On appeal, the Second Circuit focused on whether the broadcast networks could show that Aereo infringed their public performance right under the second prong of 17 U.S.C. § 101, known as the “Transmit Clause.” The Transmit Clause was created by Congress in 1976 to respond to the widespread use of cable television and clarify that the cable retransmission of a broadcast program constituted a “performance” under the act and would, absent a license, infringe the broadcaster’s copyright. At that same time, Congress also added the compulsory licensing provisions of 17 U.S.C. § 111, such that cable providers could continue to retransmit broadcast content, after paying a licensing fee.
Relying on the court’s precedent set in Cartoon Network LP, LLLP v. CSC Holdings, Inc.,
536 F.3d 121 (2nd Cir. 2008) (“Cablevision”
), the Second Circuit found that Aereo did not infringe the broadcast networks’ right of public performance. In Cablevision
, the court examined the use of remote storage DVRs, which allowed subscribers to record selected content on Cablevision’s servers for playback at a later time. The Cablevision
Court found that because Cablevision’s system created a separate recording for each user and then only transmits the recording to that subscriber and no others, that the retransmission of those recordings did not constitute a public performance. Following this logic, the Second Circuit reached a similar conclusion with regard to the Aereo system, finding the creation and retransmission of individual recordings at the request of a particular user to not be a “public performance.”
The Battle Continues
Although the broadcast networks lost their attempt to obtain a preliminary injunction, the battle over Aereo’s technology is far from over. Recently, FOX has threatened to stop over-the-air broadcast and shift to a subscription-based business model. In the same vein, ABC is moving to stream its programming to cable subscribers in New York and Philadelphia in real-time using cloud technology. Moreover, as recently as May 6, 2013, Aereo filed a suit against CBS in an effort to prevent it from shutting down Aereo’s proposed expansion in other markets beyond New York.
MSOs will have to consider how Aereo affects the marketplace for their services. If Aereo’s business model is ultimately deemed legal then this raises the prospect that MSOs could adopt a similar model and avoid retransmission fees. However, the broadcast networks could, as suggested by at least one broadcast network, move away from over-the-air broadcasts. Such a move would strengthen MSOs’ position in the market as end users are presented with fewer options for content delivery. Nonetheless, it would be wise to remember that even if Aereo prevails in Court there is precedent (Copyright Act of 1976) for Congress to enter the fray and change the law to ensure that Aereo’s business model was infringing. Accordingly, MSOs will have to be cautious and wait to see how things play out in Court.
(George Medlock is partner at Alston + Bird LLP. He is a member of the firm’s Intellectual Property Litigation Group and his practice includes all areas of intellectual property litigation and counseling, with a particular emphasis on patent litigation and enforcement. Joshua Weeks is an associate in Alston + Bird LLP’s Intellectual Property Litigation Group, focusing his practice on patent litigation and enforcement.)