(This article originally appeared in New York Law Journal, a sibling publication of The American Lawyer.)
A CBS executive testified on Wednesday that a service that streams broadcast channels over the Internet for a monthly fee is threatening immediate harm to the revenues of broadcasters and TV stations, and should be stopped.
Martin Franks, CBS’ vice president for policy, planning and government relations, said that the Barry Diller-funded start up Aereo would make it impossible to measure viewership and thus lead to a decline in advertising rates—an “irreparable harm” that justifies the preliminary injunction the networks are seeking from Southern District Judge Alison Nathan.
“If the viewer is not measured by Nielsen (the Nielsen ratings), that viewer doesn’t exist,” Franks testified before Nathan during the first day of a two-day hearing in lower Manhattan.
Aereo, launched in New York City in March, grabs over-the-air signals sent from the Empire State Building and directs them to hundreds of thousands of tiny antennas on the 10th floor of a Brooklyn building. Customers pay $12 per month to access one of the antennas via the Internet to view the programs on computers, iPads or other mobile devices within seven seconds after the broadcast or keep a recording for viewing at their pleasure.
There are currently several thousand subscribers in New York City, and Aereo hopes a rejection of the networks’ motion for a preliminary injunction will clear the way for a dramatic expansion into other cities.
There are two suits brought by networks before Nathan, ABC v. Aereo, 12 Civ. 1540, with the plaintiffs represented by Bruce Keller, Jeffrey Cunard and Michael Potenza of Debevoise & Plimpton and WNET v. Aereo, 12 Civ. 1543, with the plaintiffs represented by Steven Fabrizio, Steven Englund and Scott Wilken of Jenner & Block.
Aereo is represented by Goodwin Procter, Winston & Strawn and Constantine Cannon.
The networks claim the service is theft pure and simple and a potentially devastating attack on the economic basis of the TV industry that was carefully constructed by Congress.
They argue in their memorandum in support of an injunction that Aereo infringes on their public performance rights under 17 U.S.C. §106(4) of the Copyright Act, that it contravenes the networks’ exclusive rights, and that “Aereo provides a full-fledged retransmission service through a system of shared resources that does much more than ‘enable consumers.’”
The unauthorized transmissions, they say in their papers, “violate the plain language” of the Transmit Clause of the Copyright Act, which gives Plaintiffs the exclusive right to perform their works publicly by “transmitt[ing] or otherwise communicat[ing] a performance or display 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.
But John Englander of Goodwin Procter, representing Aereo, told Nathan yesterday that the Transmit Clause in §101 is not implicated and there is no meaningful difference between the service and the use of DVRs by individual consumers.
Englander called the use of the service by a consumer “a quintessentially private performance” and argued before the judge the networks have it wrong when they portray Aereo as being in the business of retransmitting live television.
“Aereo is not, in fact, retransmitting live TV,” Englander said. “It is the consumer doing it, not Aereo.”
Englander, in his own memorandum, filed with fellow Aereo attorneys, said that with one limited exception, each plaintiff learned of Aereo’s existence and its testing of the service in April 2011.
“Each Plaintiff then engaged in months of internal and external dialogue while Aereo continued to move toward a full launch,” the lawyers state. “Plaintiffs not only did not file suit; they never even sent a cease-and-desist notice or other objection. Indeed, some of the plaintiffs and their parent companies encouraged Aereo with talks of investment and collaboration.”
Aereo lawyers also allege that the claim of irreparable injury is purely speculative.
Michael Elkin of Winston & Strawn pursued that angle in cross-examining Franks yesterday, with Franks conceding that CBS does not yet have a measure of economic harm caused by Aereo.
Elkin tried to elicit from Franks that the entry of Diller in February 2012 and the announcement that Diller’s IAC/InterActiveCorp was leading a group of investors to provide $20.5 million in financing for the start-up was the “new wrinkle” that led CBS to take legal action.
But Franks said that wasn’t the case and a lot of factors were involved. In spring 2011, he said, he didn’t know whether Aereo, then known as Bamboom Labs, was going to get off the ground, so he spent the next several months tracking the company. Franks said he declined to arrange a meeting with an Aereo representative because he didn’t want a meeting to be perceived as giving the company his blessing.
However, by February 2012, he said, “it became clear to us that Aereo was poised to become a real business.”
