As you may have heard, this morning, the Supreme Court effectively killed off Aereo with an unfortunate and terribly problematic 6 to 3 ruling
that can be summarized simply as the "looks like a duck" test. If you're not familiar with the history, decades back, when cable companies were first around, they started rebroadcasting network TV to cable subscribes, and the Supreme Court (rightly) ruled that this was perfectly legal. The broadcasters ran screaming and crying to Congress, who changed the law to create a retransmission setup, saying that if cable companies wanted to retransmit broadcast TV they had to pay fees. Aereo got around that by setting up a very different system -- or so we thought. The majority decision, written by Stephen Breyer, really just keeps going back to the fact that Aereo looks
just like what those cable companies used to do... and therefore, given that Congress changed the law to outlaw that, Congress must have meant
that Aereo should be illegal as well. The majority seems to view things as a black box, ignoring everything in the box. It just says "well, to end users and to networks, this is identical to the old cable systems." As for the very careful steps that Aereo took to comply
with the law? The majority just brushes that off as meaningless.
Given Aereo's overwhelming likeness to the cable companies targeted by the 1976 amendments, this sole technological difference between Aereo and traditional cable companies does not make a critical difference here. The subscribers of the Fortnightly and Teleprompter cable systems also selected what programs to display on their receiving sets. Indeed, as we explained in Fortnightly, such a subscriber “could choose any of the . . . programs he wished to view by simply turning the knob on his own television set.” ... The same is true of an Aereo subscriber. Of course, in Fortnightly the television signals, in a sense, lurked behind the screen, ready to emerge when the subscriber turned the knob. Here the signals pursue their ordinary course of travel through the universe until today's “turn of the knob”—a click on a website—activates machinery that intercepts and reroutes them to Aereo’s subscribers over the Internet. But this difference means nothing to the subscriber. It means nothing to the broadcaster. We do not see how this single difference, invisible to subscriber and broadcaster alike, could transform a system that is for all practical purposes a traditional cable system into “a copy shop that provides its patrons with a library card.”
Of course, that's NOT the "single" difference between the systems, and that's only part of why the majority ruling is so troubling. The second part of the ruling -- and the one that will have serious consequences for many other technologies -- is the determination that Aereo's service is not just a "performance" but a public performance
. As we've discussed, this is the key part
of the case, as it will determine just how badly it will impact cloud computing. The majority tries to indicate it shouldn't impact others by adding an important clause that might actually give Aereo (or others) a roadmap to get around this ruling. See if you can spot it:
Moreover, the subscribers to whom Aereo transmits television programs constitute “the public.” Aereo communicates the same contemporaneously perceptible images and sounds to a large number of people who are unrelated and unknown to each other. This matters because, although the Act does not define “the public,” it specifies that an entity performs publicly when it performs at “any place where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered.” The Act thereby suggests that “the public” consists of a large group of people outside of a family and friends.
Yeah, that "contemporaneously perceptible" tidbit could become pretty damn important. It seems like Aereo could just take away live
TV viewing and basically become more DVR-like, requiring people to watch things on their own schedule
starting with a brief delay, such that no one is really watching contemporaneously
and potentially this no longer becomes a "public performance."
Still, that seems like a pretty ridiculous standard for what is and what is not public. The majority, unfortunately, brushes off concerns about how this might impact other cloud providers by going back to that "looks like a duck" test:
For one thing, the history of cable broadcast transmissions that led to the enactment of the Transmit Clause informs our conclusion that Aereo “perform[s],” but it does not determine whether different kinds of providers in different contexts also “perform.” For another, an entity only transmits a performance when it communicates contemporaneously perceptible images and sounds of a work....
