Supreme Court Rules Against Aereo in Victory for Broadcasters

Aereo Supreme Court
Sebastien Thibault for Variety

The Supreme Court delivered a big blow to Aereo on Wednesday, ruling that its streams of broadcast TV channels violated copyright law.

The justices ruled 6-3 that because Aereo functioned essentially like a cable system, its streams of broadcast signals violated the public performance clause of the Copyright Act. Cable providers are required to pay compulsory license fees.

“Aereo claims that because it transmits from user-specific copies, using individually assigned antennas, and because each transmission is available only to one subscriber, it does not transmit a performance ‘to the public,'” Justice Stephen Breyer wrote in the majority opinion. “Viewed in terms of Congress’ regulatory objectives, these behind-the-scenes technological differences do not distinguish Aereo’s systems from cable systems, which do perform publicly. Congress would as much have intended to protect a copyright holder from the unlicensed activities of Aereo as from those of cable companies.”

SEE ALSO: Could Aereo Get Relief From Congress? Don’t Bet On It

The justices also ruled that their ruling was limited, and they did not believe that it should discourage “the emergence or use of different kinds of technologies.”

Justice Antonin Scalia dissented, and was joined by Justices Clarence Thomas and Samuel Alito.

Scalia wrote that Aereo “does not perform ‘publicly’ at all. The Court manages to reach the opposite conclusion only by disregarding widely accepted rules for service-provider liability and adopting in their place an improvised standard (‘looks like cable TV’) that will sow confusion for years to come.”

Paul Clement, attorney representing ABC and other broadcasters, called the decision “a victory for consumers. The Court has sent a clear message that it will uphold the letter and spirit of the law just as Congress intended.”

The justices’ ruling casts doubt on the future of the start up and is a major victory for broadcasters, who had argued that Aereo threatened their revenue stream of retransmission fees they collect from pay TV providers.

SEE ALSO: Media Companies, NAB Applaud Supreme Court Ruling Against Aereo

The ruling ended a two-year dispute over the legality of Aereo, which started in New York and sought to roll out in markets across the country. The company’s founder, Chet Kanojia, was adamant that at stake was not only its own technology, but future innovation in cloud computing. He said that the ruling “sends a chilling message to the technology industry,” but said “our work is not done.” Even though Barry Diller, one of Aereo’s key investors, told CNBC that “it’s over now,” Kanojia suggested that they would continue to develop new technologies.

But broadcasters challenged the notion that the case was about old media trying to stifle the threat of future innovation. Instead, they cast the issue as one of a company trying to hijack its content without permission. They argued that Aereo, like other companies that had also offered broadcast streams without their permission, were in flagrant violation of copyright laws.

The case attracted widespread attention because of warnings from some broadcast figures, like Leslie Moonves and Chase Carey, that if Aereo were allowed to continue it could upend the business. Carey even dangled the prospect that Fox could simply shift its broadcast network to cable.

Nevertheless, Aereo argued that even though it is a subscription service, it was merely providing equipment for rental, with the consumers ultimately in charge of their programming choices. It  won a key victory in the 2nd Circuit Court of Appeals, which last year refused to grant a preliminary injunction to put a halt to Aereo’s service.

Breyer rejected Aereo arguments that it did not function like a cable system because its broadcast program streams are activated only when a subscriber requests it. Aereo assigns each individual subscriber a remote antenna and the individual copies of the broadcast streams are made and played back to the viewer.

He wrote that such an argument, also made by Scalia in his dissent, “makes too much of too little,” and “this sole technological difference between Aereo and traditional cable companies does not make a critical difference here.” In fact, Breyer wrote that, if Aereo’s argument were correct, cable TV providers could simply “substitute new technologies for old” and avoid copyright restrictions.

“This difference means nothing to subscriber,” Breyer wrote. “This difference means nothing to the subscriber. It means nothing to the broadcaster. We do not see how this single difference, invisible to subscriber and broadcaster alike, could transform a system that is for all practical purposes a traditional cable system into ‘a copy shop that provides its patrons with a library card.'”

Aereo argued that its broadcast transmissions were private performances, not public. But Breyer wrote that the Copyright Act spells out that a public performance is defined as one “whether members of the public capable of receiving the performance … receive it … at the same time or at different times.”

He wrote that “whether Aereo transmits from the same or separate copies, it performs the same work; it shows the same images and makes audible the same sounds. Therefore, when Aereo streams the same television program to multiple subscribers, it ‘transmit[s]… a performance’ to all of them.”

Breyer tried to emphasize that the decision was not meant to have an impact on cloud computing, as Aereo and other tech groups had argued that a ruling threatened to stifle such innovations.

He wrote that they have interpreted the term “the public” to apply to a group of individuals acting as ordinary members of the public who pay primarily to watch broadcast television programs, many of which are copyrighted. “We have said that it does not extend to those who act as owners or possessors of the relevant product. And we have not considered whether the public performance right is infringed when the user of a service pays primarily for something other than the transmission of copyrighted works, such as the remote storage of content.”

Cablevision took the decision as meaning that it won’t impact its remote DVR technology. It won a key ruling in the 2nd Circuit in 2008, upholding the legality of the remote DVR storage service, even though major media companies challenged its legality back then. The U.S. solicitor general tried to distinguish Aereo from Cablevision’s RS-DVR by noting that Cablevision’s remote storage was of content that the cable provider had licensed.

“We are gratified that the Court’s decision adopted a sensible middle ground, holding that unlicensed retransmission services like Aereo violate the copyright law, while protecting consumer friendly, cloud-based technologies, such as RS-DVR.”

The case could have an impact on pending litigation by broadcasters, including Fox, against Dish Network’s offering of its Hopper service, in which entire nights of primetime programming are automatically recorded and, if the subscriber chooses, commercials are automatically deleted. Another Dish offering, using Slingbox technology, allows customers to stream their purchased channels to an array of devices.

Gary Shapiro, president and CEO of the Consumer Electronics Assn., said they were disappointed with the ruling, and that it “raises issues on the future of broadcasting.”

“Given that consumers are increasingly choosing to view content ‘anytime/anywhere’ on smartphones and tablets, and only 6% of Americans rely exclusively on over-the-air television, we question how much longer broadcasters can claim to justify their use of public spectrum when they oppose innovative services like Aereo, which expand the viewing audience,” Shapiro said.