Aereo, Antenna Farms and Copyright Law: Creative Destruction Comes to Broadcast TV (Part 2)

by Lee Gesmer on May 21, 2013

Aereo, Antenna Farms and Copyright Law: Creative Destruction Comes to Broadcast TV (Part 2)

Only one thing is impossible for God: to find any sense in any copyright law on the planet.

– Mark Twain’s Notebook, 1902-1903

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Click here to see Part 1 of this series of posts.

In part 1 of this series I described how Aereo’s technology allows users to watch, record and access broadcast TV over the Internet. At the heart of this system is the use of a set of dime-sized antennas assigned to each subscriber, short buffering in RAM for retransmission and the creation of a unique per-subscriber copy of each broadcast the user wants to record for later viewing.

Why did Aereo construct its system this way?  Why not one antenna and one copy of each broadcast? Aren’t the thousands of antennas and thousands of personal copies expensive and unnecessary? The answer is that they may be expensive and technically unnecessary, but they are essential to Aereo’s ability to avoid broadcaster claims of copyright infringement. In fact, this Rube Goldberg system was designed to fit the legal parameters of a case decided by the Second Circuit in 2008. And, it is no accident that Aereo first released its service in New York, which falls in the Second Circuit, drawing a lawsuit by the broadcasters in the same circuit that had decided the 2008 case.

The case that Aereo based its design on is the Second Circuit’s famous (or, to the broadcast industry, infamous) decision in Cartoon Network v. CSC Holdings, usually referred to as the Cablevision case. In Cablevision the broadcasters tried to enjoin Cablevision—a cable operator with a license to retransmit cable programming to its paying subscribers—from introducing a remote storage digital video recorder (network-DVR) that would allow Cablevision customers who did not have a TiVo-like set-top DVR to record cable programming and receive playback through the cable system itself, or from “the cloud.”

Cablevision’s network-DVR system is itself something of a Rube Goldberg creation. Cablevision’s network-DVR utilizes a complex buffering and storage technology that splits a licensed cable broadcast feed into two streams, one of which includes a “buffer” copy directed to a router where it is stored in RAM for no more than 1.2 seconds as the router looks to see if any customers have asked that the program be recorded for them. If a customer has asked for the program to be recorded, the data is stored on a Cablevision hard drive storage area maintained by Cablevision and assigned solely to that customer, where it is available for later replay, much as it would be if it had been stored on a set-top DVR. If there is no “record” request from a subscriber, the data in the revolving buffer is not retained.remote dvr

For example, if 50,000 Cablevision customers recorded the Super Bowl, Cablevision would create 50,000 copies, one for each customer. If a customer wanted to play back the program, Cablevision would transmit the specific copy created for that customer. No one else could access that copy.

The broadcasters filed suit in federal court in the Southern District of New York, claiming copyright infringement. In 2007 the district court judge, Denny Chin, enjoined Cablevision, but the Second Circuit issued a controversial decision reversing Judge Chin and rejecting the the broadcasters’ copyright challenge based on  some highly technical interpretations of copyright law.*

*Ironically, Denny Chin, the district court judge reversed by the Second Circuit in Cablevision, was later elevated  to the Second Circuit, and became a dissenting judge on the 3-judge panel that decided Aereo in 2013.

Cablevision’s Buffered Copies Do Not Meet Copyright Law’s Fixation Requirement

First, the Second Circuit held that the 1.2 second buffered copy was not an infringing copy because it was not embodied “for more than a transitory duration.” A 1.2 second copy does not, the court held, satisfy copyright law’s “fixation” requirement,* and therefore the buffered copy did not qualify as a “copy” under the Copyright Act’s definition of that term. However, the court did not state how long a copy wold have to be embodied to be more than transitory, and its holding arguably conflicts with the 9th Circuit’s 1993 ruling in MAI Systems v. Peak Computer, which held that copying, for purposes of determining copyright infringement, includes the transfer from a permanent storage device (such as a hard drive) to RAM.

