McAdams On: Aereo’s Hail Mary

From the Department of Stuff You Cannot Make Up July 10, 2014
THIMBLERIG— Now that the highest court in the United States has determined that Aereo is breaking the law, it is countering with the clever strategy of claiming that it’s not breaking the law because the Supreme Court said it resembles a cable system. By extension, Aereo says it’s therefore eligible to negotiate for the carriage of TV signals. That was the upshot of its response to the district court judge whose denial of an injunction against Aereo was overturned by the Supreme Court last month.

“If Aereo is a ‘cable system’ as that term is defined in the Copyright Act, it is eligible for a statutory license, and its transmissions may not be enjoined,” Bruce P. Keller of Debevoise & Plimpton LLP wrote in a joint letter with the plaintiffs to Judge Alison Nathan of the U.S. District Court for the Southern District of New York.

The high court basically told Judge Nathan to issue the injunction. Aereo basically told Judge Nathan not to issue the injunction because it really isn’t what it said it was back when she denied the injunction.

Because, you see, Aereo is the mayor on HBO’s “True Blood.”

“The Supreme Court has announced a new and different rule governing Aereo’s operations.” Keller wrote for Aereo. “Under the Second Circuit’s precedents, Aereo was a provider of technology and equipment with respect to the near-live transmissions at issue in the preliminary injunction appeal. After the Supreme Court’s decision, Aereo is a cable system with respect to those transmissions.”

The broadcast plaintiffs in the case responded with words to the effect of, “what are these guys smoking?”

“It is astonishing for Aereo to contend that the Supreme Court’s decision automatically transformed Aereo into a ‘cable system,’” Keller wrote for the plaintiffs.

Aereo says it’s eligible to carry TV signals pursuant to the Copyright Act, Title 17, wavy sign 111, which defines the “limitations on exclusive rights: Secondary transmissions of broadcast programming by cable,” and serves as a natural alternative to Sominex.

However, Copyright Act, Title 17, wavy sign 111 says secondary transmission is “permissible under the rules, regulations or authorizations of the Federal Communications Commission.” And the FCC says in 47 Code of Federal Regulations wavy sign 76.64(a) that “no multichannel video programming distributor shall retransmit the signal of any commercial broadcasting station without the express authority of the originating station,” emphasis mine. Exceptions include must-carry and distant signals for unserved households, which do not apply to Aereo.

And so, to the first point: Did the Supreme Court define Aereo as a cable system, or is this a classic case of language filtering. It was a short-lived relationship, after all. Here’s what the ruling said, emphasis also mine:

“Because Aereo’s activities are substantially similar to those of the [community antenna TV] companies that Congress amended the [Copyright] Act to reach, Aereo is not simply an equipment provider.”

This does not appear to be a classification. Jim Burger, a media and intellectual property attorney with Thomson Coburn LLC, said in fact that the court did not formally define Aereo as a cable system, per se.
Had it done so, Aereo and everything like it would have become the FCC’s headache. However, the opinion leaves much to be desired, according to Gus Horowitz, a telecom attorney at the University of Nebraska College of Law.

“Even though it reaches the correct outcome, the Supreme Court’s Aereo opinion is staggeringly, and confusingly, bad. The court’s ‘looks like cable’ analysis fails to address the difficult questions about the meaning of the Copyright Act; rather, it has added to existing confusion,” he wrote for Tech Policy Daily.

Even if Judge Nathan accepts that the high court defined Aereo as a cable system, there’s that pesky sticky wicket of “express authority,” something the FCC recently reiterated with a $2.25 million fine against a Texas cable operator. Media attorney R. Scott Flick with Pillsbury in D.C.:

“The Supreme Court clearly did not rule that Aereo was a cable system for purposes of applying the compulsory license, and even if it had, it still wouldn't circumvent the need to get retrans consent from the broadcasters Aereo wants to carry. More importantly, Aereo’s copyright infringement up to this point carries potential damages awards to broadcasters in the multi-billions of dollars, making any rescue effort by Aereo too little, too late. 

This goes to what the Mr. Keller wrote for broadcasters in the aforementioned joint letter:

“Have these guys stepped off a curb and hit their head?”

Or rather, whether or not the court entertains the cable definition defense, the injunction should be imposed “given the court’s ruling that Aereo has been violating plaintiff’s exclusive rights to publicly perform their works for over two years, during which time plaintiffs, as the court held, have suffered irreparable harm.”

And “irreparable harm,” ladies and gentleman, is a core component of the justification for an injunction. “Irreparable” in that it can’t be measured in the way the judges in the Fox-Dish Hopper stand-off suggest is possible. (See the superbly crafted piece, “Fox v. Dish Hopper: Court Skeptical of ‘Irreparable Damages.”) The Aereo damage is arguably irreparable because the TV stations in the 13 markets where it launched have no way to measure its impact on ratings, the universal currency of ad revenue.

Finally, Aereo argues that even if the court grants an injunction for “near-simultaneous” playback, it should not cover recording under the precedent set in Cablevision. This conveniently ignores “express authority.” Aereo’s plea to the district court amounts to a Hail Mary in overtime, or as Mr. Flick writes: “Aereo is rearranging deck chairs on the Titanic not as it sinks, but as it sits on the bottom of the ocean.”

One more point peripheral to Aereo is the implication of the Supreme Court’s ruling, made by Mr. Burger.

Under this ruling, Google comes up with a local OTT package,” he said. “They could go to the broadcasters with a check.”

It seems the fun has just begun.

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