A Supreme Court ruling against Aereo won’t spell the end of cloud computing

Geoffrey Manne, Ryan Radia & Ben Sperry —  17 April 2014

Interested observers on all sides of the contentious debate over Aereo have focused a great deal on the implications for cloud computing if the Supreme Court rules against Aereo. The Court hears oral argument next week, and the cloud computing issue is sure to make an appearance.

Several parties that filed amicus briefs in the case weighed in on the issue. The Center for Democracy & Technology, for example, filed abrief arguing that a ruling against Aereo would hinder the development of cloud computing. Thirty-six Intellectual Property and Copyright Law Professors also filed a brief arguing this point. On the other hand, the United States—represented by the Solicitor General—devoted a section of its amicus brief in support of copyright owners’ argument that the Court could rule against Aereo without undermining cloud computing.

Our organizations, the International Center for Law and Economics and the Competitive Enterprise Institute, filed an amicus brief in the case in support of the Petitioners (as did many other policy groups, academics, and trade associations). In our brief we applied the consumer welfare framework to the question whether allowing Aereo’s business practice would increase the societal benefits that copyright law seeks to advance. We argued that holding Aereo liable for copyright infringement was well within the letter and spirit of the Copyright Act of 1976. In particular, we argued that Aereo’s model is less a disruptive innovation than a technical work-around taking advantage of the Second Circuit’s overbroad reading of the law in the Cablevision case.

Although our brief didn’t directly address cloud computing writ large, we did articulate a crucial distinction between Aereo and other cloud computing providers. Under our reasoning, the Court could rule against Aereo—as it should—without destroying cloud computing—as it should not.

Background

By way of background, at the center of the legal debate is what it means to “perform [a] copyrighted work publicly.” Aereo argues that because only one individual subscriber is “capable of receiving” each transmission its service delivers, its performances are private, not public. The Copyright Act gives copyright owners the exclusive right to publicly perform their works, but not the right to perform them privately. Therefore, Aereo contends, its service doesn’t infringe upon copyright owners’ exclusive rights.

We disagree. As our brief explains, Aereo’s argument ignores Congress’ decision in the Copyright Act of 1976 to expressly define the transmission of a television broadcast “by means of any device or process” to the public as a public performance, “whether the members of the public capable of receiving the performance … receive it in the same place or in separate places and at the same time or at different times.” Aereo has built an elaborate system for distributing live high-def broadcast television content to subscribers for a monthly fee—without obtaining permission from, or paying royalties to, the copyright owners in the audiovisual works aired by broadcasters.

Although the Copyright Act’s text is less than artful, Congress plainly wrote it so as to encompass businesses that sell consumers access to live television broadcasts, whether using traditional means—such as coaxial cable lines—or some high-tech system that lawmakers couldn’t foresee in 1976.

What does this case mean for cloud computing? To answer this question, it’s worth dividing the discussion into two parts: one addressing cloud providers that don’t sell their users licenses to copyrighted works, and the other addressing cloud providers that do. Dropbox and Mozy fit in the first category; Amazon and iTunes fit in the second.

A Ruling Against Aereo Won’t Destroy Cloud Computing Services like Dropbox

According to the 36 Intellectual Property and Copyright Law Professors, a loss for Aereo would be bad news for cloud storage providers such as Dropbox:

If any service making multiple transmissions of the same underlying copyrighted audiovisual work is publicly performing that work, then the distinction between video-on-demand services and online storage services would vanish, and all such services would henceforth face infringement liability. Thus, if two Dropbox users independently streamed “We, the Juries,” then under Petitioners’ theory, those two transmissions would be aggregated together, making them collectively “to the public.” Under Petitioners’ theory of this case—direct infringement by public performance—that would be game, set, and match against Dropbox.

This sounds like bad news for the cloud. Fortunately, however, Dropbox has little to fear from an Aereo defeat, even if the professors are right to worry about an overbroad public performance right (more on this below). The Digital Millenium Copyright Act (DMCA) grants online service providers—including cloud hosting services such as Dropbox—a safe harbor from copyright infringement liability for unwittingly storing infringing files uploaded by their users. In exchange for this immunity, service providers must comply with the DMCA’snotice and takedown system and adopt a policy to terminate repeat-infringing users, among other duties.

Although 17 U.S.C. § 512(c) refers only to infringement “by reason of … storage” directed by a user, courts have consistently interpreted this language to “encompass[] the access-facilitating processes that automatically occur when a user uploads” a file to a cloud hosting service. Whether YouTube streams an infringing video once or 1,000,000 times, therefore, it retains its DMCA immunity so long as it complies with the safe harbor’s requirements. So even if Aereo loses, and every DropBox user who streams “We, the Juries” is receiving a public performance, DropBox will still be safe from copyright infringement liability in the same way as YouTube, Vimeo, DailyMotion, and countless other services are safe today.

An Aereo Defeat Won’t Kill Cloud Computing Services like Amazon and Google

As for cloud computing providers that provide copyrighted content, the legal analysis is admittedly trickier. These providers, such as Google and Amazon, contract with copyright holders to sell their users licenses to copyrighted works. Some providers offer a subscription to streaming content, for which the provider has typically secured public performance licenses from the copyright owners. Cloud providers also sell digital copies of copyrighted works—that is, non-transferable lifetime licenses—for which the provider has generally obtained reproduction and distribution licenses, but not public performance rights.

