Aereo’s Legal Victory A Win For Cord Cutters

by Ali Sternburg on April 1, 2013

Today, the Second Circuit affirmed the district court’s denial of a permanent injunction against Aereo — a win for consumers, for cord cutters, and potentially for disruptive innovation.  Whether Aereo is disruptive because of its new use of now-standard cloud computing and broadcast technology or its cutting-edge reading of copyright law — or, probably, some combination of both — is not important for our purposes today.  What is important is that it makes it easier for more people to cut the cord, which ultimately threatens cable’s legacy business model.

Litigation had been pending over the legality of Aereo, a service that allows people to stream the same free over-the-air broadcast that televisions receive on a computer, tablet, or mobile device.  (That sounds like something convenient, useful, and technologically possible that should exist, right?)  Aereo’s business model is based on an essential Second Circuit precedent, the 2008 case Cartoon Network LP v. CSC Holdings, Inc., which is popularly known as “Cablevision.”  In both Cablevision and Aereo, the activities permitted by the technology at issue were found not to constitute a public performance, and thus no exclusive right granted to copyright owners was infringed.  CCIA had been following this case, and filed briefs at the district court [PDF] and in the Second Circuit [PDF].  CCIA’s briefs cited a report by Josh Lerner on the impressive growth of VC funding for US cloud computing businesses since Cablevision, which stated:

Our results suggest that the Cablevision decision led to additional incremental investment in U.S. cloud computing firms that ranged from $728 million to approximately $1.3 billion over the two-and-a-half years after the decision. When paired with the findings of the enhanced effects of VC investment relative to corporate investment, this may be the equivalent of $2 to $5 billion in traditional R&D investment.

CCIA’s briefs also had a memorable line on the Cablevision case:  “It is no exaggeration to say that the proper interpretation and application of Cablevision is critical to the future of the Internet.”  Aereo is currently only available in New York City, which is in the jurisdiction of the Second Circuit.  However, recent reports suggest that the service plans to expand to 22 other cities and has been in talks with Dish and AT&T, among others.

In March 2012, just two weeks after its launch, Aereo was sued by a number of large entertainment companies (just to name a few: Fox, ABC, CBS, NBC, and Disney) for copyright infringement in the Southern District of New York.  (The case — technically, two separate cases that were consolidated — demonstrates the entertainment industry’s tendency to litigate as a reaction to an innovative new technology service interfering with their established business model for distributing content.)  In July, the court denied plaintiffs’ request for a preliminary injunction, and Aereo was allowed to continue to operate.  The plaintiffs appealed to the Second Circuit, who affirmed for Aereo today.

(Side note:  Just last week, CCIA also filed an amicus brief [PDF] in a case against the not-so-subtly-named Aereo competitor, Aereokiller, where similar legal arguments were raised.  That case is pending in the Ninth Circuit.)

The Aereo case gathered a lot of attention, and numerous parties filed amicus briefs.  The namesake of the aforementioned Cablevision case also filed an amicus brief against Aereo, prompting this response from Techdirt:

This is a pretty cynical and obnoxious move from Cablevision. Having already won its legal fight that made the remote DVR legal, it knows that Aereo is actually potentially competitive. So rather than cheering another innovator on, following down the road it paved, Cablevision cynically jumps in to protect its turf and pretend that the ruling it fought so hard for doesn’t apply to Aereo. . . Cablevision’s position here is solely to abuse copyright law and an important decision on its own behalf to now crush a competitor.

Another amicus brief that also received a lot of attention was another brief against Aereo, by former Register of Copyrights Ralph Oman.  As Techdirt reported, Oman wrote:

The courts should not saddle the copyright owner with having to convince Congress to act to prohibit unauthorized Internet retransmissions. Whenever possible, when the law is ambiguous or silent on the issue at bar, the courts should let those who want to market new technologies carry the burden of persuasion that a new exception to the broad rights enacted by Congress should be established. That is especially so if that technology poses grave dangers to the exclusive rights that Congress has given copyright owners. Commercial exploiters of new technologies should be required to convince Congress to sanction a new delivery system and/or exempt it from copyright liability. That is what Congress intended.

Imagine a world where engineers and designers—from startups to large companies—had to get permission from Congress before inventing and innovating.  It’s preposterous and completely ignorant of reality in any decade, especially in the present.  Copyright owners have a limited bundle of rights that they can enforce—they don’t have a blanket right to exclude uses that they do not like.  And if rights holders seek to enforce their rights, they have to do so themselves—innovators should not have to affirmatively seek exemptions or permission.

This case embodies a lot of what DisCo champions.  Disruptive innovation and competition necessarily involves frustrating stubborn incumbents and paving the way for more efficient, consumer-friendly business models.  Given the substantial expansion of copyright in recent years, it is difficult to justify re-interpreting existing rights in order to shelter incumbents from innovative services.

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