On redirect examination, Bruce Keller of Debevoise asked Franks to expand on the harm done to his business. Franks said that “it’s not speculative” as Time Warner Cable and Cablevision will pay CBS and other networks less money for their programming.
“Why should they have to pay us when other people are providing it for free?” Franks said.
In their memo, the networks take aim at the “Watch Now” feature of Aereo, which allows for real-time viewing, and they engage Aereo lawyers on the meaning of Cartoon Network v. CSC Holdings, 536 F. 3d 121 (2d Cir., 2008), known as the Cablevision holding.
In Cablevision, the Second Circuit rejected the claims of TV and film producers in holding that Cablevision’s remote storage digital recorded system did not violate the Copyright Act. Unlike TiVo and other DVR systems, Cablevision’s RS-DVR allows customers without a set-top box to record programming on hard drives maintained by the company at a remote location (NYLJ, August 5, 2008).
“Because each RS-DVR playback transmission is made to a single subscriber using a single unique copy produced by that subscriber, we conclude that such transmissions are not performances ‘to the public,’ and therefore do not infringe any exclusive right of public performance,” Judge John Walker wrote for the circuit.
The networks in their papers say Aereo has twisted the meaning of the Cablevision decision.
“Aereo claims to be entirely outside of the statutory framework that Congress established for the licensing and compensation of broadcast retransmissions based on”Cablevision, they state. “According to Aereo, that single decision provides a ‘blueprint’ to engage in Internet retransmission of OTA (over-the-air) television broadcasts without authorization from, or payment to, anybody.”
Cablevision, the networks argue, “could not circumscribe the broad language of the Transmit Clause. More importantly, as a factual matter, Cablevision did not even consider, yet alone address, real-time transmissions of live OTA broadcasts, because that service was licensed.”
But lawyers for Aereo argue in their memo that Cablevision breaks their way, as it “rested solely on the source of the transmission and the nature of the potential audience of that particular transmission source.”
Moreover, they contend, the Copyright Act “makes clear that a ‘copy’ exists when the work ‘is fixed’ in a material object.”
“Whether that fixation occurs seconds or months before playback is irrelevant to its status as a ‘fixed copy,’” the Aereo lawyers state. “The playback of a single copy to a single consumer, by the volition of that consumer, is a private performance, regardless of when the consumer starts that playback, Cablevision, 536 F.3d at 138.”
The Aereo lawyers also emphasize that the plaintiff networks viewed Cablevision, erroneously, as turning on “time-shifting technology.”
Even if it did, they state, the plaintiffs’ claims would still fail, because “Aereo’s technology is, in fact, a time-shifting technology, even when operated in ‘Watch Now’ mode; it is designed to enable consumers to pause and rewind programming, which is, by definition, ‘time-shifting.’”
Aereo launched on March 14, 2012, under the theme “Live Broadcast TV, meet the Internet. Finally.” The plaintiffs’ memo states that the company had the goal of exploiting and expanding the Cablevision decision to include live retransmission of OTA television when it designed the launch.
“For Second Circuit-centric reasons, it has gone to enormous lengths to attempt to confine itself to the geographic boundaries of New York State,” the memo states. “For example, even though Aereo’s antennas are capable of receiving signals from New Jersey-based television stations, Aereo specifically chose to exclude them from its service.”
During opening arguments for the plaintiffs, Fabrizio of Jenner & Block said, “The evidence shows that this is an outright taking. It happens simply because it’s relatively easy for Aereo to do it from a technology standpoint.”
When Aereo CEO Chet Kanojia testified yesterday afternoon, he was pressed by Keller on cross-examination to concede the emphasis the company places on live television.
Under cross, Kanojia agreed that he budgeted $3 million for litigation expenses in April 2011 as he was talking to government agencies and some of the entities who would go on to be plaintiffs in the cases against Aereo.
Keller more than once asked Kanojia whether he was in the television business, but Kanojia insisted on describing his product as “an online television platform” where “the consumer controls the experience” and consumers “stream the content” to themselves.
The hearing is set to continue on Thursday, and Judge Nathan has asked both sides to submit post-hearing briefs before she makes a decision on the injunction.
Related story: Judge Trims Broadcasters’ Suit Against Aereo