But, as copyright law guru Devlin Hartline argues, determining if a performance is public or private turns on whether the cloud provider’s “volitional conduct [is] sufficient such that it directly causes the transmission.” When a user streams her own licensed content from a cloud service, it remains a private performance because the cloud service took no willful steps to facilitate the playback of copyrighted material. (The same is true for Dropbox-like services, as well.) Aereo, conversely, “crosse[s] the line from being a passive conduit to being an active participant because it supplies the very content that is available using its service.”

Neither Google’s nor Amazon’s business models much resemble Aereo’s, which entails transmitting content for which the company has secured no copyright licenses—either for itself or for its users. And to the extent that these services do supply the content being transmitted (as Spotify or Google Play All Access do, for example), they secure the appropriate public performance right to do so. Indeed, critics who have focused on cloud computing fail to appreciate how the Copyright Act distinguishes between infringing technologies such as Aereo and lawful uses of the cloud to store, share, and transmit copyrighted works.

For instance, as CDT notes:

[S]everal companies (including Google and Amazon) have launched personal music locker services, allowing individuals to upload their personal music collections “to the cloud” and enabling them to transmit that music back to their own computers, phones, and tablets when, where, and how they find most convenient.

And other critics of broadcasters’ legal position have made similar arguments, claiming that the Court cannot reach a holding that simultaneously bars Aereo while allowing cloud storage:

[I]f Aereo is publicly performing when you store a unique copy of the nightly news online and watch it later, then why aren’t cloud services publicly performing if they host your (lawful) unique mp3 of the latest hit single and stream it to you later?… The problem with this rationale is that it applies with equal force to cloud storage like Dropbox, SkyDrive, iCloud, and Google Drive. If multiple people store their own, unique, lawfully acquired copy of the latest hit single in the cloud, and then play it to themselves over the Internet, that too sounds like the broadcasters’ version of a public performance. The anti-Aereo rationale doesn’t distinguish between Aereo and the cloud.

The Ability to Contract is Key

These arguments miss the important concept of privity. A copyright holder who does not wish to license the exclusive rights in her content cannot be forced to do so (unless the content is subject to a compulsory license). If a copyright holder prefers its users not upload their licensed videos to the cloud and later stream them for personal use, the owner can include such a prohibition in its licenses. This may affect users’ willingness to pay for such encumbered content—but this is private ordering in action, with copyright holders and licensees bargaining over control over copyrighted works, a core purpose of the Copyright Act.

When a copyright holder wishes to license content to a cloud provider or user, the parties can bargain over whether users may stream their content from the cloud. These deals can evolve over time in response to new technology and changing consumer demand. This happens all the time—as in therecent deal between Dish and Disney over the Hopper DVR, wherein Dish agreed that Hopper would automatically excise the commercials accompanying ABC content only after three days elapse after each show airs.

But Aereo forecloses the possibility of such negotiation, making all over-the-air content available online to subscribers absent any agreement with the underlying copyright owners of such programs. Aereo is thus distinct from other cloud services that supply content to their users, as the latter have permission to license their content.

Of course, broadcasters make their programming freely available over the airwaves, without any express agreement with viewers. But this doesn’t mean broadcasters lose their legal right to restrict how third parties distribute and monetize their content. While consumers can record and watch such broadcasts at their leisure, they can’t record programs and then sell the rights to the content, for example, simply replicating the broadcast. The fact that copyright holders have entered into licenses to “cloud-ify” content with dedicated over-the-top apps and Hulu clearly suggests that the over-the-air “license” is limited. And because Aereo refuses to deal with the broadcasters, there’s no possibility of a negotiated agreement between Aereo and the content owners, either. The unique combination of broadcast content and an unlicensed distributor differentiates the situation in Aereo from typical cloud computing.

If broadcasters can’t rely on copyright law to protect them from companies like Aereo that simply repackage over-the-air content, they may well shift all of their content to cable subscriptions instead of giving a free option to consumers. That’s bad news for folks who access free television—regardless of the efficiency of traditional broadcasting, or lack thereof.

The Cablevision Decision Doesn’t Require a Holding for Aereo

Commentators argue that overruling the Second Circuit in Aereo necessarily entails overruling the Second Circuit’s Cablevision holding—and with it that ruling’s fair use protections for DVRs and other cloud computing functionality. We disagree, however. Rather, regardless of whether Cablevision was correctly decided, its application to Aereo is improper.

In Cablevision, the individual cable subscribers to whom Cablevision transmitted copies of plaintiff Cartoon Network’s television programming were already paying for lawful access to it. Cartoon Network voluntarily agreed to license its copyrighted works to Cablevision and, in turn, to each Cablevision subscriber whose cable package included the Cartoon Network channel.

The dispute in Cablevision thus involved a copyright holder and a licensee with a preexisting contractual relationship; the parties simply disagreed on the terms by which Cablevision was permitted to transmit Cartoon Network’s content. But even after the decision, Cartoon Network remained (and remains) free to terminate or renegotiate its licensing agreement with Cablevision.

Again, this dynamic of voluntary exchange mitigates Cablevision’s impact on the market for television programming, as copyright holders and cable companies settle on a new equilibrium. But unlike the cable company in Cablevision, Aereo has neither sought nor received permission from any holders of copyrights in broadcast television programming before retransmitting their works to paying subscribers.

Even if it is correct that Aereo itself isn’t engaging in public performance of copyrighted work, it remains the case that its subscribers haven’t obtained the right to use Aereo’s services, either. But one party or the other must obtain this right or else establish that it’s a fair use.

