Aereo, Unlicensed Retransmissions, and Emerging Technologies: The Case for Congressional Action

• Author: Sarah E. Claypool
• Position: J.D. Candidate, The University of Iowa College of Law, 2015; B.A., The University of Iowa, 2012
• Pages: 1789-1811

Aereo , Unlicensed Retransmissions, and Emerging Technologies: The Case for Congressional Action Sarah E. Claypool  ABSTRACT: In American Broadcasting Companies v. Aereo, Inc. , the Supreme Court addressed a growing split among lower federal courts regarding the copyright liability of a business that retransmitted broadcast television programs to its subscribers for a monthly fee without obtaining a license or paying royalties. In holding that Aereo violated exclusive public performance rights, guaranteed to copyright holders by the Copyright Act, the Court overturned the Second Circuit’s interpretation of the Copyright Act’s Transmit Clause. The Court’s holding relied on Aereo’s substantial similarity to cable television to conclude that Aereo’s system “performed” “to the public” under the Transmit Clause. This Comment argues that the Court’s decision in Aereo provided little guidance regarding other service providers and could threaten the development of new technologies. The uncertain state of the law after Aereo requires action by Congress to provide more guidance. A comprehensive overhaul of the Copyright Act would best address the problems in applying the Copyright Act to modern technology, as exemplified by the Aereo litigation.  J.D. Candidate, The University of Iowa College of Law, 2015; B.A., The University of Iowa, 2012. I would like to thank the editors and writers of Volumes 99 and 100 of the Iowa Law Review for their hard work on this Comment. A special thanks to Zane Umsted, Luke Dawson, Maureen O’Brien, and Lisa Castillo for their immensely helpful comments and edits. Finally, I would like to thank my parents, Tom and Becky Claypool, for their unwavering support and encouragement. 1790 IOWA LAW REVIEW [Vol. 100:1789 I. INTRODUCTION ........................................................................... 1790 II. THE SPLIT AMONG FEDERAL COURTS ......................................... 1791 A. T HE C OPYRIGHT A CT AND THE P UBLIC P ERFORMANCE R IGHT .................................................................................. 1791 B. T HE T RANSMIT C LAUSE ......................................................... 1792 C. AEREO AND U NLICENSED R ETRANSMISSIONS OF B ROADCAST T ELEVISION ........................................................................... 1793 D. T HE S ECOND C IRCUIT A PPROACH TO THE T RANSMIT C LAUSE ................................................................................. 1794 E. F EDERAL D ISTRICT C OURTS ’ R EJECTION OF THE S ECOND C IRCUIT I NTERPRETATION .................................................................. 1796 III. THE A EREO DECISION .................................................................. 1797 A. T HE AEREO M AJORITY : A EREO V IOLATES E XCLUSIVE P UBLIC P ERFORMANCE R IGHTS .......................................................... 1798 B. T HE AEREO D ISSENT : “G UILT BY R ESEMBLANCE ” ................... 1802 IV. A EREO AND THE FUTURE OF COPYRIGHT LAW ............................. 1803 A. T HE AEREO A NALYSIS AND P OSSIBLE E FFECTS ON O THER T ECHNOLOGY ....................................................................... 1804 B. T HE C ASE FOR C ONGRESSIONAL A CTION ................................. 1807 V. CONCLUSION .............................................................................. 1810 I. INTRODUCTION In American Broadcasting Companies v. Aereo, Inc. , (“ Aereo ”) the Supreme Court resolved a split among federal courts over whether unlicensed retransmissions of broadcast television programs over the Internet violated copyright holders’ exclusive public performance rights. 1 Aereo, a television retransmission business that launched in early 2012 and attracted millions of dollars in investment, had spread rapidly across the United States and prompted litigation in several circuits regarding the copyright implications of its system. 2 By holding that Aereo infringed protections guaranteed to copyright holders, the Supreme Court overturned the Second Circuit’s interpretation of the Transmit Clause of the Copyright Act. 3 The decision was a death knell to Aereo and other businesses that were built around 1. See generally Am. Broad. Cos. v. Aereo, Inc., 134 S. Ct. 2498 (2014). 2. See WNET, Thirteen v. Aereo, Inc., 712 F.3d 676, 680 (2d Cir. 2013), rev’d , Aereo , 134 S. Ct. 2498. Aereo’s customers pay a monthly fee to receive transmissions of network “broadcast television programs over the [I]nternet.” Id. 3. Aereo , 134 S. Ct. at 2511 (overturning the Second Circuit’s decision in WNET that Aereo did not “perform” copyrighted works “publicly” in violation of the Copyright Act). 2015] AEREO : THE CASE FOR CONGRESSIONAL ACTION 1791 retransmitting broadcast television programs to subscribers over the Internet. 