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Second Circuit Expresses Skepticism About Startup TV Company
New York Law Journal
The concept of building an entire business model around the language in a single court decision got a workout on Nov. 30 as judges at the U.S. Court of Appeals for the Second Circuit peppered a lawyer for AEREO with questions about why the Internet start-up TV company shouldn't be shut down for copyright infringement.
R. David Hosp of Goodwin Procter told a three-judge panel that AEREO, which grabs broadcast signals and puts them on a website that allows its subscribers to download programs to their computers, does not infringe because it is the customers making the copiesall in conformance with the Second Circuit's own decision in the "Cablevision case," Cartoon Network v. CSC Holdings, 536 F.3d 121 (2008).
As to AEREO's structure, he said, "This court decided what the law is and AEREO is following it to a T."
But Judges Denny Chin (See Profile), Christopher Droney (See Profile) and, sitting by designation, Eastern District Judge John Gleeson (See Profile) were receptive to the arguments of lawyers for WNET, CBS and other broadcasters that AEREO had failed to match its technology to the language of Cablevision.
Paul Smith of Jenner & Block for WNET and Bruce Keller of Debevoise & Plimpton for CBS, said AEREO, a Barry Diller-led start-up with thousands of New York subscribers, is stealing content pure and simple.
In Cablevision, the Second Circuit found no infringement by Cablevision through use of its RS-DVR, which allows customers to record programming on hard drives kept by the company at a remote location and not on a set-top box.
On Nov. 30, Smith and Keller said AEREO, regardless of how it characterizes its technology, is infringing their public performance rights under 17 U.S.C. §106(4) of the Copyright Act.
"What you have here is an entirely unlicensed service," Smith said.
Although Hosp claimed that AEREO is not involved in the "retransmission" of public performances because it is the consumer doing the downloading, Keller said it was clearly retransmission and "In every case that has [dealt] with retransmission of radio or television broadcast" the court "has concluded it's a violation of the transmit clause" of the Copyright Act.
AEREO captures broadcast signals from the Empire State building with thousands of small "antennas" at a building in Brooklyn. Subscribers who pay $12 per month for the service merely access one of these "antennas" and download programs on computers and mobile devices within seconds of the broadcast. The programs can be viewed immediately or at their leisure.
AEREO says this model fits like a glove the language of Cablevision, where the circuit said "Because each RS-DVR playback transmission is made to a single subscriber" the transmissions are not performances "'to the public' and therefore do not infringe any exclusive right of public performance" (NYLJ, Aug. 5, 2008).
With AEREO, Hosp argued, consumers are doing the downloading because they are accessing unique antennas and making copies they can control, pause and play back, just like a Cablevision customer uses the RS-DVR system.
ABC, CBS and other broadcasters respond that the so-called "antennas" are really one big antenna and they want the Second Circuit to reverse Southern District Judge Alison Nathan, who in July denied broadcasters the injunction they sought against AEREO (NYLJ, July 12).
Nathan held that she was constrained by Cablevision because the facts in AEREO could not be distinguished from those in Cablevision.
But on Nov. 30, the circuit judges at least gave the impression they thought there were significant differences between the two cases.
Chin said, "in Cablevision, there was an ongoing relationship with the consumer" in that the "consumer was receiving broadcasts from Cablevision and their consumer is making a copy. Here, there is no ongoing relationship with AEREO. Why doesn't that make this case different from Cablevision?"
"It seems like you're exalting form over substance," Chin said later. "Is there any legitimate business reason for having all these little itty bitty antennas?"
Hosp said the reason was to comply with the Copyright Act, as interpreted by Cablevision, and he stuck to his guns that the making of a "copy" by the consumer who downloads from one of the antennas, makes it a private performance.
Chin, who is presiding over negotiations involving Google's attempt to build a huge library of electronic books, asked whether, by analogy, putting the purchaser's name on the book would "change the logic of the case."
Hosp responded, "Where you make a copy, it's not a public performance anymore."
He also told Chin, "The plaintiffs are asking you to overturn Cablevision."
Chin, who was the district court judge affirmed by the Cablevision appeals panel, drew a laugh from the audience when he said "I think the district judge got it right in Cablevision."
Gleeson went after Hosp for being reticent to concede that the AEREO model "is built around Cablevision," like people structure a business to avoid taxes.
"The reason you have all these tiny antennas is" to use "a belt and suspenders approach" to avoid a copyright violation, Gleeson said.
When Hosp responded that he thought the Cablevision court "got it right" and the circuit should simply apply Cablevision, Chin asked, "You don't think you're asking us to go one step further?"
Droney asked Hosp what happens when AEREO sends the broadcast signal to Monday Night Football and this Monday's New York Giants-Washington Redskins contest is viewed by 5,000 AEREO customers at the same time.
"Are these people seeing the same thing?" Droney asked.
Hosp said no, because the signal on each antenna was different.
The judges weren't buying it.
"Are you saying the Redskins might lose in some, but not in others?" Gleeson asked to the merriment of the audience.
Droney pressed the point, asking "How is this in any way actually different? Aren't they seeing the same third-down-and-three play?"
And Chin asked, "Does that make any sense?" People "are watching a football game through AEREO and that's not a retransmission?"
"As a matter of common sense, is it at all logical that the 25,000 people watching are watching an individualized copy?" he asked.
Hosp responded, "If you are talking about a streaming servicethat is a public performance" but AEREO is not a streaming service.
On rebuttal, Smith told the court that Congress made the law as broad as possible to prevent retransmission and adopting AEREO's reading of Cablevision would gut the statute.
Keller closed by saying the plaintiffs were not asking the court to overturn Cablevision.
AEREO, he said, "sells our broadcast, our performances, to its subscribers."
The case captions on the appeal are CBS Broadcasting v. AEREO, 12-2807-cv, and WNET, et al v. AEREO, 12-2786-cv.