Fair Use Won’t Save Aereo

The only way legitimately to rule in Aereo’s favor would be to decide that Aereo’s retransmission of broadcast content is a fair use. But as Cablevision’s own amicus brief in Aereo (supporting Aereo) argues, fair use rights don’t cover Aereo’s non-transformative retransmission of broadcast content. Cloud computing providers, on the other hand, offer services that enable distinct functionality independent of the mere retransmission of copyrighted content:

Aereo is functionally identical to a cable system. It captures over-the-air broadcast signals and retransmits them for subscribers to watch. Aereo thus is not meaningfully different from services that have long been required to pay royalties. That fact sharply distinguishes Aereo from cloud technologies like remote-storage services and remote DVRs.

* * *

Aereo is not in the business of transmitting recorded content from individual hard-drive copies to subscribers. Rather, it is in the business of retransmitting broadcast television to subscribers.

* * *

Aereo…is not relying on its separate hard-drive copies merely to justify the lawfulness of its pause, rewind, and record functions. It is relying on those copies to justify the entire television retransmission service. It is doing so even in the many cases where subscribers are not even using the pause, rewind, or record functions but are merely watching television live.

It may be that the DVR-like functions that Aereo provides are protected, but that doesn’t mean that it can retransmit copyrighted content without a license. If, like cable companies, it obtained such a license, it might be able to justify its other functionality (and negotiate license terms with broadcasters to reflect the value to each of such functionality). But that is a fundamentally different case. Similarly, if users were able to purchase licenses to broadcast content, Aereo’s additional functionality might also be protected (with the license terms between users and broadcasters reflecting the value to each). But, again, that is a fundamentally different case. Cloud computing services don’t create these problems, and thus need not be implicated by a proper reading of the Copyright Act and a ruling against Aereo.

Conclusion

One of the main purposes of copyright law is to secure for content creators the right to market their work. To allow services like Aereo undermines that ability and the incentives to create content in the first place. But, as we have shown, there is no reason to think a ruling against Aereo will destroy cloud computing.

12 responses to A Supreme Court ruling against Aereo won’t spell the end of cloud computing

  1. 

    So now that we have seen oral argument, we know that many of the Justices don’t share your confidence that “there’s no reason to think a ruling against Aereo will destroy cloud computing.”

    I count at least 5 justices (Alito, Breyer, Kagan, Kennedy and Sotomayor) who appear as if they recognize that trying to read the transmit clause as petitioners and their amici have proposed would create very substantial consequences for other technologies, and particularly cloud technologies.

    I expect that at least those 5 will ultimately conclude that there’s no way for them to find the transmissions of Aereo’s system to be public performances without hopelessly mucking up copyright law, and that to degree such is a problem, it’s for Congress to fix. (Congress could “fix” such cleanly, because they can write new law. The Court cannot fix it cleanly within the confines of the law as currently written.)

    It was also apparent that the Court recognized that if the transmissions are public performances, then Aereo would qualify for the Copyright Act’s compulsory license for retransmission. Furthermore, referencing the exchange with Ryan Radia below, Aereo clearly is not a cable system under the Communications Act, and they do not appear to be an MVPD either. So far as I can tell, the FCC opened a docket for comments on the issue of whether to expand the regulatory interpretation of MVPD to include OTT providers, but has never taken any action. (And there would appear to be some thorny issues and potential for unintended consequences if they do expand that definition, that may make it difficult for them to so expand the definition, even if they wanted.) So Aereo would not be subject to retransmission consent.

    So it seems to me that, even if the Court contorts the transmit clause to find Aereo’s transmissions to be public performance, Aereo (and others) will still be able to deliver live/near-live retransmissions. If the Court were to try to make the ruling narrow (limited to live/near-live retransmission of broadcast) in order to try to protect other technologies, then Aereo would also be able to proceed with its DVR features. But even then, there would surely end up being consequences for other technologies, and particularly cloud services. And of course, if the Court were to make a broader ruling, there would be very broad consequences for cloud providers.

    Either way, the broadcasters end up losing on at least the one issue (live/near-live) that they were challenging here. And also either way, by reviving the cable system qualification issue through this litigation, they have probably made it even easier for companies to enter this business. That is, they have effectively revived the Ivi approach (that doesn’t require dedicated antennas).

  2. 
    northforkinvenstor 25 April 2014 at 9:46 am

    regarding your interesting points relating to 1. DMCA safe harbor and notice and related takedown system and 2. importance of ability to contract:

    was there anything in the oral argument indicating any of the justices or Clement, Stewart or Frederick were focusing on these issues. I don’t see any direct references to either point in the transcript but I may be missing some subtleties.

    • 

      Remarkably, there was nothing at all about DMCA. At some point the clerks are going to have to recognize the point, though.

      There was some discussion that could relate to some degree to the contracting point, but I didn’t see anything suggesting an approach much like ours.

      • 

        Why is it remarkable that there was nothing at all about DMCA? Who briefed that issue?

        In any case, as has been discussed, DMCA safe harbor does not offer a solution for the cloud problems created by petitioners’ contorted interpretation of the transmit clause. Making what are, fundamentally, private transmissions infringing, and subject to takedown notices is not a solution. And even beyond that, the safe harbor exclusion of cases where the provider already knows what the content is would lead to absurd results.

        As for the contracting argument, as was also discussed below, it is without merit. Rightsholders have never had the ability to effect control via contract when it comes to equipment suppliers. The absence of an ability to demand a contract does not render a technology infringing. It either infringes or it doesn’t, regardless of whether there is a contractual control overlying the conduct. What you are making, by this, is a policy argument, not a legal argument.

