Aereo Defeated at the Supreme Court

On June 25, 2014, Aereo lost a landmark copyright decision at the U.S. Supreme Court in a 6-3 vote in American Broadcasting Cos., Inc. v. Aereo Inc. Overturning the decision of the Second Circuit, the majority found Aereo to be a performer of copyrighted works in violation of copyright law.

Aereo enabled its subscribers to stream over-the-air television broadcasts through the internet. Specifically, Aereo utilized thousands of dime-sized antennas that were individually assigned to its subscribers to receive over-the-air broadcasts. The use of small, dedicated antennas was not a technological requirement of Aereo’s service, but rather a legal strategy that Aereo employed to avail itself of the United States Court of Appeals for the Second Circuit’s ruling in the 2008 Cablevision case.

At issue in Aereo was whether Aereo’s retransmission of over-the-air broadcasts via its individual antennas constituted a “public performance” within the meaning of the Copyright Act. The public performance right is one of the exclusive rights in copyrighted works protected by the Copyright Act. Because the vast majority of television content is copyright protected, an unauthorized public performance of television content would constitute a violation of the Copyright Act.  The Cablevision decision held that consumers’ playback of remotely-stored content did not constitute a public performance because the technology was analogous to a VCR or a traditional DVR in that it allows users to record live broadcasts, an act previously recognized as fair-use by the Supreme Court’s Sony decision. The Second Circuit based its holding on the rationale that each household caused its own distinct copies of content to be created on Cablevision’s servers, and each household viewed its own copies of that content. The Cablevision court found that the playback of remotely-stored recordings did not constitute public performances because the only meaningful difference between traditional DVR and VCR recordings and remotely-stored recordings was the location at which they were stored. Cablevision subsequently become a legal cornerstone of cloud computer services.

Aereo attempted to follow the Cablevision holding by assigning its subscribers distinct antennas. Its strategy was successful at the United States Court of Appeals for the Second Circuit. However, unlike Cablevision, Aereo did not consider itself a “cable system” under the Copyright Act and did not license content. Yet, Aereo charged its subscribers a monthly fee for its services. In contrast, in the Cablevision case, Cablevision had a license to transmit content to its subscribers in the first instance.

The Supreme Court held that Aereo was a cable system that retransmits content within the meaning of a “public performance” of the Copyright Act. By finding that Aereo was in effect a cable system, the Justices carefully preserved the Cablevision holding for the cloud computing industry without disturbing the business model of traditional broadcasting. Cloud computing relies on storing a copy of the consumers’ content, e.g., music and movies, remotely. A different decision from the Supreme Court that shrank Cablevision in the context of the internet could have increased uncertainty vis-à-vis copyright law and cloud computing. In addition to heightened certainty in the cloud computing industry, the practical effect of Aereo is that over-the-air television broadcasts will need to follow conventional content licensing practices to be disseminated over the internet.