The long-awaited Aereo opinion is out. The Second Circuit was reversed 6-3, and it’s not encouraging for the cloud industry, as we feared. (This appears to be 2(a) in Matt’s list of possible outcomes, more of a broad reversal than a narrow reversal.)
Matt has written several posts on how this case impacts the cloud industry (, ). He explained that while the broadcasters may not intend to go after the cloud, any argument that attempts to just eliminate Aereo would also implicate cloud services. And in fact, several members of the Supreme Court were concerned at oral argument (which I attended) with the effect of this decision on the cloud, although this was not sufficiently represented in the majority opinion.
The United States government had filed an amicus brief arguing that the Court could find Aereo unlawful while simultaneously not threatening the cloud, but as Matt explained, this is not possible. (The majority, however, appears to have been persuaded by the U.S. government’s argument, as I explain below.)
Not only does this decision against Aereo potentially affect the cloud industry for legal reasons, but it is likely to deter investment in innovative new services. The certainty provided by Cartoon Network LP, LLLP v. CSC Holdings, Inc., 536 F.3d 121 (2008)) (popularly known as Cablevision) led to additional investment in U.S. cloud computing companies ranging from $728 million to $1.3 billion during the two years after the decision. (Cablevision also happens to be the case that Aereo’s business model heavily relies upon. As explained below, the majority does not cite the case, which is odd.) Today’s decision may mean that the next Aereo is unable to secure funding from investors. And that’s bad for everyone.
Some initial takeaways from the majority opinion:
First of all, the split was unique for copyright cases. The majority opinion was written by Justice Breyer, who has often been on the side of limited copyright and increased innovation. (See, e.g., his opinion in Kirtsaeng, and his dissents in Eldred and Golan.)
1. Breyer starts off by calling Aereo a “technologically complex service”
This is not a good start. That is reminiscent of the ‘Rube Goldberg’ argument, but Aereo should not be faulted for designing a system that complies with the law. The majority does not even cite the main precedent Aereo relies on, Cablevision, except for in a parenthetical. This signifies that a results-oriented decision is to follow, rather than one that follows the law. It also may implicate the broader cloud storage industry, if how the technology works does not matter to the Court.