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Aereo to Face Uphill Battle in Supreme Court, Experts Say (Analysis)

With broadcasters on one side and the cloud computing business on the other, the stakes are high – and the case could go either way.

 Aereo CEO Chet Kanojia - P 2013
Aereo CEO Chet Kanojia

Next week's Supreme Court argument will be difficult for cable-competitor Aereo, legal experts agree, as the company faces off against not just broadcasters but also the influential U.S. Solicitor General's office and the Copyright Office. While it will be a tough fight for the company, the case is so complex and the copyright and communications statutes so intricate that one advocate said the decision could end up as lopsided as 7-1 -- in either direction.

The only expert willing to offer a prediction, Akin Gump's Pratik Shah, said, "I think a majority of the Court will be skeptical of Aereo's position and thus likely to rule in favor of the broadcast-petitioners," while another -- who spoke on background and supports Aereo -- put the odds in the broadcasters' favor at 60-40 or 70-30.

And yet, only two Justices' votes – those of Ruth Bader Ginsburg and Steven Breyer – are predictable with any confidence ("this is not a conventionally political case," noted Georgetown's Rebecca Tushnet), and even an awkward 4-4 tie is possible, because one Justice, Samuel Alito, is recused from the case for unknown reasons. That uncomfortable outcome would leave in place a welter of conflicting lower-court decisions, which ratify Aereo and similar services in some parts of the country and outlaw them in others. (UPDATE: Alito is now no longer recused, removing the possibility of a tie.)

STORY: Aereo Gets Support From Cable Operators, Law Professors, Tech Industry 

 

Aereo, you'll recall, is an $8-$12 per month Internet service that lets users watch or record broadcast TV using a PC or cell phone. That price is a lot cheaper than cable, and one reason why is that Aereo doesn't have a license from broadcasters or pay fees to them. That led to a March 2012 lawsuit by an all-star lineup of broadcasters – ABC, CBS, FOX, NBC, PBS, Telemundo, Univision and several others – who say that Aereo is a copyright infringer, plain and simple. But the case isn’t simple, and the broadcasters lost in federal court in Manhattan and the Second Circuit Court of Appeals. Now, represented by veteran Supreme Court litigator Paul D. Clement of Bancroft PLLC, they’re seeking to reverse the lower court rulings. Clement, a former Bush administration Solicitor General and earlier a clerk to Justice Antonin Scalia, has argued more than 70 cases before the Court, an astonishing number.

The case, set for argument April 22, is intrinsically hard in part because of the way the copyright law is written. Congress "really messed up this statute," said Temple University's David Post, a cyberlaw specialist who clerked for Ginsburg and submitted an amicus brief backing Aereo. As a result, he added, "nobody can make a good argument. Wherever you go, you leave a piece of the puzzle broken on the ground."

Numerous experts told The Hollywood Reporter that Ginsburg will side with the broadcasters and Breyer most likely with Aereo. Beyond that, "this could go (as extreme as) 7-1 in either direction," said Post.

STORY: Utah Judge Gives TV Broadcasters an Injunction Against Aereo

Aereo is also represented by a heavy hitter, David C. Frederick of Kellogg, Huber, who has 41 Supreme Court arguments under his belt and clerked for then Justice Byron White. But complicating things for the company, the Solicitor General's office filed a brief and has asked for time at oral argument, a request that experts said will almost certainly be granted. Solicitor General Donald Verrilli himself will not be arguing, however; he and his principal deputy both have conflicts of interest for undisclosed reasons. Nonetheless, the office – which represents the government in Supreme Court cases – holds great sway with the Court.

"When the government participates as an amicus in a case where it does not have a direct interest... the Court normally – though not always – agrees with the government’s position," said King & Spalding's Daryl Joseffer, who has argued 12 cases before the Justices. "That has been particularly true in intellectual property cases. So the government’s brief tends to be a good barometer for where the Court will end up, though there are certainly exceptions to that general rule."

