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The system that Aereo Inc. uses to allow its customers to watch and record television broadcasts is “materially identical” to the system used in Cablevision, and thus 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 U.S. District Court for the Southern District of New York ruled July 11 (American Broadcasting Companies Inc. v. Aereo Inc., S.D.N.Y., No. 1:12-cv-01540-AJN, 7/11/12).
In a 52-page opinion that the plaintiffs said they would immediately appeal, the court rejected every effort made by the television networks to distinguish the technology at issue here from the remote storage DVR device that was held not directly infringing in Cartoon Network LP v. CSC Holdings Inc., 536 F.3d 121, 87 USPQ2d 1641 (2d Cir. 2008) (151 PTD, 8/6/08). Instead, the court concluded that it was bound by the Second Circuit's opinion due to “the substantial factual parallels Aereo's service and that in Cablevision.”
Moreover, the court said that one of the few distinctions between the two devices may in fact give Aereo “a stronger case” for arguing that it does not offend the Copyright Act's “transmit clause.”
In addition, while the court determined that Aereo's service may over an extended period of time cause the television networks irreparable harm, it said that harm is unlikely to befall the plaintiffs during the pendency of the case. The court thus declined to issue a preliminary injunction.
Aereo Inc. launched in the New York metropolitan on March 14.
Aereo allows subscribers to pay a monthly fee to stream live broadcast television programs to internet connected devices, such as laptops, mobile phones, and tablets(56 PTD, 3/23/12).
Many 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.
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 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 March 13. 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.
The court's decision followed 11 weeks of expedited discovery and a two-day evidentiary hearing.
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 three 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, 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 only make transmissions to one subscriber, and thus there was no public performance within the meaning of Section 101, Cablevision held.
Cablevision also rejected the theory that the transmit clause was implicated due merely to the fact that upstream broadcasters transmitted their content to Cablevision and other cable companies. This initial transmission is “to the public,” and thus it is irrelevant if Cablevision's subsequent broadcast to individual users is private, the plaintiffs argued.
The Second Circuit said it was inappropriate to look at the initial transmission and instead said courts should look “downstream, rather than upstream or laterally, to determine whether any link in a chain of transmissions made by a party constitutes a public performance.”
The court here had to first determine whether Aereo's service was facilitated by--as it claimed--multiple individual antennas functioning separately, or if instead the antennas collectively function as a single antenna.
The networks claimed the single antennas--which consist of dime-sized metal loops that are packed in groups of eighty on one end of a circuit board--are not functional on their own.
In a declaration an expert witness for the networks said that the close proximity of the antennas means that an incoming signal “does not see the loops as separate elements, but rather as one continuous piece of metal.” According to the expert, John Volakis, this phenomenon is exacerbated by the fact that the antennas are attached to circuit boards and metal rails.
Aereo pointed to numerous flaws in Volakis's tests and also submitted substantial evidence tending to demonstrate that the antennas function independently. The court was swayed both by Aereo's experts, and by the fact that Volakis did not testify during the hearing and thus did not rebut Aereo's criticism of his methods.
On balance, the court said the relevant evidence demonstrated that Aereo's antennas function independently. “That is to say, each antenna separately receives the incoming broadcast signal, rather than functioning collectively with the other antennas or with the assistance of the shared metal substructure,” Nathan said.
As in Cablevision, a unique copy of a broadcast program is made at the request of subscriber, and that unique copy is transmitted solely to that subscriber, the court said.
Plaintiffs' argument that Aereo's transmissions actually “emanate[ ] from the original broadcast signal” rather than from the unique copies Aereo's system creates is just another variant of these arguments, rejected by Cablevision, that the Court should look back (or “upstream”) to the point at which Aereo's antennas obtain the broadcast content to conclude that Aereo engages in a public performance in retransmitting this content.
The court said that Cablevision recognized a “dividing line” between the transmissions made by the broadcasters and the transmission made by Cablevision to the customer. Not only does that same dividing line exist here, but in light of the independently functioning antennas “the Aereo system is a stronger case thanCablevisionfor attaching significance to such copies because, unlike Cablevision in which multiple copies were all created from a single stream of data … each copy made by Aereo's system is created from a separate stream of data,” the court said.
Aereo argued that it creates user-requested copies that are then transmitted to individual subscribers. Accordingly, Cablevisionis directly controlling, Aereo said.
The television networks, on the other hand, argued Cablevision was inapplicable because Aereo allows its subscribers to watch programs as they are still being broadcast. According to the networks, the RS-DVR at issue in Cablevision allowed the subscriber to record the program and watch it at a later date. Cablevision thus only controls devices that permit “time-shifting” and is inapplicable where, as here, the device allows viewing contemporaneous with the broadcast, the networks argued. The court disagreed.
