional alternative to a set-top DVR. The core of Aereo’s business is streaming broadcasts over the Internet in real-time; the addition of the record function, however, cannot legitimize the unauthorized retransmission of copyrighted content.
Second, subscribers interact with Aereo’s system differently from the way Cablevision’s subscribers interacted with the RS–DVR. Cablevision subscribers were already paying for the right to watch television programs, and the RS–DVR gave them the additional option to “record” the programs. Cablevision, 536 F.3d at 125. In contrast, Aereo subscribers can choose either “Watch” or “Record.” Am. Broad. Cos. v. AEREO, Inc., 874 F.Supp.2d 373, 377 (S.D.N.Y.2012). Both options initiate the same process: a miniature antenna allocated to that user tunes to the channel; the television signal is transmitted to a hard drive; and a full-length, permanent copy is saved for that customer. Id. at 377–79. If the subscriber has opted to “Watch” the program live, the system immediately begins playing back the user’s copy at the same time it is being recorded. Id. Aereo will then automatically delete the saved copy once the user is done watching the program, unless the subscriber chooses to save it. Id. at 379.
These differences undermine the applicability of Cablevision to Aereo’s system. Cablevision found that the RS–DVR was indistinguishable from a VCR or set-top DVR because Cablevision’s system “exist[ed] only to produce a copy” and its subscribers provided the “volitional conduct” necessary to make a copy by “ordering that system to produce a copy of a specific program.” Cablevision, 536 F.3d at 131; see also U.S. Cablevision Amicus Br., supra, at 16 (noting that Cablevision turned on whether RS–DVR was more analogous to set-top DVR or video-on-demand service). The RS–DVR was not designed to be a substitute for viewing live television broadcasts. Aereo’s system, however, was designed to be precisely that. It does not exist only, or even primarily, to make copies; it exists to stream live television through the Internet. Its users can choose to “Watch” live television instead of “Record” a program, but the system begins to produce a full-length copy anyway because, even under its own theory, Aereo cannot legally retransmit a television signal to them without such a copy.FN3 Aereo’s system is much different than a VCR or DVR—indeed, as Aereo explains, it is an antenna, a DVR, and a Slingbox rolled into one—and for that reason Cablevision does not control our decision here.
It is clear that this litigation is not over. There is parallel litigation in the Ninth Circuit in which a contrary decision was reached in Fox Television Studios v BarryDriller Content Systems, Case, No. CV-12-6921, (C.D.Cal. Dec 20, 2012). Given the strong dissent in the Aereo case, it would not be surprising to see a motion to have this case reheard en banc by the Second Circuit or eventually to have the scope of the public performance right be brought before trhe US Supreme Court.