‘Aereokiller’ Hearing May Portend Difficulties for Networks (Analysis)

Although it’s notoriously difficult to read the minds of appellate judges, there was probably enough at Tuesday’s oral argument in Fox v. Aereokiller to make top network executives nervous. Aereokiller, as you’ll recall, is similar to Aereo: both systems allow customers to watch broadcast television on Internet connected devices; both systems feature antenna farms with individual antennas dynamically assigned to each viewer; and both systems operate without licenses from the networks. That last is the part that triggered litigation in four of the 12 U.S. court circuits.

But do these systems need a license? FilmOn says no. (That’s the new name for Aereokiller; founder Alki David told The Hollywood Reporter that the name “Aereokiller” had merely been “a passing fancy.”) The networks, of course, disagree. The networks prevailed in the district court in Los Angeles, but the appellate panel considers the legal issue anew – and this time in light of a recent decision involving Dish that was adverse to the networks.

Early in the 40 minute oral argument, Judge Brian Cogan told FilmOn’s counsel, Ryan Baker of Baker Marquart, that “your system is pretty damn clever.” Cogan asserted that “it’s a system that was arrived at for the sole purpose of avoiding the statute” – but then added, “maybe you have.” That can’t have been reassuring for the dozen or so network lawyers and executives in the courtroom.

Baker took issue with Cogan’s characterization, saying that the “purpose is to comply with the law.”

Ironically, Cogan, a district judge sitting by designation on the three-judge panel, is from New York – where the Second Circuit Court of Appeals held 2-1 that Aereo’s system is non-infringing. That precedent isn’t binding on the West Coast’s Ninth Circuit, but of course was on everyone’s minds, as was the dissent in the case.

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Said Fox lawyer Paul Smith of the Washington office of Jenner & Block, “There’s not a lot in Judge Chin’s (dissenting) opinion (that) I don’t love.” As to the majority opinion, he asserted that “the Second Circuit went completely off the rails.” He described in the same terms the Cablevision case, which is the precedent the Second Circuit relied on. He argued that “people shouldn’t be able to build businesses on the backs of other people’s content.”

Judge Diarmuid O’Scannlain asked Smith what significant differences existed between the Cablevision case – which upheld the legality of RS-DVRs – and the current case. Smith answered that Cablevision concerned a situation in which the company had (allegedly) exceeded the scope of its license, whereas the current case involved a company, FilmOn, with no license at all.

But Smith then conceded that “whether or not that distinction makes a legal difference is unclear.” If O’Scannlain finds Cablevision applicable and persuasive, that won’t be good for the networks, because it could lead the way to an analysis similar to that of the Second Circuit.

Robert Garrett, of the DC office of Arnold & Porter, then argued on behalf of NBCU and several other media companies. “When someone inserts themselves as a middleman (in the process of transmitting content), a license fee needs to be paid,” he said.

But O’Scannlain asked, “why can’t we find that this technology is different?”

O’Scannlain, who appeared remotely via video linkup, also cited the Aereo decision, then asked “is there no room for private transmissions?” That’s a reference to a key issue in the case: whether the transmissions from FilmOn to each individual user amount to public transmissions, which are prohibited by the copyright statute absent a license from the broadcaster. The Aereo court said that they do not: that is, aggregating private transmissions does not make them public.

Earlier, O’Scannlain asked Baker whether the issue wasn’t “really a problem for Congress” to address. That could cut both ways, however – perhaps he means that if the networks have a problem with the state of the law, they need to go to Congress and seek revision, or perhaps he means that FilmOn will need to seek a legislative solution.

Baker spoke again, this time in rebuttal, and cited the Ninth Circuit’s recent decision upholding Dish’s ad-skipping “Hopper,” another cause for network indigestion. Baker said that FilmOn’s system is an RS-DVR, because even live broadcasts are delayed by several seconds and transmitted from a copy. (Other aspects of the Dish decision also have been used in support of Aereo, as THR previously reported.)

Judge Morgan Christen, the third member of the panel, asked only one or two questions, providing not even a glimmer of a hint as to her thinking.

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Only a brief mention was made during the argument of On Command Video v. Columbia Pictures, a 1991 case that the district court had relied on in holding for the networks. Because that network-friendly case ended at the district court level, it’s not binding on the Court of Appeals.

After the hearing, as the judges huddled behind a curtain – literally – FilmOn chief David told THR the networks “should be embracing us, not trying to kill us.” But the issue, he added, is that FilmOn viewers don’t show up in the Nielsen ratings, which he blasted as obsolete.

David also said that his company’s technology was “an infrastructure-saving platform (that) dynamically adapts to how many users (are watching a given channel).” He conceded that this aspect of the technology may not have been made clear to the judges.

Asked how legal relations stood between Aereo and FilmOn, David said, “we’re not fighting Aereo (and) we’re not going to.” Rather, he described his focus as expansion, saying that the company is in 45 markets now and will be in 18 more in the next 3-4 weeks.

However, the Aereo and FilmOn litigation business is also in expansion mode. According to Smith, a lawsuit in Boston against Aereo will come on for a hearing September 12, and a Washington, DC suit against FilmOn will have a hearing on September 20. Meanwhile, although the judges in the current case may already have reached a decision, it’s unknown when a written opinion will be released. Observers increasingly expect one or more of the cases to be appealed to the Supreme Court.

Listen to the oral argument here.

Email: jhandel99 at gmail dot com
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