Further, we have interpreted the term “the public” to apply to a group of individuals acting as ordinary members of the public who pay primarily to watch broadcast television programs, many of which are copyrighted. We have said that it does not extend to those who act as owners or possessors of the relevant product. And we have not considered whether the public performance right is infringed when the user of a service pays primarily for something other than the transmission of copyrighted works, such as the remote storage of content
Still, there are serious concerns about this. At the very least, it's going to lead to a lot of litigation as people try to determine if other sorts of cloud storage systems are engaged in "public performances." The dissent, written by Justice Scalia, highlights how problematic this ruling is on many levels. Rather than simplifying things down to a "looks like a cable duck" test, Scalia actually looks at copyright law
, and the question of whether what Aereo does is direct
infringement (in fact, he later says that even though it's clearly not direct infringement, Aereo might
be liable for secondary infringement), and points out that there's no reasonable way to find Aereo guilty of direct infringement.
offers access to an automated system consisting of routers,
servers, transcoders, and dime-sized antennae. Like a
photocopier or VCR, that system lies dormant until a
subscriber activates it. When a subscriber selects a program, Aereo’s system picks up the relevant broadcast
signal, translates its audio and video components into
digital data, stores the data in a user-specific file, and
transmits that file’s contents to the subscriber via the
Internet—at which point the subscriber’s laptop, tablet, or
other device displays the broadcast just as an ordinary
television would. The result of that process fits the statutory definition of a performance to a tee: The subscriber’s
device “show[s]” the broadcast’s “images” and “make[s] the
sounds accompanying” the broadcast “audible.” §101. The
only question is whether those performances are the product of Aereo’s volitional conduct.
They are not. Unlike video-on-demand services, Aereo
does not provide a prearranged assortment of movies and
television shows. Rather, it assigns each subscriber an
antenna that—like a library card—can be used to obtain
whatever broadcasts are freely available. Some of those
broadcasts are copyrighted; others are in the public domain. The key point is that subscribers call all the shots:
Aereo’s automated system does not relay any program,
copyrighted or not, until a subscriber selects the program
and tells Aereo to relay it. Aereo’s operation of that system is a volitional act and a but-for cause of the resulting
performances, but, as in the case of the copy shop, that
degree of involvement is not enough for direct liability.
Scalia further calls out Breyer for using a questionable "resemblance" test based on nothing in the actual law. He points out that it's not illegal to be "similar to cable TV," but rather you have to look at the actual law and see if Aereo violates it. He further notes that the majority ruling relies heavily
on taking a few snippets of the Congressional record out of context, and then leaping to the conclusion that Aereo is too similar to those old cable systems, rather than really exploring the differences within the blackbox:
former (which were then known as community-antenna
television systems) captured the full range of broadcast
signals and forwarded them to all subscribers at all times,
whereas Aereo transmits only specific programs selected
by the user, at specific times selected by the user. The
Court acknowledges this distinction but blithely concludes
that it “does not make a critical difference.” ...
Even if that were true, the Court fails to account for other
salient differences between the two technologies. Though
cable systems started out essentially as dumb pipes that
routed signals from point A to point B, ... by
the 1970’s, that kind of service “ ‘no longer exist[ed],’ ”
At the time of our Teleprompter decision, cable companies
“perform[ed] the same functions as ‘broadcasters’ by deliberately selecting and importing distant signals, originating programs, [and] selling commercials,”... thus
making them curators of content—more akin to video-on-demand services than copy shops. So far as the record
reveals, Aereo does none of those things.
of all of this, Scalia points out that the majority decision is not only self-contradictory, but part of it actually makes a huge part of the rest of it entirely superfluous... and then creates tremendous uncertainty.
The rationale for the Court’s ad hoc rule for cablesystem lookalikes is so broad that it renders nearly a third
of the Court’s opinion superfluous. Part II of the opinion
concludes that Aereo performs because it resembles a
cable company, and Congress amended the Act in 1976 “to
bring the activities of cable systems within [its] scope.”
