Aereo, a TV-over-the-Internet startup whose legal battles have been closely watched, has been ruled illegal by the Supreme Court today. If the company survives at all, its business model will have to change drastically, and it will have to pay fees to the television companies it has been fighting in court for more than two years.
In a 6-3 opinion (PDF) written by Justice Stephen Breyer, Aereo was found to violate copyright law. According to the opinion, the company is the equivalent of a cable company, which must pay licensing fees when broadcasting over-the-air content. "Viewed in terms of Congress regulatory objectives, these behind-the-scenes technological differences do not distinguish Aereos system from cable systems, which do perform publicly," reads the opinion.
The court's majority accepts the copyright arguments of the TV broadcasters who initiated the lawsuits against Aereo. They claim that Aereo's capture-and-retransmission is a violation of their "public performance" right, and the court agreed.
"[W]hen read in the light of its purpose, the [1976 Copyright] Act is unmistakable: An entity that engages in activities like Aereo's performs," Breyer writes.
To the majority, Congress' intent in 1976 is clear: to bring the activities of cable systems within the scope of the Copyright Act." Just as they must follow the 1976 rules, so must Aereo.
Aereo argued that it wasn't like a cable system because it was simply renting equipment to customers. Each customer had their own dime-sized antenna and their own DVR storage space.
The six-justice majority believed that Congress specifically ruled out such an argument. Before cable was widespread, Community Antenna Television (CATV) systems, which simply re-broadcast programs into areas with poor reception, were found legal by the Supreme Court. When Congress amended copyright law in 1976, it made clear that the community antenna systems were having a "public performance" because they "both show the program's images and make audible the program's sounds."
The majority sees Aereo's activities as being "substantially similar to those of the CATV companies." That's true even though those systems transmitted constantly, whereas Aereo's system only is activated when a subscriber wants to see a program. (That argument had some impact on the three dissenters.)
If Congress wanted cable companies to be engaged in "public performances," the majority holds that Aereo should be treated the same way. The differencesindividual antennas and transmissions to individual subscribers"do not render Aereo's commercial objective different from that of any cable company," Breyer writes. They were similarly unswayed by the fact that Aereo transmits "personal copies of programs."
Finally, the opinion makes clear that Aereo is transmitting to "the public," thus implicating the public performance rights of the TV companies. When a performance is watched by a group of people "outside a normal circle of family and its social acquaintances," it's a public performance.
Aereo was launched in 2012 and was sued by TV broadcasters shortly thereafter. Aereo generally won in the lower courts, including a major victory in the US Court of Appeals for the 2nd Circuit, the only appeals court that considered the case. After the Supreme Court agreed to hear the case, a Utah federal judge banned Aereo from six states, forcing it to shut down in two cities in which it was already operating.
Aereo CEO Chet Kanojia has said the idea that in 1976, Congress intended to require payment for all transmissions is "absolutely a false narrative." Still, it appears to be one accepted by a majority of the high court.
In a statement today, Kanojia called the decision "a massive setback for the American consumer" that "sends a chilling message to the technology industry." He hailed Scalia's dissent and said Aereo will "continue to fight for our consumers and fight to create innovative technologies that have a meaningful and positive impact on the world."
Majority: Shut off Aereo but protect the cloud
Many tech companies rushed to Aereo's side in this case, saying that if the company lost, it would endanger cloud computing services more generally. The legal precedent Aereo relied upon was the 2008 Cablevision case, which legalized DVR services in the cloud. That decision was widely seen in the tech sector as one that legitimized cloud services.
So now, with Aereo stepping into "public performance" territory by sending a single transmission to a single user, how hard would it be for a copyright holder to argue that a storage service like Google, Dropbox, or Amazon is doing the same when a user accesses her own content?
In the fourth section of the opinion, Breyer tries to allay these fears, saying that the holding today is really about applying the Transmit Clause to "cable companies and their equivalents." Congress "did not intend to discourage or control the emergence or use of different kinds of technologies," and today's decision won't alter that, he insists. Using language that will likely be a cold comfort to cloud services, he explains that today's decision is really just about broadcast television:
We have interpreted the term the public to apply to a group of individuals acting as ordinary members of the public who pay primarily to watch broadcast television programs, many of which are copyrighted. We have said that it does not extend to those who act as owners or possessors of the relevant product. And we have not considered whether the public performance right is infringed when the user of a service pays primarily for something other than the transmission of copyrighted works, such as the remote storage of content... In addition, an entity does not transmit to the public if it does not transmit to a substantial number of people outside of a family and its social circle.
Breyer makes clear that questions about cloud computing, remote DVRs, and "other novel issues not before the Court" aren't being decided today. The decision kicks Aereo's case back down to the lower courts for further consideration, but it's hard to see the case not resulting in a decision against the service, given today's finding.
Dissent condemns the looks like cable rule
The dissent, written by Justice Antonin Scalia and joined by Clarence Thomas and Samuel Alito, rejects the "public performance" framework accepted by the majority.
The networks' claim "fails at the very outset because Aereo does not 'perform' at all," Scalia writes. "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 Cablevision standard is clear: the question is who does the performing. If the answer is the subscriber pushing the "watch" button, in the dissenters' view, it's legal. Scalia makes a few analogies that don't really go anywhere, comparing the copyright rules governing video-on-demand services to those of a photocopy shop, before determining that Aereo is actually more like a library.
"It assigns each subscriber an antenna thatlike a library cardcan be used to obtain whatever broadcasts are freely available," he writes. "Aereo does not 'perform' for the sole and simple reason that it does not make the choice of content."
Scalia accuses the majority of essentially writing a "looks like cable television" rule based on "a few isolated snippets of legislative history." It's not at all clear to him and his fellow dissenters that Congress intended technologies like Aereo to be regulated like cable systems. The majority's "ad hoc rule for cable-system lookalikes" has "no criteria" for when it should be applied.
"Must a defendant offer access to live television to qualify?" Scalia asks. If so, then Aereo would be legal if it simply built in "mandatory time shifting," requiring subscribers to wait until a live TV program ended before they could watch it. On the other hand, if the ruling is meant to cover anyone storing and broadcasting live TV shows, then the Court has overruled Cablevision and made remote DVRs illegal.
"The Court vows that its ruling will not affect cloud-storage providers and cable television systems, but it cannot deliver on that promise given the imprecision of its result-driven rule," Scalia writes.
In other words, by creating an "Aereo looks like cable" argument, the majority may have banned Aereo's "watch" function without banning its "record" function, he suggests. "We came within one vote of declaring the VCR contraband 30 years ago in Sony," concludes Scalia. In that decision, the court ignored the dark predictions about the future, and it should do so again.
He writes:
The dissent in that case was driven in part by the plaintiffs prediction that VCR technology would wreak all manner of havoc in the television and movie industries. The Networks make similarly dire predictions about Aereo. We are told that nothing less than the very existence of broadcast television as we know it is at stake. Aereo and its amici dispute those forecasts and make a few of their own, suggesting that a decision in the Networks favor will stifle technological innovation and imperil billions of dollars of investments in cloud-storage services.
Scalia ends by noting that while Congress may want to "take a fresh look at this new technology," the court should have left it alone. "
t is not our job to apply laws that have not yet been written," he concludes, quoting the Sony Betamax decision of three decades ago.