        I fear that you, like many, hopelessly conflate policy issues (i.e., things that are the domain of Congress to consider and potentially address), with interpretation of law.

  3. 
    J. S. Greenfield 18 April 2014 at 1:07 pm

    With all due respect, much of your logic here is deeply flawed. Some of it borders on the absurd.

    You suggest that even if all individual file streaming were deemed a public performance, services such as DropBox would be protected by DMCA safe harbor, if they merely adopt a notice and takedown system. But what protects users? A notice and takedown system implies that rightsholders have the right to prohibit users from storing and streaming back their own content. That would be a dramatic and transformative change, indeed, for many of these services.

    You reference Devlin Hartline’s arguments attempting to distinguish Aereo from all other providers, but his attempts to distinguish are wholly subjective and completely unmoored from the statute. Hartline would have us believe that Aereo’s programming of its system constitutes “volition conduct sufficient such that it directly causes the transmission,” but that the identical conduct by a cable company in programming its in-home DVRs does not. He would have us believe that Aereo supplying the content in the first instance (an assertion that is highly questionable) creates sufficient volition by Aereo, but the (indisputable) fact that cable companies supply the content to their in-home DVRs doesn’t do the same. Hartline has presented nothing that actually distinguishes Aereo from alternatives that he, and presumably you, argue do not infringe.

    You argue that “the ability to contract is key,” but rightsholders have never had the ability to contract (that is, the ability to demand a contract) with equipment suppliers. That this is the case does not render those equipment suppliers infringing, as the Sony Court aptly held. And it does not render technology suppliers in the modern context infringing, either.

    In fact, what we see in this case is nothing more than the relitigation of Sony. In the thirty years since Sony, the technology model has shifted from predominantly outright equipment sales (e.g., a consumer buys a VCR outright), to one where technology is partly delivered on a services basis (e.g., a consumer purchases a DVR coupled with ancillary recurring services, such as a guide data feed and software updates) or wholly delivered on a services basis (e.g., a consumer rents a DVR along with its ancillary services). And more recently, the technology model has been shifting from in-home equipment (e.g., consumer purchase a disk storage) to cloud-hosted equipment (e.g., consumer rents storage in the cloud).

    Petitioners, and supporters such as yourselves, would have us believe that this transition in the model of how technology is delivered to customers actually constitutes a transition from the delivery of technology to the delivery of content. But it simply is not so.

    You say that “the only way legitimately to rule in Aereo’s favor would be to decide that Aereo’s retransmission of broadcast content is a fair use.” Nonsense. The Court need not reach the question of fair use at all, since the present proceeding is focused solely on the transmissions, and not the actual DVR copying. Rather, the Court need only find that such transmissions are structurally private rather than public. The Second Circuit’s construction of the transmit clause provides a completely legitimate, consistent and sensible way to do that. On the other hand, all of the proposed alternatives suffer absurd flaws. So in fact, the Second Circuit construction is the only construction that has been put forward that is even plausible.

    • 

      Thanks for the comment.

      You suggest that even if all individual file streaming were deemed a public performance, services such as DropBox would be protected by DMCA safe harbor, if they merely adopt a notice and takedown system. But what protects users? A notice and takedown system implies that rightsholders have the right to prohibit users from storing and streaming back their own content. That would be a dramatic and transformative change, indeed, for many of these services.

      Note that Dropbox and nearly all other cloud hosting services already accept DMCA takedown notices and have designated an agent pursuant to 17 U.S.C. § 512(c)(2). As for what protects users who lawfully upload licensed content to Dropbox, that would be fair use. Insofar as reproducing content for personal, non-commercial time-shifting purposes without the copyright owner’s permission is fair use, so too is streaming one’s licensed content from a cloud storage service. A Dropbox user whose licensed content is wrongfully taken down due to a DMCA notice can send Dropbox’s designated agent a counter notification under 17 U.S.C. § 512(g)(3).

      You reference Devlin Hartline’s arguments attempting to distinguish Aereo from all other providers, but his attempts to distinguish are wholly subjective and completely unmoored from the statute.

      Well, secondary liability for copyright infringement is itself “unmoored from the statute,” isn’t it? It arose out of the common law, not out of the Copyright Act, and Congress has largely deferred to the judiciary to determine the contours of secondary copyright infringement liability.

      Hartline would have us believe that Aereo’s programming of its system constitutes “volition conduct sufficient such that it directly causes the transmission,” but that the identical conduct by a cable company in programming its in-home DVRs does not. He would have us believe that Aereo supplying the content in the first instance (an assertion that is highly questionable) creates sufficient volition by Aereo, but the (indisputable) fact that cable companies supply the content to their in-home DVRs doesn’t do the same. Hartline has presented nothing that actually distinguishes Aereo from alternatives that he, and presumably you, argue do not infringe.

      Aereo’s volitional conduct goes far beyond its supplying the content: the service was build from the ground up for precisely one purpose: acquiring and monetizing broadcast television programming by distributing it in (nearly) real-time to paying subscribers. Aereo doesn’t dispute this, either in court or in its marketing materials. If Aereo were simply leasing antennas and virtualized operating system environments in data centers that subscribers could theoretically configure to access live broadcast television, the comparison to Sony’s conduct in building and selling Beta machines would be apt. Moreover, even if Aereo’s conduct is insufficient to establish volition as regards the television shows copied on its servers at the best of users for more than a transitory duration, it does not follow that Aereo also lacks the volitional element to establish its direct liability for “live” transmissions of broadcast television (even if these transmissions are intermediated by transitory buffering).

