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Networks Denied En Banc Review of Aereo; Chin Dissent: Cablevision ‘Wrongly Decided'

Wednesday, July 17, 2013
By Tamlin H. Bason

The U.S. Court of Appeals for the Second Circuit on July 16 denied en banc review to a group of television networks claiming that Aereo Inc.'s streaming television service is infringing (WNET v. Aereo Inc., 2d Cir., No. 12-2786, 7/16/13).

A split 2-1 panel held in April that Aereo's use of individual antennas allowing subscribers to watch television programs online at nearly the same time as they are being broadcast did not constitute a public performance underCablevision, affirming the district court's refusal to enjoin Aereo's service. A majority of the appeals court voted against en banc review of that decision.

Judge Denny Chin, who dissented from the panel's decision in April, said he would have granted en banc review for a number of reasons, not the least of which is that in his opinion “Cablevision was wrongly decided.”

Aereo Sued Before Official Launch

Aereo Inc. launched its service in the New York metropolitan region on March 14, 2012.

Aereo allows subscribers to pay a monthly fee to stream broadcast television programs to internet connected devices, such as laptops, mobile phones, and tablets.

Leading television networks filed two lawsuits March 1, before Aereo had even officially launched, alleging that the service constituted direct copyright infringement by facilitating the unauthorized broadcast of copyrighted content. The two cases were accepted as being related, and both were assigned to Judge Alison J. Nathan of the U.S. District Court for the Southern District of New York.

In an answer and counterclaim for declaratory judgment, Aereo argued, “This case involves nothing more than the application of settled law to updated technology--settled law that establishes conclusively that Aereo's business is entirely lawful.” For support, Aereo's filings relied on Cartoon Network LP v. CSC Holdings Inc., 536 F.3d 121, 87 U.S.P.Q.2d 1641 (2d Cir. 2008), the case commonly known as Cablevision.

Aereo pointed out that its service only permits a subscriber to view content that would otherwise be free to view with the use of an antenna attached to a television. Its service, which assigns each subscriber a small, remotely located antenna through which the subscriber may stream or record a requested broadcast, is legally analogous to the subscriber using the antenna in their own homes, Aereo claimed.

The television networks moved for a preliminary injunction. The motion challenged only the aspect of Aereo's service that permits users to watch the broadcasts at the same time as when they were being broadcast over the air.

After 11 weeks of expedited discovery and a two-day evidentiary hearing, the district court determined that the networks were not entitled to a preliminary injunction. Nathan said that Aereo's system is “materially identical” to the system used in Cablevision, and thus she said that the Second Circuit's determination that the Cablevision device did not transmit the broadcast precludes an issuance of a preliminary injunction against Aereo in this case.

The networks filed an interlocutory appeal and the case was briefed on an expedited schedule.

In between the district court's refusal to grant an injunction and the Nov. 30 oral argument, the Second Circuit upheld a preliminary injunction against a similar online service that streams broadcast content live. WPIX Inc. v. ivi Inc., 691 F.3d 275, 104 U.S.P.Q.2d 1071 (2d Cir. 2012). An online service that streams broadcast content in real-time is not a “cable system” entitled to a compulsory license under the Copyright Act, the appeals court held.

Cablevision Finds RS-DVR Non-Infringing

In Cablevision, the appeals court reversed on all grounds a district court's determination that a cable television operator's planned digital video recording service, which would store copyrighted television programming on a remote server for re-transmission at the viewer's request, would infringe the copyright owners' exclusive rights to reproduce and publicly perform their television programming.

At the district court level, then district judge Denny Chin had determined that RS-DVR technology would infringe the plaintiffs' rights to reproduce their work in two distinct ways. First, it would copy the works and store them indefinitely on the defendant's server, and second, it would copy the works and store them temporarily in “buffer memory” on the defendant's server. Chin also found that Cablevision's streaming of copyrighted work in response to requests by members of the public would also constitute an infringing public performance of the work.

The opinion was reversed on all grounds by the Second Circuit.

First, the court held that each buffer copy was transitory and so not infringing. The court distinguished two prongs of the definition of a copy being “fixed in a tangible medium of expression,” under Section 101 of the Copyright Act, 17 U.S.C. §101.

Second, the court concluded that the subscriber “ 'does' the copying produced by the RS-DVR system,” so if there is a claim for reproduction infringement, it is against the subscriber and not Cablevision.

Third, and most relevant to the present case, Cablevision held “the RS-DVR playback … does not involve the transmission of a performance 'to the public.'”

The court's holding relied on a reading of the “transmit clause” of Section 101, where “to perform or display a work 'publicly' ” includes “to transmit … to the public … whether the members of the public capable of receiving the performance …  receive it in the same place or in separate places and at the same time or at different times.”

