2nd Circuit Affirms Denial of Preliminary Injunction in Internet Streaming Case

DWT Media Law June 19, 2013 Comments Off on 2nd Circuit Affirms Denial of Preliminary Injunction in Internet Streaming Case
2nd Circuit Affirms Denial of Preliminary Injunction in Internet Streaming Case
By Jim Rosenfeld and Eric Feder

As consumers increasingly obtain entertainment content on the Internet, media companies and technology start-ups are vying over models for the distribution of that content. This tension has spilled over into the courts, which must apply established copyright law to new technologies. In WNET v. Aereo, 712 F.3d 676 (2nd Cir. 2013), the 2nd Circuit affirmed the district court’s denial of a preliminary injunction which would have prohibited the defendant’s system from streaming unlicensed broadcast television signals over the Internet. The television broadcasters that brought the suit against Aereo have not been deterred, seeking en banc review of the Aereo decision and bringing suit against copycat services in other jurisdictions.

The Southern District of New York and 2nd Circuit Decisions

In Aereo, television broadcasters (and other copyright owners of broadcast television programs) brought a copyright infringement lawsuit against Aereo, Inc. (“Aereo”) in the District Court for the Southern District of New York. Aereo provides a service allowing subscribers to watch broadcast television programs over the Internet in exchange for a monthly fee. Aereo’s subscribers can also record and store programs, either while they are being broadcast or in advance, much like a remote Digital Video Recorder (“DVR”). Aereo does not obtain licenses from copyright holders to record or transmit their programs.

The Aereo case concerns the exclusive right of a copyright holder to publicly perform his or her work. 17 U.S.C. § 106(4). The Copyright Act defines “perform” as “to recite, render, play, dance, or act it, either directly or by means of any device or process or, in the case of a motion picture or other audiovisual work, to show its images in any sequence or to make the sounds accompanying it audible.” 17 U.S.C. § 101. Performing a work “publicly” means:

(1) to perform or display it at a place open to the public or at any place where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered; or

(2) to transmit or otherwise communicate a performance or display of the work to a place specified by clause (1) or to the public, by means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times.

Id. (emphasis added).

The broadcaster plaintiffs asserted that Aereo infringed their public performance and reproduction rights under the Copyright Act, and sought a preliminary injunction barring Aereo from transmitting television programs while they were being broadcast. The district court denied the preliminary injunction motion, principally because the plaintiffs were not able to show a sufficient likelihood of success on the merits of the case.

On April 1, 2013, the 2nd Circuit affirmed.

The 2nd Circuit’s earlier decision in Cartoon Network LP v. CSC Holdings, Inc., 536 F.3d 121 (2d Cir. 2008) (“Cablevision”), was critical both to how Aereo designed its system and how the courts have analyzed it. In Cablevision, the 2nd Circuit held that a cable company’s transmission of a recorded program to an individual subscriber through its Remote Storage Digital Video Recorder (RS-DVR) system was not a public performance of the program. This, according to the Cablevision court, was because whether a retransmission is a public performance turns on “who is ‘capable of receiving’ the performance being transmitted.” Id. at 134 (quoting 17 U.S.C. § 101). This depends not on the audience capable of receiving a performance of the underlying work, but rather, on who is capable of receiving a particular transmission of that work. With the RS-DVR system, when a subscriber selected a particular program to record, a separate copy of that program was created and stored for that specific user. Thus, in the court’s view, because a Cablevision subscriber played back a unique copy of a program that was only accessible to that subscriber, the work was not being performed publicly.

Aereo’s system was designed based on Cablevision’s holding. Aereo transmits broadcast programs by capturing the broadcast signal with a different antenna for each subscriber. (Aereo’s facility contains boards with thousands of tiny antennas—each roughly the size of a dime—so that each subscriber using the service at any one time has access to a single antenna.) Because each subscriber has access to a single copy of a broadcast through that single antenna, and no other subscribers can receive a transmission from that copy, the 2nd Circuit affirmed that, as in Cablevision, the transmission did not constitute a public performance.

In a forceful dissent, Judge Chin described Aereo’s technology platform as a “sham” and 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.” 712 F.3d at 697 (Chin J., dissenting). In his view, the majority’s decision elevated “form over substance.” Id. Judge Chin also viewed as an important distinction the fact that Cablevision had licensed the content it redistributed, while Aereo had not. (The majority found the distinction insignificant because the issue was whether the transmission was a public performance at all—not whether it was a licensed public performance.

