Chet Kanojia raised $20.5 million in seed investment, including millions from Barry Diller, who said that when he first heard Kanojia pitch Aereo, his team "spent a lot of time and a good amount of money trying to find, legally and technically, what was wrong with it."
Last week, as The Hollywood Reporter reported, Fox lost an appeal in a California case in which the network is challenging Dish’s ad-skipping feature called AutoHop or the Hopper, which allows users to automatically skip commercials in recorded programs. The appeal concerned denial of an injunction; the case now continues in the lower court.
The next day, Aereo’s counsel cited the Dish decision in a New York case concerning Aereo’s service, which allows users to view broadcast television programs online, without a cable TV subscription. Aereo’s service makes it possible for users to watch live TV (“Watch Now”) or to record programs for later use (“Watch Later”).
Both Dish and Aereo are high stakes cases that the broadcast industry says could kill its business. Dish’s feature may undermine ad revenue, while Aereo’s service threatens retransmission monies from cable companies, satellite providers and telcos.
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The broadcasters suing Aereo are alleging several violations of copyright law: They argue that Aereo’s retransmission of broadcast signals is an unauthorized public performance or public transmission. The broadcasters have lost twice on this issue – once in the district court in the context of a preliminary injunction motion and once in the 2nd Circuit court of appeals. Both courts held that what Aereo offers are private transmissions – one per viewer, with each one linking a micro antenna to the particular viewer – and that you can’t conceptually aggregate these transmissions and call the result a public transmission.
The Aereo case has now progressed to cross-motions for summary judgment, which gives the broadcasters another bite at the apple, however unfruitful that may prove to be. But this issue is unrelated to the Dish decision.
Another violation that the broadcasters allege is that the Aereo Watch Now feature makes intermediate copies of the program being watched, and that these unauthorized copies violate the broadcasters’ copyrights. The broadcasters contend that this is direct infringement, because Aereo makes the copies. Aereo argues that this conduct is attributable to the viewer, because the Aereo equipment makes those copies only if the user clicks a button that commences playing the channel.
In other words, Aereo says that the viewer “makes” the copies.
And this is where the Dish decision and the Aereo case overlap. The Dish decision says that, under the factual circumstances present in the Dish case, the viewer “is ‘the most significant and important cause’ of the copy.” Aereo says this reasoning should apply to the Aereo case as well.
But direct infringement isn’t the only kind of infringement out there. You can be liable for indirect infringement if you facilitate someone else’s infringement. The broadcasters argue that – if the making of the Watch Now copy is attributed to the viewer – then Aereo is liable for indirect infringement, because, say the broadcasters, the viewers’ conduct is infringing.
Here again, Aereo points to the Dish decision, which it says held that “all four fair use factors favor a finding that a consumer’s recording of programming broadcast over-the-air constitutes a fair use.” In doing so, the Dish court was reiterating the 1984 landmark Sony Betamax case, Sony Corp. of America v. Universal City Studios, Inc., which held that using video cassette recorders for time-shifting was non-infringing.
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Buttressing Aereo’s citation to Dish is the fact that the Dish court relied on a case from the 2nd Circuit involving Cablevision’s remote storage DVR (RS-DVR).
Yet another aspect of the Aereo system is that the system makes additional copies for internal use only, for quality assurance purposes. The broadcasters says these are infringing, which Aereo denies. This issue is related to a different section of the Dish decision, which considers whether quality assurance copies are infringing. It’s difficult to draw any ultimate conclusion on the question, however, because the 9th Circuit did not need to address the question head on.
A final aspect of the Aereo system does not seem to be at issue: the Watch Later copies. Under Cablevision, such systems were found to be non-infringing. In reaching this conclusion, Cablevision relied most prominently on the Betamax case.
It’s worth remembering that the district court in New York (which is in the 2nd Circuit) isn’t bound by the 9th Circuit’s ruling in Dish, since those are different jurisdictions. But courts in one circuit often do consider decisions in a different circuit – sometimes accepting them, sometimes rejecting.
If this all sounds about as complex as the tax code, it is. The copyright law is much shorter and seemingly simpler than the tax code, but as technology has evolved, courts have been forced to make finer and finer decisions. And since technology doesn’t stand still, there’s no shortage of new devices, services and fact patterns under the law. With the stakes high, and parties on both sides often well-funded – Aereo, for instance, is backed by Barry Diller – litigation continues apace.
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Indeed, another interesting question about the Dish decision is what effect it will have on an Aereo type case currently pending in the 9th Circuit itself. A district court case in Los Angeles found that an Aereo-type service was indeed infringing. That service is from an Aereo competitor variously known as Aereokiller, FilmOn, FilmOn X and even Barry Driller (not Diller).
(Cases against Aereo or Aereokiller are pending in federal district courts in Boston and Washington as well.)
The Aereokiller decision, in other words, is directly contrary to the Aereo decisions in the 2nd Circuit. But it’s now on appeal to the 9th Circuit. The Dish decision may signal that at least some aspects of Aereokiller (and Aereo) will be held non-infringing – especially since Dish cites the 2nd Circuit’s Cablevision case with approval.
Even worse for the broadcasters, Dish suggests that the 9th Circuit may not be overly convinced by their argument that the Hopper is a potential industry killer. In just a few sentences, the court dismissed this business model based argument: since the ads are not copyrighted by Fox, “any analysis of the market harm should exclude consideration of AutoHop because ad-skipping does not implicate Fox’s copyright interests.”
The Aereokiller case presents a different picture, so to speak, since it involves transmission of programs that are copyrighted by the broadcasters. Market harm, in other words, may be front and center in the Aereokiller case.
Still, the fact that Dish so easily swept away a market harm argument has got to be unsettling for broadcasters – since, at base, market harm is what the broadcasters fear most from both AutoHop and Aereo(killer). With adverse precedent hopping back and forth across the country, the broadcasters may be wishing that judicial opinions could be skipped as easily as ads.