.... Part III of the opinion purports to address
separately the question whether Aereo performs “publicly.” .... Trouble is, that question cannot
remain open if Congress’s supposed intent to regulate
whatever looks like a cable company must be given legal
effect (as the Court says in Part II). The Act reaches only
public performances, see §106(4), so Congress could not
have regulated “the activities of cable systems” without
deeming their retransmissions public performances. The
upshot is this: If Aereo’s similarity to a cable company
means that it performs, then by necessity that same characteristic means that it does so publicly, and Part III of
the Court’s opinion discusses an issue that is no longer
relevant—though discussing it certainly gives the opinion
the “feel” of real textual analysis.
Making matters worse, the Court provides no criteria
for determining when its cable-TV-lookalike rule applies.
Must a defendant offer access to live television to qualify?
If similarity to cable-television service is the measure,
then the answer must be yes. But consider the implications of that answer: Aereo would be free to do exactly
what it is doing right now so long as it built mandatory
time shifting into its “watch” function. Aereo would not
be providing live television if it made subscribers wait to
tune in until after a show’s live broadcast ended. A subscriber could watch the 7 p.m. airing of a 1-hour program
any time after 8 p.m. Assuming the Court does not intend
to adopt such a do-nothing rule (though it very well may),
there must be some other means of identifying who is and
is not subject to its guilt-by-resemblance regime.
Take this a step further, and as Scalia notes, suddenly you implicate a lot of other services:
Two other criteria come to mind. One would cover any
automated service that captures and stores live television
broadcasts at a user’s direction. That can’t be right, since
it is exactly what remote storage digital video recorders
(RS–DVRs) do, ... and the Court insists that its “limited holding” does
not decide the fate of those devices.... The
other potential benchmark is the one offered by the Government: The cable-TV-lookalike rule embraces any entity
that “operates an integrated system, substantially dependent on physical equipment that is used in common by
[its] subscribers.” ... The Court sensibly avoids that approach because it
would sweep in Internet service providers and a host of
other entities that quite obviously do not perform.
That leaves as the criterion of cable-TV-resemblance
nothing but th’ol’ totality-of-the-circumstances test (which
is not a test at all but merely assertion of an intent to
perform test-free, ad hoc, case-by-case evaluation). It will
take years, perhaps decades, to determine which automated
systems now in existence are governed by the traditional volitional-conduct test and which get the Aereo
treatment. (And automated systems now in contemplation
will have to take their chances.) The Court vows that its
ruling will not affect cloud-storage providers and cable television systems..., but it cannot deliver
on that promise given the imprecision of its result-driven
rule. Indeed, the difficulties inherent in the Court’s
makeshift approach will become apparent in this very
case. Today’s decision addresses the legality of Aereo’s
“watch” function, which provides nearly contemporaneous
access to live broadcasts. On remand, one of the first
questions the lower courts will face is whether Aereo’s
“record” function, which allows subscribers to save a program while it is airing and watch it later, infringes the
Networks’ public-performance right.
Scalia further notes that it's quite troubling to see the Supreme Court effectively picking winners and losers in the technology space, noting as a warning how close the Court came to outlawing the VCR based on bogus claims of "we'll die!" by Hollywood.
We came within one vote of declaring the VCR contraband 30 years ago in Sony....
The dissent in that case was driven in part by the plaintiffs’ prediction that VCR technology would wreak all
manner of havoc in the television and movie industries.
(arguing that VCRs “directly threatened” the bottom line
of “[e]very broadcaster”).
The Networks make similarly dire predictions about
Aereo. We are told that nothing less than “the very existence of broadcast television as we know it” is at stake.
.... Aereo and its amici dispute those
forecasts and make a few of their own, suggesting that a
decision in the Networks’ favor will stifle technological
innovation and imperil billions of dollars of investments in
cloud-storage services. We are in no position to judge the validity of those
self-interested claims or to foresee the path of future
technological development.... Hence, the proper course is not to bend and twist
the Act’s terms in an effort to produce a just outcome, but
to apply the law as it stands and leave to Congress the
task of deciding whether the Copyright Act needs an
Unfortunately, the majority decided to go in the other direction. And it has just created a huge mess for cloud computing that may result in tremendous stifling of important innovation online.