      As for distinguishing Aereo from in-home DVRs leased by cable companies, for one thing, cable companies must obtain statutory licenses to retransmit—that is, publicly perform—broadcast television programs under 17 U.S.C. § 111(c). If a content owner doesn’t like how a cable company has configured its DVR service, it can seek to renegotiate the terms of its carriage agreement—just as Disney did with Dish Network—or simply refuse to permit carriage entirely.

      In fact, what we see in this case is nothing more than the relitigation of Sony. In the thirty years since Sony, the technology model has shifted from predominantly outright equipment sales (e.g., a consumer buys a VCR outright), to one where technology is partly delivered on a services basis (e.g., a consumer purchases a DVR coupled with ancillary recurring services, such as a guide data feed and software updates) or wholly delivered on a services basis (e.g., a consumer rents a DVR along with its ancillary services). And more recently, the technology model has been shifting from in-home equipment (e.g., consumer purchase a disk storage) to cloud-hosted equipment (e.g., consumer rents storage in the cloud).

      I don’t dispute your portrayal of how content distribution technologies have evolved, but we do not wish for the Court to hold providers of cloud storage liable for their users’ conduct, nor do we believe it’s necessary or likely that the Court will so hold. In the past, the Court has articulated relatively clear lines delineating lawful technology providers from infringing ones, such as the inducement test described in MGM Studios v. Grokster. Admittedly, there’s always the risk the Court will throw out the baby with the bathwater, and issue some extremely broad ruling in Aereo that adversely affects the cloud. If that happens, I’ll buy you a beer.

      • 
        J. S. Greenfield 18 April 2014 at 5:11 pm

        As for what protects users who lawfully upload licensed content to Dropbox, that would be fair use. Insofar as reproducing content for personal, non-commercial time-shifting purposes without the copyright owner’s permission is fair use, so too is streaming one’s licensed content from a cloud storage service.

        The petitioners’ proposed interpretation of the transmit clause would hold that the transmission is a public performance by Dropbox, not a private transmission by the user.

        A Dropbox user whose licensed content is wrongfully taken down due to a DMCA notice can send Dropbox’s designated agent a counter notification under 17 U.S.C. § 512(g)(3).

        I expect that even you had to be chuckling as you wrote this. ;)

        Aereo’s volitional conduct goes far beyond its supplying the content: the service was build from the ground up for precisely one purpose: acquiring and monetizing broadcast television programming by distributing it in (nearly) real-time to paying subscribers.

        In the exact same sense, Tivo’s DVRs were built from the ground up for precisely one purpose: acquiring and monetizing broadcast television programming by recording and replaying it in (nearly) real-time to paying subscribers. Likewise, Sling’s Slingboxes were built from the ground up for precisely one purpose: acquiring and monetizing broadcast television programming by distributing it in (nearly) real-time to paying customers.

        Your arguable nuance in how you cast the characterization notwithstanding, this alleged volition due to design does not distinguish Aereo from other examples that nobody seems to argue are infringing — because under Sony it is not infringing to build a system for the purpose of enabling people to do that which they are legally entitled to do.

        If Aereo were simply leasing antennas and virtualized operating system environments in data centers that subscribers could theoretically configure to access live broadcast television, the comparison to Sony’s conduct in building and selling Beta machines would be apt.

        I don’t follow what you’re suggesting here. Tivo is infringing if they include software in their DVRs to accomplish tuning, but not if they simply sell hardware and leave it to consumers to code the software themselves?

        I don’t think this is the legal standard. And so I still don’t see how you have distinguished Aereo.

        As for distinguishing Aereo from in-home DVRs leased by cable companies, for one thing, cable companies must obtain statutory licenses to retransmit—that is, publicly perform—broadcast television programs under 17 U.S.C. § 111(c). If a content owner doesn’t like how a cable company has configured its DVR service, it can seek to renegotiate the terms of its carriage agreement—just as Disney did with Dish Network—or simply refuse to permit carriage entirely.

        No, cable companies don’t need to do anything to obtain statutory licenses to retransmit local stations. They get them automatically, and royalty-free, under 111.

        You are conflating a license under copyright law with limitations placed specifically upon cable operators under the retransmission consent regime of the 1992 Cable Act.

        And in any case, that has nothing to do with the question of volition in the design and development of their DVRs.

        That Disney is able to negotiate terms of its carriage agreement with Dish, or with a cable operator, is fine and dandy, but such is not a requirement for a DVR not to infringe. Disney has no contract by which to force negotiation of terms with Tivo, if Tivo should implement a feature that Disney finds objectionable. And yet, that doesn’t render it automatically infringing for Tivo to implement such a feature.

        Btw, speaking of 111’s compulsory license, FilmOn X made a strong argument that if Aereo’s transmissions constitute public performances under the “any device or process” language, then Aereo should also qualify as a “cable system” under 111, since the definition of “transmit” in 101 turns on the very same “any device or process” language. In that case, Aereo would qualify for a royalty-free statutory license. Case closed.

        I don’t dispute your portrayal of how content distribution technologies have evolved, but we do not wish for the Court to hold providers of cloud storage liable for their users’ conduct, nor do we believe it’s necessary or likely that the Court will so hold. In the past, the Court has articulated relatively clear lines delineating lawful technology providers from infringing ones, such as the inducement test described in MGM Studios v. Grokster.

        Likening Aereo to Grokster is inapposite. Aereo is enabling users to access broadcast signals that those users are legally entitled to access.