*”A work is ‘fixed’ in a tangible medium of expression when its embodiment in a copy or phonorecord, by or under the authority of the author, is sufficiently permanent or stable to permit it to be perceived, reproduced, or otherwise communicated for a period of more than transitory duration.” 17  U.S.C. §101.

Transmission of a Unique Copy to a Single Subscriber Is Not a “Public Performance”

In addition to making a copy, one of the exclusive rights of a copyright owner is the right to authorize a “public performance” of a work. This right is found in a section of the copyright statute that includes a provision known as the “transmit clause,” which states that to perform a work “publicly” includes:

to transmit … a performance or display of the work … to the public, by means of any device or process, whether the members of the public capable of receiving the performance … receive it in the same place or in separate places…, at the same time or at different times. 17  U.S.C. §101.

The most controversial holding in Cablevision was the Second Circuit’s conclusion that the word “performance” did not refer to the performance of the underlying work being transmitted but rather the transmission itself. The court held that “the transmit clause directs us to examine who precisely is capable of receiving a particular transmission of a performance.” The court concluded that because Cablevision’s network-DVR required each transmission to be made to a single subscriber using a unique copy saved by that subscriber, the potential audience for a network-DVR playback transmission is limited to the single subscriber, and therefore the transmissions are not performances to the public.

In other words, for purposes of the “public performance” right the 50,000 copies of the Super Bowl (each of which has been “saved” to a separate directory by a single subscriber) should not be aggregated for purposes of determining whether Cablevision is engaged in a “public performance” of the Super Bowl.*

*Making individual copies for each subscriber in this manner requires thousands of terabytes of hard disk storage. The ability to provide this storage at low cost is a consequence of “Kryder’s Law,” which holds that magnetic disk storage density doubles every 13 months, a rate faster than the doubling of semiconductor chip performance according to Moore’s law.

It is this “unique copy” test that became critical when the broadcasters challenged Aereo in the Second Circuit.

Subscribers, Not Cablevision, Exercise the Volitional Conduct Necessary to Make a Stored Copy For Later Viewing 

Third, the Cablevision network-DVR does save a copy for each subscriber that requests it, and these copies clearly do meet the copyright statute’s fixation requirement. However, the Second Circuit focused on the “volitional conduct” that caused the copy to be made, and held that while Cablevision created and maintained a system that allowed a copy to be made, it is the customer’s conduct in ordering the system to make a copy—”the person who actually presses the button to make the recording”—that causes the copy to be made. The Second Circuit analogized Cablevision to a store proprietor who charges customers to use a photocopy machine on the store’s premises, in which case (in most circumstances) it is the customer, not the store owner, who makes the copy for purposes of determining direct liability under the Copyright Act.*

*The court emphasized that the conduct Cablevision engaged in would better be analyzed under principles of contributory infringement. However, Cablevision had not pursued that theory of liability.

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Clearly, the Cablevision network-DVR was designed to avoid copyright liability, not to achieve technical efficiency. And, if the Second Circuit’s three legal holdings strike you as threading the needle through some very tight legal loopholes, you are not alone. The case has its supporters, but their support is mostly based on copyright policy – why shouldn’t people who are paying for cable service that is being transmitted to them by the cable company under license be able to “time shift” their viewing of cable shows using a network-DVR, just as they can using a set-top DVR? However, strictly as a matter of copyright law each of the three conclusions has suffered scathing criticism by copyright law scholars—particularly the public performance and the “volitional conduct” holdings.

Nevertheless, this decision remains the law in the Second Circuit – copyright law’s most influential circuit. And, it didn’t take long for enterprising entrepreneurs to see how they could stretch this precedent even further, leading to the Second Circuit’s April 1, 2013 decision in WNET V. Aereo. In fact, Cablevision may have opened the door to creative destruction in the television industry. I will discuss Aereo in Part 3 of this series of posts.

Click here to continue to Part 3.

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