Why Aereo lost before the U.S. Supreme Court

Last June 25, the U.S. Supreme Court made a highly awaited ruling in the case opposing technology startup Aereo and broadcasters as well as other copyright holders that accused Aereo of unauthorized transmission of their content. In this case, the Supreme Court was asked to specify the limits of copyright in the context of an emerging new technology that challenged the conventional cable television model.

Aereo’s contested technology enables the dissemination of televised content via the internet. Instead of emitting a constant flow of data or creating a centralized database, Aereo chose to decentralize its service’s IT structure to a certain extent. Thus, in exchange of a fixed monthly fee, Aereo provided its subscribers with access to TV shows and other types of content, most of which were protected by copyright. To gain access to the content of their choice, individual subscribers used a small antenna that was assigned exclusively to them and the content was stored on a dedicated hard disk for home viewing. Aereo thereby set itself apart from conventional broadcasters by providing a decentralized service over which subscribers had total control.

In appearance, the question before the Supreme Court was very simple. By offering its service to subscribers (who thus gained access to copyrighted content without the permission of the copyright holders), was Aereo in direct violation of copyright law?

Public transmission of copyrighted works: a notion at the heart of the Supreme Court’s ruling

Six of the nine Supreme Court justices formed the majority opinion. From the onset, the Court reiterated the fundamental analysis of American copyright infringement. Thus, the majority judges held that Aereo was publically transmitting copyrighted works. Before arriving at this conclusion, the Court dissected the two components at play: the transmission itself and its public nature.

In the Court’s opinion, the technological architecture underlying Aereo’s service was the equivalent to that used by satellite retransmission companies that had faced similar lawsuits in the 1970s. The majority judges based their opinion on the “total sum” of IT operations carried out by Aereo. Aereo operated in the same fashion as the satellite retransmission companies involved in past rulings. The Court disagreed with the fact that it was not Aereo itself that chose the transmitted content. Moreover, it pointed out that seeing as the subscriber was not aware of this technological difference, it should therefore be considered inconsequent. Basing itself on its historical analysis of the law, the Court concluded that a business model such as Aereo’s violated copyright law.

Once the “transmission” principle had been established, the Court needed to determine whether the transmission was public. The fact that a single subscriber received the transmission did not convince the Court that the transmission was “private”, which is what Aereo had pleaded. Furthermore, the Court examined Aereo’s business objectives which were very similar to those of cable operators. Despite the inherently short delays of “ordering” content through Aereo’s service, the Court privileged the argument of the consumer’s indifference and found in sum that Aereo offered the same type of service as cable operators but at a larger scale. The Court defined a “public” as a group of unrelated persons in different locations and at different moments in time. Aereo subscribers therefore had access to publically transmitted copyrighted works.

A disincentive to future technological developments?

In its conclusion, the Court raised a crucial issue, i.e., the impact its ruling would have on future technological developments. Aereo had pleaded that a negative ruling of the Court would have drastic effects and undermine all future developments in television broadcasting technology. As such, the Court sought to put an end to any speculation and instead insisted on the fact that its ruling applied only to Aereo’s business model. When judgement was rendered, the dissenting judges pointed out that the U.S. Supreme Court had once come to one vote close of finding VCR technology illegal in light of arguments similar to those raised by the copyright holders. By doing so, these dissenting judges sought to warn the majority judges of the potential major consequences of a ruling against Aereo. The dissenting judges held that the court majority had erred in its analysis: seeing as Aereo did not directly violate copyright law, the infringement doctrine should have been raised. The dissenting judges made sure to criticize the analogy made between satellite retransmission and Aereo’s technology.

Will this ruling discourage entrepreneurs seeking to challenge the status quo in the cable television industry? Will the U.S. Supreme Court’s ruling against Aereo hinder the emergence of new content distribution models that are more focussed on consumers? Beyond the cliché that the law is always driven by innovation and technological development, this ruling of the U.S. Supreme Court will obviously highlight the risk profile of the audiovisual content distribution industry. Given Aereo’s popularity in the United States and the host of competitors that have since made their way into the industry, consumers’ growing thirst for on-demand content—regardless of the distribution model—places the market under tremendous pressure. Consequently, lawmakers will have no other choice than to adapt the law to this new reality. It even seems like Aereo is already on to an alternative solution.

Paul Gagnon
Paul Gagnon is a lawyer whose practice is focused on technology, intellectual property, and competition law. He provides legal services to Element AI, a company that is at the forefront of the move toward artificial intelligence.
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