Said Vinson & Elkins' John Elwood, a veteran of the SG's office who has argued seven cases before the Court and earlier clerked for Justice Anthony Kennedy, "The government's position is bound to be very influential." He added, "The Court respects the Office quite a bit, because it's the most frequent litigant before the Court and tries hard to preserve its credibility with the Court by presenting a fairly balanced and unvarnished view of the case."

The SG brief filed last month "will carry significant weight (and) could well be viewed as a more objective voice," said Shah, who clerked for Breyer, worked in the SG’s office and has argued 13 cases before the Court.

At least one observer  saw that brief as less than neutral, however. "They are just pro-cop[yright]," said Pamela Samuelson, a UC Berkeley expert on copyright and information technology, in an email. "Verrilli was the lawyer who argued for MGM in the (Supreme Court) Grokster case and the Obama folks are cozy with Hollywood."

In any event, Post said the SG brief makes the case "an uphill battle" for Aereo.

STORY: Universal Responds to James Bond Lawsuit: No Green Light for 'Section 6'

Yet Aereo says that its system – which combines remote storage DVR capability with antennas that are dynamically assigned one per user – is just a logical development at the intersection of three legal technologies: DVRs, cloud computing and TV antennas. Each transmission from Aereo's server to a user's PC or mobile device is one-to-one: the system is designed so that each user is viewing a distinct copy of a program, recorded from an individually-assigned miniature antenna, regardless of how many other users are viewing their own copies of the same program at the same time, whether live or delayed.

Because of that architecture, Aereo says, each of the transmissions is a private performance and thus not violative of the copyright law's prohibition of unlicensed "public performance" even though there may be thousands of similar or identical "private performances" taking place simultaneously. Moreover, says Aereo, it is the user, not the company, that is "performing" the work. Under its theory – endorsed by some but not all lower courts – Aereo is not an infringer.

The broadcasters see the company's offering through a very different lens. "Aereo is in the business of retransmitting live television broadcasts to paying strangers," their brief says. "That conduct falls squarely within Congress' unambiguous definition of what it means ‘to perform or display a work publicly.'" They argue that the legislative history of the current Copyright Act, which dates to 1976, shows a clear intent to require licenses or compensation for such retransmission.

At stake, say the broadcasters, is "the very existence of broadcast television as we know it": as retransmission monies continue to grow while advertising revenue (although still much larger) stalls, the broadcasters warn that a ruling against them would drive them to take their content off the airwaves and provide it only via cable, satellite and telephone systems. (What would become of the abandoned public airwaves is something the broadcasters don’t address.) Were that to happen, the broadcasters say, cable providers might use Aereo as leverage to reduce or even eliminate retransmission fees, a claim that Aereo disputes, arguing that since retransmission fees are a creature of the Cable Act, not the copyright statute, those fees would be undisturbed. Yanking those signals from the air would in any event reduce audience sizes, and hence ad revenue, since ten percent of the country watches television only over the air.

Seemingly undermining the broadcaster's argument, CBS' Les Moonves recently said of his company "we are not going to be financially handicapped at all" if the Supreme Court holds in Aereo's favor. It's a comment that Aereo quotes at the conclusion of its brief.

Left unsaid in both sides' papers is another effect that Aereo might have: the service's low price point may ultimately force cable providers to reduce prices and move toward unbundled offerings in order to compete.

In a key detail, Aereo's system is designed so that even "live" television is viewed with a six or seven second delay, transmitted from a user-specific copy on a hard disk rather than directly from one of the dime-sized antennas. In Aereo's view, that makes its system simply an RS-DVR with individualized antennas; but the broadcasters point out that Aereo advertises "Watch Live TV Online," which makes it look like a cable system. Like a well-balanced optical illusion, Aereo manages to be two things at once, only one of which is legal without a license.

Is Aereo just being picayune, focusing on minutiae in an attempt to distract from the big picture? No, the company says, the Court's own precedent "mandates technical and analytical precision in any application of the exclusive rights (granted by copyright)." And it’s certainly true that modern-day copyright decisions sometimes read as much like computer manuals as court cases.