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Aereo Decision a Boon, Not a Bane for Innovation

Thursday, June 26, 2014

Aereo’s system was a case of legal engineering rather than technical ingenuity.

In American Broadcasting Companies, Inc. v. Aereo, Inc., the Supreme Court just held that Aereo’s television service, which re-transmits over-the-air TV signals to subscribers via the Internet, does indeed transmit performances to the public within the meaning of the Copyright Act. Aereo had been intercepting broadcast signals and re-selling them to subscribers without securing permission from or paying broadcasters or TV show creators.

Some have decried the decision as a threat to innovation, with Aereo’s CEO claiming it was “a chilling message to the technology industry.” One journalist even called it “a crushing blow to one of the most exciting technologies we have.”

But was Aereo really innovative? Its system was hardly forward-looking. Instead, it was an inefficient contraption that tried to skirt the law by using individual micro-antennas assigned to each subscriber. Its claim was that is was not transmitting to the public, since it was sending a unique signal to each subscriber.

It’s hard to see any purpose for this design beyond exploiting perceived loopholes in the law. An appellate judge described this system as a “Rube Goldberg-like contrivance.” In sum, Aereo’s system was a case of legal engineering rather than technical innovation.

Justice Breyer’s opinion for the Court saw through this pretext and cut to the main point. He dismissed this focus on the “behind-the-scenes way in which Aereo delivers television programming to its viewers’ screens.” Aereo has the same commercial aims and provides the same experience as any other consumer TV provider.

In a key passage, Justice Breyer explained the Court's focus on results rather than technical design:

Viewed in terms of Congress’ regulatory objectives, why should any of these technological differences matter? . . . They do not render Aereo’s commercial objective any different from that of cable companies. Nor do they significantly alter the viewing experience of Aereo’s subscribers. Why would a subscriber who wishes to watch a television show care much whether images and sounds are delivered to his screen via a large multisubscriber antenna or one small dedicated antenna, whether they arrive instantaneously or after a few seconds’ delay, or whether they are transmitted directly or after a personal copy is made?

The Court thus looked beyond the superficial appearances created by Aereo’s technical design and instead focused on the clear result and intent of Aereo’s business model. In doing so, it returned to Congress’s intent under the 1976 Copyright Act to assure that copyright owners have the right to control the distribution and performance of their works, regardless of technological platform.

Was Aereo really innovative? Its system was hardly forward-looking.

This principle of technology neutrality is essential to effective copyright laws. It allows creators to be secure in their property rights, regardless of changing technology. It is more likely to future-proof the law, since it avoids the need to revisit basic questions with every technical change. 

It’s important to note a few things that this decision does not do:

First, it does not threaten cloud computing services such as Dropbox. The Court expressly avoided that issue. Moreover, by focusing on Aereo’s similarity to a cable TV service, the Court implicitly distinguishes it from cloud computing services like Dropbox. Aereo is acting as an unauthorized extension of the broadcast networks, thus serving as a substitute TV provider for consumers. By contrast, Dropbox serves a very different remote storage function. Nobody counts on Dropbox for TV.

The Court certainly saw the distinction between Aereo and Dropbox, saying that “an entity that transmits a performance to individuals in their capacities as owners or possessors does not perform to 'the public,' whereas an entity like Aereo that transmits to large numbers of paying subscribers who lack any prior relationship to the works does so perform."

Second, this decision does not make Aereo or its technology illegal. Instead, it simply confirms that copyright owners and broadcasters continue to have the right to decide how their property is used and sold by commercial resellers. In other words, Aereo must play by the rules just like everybody else does — cable systems, Netflix, and broadcasters themselves. They need to pay for what they are re-selling.

Aereo has several options available to it under the rules that apply to everybody else. It may try to avail itself of the same opportunities that the law provides to cable systems. Cable systems can use copyrighted content pursuant to a compulsory license under Section 111 of the Copyright Act. This compulsory license allows cable systems to rebroadcast local content without permission from copyright owners, but subject to a mandatory statutory fee. However, that license may not be available to it. It would depend on whether Aereo qualifies as a "cable system," which could be open to debate. In any event it might not matter, since there are two sets of rights at stake here — the copyright in the programming and the rights in the signal owned by the broadcasters. Even if Aereo were a cable system, then Aereo would need to get retransmission consent for the broadcast signal from the local broadcasters.

The Court returned to Congress’s intent under the 1976 Copyright Act to assure that copyright owners have the right to control the distribution and performance of their works, regardless of technological platform.

That's not the end of the story, of course. Copyright owners like studios and TV networks aren't in the business of exercising their rights to keep their product away from the public. They just want to get paid. Aereo may be able to negotiate a market price. While it may complain about the need to do so, why should that seem so shocking, when most businesses and most people have to pay market prices for most things? Aereo doesn't get free or price-controlled hardware. Why should the content that flows over Aereo’s hardware be treated any differently?

Third, this decision does not harm, but rather supports innovation. People may not like paying their cable bills, but they like live sports and innovative TV programming. Many say we are living in a second golden age of television, but creative investments like that don’t happen if you threaten the ability of creators and broadcasters to secure these investments.

Moreover, the creative industries are investing in technological innovation. They have spent hundreds of millions of dollars on new platforms and are and are licensing their works broadly. They can now continue to make these innovative investments with greater certainty that they won't be undermined by overly technical, narrow interpretations of their rights.

Mark F. Schultz is a senior scholar at the Center for the Protection of Intellectual Property at the George Mason University School of Law and an associate professor and director of faculty development at Southern Illinois University School of Law.

 
FURTHER READING: Roslyn Layton contributes "America’s Broadband Service Is Not Falling Behind." Adam Gomolin considers "Crowdfunders' Losing Deal."  Jeffrey Eisenach notes "The Internet Doesn’t Need More Regulation." 

 

Image by Meg Bosse / Bergman Group

 

 

 

 

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