        Furthermore, that you would like for the Court to hold Aereo infringing while not holding other “good” cloud providers infringing is understandable, but we still have not a single factually accurate distinction that has been drawn between Aereo and those “good” cloud providers, to distinguish legality, let alone a distinction that has any basis in the statute.

        So in essence, what you are asking is for the Court to simply make up an arbitrary distinction, to serve your notion of what is right policy-wise, where Congress created no such distinction.

        That is not the proper role of the courts. It is for Congress to draw such distinctions.

        Admittedly, there’s always the risk the Court will throw out the baby with the bathwater, and issue some extremely broad ruling in Aereo that adversely affects the cloud. If that happens, I’ll buy you a beer.

        Actually, I’d be unhappy to see Court issue a ruling that would hold these kind of transmissions from both Aereo and other cloud providers to be public performances, because to my view, all interpretations that have been proposed to reach such a result produce absurd results. But even if they misinterpreted (IMO) the law to find such, at least they would be interpreting the law consistently.

        On the other hand, if they were to issue a ruling holding Aereo’s transmissions to be public performances but other cloud providers’ transmissions to be private performances, it would be a far sadder occurrence. To achieve that, the Court would have to manufacture new law of whole cloth, substituting its judgment for what is properly left to Congress, and elevating the politicization of the Court to a new level (reaching beyond traditional ideological political issues).

        That would be a sad occurrence, indeed, and I would be far more in need of a beer to cry in, in that circumstance. ;)

      • 

        @J. S. Greenfield – it seems I can’t reply to you directly, so I replied to my reply.

        The petitioners’ proposed interpretation of the transmit clause would hold that the transmission is a public performance by Dropbox, not a private transmission by the user.

        Even if the Court agrees with that interpretation, section 512(c) still protects Dropbox, just as it protects YouTube when the site publicly performs one infringing music video to a million users. If either OSP receives a takedown notice, it must disable access to the particular infringing upload at issue, etc. Copyright owners have tried and failed to convince courts that YouTube is liable for publicly performing their content. See, e.g., UMG Recordings, Inc. v. Shelter Capital Partners LLC, 718 F.3d 1006, 1016 (9th Cir. 2013).

        Also, when did the petitioners urge the Court to rule that a provider publicly performs a work whenever it makes multiple transmissions of a single performance of the work to different users, at different places and at different times? Although some plaintiffs and their amici have advocated such an interpretation, the petitioners themselves didn’t go so far, did they?

        I expect that even you had to be chuckling as you wrote this

        Yeah, I did. As I’ve argued before, DMCA takedown notices should take fair use into consideration – and courts should vigilantly police bogus takedown notices.

        In the exact same sense, Tivo’s DVRs were built from the ground up for precisely one purpose: acquiring and monetizing broadcast television programming by recording and replaying it in (nearly) real-time to paying subscribers. Likewise, Sling’s Slingboxes were built from the ground up for precisely one purpose: acquiring and monetizing broadcast television programming by distributing it in (nearly) real-time to paying customers.

        For the record, I think a copyright holder could make a serious case that Tivo or Slingbox is contributorily liable for infringing upon their reproduction rights. Contrary to popular belief, Sony did not hold that non-commercial home time-shifting is necessarily fair use. Instead, Sony merely held that such copying is fair use absent “proof either that the particular use is harmful, or that if it should become widespread, it would adversely affect the potential market for the copyrighted work.” 464 U.S. at 451. Given the broadcast television marketplace circa the late 1970s, wherein television shows were not routinely monetized for home viewing and skipping commercials were cumbersome, the trial court in Sony held that “[h]arm from time-shifting is speculative and, at best, minimal.” 480 F. Supp. 429, 467 (C.D. Cal. 1979). Were the issue re-litigated today, however, I could see a determined copyright owner convincing the Supreme Court to hold otherwise.

        But for the Court to hold Aereo liable, it need not open that can of worms. Whereas Tivo and Slingbox simply sell devices that individuals can use to time-shift content they acquire from some other source, Aereo plays a qualitatively more central role in supplying content to its subscribers. I’m not talking about Aereo facilitating its subscribers’ time-shifting of broadcast content; that functionality implicates the reproduction right, not the performance right, as you’ve argued elsewhere. Rather, if Aereo’s initial (nearly) live transmission is a public performance, the actor directly responsible for such a performance is Aereo itself, not the subscriber who requests the content.

        No, cable companies don’t need to do anything to obtain statutory licenses to retransmit local stations. They get them automatically, and royalty-free, under 111.

        One of us is very confused about section 111. As I read 111, a cable system that retransmits local and/or distant broadcast signals is automatically eligible for the 111(c) statutory license – so long as the cable system submits a semiannual statement of account and any applicable royalty fees under 111(d). A cable system that retransmits exclusively local signals must still remit a minimum fee to the Copyright Office. See 72 Fed. Reg. 70533:

        [L]arger cable systems grossing $527,600.00 or more semi–annually … must pay at least a ‘‘minimum fee’’ that is calculated at 1.013% of aggregate gross receipts (e.g., $527,600.00 x 1.013%). The minimum fee is paid by operators for the privilege of retransmitting distant broadcast signals even if none are carried. The vast majority of SA–3 systems pay more than the minimum fee because they carry distant television signals.

        As for whether Aereo is a cable system, you point out:

        Btw, speaking of 111′s compulsory license, FilmOn X made a strong argument that if Aereo’s transmissions constitute public performances under the “any device or process” language, then Aereo should also qualify as a “cable system” under 111, since the definition of “transmit” in 101 turns on the very same “any device or process” language. In that case, Aereo would qualify for a royalty-free statutory license. Case closed.

