Aereo's retransmission of television broadcasts was a "public performance" of the networks' copyrighted work. The Copyright Act of 1976 forbids such performances without the permission of the holder of the copyright. Second Circuit Court of Appeals reversed.
Cable companies are required by the 1992Cable Television Consumer Protection and Competition Act to negotiate forretransmission consent, usually paying broadcasters for the right to carry their signals. Broadcasters argued that Aereo was a threat both to their business model by undermining the cable retransmission fees and the size of their audience.[2] Because the fees that cable companies paid for broadcast content could comprise up to 10% of a broadcaster's revenue,[3] broadcasters objected to Aereo's re-distribution of this content without paying any fees. Broadcasters have also identified Aereo as part of thecord-cutting trend among television audiences that poses a threat to broadcasters' advertising revenue.[4]
On March 1, 2012, two weeks before Aereo's initial launch in New York City, Aereo was sued forcopyright infringement by a consortium of major broadcasters, includingCBS Corporation'sCBS,Comcast'sNBC,Disney'sABC and21st Century Fox'sFox.[6] The broadcasters argued that Aereo infringed their copyrighted material because Aereo's streams constituted public performances. They sought a preliminary injunction against the company.[6][7] On July 11, Federal JudgeAlison Nathan denied this injunction, citing as precedent the2008 Cablevision case, which established the legality of cloud-based streaming and DVR services.[8][9] In response to the decision, the Aereo founder and CEO,Chet Kanojia, said, "Today's decision shows that when you are on the right side of the law, you can stand up, fight the Goliath and win."[10] In a subsequent interview with CNET, Kanojia asserted, "With one step, we changed the entire TV industry. The television industry and its evolution are now starting towards the Internet and that was stopped until Aereo came along.... And I think as consumers start migrating to the Internet, new programming and new content are going to come in."[11]
The plaintiffs appealed the decision to theU.S. Court of Appeals for the Second Circuit. Several other players in the industry, such as cable provider Cablevision, theElectronic Frontier Foundation, and theConsumer Electronics Association, filedamicus briefs.[12] On April 1, 2013, the federal appeals court upheld the lower court's ruling by finding that Aereo's streams to subscribers were not "public performances" and thus did not constitute copyright infringement.[13] The appeals court also affirmed the earlier district court decision that denied the broadcasters a preliminary injunction against Aereo.[14] In response,News CorporationChief Operating OfficerChase Carey stated that the company is contemplating taking Fox off the air and converting it to a cable-only channel: "We need to be able to be fairly compensated for our content... we can't sit idly by and let an entity steal our signal. We will move to a subscription model if that's our only recourse."[15]Univision and CBS have also stated that they may also follow and convert to cable-only.[16][17]
In October 2013, the broadcasters filed a petition to theUnited States Supreme Court to take up the issue.[18] On January 10, 2014, the Supreme Court agreed to hear the case.[19] In February 2014, in advance of the case being taken up by the Supreme Court, a judge in the 10th Circuit Court of Appeals granted a preliminary injunction against Aereo, blocking the service within the10th District, which includesColorado,Kansas,New Mexico,Oklahoma,Utah,Wyoming, andYellowstone National Park.[20] On November 17, 2013, theNational Football League andMajor League Baseball filed a jointamicus brief to the Supreme Court that warned that sports programming would likely migrate from broadcast to cable television and that Aereo may put the US in violation of several international treaties, which prohibit the retransmission of broadcast signals over the Internet without their copyright holders' consent.[21] TheUnited States Department of Justice andUnited States Copyright Office also filed a joint brief in March 2014 that stated that Aereo's "system is clearly infringing."[22] The Supreme Court heard oral arguments on April 22, 2014.[23]
The Court decided in favor of the broadcasters on June 25 in a 6–3 decision and remanded the case. The Court's decision describes Aereo as not being "simply an equipment provider" with an "overwhelming likeness to cable companies" that "performs petitioners' works 'publicly.'" Further, the Court adds that its decision should not discourage the emergence or use of different kinds of technologies.[24]
Justices Scalia, Thomas and Alito dissented. Writing for the dissenting minority, Scalia quoted fromSony Corp. of America v. Universal City Studios, Inc. and noted that the broadcasters had made similar predictions regarding theVCR. Like the final paragraph in that previous ruling, he stated that the Court should be in no position to make judgements on novel technologies and that Congress indeed has the task of determining if copyright laws should be modified to address those issues.[25]
The dissent continues and criticizes the majority's opinion calling it poorly reasoned because it relies on a "guilt by resemblance" standard, which states Aereo is performing because it "looks-like-cable-TV:"
That claim fails at the very outset because Aereo does not "perform" at all. 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.
Even though the United States Supreme Court held Aereo was "performing" the broadcasters copyrighted material because Aereo "looks-like-cable-TV" and was similar to community antenna television (CATV) systems, Aereo could not continue its service under a compulsory license as a cable provider would, it was later held.
Doing its best to turn lemons into lemonade, Aereo now seeks to capitalize on the Supreme Court's comparison of it to a CATV system to argue that it is in fact a cable system that should be entitled to a compulsory license under § 111. This argument is unavailing for a number of reasons.[26]
