Networks Defeat TV-Streaming Service Aereo in Supreme Court

      WASHINGTON (CN) - Aereo, a service that lets subscribers watch broadcast television online, infringes on the copyrights owned by the networks, the Supreme Court ruled Wednesday.
     Backed by IAC's Barry Diller, Aereo debuted in major cities in 2012, allowing subscribers to access TV broadcasts online via Aereo's warehouse of dime-sized antennae.
     While Aereo likened its service to the permissible "rabbit ears" of old, major broadcast networks like ABC and Fox said it infringes their exclusive rights.
     A divided three-judge panel of the 2nd Circuit created a circuit split last year in denying the networks an injunction, and digital rights groups like the Electronic Frontier Foundation urged the Supreme Court to affirm after it took up the case in January.
     By a 6-3 vote, the justices reversed on Wednesday.
     Relevant to their holding are amendments that Congress made to the Copyright Act in 1976 to ensure that the law governed community antennae television (CATV) systems, a precursor to modern cable.
     "Aereo's activities are substantially similar to those of the CATV companies that Congress amended the act to reach," Justice Stephen Breyer wrote for the majority. "Aereo sells a service that allows subscribers to watch television programs, many of which are copyrighted, almost as they are being broadcast. ... 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.' It 'carr[ies] ... whatever programs [it] receive[s],' and it offers 'all the programming' of each over-the-air station it carries." (Parentheses in original.)
     Justice Clarence Thomas and Samuel Alito joined the dissent by Justice Antonin Scalia, which concludes that, while Aereo's service maybe "ought not to be allowed," the court should "not distort the Copyright Act to forbid it."
     "It is not the role of this court to identify and plug loop­holes," Scalia wrote. "It is the role of good lawyers to identify and exploit them, and the role of Congress to eliminate them if it wishes. Congress can do that, I may add, in a much more targeted, better informed, and less disruptive fashion than the crude 'looks-like-cable-TV' solution the court invents today."
     Disputing the majority's finding that Aereo "performs," and thus violates the Copyright Act, Scalia said Aereo is most similar to "a copy shop that provides its patrons with a library card.'
     Unlike a video-on-demand service that provides "a prearranged assortment of movies and television shows," Aereo "assigns each subscriber an antenna that - like a library card - can be used to obtain whatever broadcasts are freely available," the dissent states.
     "Some of those broadcasts are copyrighted; others are in the public do­main," Scalia continued. "The key point is that subscribers call all the shots: Aereo's automated system does not relay any program, copyrighted or not, until a subscriber selects the program and tells Aereo to relay it. Aereo's operation of that sys­tem is a volitional act and a but-for cause of the resulting performances, but, as in the case of the copy shop, that degree of involvement is not enough for direct liability."
     The majority meanwhile did not see any relevance in the major difference between Aereo's system, which "remains inert until a subscriber indicates that she wants to watch a program," and the old systems that transmitted constantly.
     "Given Aereo's overwhelming likeness to the cable companies targeted by the 1976 amendments, this sole technological difference between Aereo and traditional cable companies does not make a critical difference here," Breyer wrote.
     "Here the signals pursue their ordinary course of travel through the universe until to­day's 'turn of the knob' - a click on a website - activates machinery that intercepts and reroutes them to Aereo's subscribers over the Internet," he added. "But this difference means nothing to the subscriber. It means nothing to the broad­caster. We do not see how this single difference, invisible to subscriber and broadcaster alike, could transform a system that is for all practical purposes a traditional cable system into 'a copy shop that provides its patrons with a library card.'"
     Though Aereo "transmits via personal copies of programs," Breyer emphasized that these copies still go to "the public," thus meeting the requirements of the Copyright Act.
     The majority denied that its holding would "discourage or to control the emergence or use of different kinds of technologies," but the dissent warned that the court cannot deliver on this promise.
     "Indeed, the difficulties inherent in the court's makeshift approach will become apparent in this very case," Scalia wrote. "Today's decision addresses the legality of Aereo's 'watch' function, which provides nearly contemporaneous access to live broadcasts. On remand, one of the first questions the lower courts will face is whether Aereo's 'record' function, which allows subscribers to save a pro­gram while it is airing and watch it later, infringes the networks' public-performance right. The volitional ­conduct rule provides a clear answer to that question: Because Aereo does not select the programs viewed by its users, it does not perform. But it is impossible to say how the issue will come out under the court's analysis, since cable companies did not offer remote recording and play­back services when Congress amended the Copyright Act in 1976."
     Breyer quoted a brief from the U.S. solicitor general that "questions involving cloud computing,[remote storage] DVRs, and other novel issues not before the court, as to which 'Congress has not plainly marked [the] course,' should await a case in which they are squarely presented."
     "And we note that, to the extent commercial actors or other interested entities may be concerned with the relationship between the development and use of such technologies and the Copyright Act, they are of course free to seek action from Congress," he added.
     Scalia councluded with a discussion of the 1984 decision Sony Corp. of America v. Universal City Studios Inc., which "came within one vote of declaring the VCR contra­band."
     "The dissent in that case was driven in part by the plain­tiffs' prediction that VCR technology would wreak all manner of havoc in the television and movie industries," Scalia added.
     "The networks make similarly dire predictions about Aereo. We are told that nothing less than 'the very exist­ence of broadcast television as we know it' is at stake. Aereo and its amici dispute those forecasts and make a few of their own, suggesting that a decision in the networks' favor will stifle technological innovation and imperil billions of dollars of investments in cloud-storage services. We are in no position to judge the validity of those self-interested claims or to foresee the path of future technological development. Hence, the proper course is not to bend and twist the act's terms in an effort to produce a just outcome, but to apply the law as it stands and leave to Congress the task of deciding whether the Copyright Act needs an upgrade."