        Subject to the minimum fee requirement I mentioned above, if Aereo is a cable system, it is indeed eligible for a statutory license. It’s a plausible argument, were Aereo to make it. But what about 47 U.S.C. § 325(b)(1), which bars a cable system from retransmitting a broadcast signal without the station’s express authority? I realize the definition of a “cable system” in Title 47 is not expressly identical to the term as used in Title 17, but when Congress wrote the 1992 Cable Act (and enacted it over Bush I’s veto), I think it meant the same thing as it did in passing the 1976 Copyright Act.

        On the other hand, if they were to issue a ruling holding Aereo’s transmissions to be public performances but other cloud providers’ transmissions to be private performances, it would be a far sadder occurrence. To achieve that, the Court would have to manufacture new law of whole cloth, substituting its judgment for what is properly left to Congress, and elevating the politicization of the Court to a new level (reaching beyond traditional ideological political issues).

        I’m all about the rule of lenity in the criminal law context, but in the civil realm, why shouldn’t courts use common law principles to fill the many gaps in causes of action sounding in federal statutes? Congress has all but expressly authorized the courts to flesh out gaps in the text of the Copyright Act – as evinced by the DMCA itself, which impliedly accepted the judge-made doctrine of secondary copyright infringement liability doctrine while also modifying its contours as regards OSPs. The Transmit Clause is admittedly somewhat ambiguous, but its underlying purpose — to require businesses that intentionally distribute and monetize broadcast television to a broad audience to obtain a license, statutory or otherwise — is quite clear. Because Aereo offers local broadcast television signals only to those subscribers who putatively live within the transmitting stations’ service area, I suppose your comparison of Aereo to a cable system that only retransmit local signals is apt. If courts impose and confer upon Aereo the same rights and duties of such cable system, then, how would they be making new law out of whole cloth? Wouldn’t they be stretching the cloth of existing, albeit dated, laws to new technologies?

      • 

        @J. S. Greenfield – it seems I can’t reply to you directly, so I replied to my reply.

        WordPress is apparently configured to allow replies only 3 deep. It’s a common configuration.

        Even if the Court agrees with that interpretation, section 512(c) still protects Dropbox, just as it protects YouTube when the site publicly performs one infringing music video to a million users.

        True, but irrelevant to my point. You are saying that cloud providers wouldn’t be at risk for being sued out of existence. I am saying that to avoid such risk, the providers have to transform their systems to the point where they are likely to lose substantially all of their utility for use with media. If as an end user, I cannot rely on my content being available on a cloud storage service because it is subject to removal upon receipt of a takedown notice, it becomes impractical to use, and I will be forced to do something else.

        So the provider isn’t sued out of existence, but the utility of its system to end-users is eviscerated all the same.

        Also, when did the petitioners urge the Court to rule that a provider publicly performs a work whenever it makes multiple transmissions of a single performance of the work to different users, at different places and at different times? Although some plaintiffs and their amici have advocated such an interpretation, the petitioners themselves didn’t go so far, did they?

        It is the (only consistent) implication of the petitioners’ proposed construction of the transmit clause. That they wave their hands for a paragraph or two at the end of their brief saying,”Oh, but this doesn’t mean you have to find other cloud providers infringing” is no actual mitigation for such.

        For the record, I think a copyright holder could make a serious case that Tivo or Slingbox is contributorily liable for infringing upon their reproduction rights. Contrary to popular belief, Sony did not hold that non-commercial home time-shifting is necessarily fair use. Instead, Sony merely held that such copying is fair use absent “proof either that the particular use is harmful, or that if it should become widespread, it would adversely affect the potential market for the copyrighted work.” 464 U.S. at 451. Given the broadcast television marketplace circa the late 1970s, wherein television shows were not routinely monetized for home viewing and skipping commercials were cumbersome, the trial court in Sony held that “[h]arm from time-shifting is speculative and, at best, minimal.” 480 F. Supp. 429, 467 (C.D. Cal. 1979). Were the issue re-litigated today, however, I could see a determined copyright owner convincing the Supreme Court to hold otherwise.

        Ah, but this is a completely different argument. Neither you, nor petitioners, are arguing that Aereo secondarily infringes on the basis that timeshifting, itself, is infringing.

        You are arguing that what Aereo did in designing its system constitutes volitional conduct to the point where anything done with the system is a direct act by Aereo. But systems such as Tivo’s and Sling’s (not to mention every MVPD’s in-home DVR) entail exactly the same alleged volitional conduct. So why isn’t every action taken with those systems also a direct act by their designers?

        As for what Sony did or didn’t say, after standing for 30 years, and Congress declining to intervene for 30 years, I think we have classic stare decisis, and there is zero chance of the courts holding timeshifting, itself, to be infringing. (And if somehow they ever did, Congress would surely intervene, immediately.)

        On the other hand, I would personally be sympathetic to an argument that the systematic skipping of all commercials is not a fair use, and that as DVR storage sizes continue to increase, at some point, it becomes implausible that the incremental space has any utility for non-infringing timeshifting. I don’t think that Sony forecloses consideration of those issues, and I could conceive of the courts holding those to be infringing, or Congress legislating such, for that matter. But of course, none of this is relevant to the case at hand.

        And ultimately, the key thing that Sony said was that a staple article of commerce test is to be applied: that to the degree a system has a substantial non-infringing use, its makers cannot be held liable for infringing uses.

        But for the Court to hold Aereo liable, it need not open that can of worms. Whereas Tivo and Slingbox simply sell devices that individuals can use to time-shift content they acquire from some other source, Aereo plays a qualitatively more central role in supplying content to its subscribers.