This “creative attempt to escape from the express holding of Cablevision” cannot succeed given the “materially identical” nature of the systems in both cases, and the fact that the Second Circuit “did not say one word to suggest that time-shifting played any part in its holding,” the court said.
[T]ime-shifting is simply not the basis of the Second Circuit's opinion. Far from it: the Second Circuit never even mentioned time-shifting, whether complete or partial, as a reason to conclude the copies Cablevision created were significant or that the performances at issue were non-public. See generally id. Thus, even accepting that a distinction based on time-shifting exists in this case, nothing in the Second Circuit's analysis indicates that this distinction is material, and this Court remains obligated to apply Circuit precedent with fidelity to its underlying reasoning.
Moreover, the time-shifting arguments “are simply not consistent with the reasoning of Cablevision,” the court said.
The networks argued that the devices such as the RS-DVR “break the chain of tranmission,” and in doing so limit the potential audience size. But “nothing in Cablevision suggests that whether a performance is public turns on the times at which individuals receive the transmission,” the court said. Indeed, the Second Circuit “explained in Cablevision that certain of these arguments would lead to 'odd results,' such as imposing public performance liability on 'a hapless customer who records a program in his den and later transmits the recording to a television in his bedroom,' ” the court said, quoting Cablevision.
The court also dismissed the networks' reliance on other cases that they claimed supported the time-shifting theory.
Specifically, the networks pointed to the Second Circuit's determination in National Football League v. Primetime 24 Joint Venture, 211 F.3d 10, 54 USPQ2d 1569 (2d Cir. 2000), that held “a public performance or display includes each step in the process by which a protected work wends its way to its audience.”
NFLheld that the uplink transmission of copyrighted NFL game broadcasts to a satellite for retransmission to Canadian viewers constituted an infringing public performance. A later case, United States v. American Society of Composers, Authors and Publishers, 627 F.3d 64, 96 USPQ2d 1360 (2d Cir. 2010) (187 PTD, 9/29/10)noted that a controlling factor in NFL was “the immediately sequential downlink from the satellite to Canadian PrimeTime subscribers was a public performance of the games.”
Asin NFL, Aereo here is allowing subscribers to immediately view the broadcast, and should similarly be held infringing, the networks argued. The court disagreed.
“Both Cablevisionand Composersexpressly distinguished NFL based on the creation, in those cases, of unique copies from which the transmissions were made, explaining that such copies meant that the ultimate performance was not 'to the public,' ” the court said.
Moreover, NFL and other cases “have generally not considered the impact of the creation of unique copies-the focus of Cablevision's analysis--on whether internet streaming transmissions involve a public performance and thus did not address the question currently before the Court,” the court said.
Cablevision is controlling and directly on point, and “considering the role of district courts to faithfully apply their best understanding of the Second Circuit's precedent, this Court does not believe it would be appropriate to blaze a trail that runs opposed to the direction dictated by Cablevision,” the court said.
The court agreed that Aereo could cause irreparable harm to the television networks.
“First, Aereo will damage [the broadcasters'] ability to negotiate with advertisers by siphoning viewers from traditional distribution channels, in which viewership is measured by Nielsen ratings, into Aereo's service which is not measured by Nielsen, artificially lowering these ratings,” the court said. “Similarly, the evidence shows that by poaching viewers from cable or other companies that license [the broadcasters'] content, Aereo's activities will damage [the broadcasters'] ability to negotiate retransmission agreements, as these companies will demand concessions from [the broadcasters] to make up for this decrease in viewership.
However, the court said it was unlikely that the networks “will suffer the full magnitude of their claimed irreparable harm during the pendency of this litigation.”
Thus, the balancing of the hardships favored a rejection of the preliminary injunction, the court said. Accordingly, it denied the motion for a preliminary injunction.
The networks claimed that they would immediately appeal the decision, while Aereo's chief executive and founder, Chet Kanojia, released a statement saying the decision “isn't just a win for Aereo, it's also a significant win for consumers who are demanding more choice and flexibility in the way they watch television.“
The American Broadcasting Companies were represented by Bruce P. Keller of Debevoise & Plimpton New York. WNET was represented by David J. Bradford of Jenner & Block, Chicago. Aereo was represented by Jennifer A. Golinveaux of Winston & Strawn, San Francisco.
Opinion at http://pub.bna.com/ptcj/121540July1112.pdf
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