Stephen A. Miller and Thomas A. Leonard,
Stephen A. Miller and Thomas A. Leonard ()

We live in an on-demand era. That is especially true in the entertainment industry, where on-demand access has transformed music, movies and other art forms. This spring, the U.S. Supreme Court is set to determine whether one company’s system of transmitting television programs over the Internet violates the Copyright Act. The ruling could have a seismic impact on the television industry and how Americans view television shows.

The case under review turns on the meaning of a “public” performance under the Copyright Act. In American Broadcasting Cos. v. Aereo, No. 13-461, the court will review the U.S. Court of Appeals for the Second Circuit’s favorable ruling for Aereo, the operator of a website that airs publicly available television programs over the Internet (ABC, NBC, CBS, PBS, etc.). A number of television networks and media groups sued Aereo to enjoin the company from providing their programming to its subscribers. The Second Circuit held that the system used by Aereo transmits many private performances rather than any public broadcasts, thus removing it from the ambit of the Copyright Act.

On the surface, Aereo’s system is not much different from other popular Internet websites that show pre-aired television programs, such as Netflix or Hulu. Its subscribers pay a monthly fee to watch broadcast television programs over the Internet. What is different is that Aereo subscribers can choose to watch or record network television programming that is currently airing or will air in the future. An Aereo subscriber has the ability to stop and rewind the on-air broadcasts but can only go back to the point where the subscriber started watching. Notably, its system is currently limited to New York City residents and only New York-area public stations can be viewed.

Aereo uses a unique method of receiving the television programs and transmitting them to its subscribers. Although the technical features of its system are not particularly complicated, they are crucial to the Second Circuit’s holding. At its facility in Brooklyn, Aereo collects television stations’ programming through the use of thousands of dime-sized antennas. An individual antenna is assigned to receive each subscriber’s selection, and the programming collected by each antenna is saved independently in a file for the individual subscriber to access.

The key to the Second Circuit’s holding was its prior interpretation of the Copyright Act’s “transmit clause” in a case called Cartoon Network LP v. CSC Holdings, 536 F.3d 121 (2d Cir. 2008), also known as Cablevision. The transmit clause states that to “perform or display a work ‘publicly’ means … to transmit or otherwise communicate a performance or display of the work to a [public] place … or 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.” Cablevision held that a company’s television recording system, which similarly created individual copies of each recording for each subscriber, did not violate the Copyright Act’s prohibition on transmitting performances publicly without the owner’s consent. The court there looked at the transmit clause’s language that a transmission may be public regardless of whether the members of the public capable of receiving the performance receive it at the same time or place. It then determined that “capable of receiving the performance” does not refer to the underlying performance being transmitted, but rather to the transmission itself because the transmission of the performance is itself a performance under the transmit clause. The court held that a transmission “to the public” must refer to the particular transmission and not the underlying work because the potential audience for every copyrighted work is the general public and to interpret it otherwise would contradict the transmit clause’s anticipation of nonpublic transmissions.

In summarizing the rationale of Cablevision, the Second Circuit listed four “guideposts” that determined the outcome of the case against Aereo. First, courts must consider the potential audience of individual transmissions under the transmit clause. Second, and relatedly, those individual transmissions should generally not be aggregated. Third, individual transmissions should only be aggregated if they come from the same copy of the performance. Fourth, any factor that limits the potential audience of a transmission is relevant to an analysis of the transmit clause. Because Aereo’s system transmits unique copies of the television programming, the court ruled that it was not violating the plaintiffs’ “public performance” rights.

Second Circuit Judge Denny Chin wrote a lengthy dissent that both criticized Cablevision and distinguished it. He argued that the court should not create a loophole in the Copyright Act by getting caught up in the technicalities of a company’s system when it functionally transmits public performances. It was telling, he noted, that Aereo refused to show New Jersey programming, allegedly to keep its system within the geographic boundaries of the Second Circuit and therefore governed by Cablevision.

This opinion has potentially enormous consequences for the television market. This is evidenced by the interest that this case generated in the Second Circuit. The list of plaintiffs is a who’s who of television giants, including ABC, NBC, CBS, Fox, PBS and Telemundo. There were also many notable amicus briefs supporting the plaintiffs from key players in the entertainment industry, such as the major movie studios and professional sports leagues. These parties are clearly concerned that a number of companies could design their transmitting systems in line with Aereo’s to avoid paying for licenses from the major networks.

The networks will not view a legal defeat at the Supreme Court as the end of the matter. If the court does not overturn the Second Circuit’s decision, it would not be surprising to see the entertainment industry’s lobbyists push legislators to tweak the Copyright Act itself. In fact, the transmit clause was created approximately 40 years ago in response to a pair of Supreme Court decisions that similarly sought to define the scope of “performance” in relation to technological improvements in transmitting television. A Supreme Court decision in favor of Aereo would be the lobbyists’ Full Employment Act, spurring the networks to switch their attention to the other side of First Street on Capitol Hill.

Stephen A. Miller practices in the commercial litigation group at Cozen O’Connor’s Philadelphia office. Prior to joining Cozen O’Connor, he clerked for U.S. Supreme Court Justice Antonin Scalia and served as a federal prosecutor for nine years in the Southern District of New York and the Eastern District of Pennsylvania. Thomas A. Leonard practices in the litigation group at the firm’s Philadelphia office. He graduated from Boston University and Villanova University School of Law.