4 This Comment explores the Aereo decision and its potential effects. Part II examines the relevant portions of the Copyright Act and the split in authority between the Second Circuit Court of Appeals and federal district courts outside the Second Circuit regarding whether unlicensed retransmissions by Aereo-like services violated copyright holders’ exclusive public performance rights. Part III discusses the Aereo decision, which resolved the lower courts’ disagreement over the proper interpretation of the Copyright Act and its Transmit Clause. Part IV explores the potential effects of the Aereo decision, its potential impact on other technologies, and the broader issues underlying the Aereo litigation. Part V concludes by arguing that Congress should perform a comprehensive update of the Copyright Act to address changes in technology. II. THE SPLIT AMONG FEDERAL COURTS This Part discusses the portions of the Copyright Act at issue in the Aereo litigation, including the exclusive public performance right guaranteed to copyright holders and the Transmit Clause. It then explores Aereo and its business model, the Second Circuit’s interpretation of the Transmit Clause as allowing Aereo to retransmit programs without violating exclusive public performance rights, and the rejection of the Second Circuit approach by federal district courts outside the Second Circuit. A. T HE C OPYRIGHT A CT AND THE P UBLIC P ERFORMANCE R IGHT The Copyright Act of 1976 gives copyright holders several exclusive rights in their copyrighted work. 5 As the Supreme Court has explained, these protections aim “to secure a fair return for an author’s creative labor” while “stimulat[ing] artistic creativity for the general public good.” 6 One right the 4. See Mike Snider, Aereo Shuts Down Just Days After Court Decision , USA TODAY (June 28, 2014, 1:18 PM), http://www.usatoday.com/story/tech/personal/2014/06/28/aereo-ceo-shuts-down-service/11619083/ (reporting that Aereo’s CEO announced that the company will pause operations indefinitely in the wake of the Supreme Court decision). Other businesses, such as FilmOn X, that used systems modeled after Aereo will also be affected by the Court decision. See infra Part II.E. 5. See Copyright Act of 1976, 17 U.S.C. § 106 (2012) (giving copyright holders the exclusive right to reproduce or make copies of copyrighted work; to create derivative works stemming from the copyrighted work, to distribute copies of the copyrighted work to the public; to publicly perform the copyrighted work; to publicly display the copyrighted work, or, “in the case of sound recordings,” to publicly perform the work via audio transmissions); see also Shyamkrishna Balganesh et al., Judging Similarity , 100 IOWA L. REV. 267, 272 (2015) (discussing copyright owners’ exclusive rights). 6. Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417, 432 (1984) (internal quotation marks omitted); see also Twentieth Century Music Corp. v. Aiken, 422 U.S. 151, 156 (1975) (discussing the purposes of the Copyright Act and noting that “[c]reative work is to be 1792 IOWA LAW REVIEW [Vol. 100:1789 Copyright Act guarantees is the exclusive right to perform the work publicly. 7 The statute defines “performing a work publicly” as (1) performing a work in a public location or at a “place where a substantial number” of people have gathered; or (2) “to transmit . . . a performance or display of the work . . . by means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times.” 8 B. T HE T RANSMIT C LAUSE The latter definition of a “public performance,” known as the Transmit Clause, protects copyright holders against retransmissions of their works without their permission. This definition of “public performance” did not appear in the 1909 version of the Copyright Act; however, when Congress passed the 1976 Copyright Act, it broadened the definition of “public performance” by adding the Transmit Clause. 9 Congress passed the 1976 Copyright Act in response to changes in technology, specifically the emergence of cable television, and included the Transmit Clause in order to abrogate Supreme Court decisions interpreting the 1909 Copyright Act to mean that cable companies did not “perform” copyrighted works by transmitting broadcast television to subscribers. 10 In addition to adding the Transmit Clause to bring cable retransmissions within the scope of copyright holders’ exclusive performance right, the 1976 Copyright Act established a encouraged and rewarded,” with the ultimate goal to “promot[e] broad public availability of literature, music, and the other arts”). 7. 17 U.S.C. § 106(4) (“[I]n the case of literary, musical, . . . and motion pictures and other audiovisual works, [the copyright owner has the right] to perform the copyrighted work publicly.”). 8. Id. § 101. This express definition is unlike the terms “license” and “ownership” in the Act, both were left undefined. Christopher M. Newman, A License Is Not a “Contract Not to Sue”: Disentangling Property and Contract in the Law of Copyright...