Second Circuit Affirms Denial of Preliminary Injunction Against Aereo

Practical Law Legal Update 2-525-5212 (Approx. 6 pages)

Second Circuit Affirms Denial of Preliminary Injunction Against Aereo

by PLC Intellectual Property & Technology

Key Litigated Issues

The plaintiffs claim that Aereo's internet service that transmits broadcast television programs to subscribers infringes the plaintiffs' public performance rights.

The key litigated issues before the Second Circuit were:

Whether the plaintiffs were likely to succeed on the merits of their claim that AEREO, Inc. (Aereo) infringed the plaintiffs' copyrights by its transmission of broadcast television programs over the internet.
The applicability of the US Court of Appeals for the Second Circuit's decision in Cartoon Network LP v. CSC Holdings, Inc. (Cablevision), which held that a remote storage digital video recorder (DVR) did not infringe television broadcasting and production companies' public performance rights in their television programs under the Copyright Act where each remote storage DVR transmission:
- was made using a single unique copy of a television program;
- was selected and activated by a single, individual subscriber; and
- could be received and played only on the cable box of that subscriber.

Background

The plaintiffs are entities engaged in the broadcasting, production and marketing of television programs, and include ABC, CBS, NBC and Disney. Aereo is a company that offers its subscribers access to over-the-air television broadcasts through its website. Through Aereo's service, subscribers use a programming guide to select and view current and future-scheduled television programs on their internet-connected devices, including internet-ready televisions, computers, laptops and mobile devices.

Aereo's playback technology operates like a remote DVR that uses antennas assigned only to one subscriber at a time, either on an assigned-as-needed or dedicated-unit basis. Each of these antennas functions separately to receive and transmit incoming broadcast signals. As a result, not more than one Aereo subscriber may select a television program for transmission by an Aereo antenna at any given time.

On learning of the intended public launch of Aereo's service, the plaintiffs filed two complaints against Aereo on March 1, 2012, alleging multiple theories of liability that included infringement of the plaintiffs' exclusive public performance and reproduction rights and contributory infringement. On March 13, 2012, the plaintiffs moved for a preliminary injunction based solely on their public performance claim, alleging that Aereo's service infringed the plaintiffs' copyrights in their television programs by retransmitting these programs to the public at the same time as their over-the-air broadcasts. After expedited discovery and briefing on the motion, the court held an evidentiary hearing. In its July 11, 2012 opinion, the US District Court for the Southern District of New York denied the plaintiffs' motion for a preliminary injunction against Aereo, ruling that:

The plaintiffs failed to distinguish the facts of Cablevision.
The Second Circuit's reasoning in Cablevision precluded any likelihood that the plaintiffs could show that Aereo's one-to-one, private retransmissions of their television programs constituted a public performance in violation of the plaintiffs' copyrights.

For more on the SDNY's decision, see Legal Update, SDNY Denies Copyright Infringement Preliminary Injunction Against AEREO.

The plaintiff broadcasters appealed.

Outcome

In its April 1, 2013, 2-1 decision, the Second Circuit affirmed the SDNY's denial of a preliminary injunction against Aereo. Judge Chin wrote a dissenting opinion.

Majority Opinion

The majority concluded that under Cablevision, Aereo's transmission of unique copies of broadcast television programs created at its users' requests and transmitted while the programs are still airing on broadcast television are not public performances. The plaintiffs therefore failed to show that they are likely to prevail on the merits on this claim. The court further found that the plaintiffs failed to show serious questions as to the merits and a balance of hardships that tips decidedly in their favor.

In Cablevision, the Second Circuit construed the transmit clause of Section 101 of the Copyright Act, which provides, in part, that to perform or display a work publicly means to "transmit or otherwise communicate a performance of the work... to the public by means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times." (17 U.S.C. § 101).

Cablevision's remote storage DVR allowed subscribers who lacked at-home set-top DVRs to record a copy of cable programming on Cablevision's hard drives, which were housed at a remote location. Each Cablevision subscriber, by home-operated remote control, created a unique playback copy of the television program that was stored on Cablevision's hard drive for that subscriber. Cablevision would then transmit the program only to that subscriber and only when the subscriber (or another user of the subscriber's cable service) requested to watch the program. The Second Circuit ruled that:

The relevant performance of the recorded program was the discrete transmission of each subscriber's unique playback copy to that subscriber, resulting in an audience of one subscriber and, therefore, a private, not public, performance.
Cablevision's providing this one-to-one service to multiple remote-DVR subscribers did not convert these private playbacks into a public performance.

The Second Circuit found that Aereo's system included the same two key features:

It creates a unique copy of the requested program on a portion of a hard drive assigned only to that Aereo user.
No other user can ever receive a transmission from that copy.

The court concluded that, as in Cablevision, the potential audience of each Aereo transmission is the single user who requested that a program be recorded and therefore the transmissions were private, not public performances.

The court rejected the plaintiffs' arguments that:

Cablevision is distinguishable because Cablevision had a license to transmit the programming in the first instance while Aereo has no license.
Discrete transmissions should be aggregated to determine whether they are public performances.
Cablevision was decided based on an analogy to a typical VCR while Aereo's system is more like a cable television provider.
Cablevision's DVR service broke the continuous chain of retransmission to the public in a way that Aereo's copies do not. Specifically, plaintiffs argued that Aereo's copies are merely a device by which Aereo allows users to watch nearly live TV, while Cablevision's copies only served as the source for a transmission of a program after the live broadcast of the program had finished.
Holding that Aereo's transmissions are not public performances exalts form over substance because the Aereo system is functionally equivalent to a cable television provider.

Dissenting Opinion

Judge Chin dissented from the majority, saying it elevated form over substance. He argues that Aereo's platform is "a sham" by employing thousands of individual-dime sized antennas for no technologically sound reason to take advantage of a perceived loophole in the law.

Judge Chin found key differences that distinguish Cablevision from this case, specifically:

Cablevision involved a cable company that paid statutory licensing and retransmission fees for the content it distributed, while Aereo pays no fees.
Cablevision's subscribers already had the ability to view television programs in real-time through their authorized subscriptions, and the remote DVR service at issue there was a supplemental service allowing subscribers to store that authorized content for later viewing.

Practical Implications

The majority found its decision Cablevision controlling. Under this analysis, Aereo's one-to-one, service provider-to-user transmission of a public television broadcast does not infringe the copyright holder's public performance rights in the broadcast program because:

The system creates a unique copy of the television program for each subscriber who requests that program.
The system saves the unique copy to a unique directory that is assigned to a unique user.
The unique copy's transmission is made only to the subscriber who requested it.
No other subscribers can receive and play that transmission.

The Second Circuit's decision advances a potential rift between the Second and Ninth Circuits on the interpretation of what constitutes a public performance under the transmit clause of the Copyright Act. In December 2012, in Fox Television Stations, Inc. v. Aereokiller, LLC, a case involving similar technology to Aereo's service, the US District Court for the Central District of California expressly rejected the Second Circuit's reasoning in Cablevision and granted the plaintiff television producers' and broadcasters' motion for a preliminary injunction against Aereokiller (see Legal Update, California District Court Rejects SDNY's ABC v. Aereo Decision). The decision is currently on appeal to the Ninth Circuit.

Ultimately, it may be necessary for the Supreme Court to decide this issue unless or until Congress steps in with legislation clarifying the scope of the Copyright Act's definition of public performance.

Second Circuit Affirms Denial of Preliminary Injunction Against Aereo | Practical Law