        Not true. The only difference is the transition in the technology delivery paradigm, from an in-home equipment sales paradigm (though both Tivo and Sling are actually hybrids, with recurring services components), to a cloud-hosted infrastructure-as-a-service technology delivery paradigm. This is not unique to Aereo. This is part of a much broader transition in the technology delivery paradigm.

        The Copyright Act is supposed to be technology neutral. It should be neutral to this shift in the technology delivery paradigm, and Aereo should be viewed no differently than a Sony, or Tivo or Sling.

        Arguing that the shift, in itself, renders the vendor with volition that they would lack otherwise is nothing more than an attempt to re-litigate Sony—only trying to go even further and argue direct infringement, rather than secondary infringement.

        One of us is very confused about section 111.

        I was not aware of the minimum ~1% royalty required by the regs, even when not carrying distant signals. Mea culpa…though 1% is hardly of much consequence to the argument. (The filing is a mere formality.)

        Subject to the minimum fee requirement I mentioned above, if Aereo is a cable system, it is indeed eligible for a statutory license. It’s a plausible argument, were Aereo to make it. But what about 47 U.S.C. § 325(b)(1), which bars a cable system from retransmitting a broadcast signal without the station’s express authority? I realize the definition of a “cable system” in Title 47 is not expressly identical to the term as used in Title 17, but when Congress wrote the 1992 Cable Act (and enacted it over Bush I’s veto), I think it meant the same thing as it did in passing the 1976 Copyright Act.

        I think there’s zero chance that Aereo qualifies as “cable system” under Title 47. And for whatever reasons Congress may have had, they quite clearly were deliberate in not defining it the same as in Title 17. (And their decision to redefine the term stands in stark contrast to other instances where they actually reference definitions in Title 17.) For example, they expressly carved out systems that carry only broadcast signals–presumably because the policy purpose for retransmission consent was to mitigate cable competition with local broadcasters, and systems that carry only broadcast signals clearly aren’t competing with them.

        Perhaps Aereo could be deemed an MVPD under Title 47, but definitely not a cable system, without amendment of that definition.

        This, of course, is not at issue in the current proceeding — but if Aereo were deemed to be performing publicly and cable system for purposes of the Copyright Act, this would become the critical issue, since we all know that most of the petitioners’ will not voluntarily offer viable terms for retransmission to the likes of Aereo. They will not undermine the anti-competitive licensing terms that they are currently allowed to negotiate with impunity, in dealing with MVPDs.

        If I were a betting man, I ‘d bet that the FCC would avoid classifying Aereo as an MVPD if it could, precisely because of this.

        The Transmit Clause is admittedly somewhat ambiguous, but its underlying purpose — to require businesses that intentionally distribute and monetize broadcast television to a broad audience to obtain a license, statutory or otherwise — is quite clear.

        Really? It is? While there’s no question that Congress intended to bring cable retransmissions within the purview of the Copyright Act, it seems beyond the pale to suggest that the transmit clause’s purpose was specific to the retransmission of broadcast television, given that it mentions neither broadcast television nor retransmission, in particular.

        Rather, Congress very clearly adopted a generic, application neutral and technology neutral definition that was intended to apply generally.

        I think there is zero merit to the suggestion that Congress’s intentional adoption of such an intentionally generic definition warrants specifically distinguishing a particular application from all other applications, for a different interpretation. It is nothing more than an argument that (alleged) legislative intent should be elevated above what Congress actually wrote in the law.

        I think that such legislative intent could be used to justify a particular application-neutral interpretation of the provision, in choosing among viable alternative interpretations. I don’t think it can be used to justify interpreting an intentionally application-neutral provision to have application-specific meaning.

        And in this case, there’s been absolutely no viable application-neutral interpretation proposed that achieves petitioners’ (and your) intended result.

        Because Aereo offers local broadcast television signals only to those subscribers who putatively live within the transmitting stations’ service area, I suppose your comparison of Aereo to a cable system that only retransmit local signals is apt. If courts impose and confer upon Aereo the same rights and duties of such cable system, then, how would they be making new law out of whole cloth? Wouldn’t they be stretching the cloth of existing, albeit dated, laws to new technologies?

        If they read application-specific rules into a provision that Congress very intentionally made application-neutral, then yes, they are manufacturing new law out of whole cloth.

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  1. Friday’s Endnotes – 04/25/14 | Copyhype - April 25, 2014

    […] A Supreme Court ruling against Aereo won’t spell the end of cloud computing — One more item on Aereo, this one from Geoffrey Manne, Ryan Radia & Ben Sperry. “Aereo’s argument ignores Congress’ decision in the Copyright Act of 1976 to expressly define the transmission of a television broadcast ‘by means of any device or process’ to the public as a public performance, ‘whether the members of the public capable of receiving the performance … receive it in the same place or in separate places and at the same time or at different times.’ Aereo has built an elaborate system for distributing live high-def broadcast television content to subscribers for a monthly fee—without obtaining permission from, or paying royalties to, the copyright owners in the audiovisual works aired by broadcasters.” […]

  2. Friday’s Endnotes – 04/18/14 | Copyhype - April 18, 2014

    […] A Supreme Court ruling against Aereo won’t spell the end of cloud computing — Over at Truth on the Market, Geoffrey Manne, Ryan Radia, and Ben Sperry explain why a holding finding Aereo liable for publicly performing copyrighted works won’t mean cloud computing services would face new liability. […]

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