Supreme Court Hands Broadcasters Huge Win in Aereo Battle

US Supreme Court Building - H 2012
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US Supreme Court Building - H 2012

The Supreme Court on Wednesday ruled in favor of TV broadcasters against Aereo. In a 6-3 decision, the high court, led by Justice Stephen Breyer determined that Aereo publicly performs copyrighted work and has reversed the 2nd Circuit holding. The case has now been remanded, where the broadcasters look primed to score an injunction that will shut down the service.

According to Breyer's opinion, the "behind-the-scenes technological differences do not distinguish Aereo's system from cable systems, which do publicly perform."

A dissenting opinion came from Justice Antonin Scalia, with Clarence Thomas and Samuel Alito joining.

Read the full opinion.

Aereo is a subscription digital service that allows users to watch or record live broadcast TV using a PC or cell phone. It was introduced to the public in February 2012 by its biggest financial backer Barry Diller, who at the time proclaimed that Aereo would pry over-the-air broadcast television out of a closed system. The following month, just as Aereo launched in New York, all of the major TV broadcasters took Aereo to a New York federal court to face charges of violating copyright law. With the ultimate outcome of the case pending, Aereo has expanded its operations to more than two dozen markets.

The plaintiffs contend that Aereo steps on the broadcasters' public performance rights under the 1976 Copyright Act, which requires a license for retransmission. Aereo, however, has maintained that its dime-sized antennas are analogous to old rooftop antennas and that users direct the system to pass along unique copies of programming, akin to the private performance afforded a remote-storage DVR.

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Aereo fended off a preliminary injunction — a ruling that was affirmed at the 2nd Circuit Court of Appeals, leading the broadcasters to appeal to the high court with warning that the ruling "threatens to upend" the billions of dollars that the TV industry has invested in programming.

The case was argued on April 22, with the broadcasters getting an assist from the U.S. government, whose deputy solicitor general made an appearance. At oral arguments, the justices were also told by Aereo's lawyers that a decision in favor of the broadcasters had the potential of harming technological innovation like cloud computing.

Justice Breyer's majority opinion leaves little room for doubt that Aereo's service is illegal.

He points to changes in copyright law after the 1968 case, Fortnightly Corp. v. United Artists Television, Inc, which had to do with an antennae set up on a mountaintop in a rural area that transmitted programming to a local community. "History makes plain that one of Congress’ primary purposes in amending the Copyright Act in 1976 was to overturn this Court’s determination that community antenna television (CATV) systems (the precursors of modern cable systems) fell outside the Act’s scope," writes Breyer.

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The justice says that changes in the law were meant to bring cable systems within the scope of the Copyright Act and doesn't believe that Aereo should be immune from copyright obligations given its "overwhelming likeness" to cable systems..

"This history makes clear that Aereo is not simply an equipment provider," he writes. "Aereo sells a service that allows subscribers to watch television programs, many of which are copyrighted, almost as they are being broadcast. In providing this service, Aereo uses its own equipment, housed in a centralized warehouse, outside of its users’ homes. By means of its technology (antennas, transcoders, and servers), Aereo’s system 'receive[s] programs that have been released to the public and carr[ies] them by private channels to additional viewers.'"

Justice Breyer elaborates on why Aereo's system of capturing transmissions and enabling a one-to-one copy to its subscribers still doesn't make it anything more than other TV services that are required to license before operating.

"Why should any of these technological differences matter?" he asks. "They concern the behind-the-scenes way in which Aereo delivers television programming to its viewers’ screens. 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? And why, if Aereo is right, could not modern CATV systems simply continue the same commercial and consumer-oriented activities, free of copyright restrictions, provided they substitute such new technologies for old? Congress would as much have intended to protect a copyright holder from the unlicensed activities of Aereo as from those of cable companies."

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The fact that it was Breyer delivering the majority opinion comes as a huge surprise as he was the one asking the toughest questions of broadcasters' lawyers at the April hearing. He was the one who expressed the most concern about the ramifications of a holding disfavoring Aereo. And yet he is the one today who writes an opinion that will have legal observers parsing his interpretation of copyright law to determine its impact on the future.

On one hand, the justice writes passages that will cause many in the technology industry to shudder.

"Neither the record nor Aereo suggests that Aereo’s subscribers receive performances in their capacities as owners or possessors of the underlying works," he writes. "This is relevant because when an entity performs to a set of people, whether they constitute 'the public' often depends upon their relationship to the underlying work."

In his dissent, Justice Scalia warns of the consequences. "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," he writes.

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Then again, Justice Breyer does look to calm nerves by noting that today's opinion is a "limited holding" addressing a tech service that acts like a cable company, by softly endorsing certain time- and place-shifting technologies ("We note that Aereo’s subscribers may receive the same programs at different times and locations"), and saying that the legality of technological advances such as cloud computing and DVRs will have to await future court cases.

Whether or not his approach will be interpreted as limited and cautious as intended will be hotly debated in the months and years to come.

For now, the Supreme Court leaves Aereo in a dire position. The company didn't resist TV broadcasters when the appellants wanted the high court to hear the case. Aereo concluded that clarity in the law would be in its best interest. But in the run-up to today's decision, Aereo officials downplayed any potential "Plan B" for the company. It's possible that Aereo could forge deals to save itself, but this is clearly a bad day for Aereo and its employees.

The petitioners in the case include: American Broadcasting Companies, Inc.; Disney Enterprises, Inc.; CBS Broadcasting Inc.; CBS Studios Inc.; NBCUniversal Media, LLC; NBC Studios, LLC; Universal Network Television, LLC; Telemundo Network Group LLC; WNJU-TV Broadcasting LLC; WNET; Thirteen Productions, LLC; Fox Television Stations, Inc.; Twentieth Century Fox Film Corporation; WPIX, LLC; Univision Television Group, Inc.; The Univision Network Limited Partnership; and Public Broadcasting Service.

Twitter: @eriqgardner