Each RS-DVR device was designed to make transmissions to only one subscriber, and thus there was no public performance within the meaning of Section 101, Cablevision held.

Majority in April: We Cannot Overrule Cablevision

The networks proffered numerous reasons for why Cablevision was inapplicable to Aereo's service. “Though presented as efforts to distinguish Cablevision, many of Plaintiffs' arguments really urge us to overrule Cablevision,” Judge Christopher F. Droney said, writing for himself and for Judge John Gleeson of the U.S. District Court for the Eastern District of New York, sitting by designation. “One panel of this Court, however, 'cannot overrule a prior decision of another panel,' ” the court said, quoting Union of Needletrades Indus. & Textile Employees v. U.S. I.N.S., 336 F.3d 200, 210 (2d Cir. 2003).

The court's April decision, however, seemed to suggest that en banc attention to the issue may be helpful.

“Perhaps the application of the Transmit Clause should focus less on the technical details of a particular system and more on its functionality, but this Court's decisions in Cablevision and NFL, …  held that technical architecture matters,” the court said, referencing National Football League v. Primetime 24 Joint Venture, 211 F.3d 10, 54 U.S.P.Q.2d 1569 (2d Cir. 2000).

The court, powerless to overturn Cablevision, examined, and then rejected, each of the networks' arguments for why that case was not applicable to Aereo.

Chin disagreed with the majority on nearly every substantive issue, starting with Aereo's business model. He said:  

Aereo's 'technology platform' is, however, a sham. The system employs thousands of individual dime-sized antennas, but there is no technologically sound reason to use a multitude of tiny individual antennas rather than one central antenna; indeed, the system is a Rube Goldberg-like contrivance, over-engineered in an attempt to avoid the reach of the Copyright Act and to take advantage of a perceived loophole in the law.  

 

 

No Explanation for En Banc Denial

The networks filed a petition for en banc review two weeks after the appeals court's decision. In its petition, the networks directly challenged Cablevision, claiming that “the erroneous analysis” used in that decision “has now spawned an obviously incorrect decision that threatens to cause massive disruption to the television industry, and will adversely impact the public's access to the quality and diversity of programming available through broadcast television.”

The networks were hopeful that the full Second Circuit would use their petition as an opportunity to provide clarity to the jurisprudence regarding public performances under the Copyright Act. The petition for en banc review was also timely given the outstanding issues in the Aereo litigation.

In May, Aereo filed a motion for summary judgment on the networks' infringement claims. Aereo also filed a complaint for a declaratory judgment, seeking to bar the networks' attempts to re-litigate in other forums copyright infringement claims that failed in the Second Circuit.

On July 10, an ABC affiliate filed a suit against Aereo in the U.S. District Court for the District of Massachusetts. The suit was filed just weeks after Aereo launched its Boston service.

The Second Circuit, however, determined that en banc review was not warranted. The one-paragraph order denying en banc review simply stated that there was not a majority in favor of en banc review. The petition was therefore denied.

Chin Again Faults Aereo Business Model, Cablevision

Chin was joined by Judge Richard C. Wesley in a 31-page dissent from the court's denial of en banc review. Chin raised four primary objections.

First, Chin argued that Aereo conflicted with ivi. Thus, “en banc consideration is necessary to secure or maintain uniformity of the court's decisions,” he said, quoting Fed. R. App. P. 35(a)(1).

Second, Chin reiterated his belief--first raised in his dissent from the April decision--that Aereo's transmission of the television programs constitutes a public performance, and therefore is prohibited by the Copyright Act.

Chin then raised his third and most forceful objection. He said:  

The panel majority's decision is based entirely on Cablevision. In my view, however, as some of the broadcasters argue, Cablevision was wrongly decided. Of course, I was the district judge in Cablevision, and I recognize that the panel was bound by the Court's decision in Cablevision, to the extent the decision is controlling. But rehearing these cases en banc would also give the Court the opportunity to reconsider Cablevision.  

 

 

Chin's final argument was that even if “Cablevisionwas correctly decided, its holding should be limited to its facts.” Aereo's use of Cablevision to find Aereo's service non-infringing “eviscerates the Copyright Act,” Chin said.

Aereo was represented by Yvonne W. Chan of Goodwin Procter, Boston. WNET was represented by Scott Wilkens of Jenner & Block, New York. The American Broadcasting Cos. were represented by Bruce P. Keller of Debevoise & Plimpton, New York.

 


Order denying en banc review is available at http://www.bloomberglaw.com/public/document/American_Broadcasting_v_AEREO_Inc_Docket_No_1202807_2d_Cir_Jul_16/2.

Chin's dissent is available at http://www.bloomberglaw.com/public/document/American_Broadcasting_v_AEREO_Inc_Docket_No_1202807_2d_Cir_Jul_16/3.

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