Broader Implications and New Developments

The starkly different approaches between the majority and dissent in Aereo capture the difficulty courts have in applying copyright law to technology platforms that were not yet contemplated when the Act was drafted. Both parties offered competing analogies in an attempt to fit the case within an established framework: The plaintiffs argued that Aereo was essentially a cable service (which would be required to obtain a license pay statutory retransmission fees). The defendants analogized their system to a combination of a television, DVR and Slingbox (which transmits content from a DVR to a computer or mobile device) which would not require any additional license.

The court also struggled with the more fundamental question in these types of cases of whether to focus on a platform’s technical aspects or its practical functionality. Judge Chin’s dissent focuses on the practical effect. The majority, on the other hand, acknowledged that Aereo was likely designed with an eye toward avoiding copyright liability, but it did not find this fact dispositive. The majority mused that “[p]erhaps the application of the Transmit Clause should focus less on the technical details of a particular system and more on its functionality,” but the court read its past decisions, including Cablevision, as dictating that “technical architecture matters.” 712 F.3d at 694.

How courts continue to approach this fundamental will have far-reaching effects in a variety of industries. And with Aereo’s plans to expand its service to major markets across the United States, this particular legal battle is far from over:

  • In December 2012, a district court in California reached a conclusion similar to Judge Chin’s dissent in a decision granting a preliminary injunction against a service similar to Aereo (creatively called “Aereokiller”). See Fox Television Stations, Inc. et al v. BarryDriller Content Systems, PLC, et al, 12-6921-GW(JCx), Civil Minutes, (C.D. Cal. Dec. 27, 2012). That decision had the effect of enjoining the service from operating in the 9th Circuit. The makers of Aereokiller have appealed the decision to the 9th Circuit Court of Appeals.
  • In May 2013, broadcasters filed suit against Aereokiller in the District Court for the District of Columbia, seeking to prevent the service from opening in the D.C. market.
  • In the meantime, back in the 2nd Circuit, the Aereo parties’ scuffle continues on multiple fronts. The Aereo majority had observed that rather than contesting the application of Cablevision to this case, the plaintiffs were seemingly urging the court to overturn Cablevision itself. It noted that only an en banc panel of all of the judges on the circuit (or the Supreme Court) can overrule a past decision. Accepting this invitation, the plaintiffs filed a petition for rehearing en banc. However, on July 15, 2013, the 2nd Circuit denied the petition for rehearing.  Judge Chin (joined by one other judge from the Circuit) filed a lengthy dissent from this denial, for many of the same reasons underlying his dissent from the original panel decision.
  • Emboldened by the Second Circuit’s decision, Aereo has since gone on the offensive.  In May 2013, it filed a motion for summary judgment in the District Court seeking to dismiss the original lawsuit, arguing that the reasoning of the District Court and the Second Circuit compels such a result.  That motion is currently pending before the court.
  • Aereo has also attempted to open a separate front in the battle after executives from CBS publicly stated their intention to sue Aereo if it attempted to expand into Boston and other markets. In May 2013, Aereo responded to these threats by bringing a new lawsuit in the Southern District of New York against CBS and several of its local affiliates. The new suit seeks a declaratory judgment that Aereo’s technology does not infringe the broadcasters’ copyrights. Such a ruling could then be used to help justify the system’s operation in any jurisdiction. The case was filed as a related case to the broadcasters’ suit against Aereo, which means that it is being heard by the same judge presiding over that suit. CBS has filed a motion to dismiss the suit, arguing that Aereo’s actions amount to “anticipatory forum shopping,” that the suit is duplicative of counterclaims filed by Aereo in the already pending case, and that the court is without jurisdiction because there is not an “actual controversy” between the parties. That motion is currently pending.
  • Most recently, after Aereo did in fact begin offering service in Boston, a local affiliate of ABC (owned by Hearst) brought suit against Aereo in the U.S. District Court for the District of Massachusetts

A possible split of authority among some combination of the 1st, 2nd, 9th and D.C. Circuits would likely invite review from the Supreme Court. The Court previously denied a petition for certiorari in Cablevision, but in light of the potential circuit split, and the far-reaching implications of these decisions for the Internet, cable and broadcast television industries, it may well take up this issue.

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