Poison ivi: compulsory licensing and the future of Internet television.

• Author: Garon, Dan
• Position: Internet-based television streaming technology provider ivi, Inc.

1. INTRODUCTION II. BACKGROUND A. A Brief History of Copyright Law and Compulsory Licensing B. Steady Expansion of American Copyright Law C. History of Compulsory Licenses in the Copyright Act D. The Rise of Broadcast Television and Cable Systems E. Compulsory Licenses for Cable Systems Introduced in the Copyright Act of 1976 F. Congressional Justifications, FCC Regulations, and Retransmission Consent III. ANALYSIS A. The Decline of Television Broadcasting, the Growth of Cable Conglomerates, and the Consolidation of Content Ownership B. STELA and the Push To Eliminate the Compulsory License C. Disruptive Innovation: ivi and Aereo 1. WPIX v. ivi, Inc 2. American Broadcasting v. Aereo E. Linear Feed Versus Individual Content F. Stifling Innovation? IV. Recommendation A. The Elimination of the Compulsory License Is Inevitable B. The Need for Parity in the Compulsory License C. The Existing Compulsory License Precludes Development of Interim Alternatives D. The Non-Issue of a Lack of Geographic Control E. Judicial Versus Legislative Action V. Conclusion I. INTRODUCTION

   Broadcast television plays a central role in modern American culture. Millions of Americans tune to local broadcast affiliates each day to watch local television news, sporting events, national network programming, and syndicated shows. (1) Although this content is available free of charge to viewers over-the-air, a majority of Americans nevertheless access broadcast television through a cable or satellite television subscription. (2) In particular, cable television not only offers easy access to high quality broadcast signals without the need for an external antenna, but also separately delivers tiers of premium channels not available over-the-air. (3) To deliver such a seamless user experience, cable companies retransmit over-the-air broadcast signals to their viewers through the cable television infrastructure. (4) End users simply hook their television into the cable network, pay a monthly fee to the cable company, and then have quick access to a stream of both local and premium content. (5)

   American copyright law grants copyright owners the exclusive right to perform their works publicly. (6) Public performance encompasses the transmission of a work, which, in this case, could be a movie, sitcom, or other video content. (7) Broadcasters therefore must negotiate with the copyright owners to carry programming. (8) However, when a cable company retransmits a broadcast television feed to its customers, it is presumably doing so outside of the scope of that broadcaster's license with the copyright owner. (9) Prior to the 1976 revision of the Copyright Act, cable systems escaped liability because the Supreme Court deemed these retransmissions outside the scope of the public performance right. (10) Congress subsequently included cable system retransmissions of distant signals of non-network programming within the copyright public performance right. (11)

   Recognizing the difficulty that a cable system would have in negotiating with numerous copyright owners, Congress instituted a compulsory (statutory) license for retransmitted works. (12) Cable companies could continue to retransmit broadcast television content; they would just pay a statutory royalty, which the government would distribute to copyright owners to compensate them for the additional public performances of their works. (13) Congress later provided a similar compulsory license for satellite television providers. (14) These compulsory licenses remain in effect today. (15)

   Innovation in the cable television market has been slower than many would like. Since the 1970s, cable companies have upgraded to digital technology, introduced on-demand programming via set-top boxes, dramatically expanded access to channels, and begun providing access to certain premium content over the Internet. (16) However, the basic business model--that customers pay a flat fee to access a large tier of channels-- has largely remained constant. (17) As a result, in the past decade, a variety of Internet startups have emerged to challenge traditional cable systems. (18) These companies seek to leverage changing consumer tastes, low infrastructure costs, and the flexibility of Internet technology to deliver a new television viewing experience. (19) However, to disrupt the existing cable market, the Internet streaming providers would like to also provide their customers with access to retransmitted broadcast television. (20)

   Unfortunately, new firms have met stiff resistance in trying to do so. (21) Because the compulsory license for cable systems does not appear to apply to Internet streaming providers, the new firms cannot rely on the statute as a safe harbor against infringement allegations. (22) However, because the compulsory license only offers protection for cable and satellite providers, there are no market-based clearinghouses available from which an Internet streaming provider can acquire broad rights to retransmit broadcast television. (23) At least one new firm has temporarily evaded copyright law by relying on technological gimmicks, but it is unclear if the strategy is durable. (24)

   Congress seems to be contemplating eliminating the compulsory license altogether. (25) Although it is unclear if or when this will happen, this Note argues that while the compulsory license remains in force, Internet streaming providers should be given equal access to it. If the compulsory license is ultimately eliminated, whatever market-based mechanisms replace it should afford equal access to content for Internet streaming providers.

   Part II provides an introduction to American copyright law and traces the roots of compulsory licensing. It then discusses the introduction of compulsory licenses for cable systems. (26) Part III analyzes the many factors affecting the modern compulsory license, including the decline of broadcast television and the growth of cable television. (27) Part III also discusses the recent trend of Internet streaming television, and how several new firms are attempting to gain access to television content. (28) Finally, Part IV recommends that either a market-based mechanism or statutory provision provide parity in relation to content licensing so that disruptive innovators can continue to emerge. (29)

2. BACKGROUND

   American copyright law is designed to provide incentives for authors to create new works. (30) As part of that package of copyright rights, authors are granted the exclusive right to perform their work publicly. (31) The cable system compulsory license provides compensation for copyright owners under this right when cable systems retransmit broadcast television signals. (32) This Part first discusses the history and expansion of American copyright law, and then traces the roots of the compulsory license for cable systems. Finally, this Part addresses some of the ancillary areas of law relevant to the television retransmissions.

   1. A Brief History of Copyright Law and Compulsory Licensing

      Under American copyright law, it is axiomatic that original works of creative expression, such as books, movies, musical compositions, or television broadcasts, are protected against unauthorized copying. (33) Copyright law generally grants authors (34) the exclusive right to copy, distribute, perform, display, or create derivative versions of their work. (35) Breaching these exclusive rights constitutes copyright infringement, (36) and infringers can face harsh civil, (37) and sometimes criminal, (38) penalties. For example, a jury recently awarded $1.3 billion to software giant Oracle after its archrival, SAP, copied portions of its software code and user manuals. (39) This was reportedly the largest infringement verdict in American history. (40) Moreover, within the past decade, federal prosecutors have been successful in gaining criminal convictions for copyright infringers, most notably involving unauthorized distribution of music files over the Internet. (41) These recent enforcement examples underscore the degree to which courts, Congress, and major industries in the United States take copyright law seriously. (42)

   2. Steady Expansion of American Copyright Law

      American copyright law largely springs from England's enactment of the Statute of Anne in 1710. (43) The Framers adopted a Copyright Clause in the American Constitution in 1787, (44) which is rooted largely in economic theories of incentivizing innovation and creativity. (45) The non-economic bases for copyright law largely involve a desire to protect the fruits of individual labor, much in the same way a farmer would have a property right in his harvest. (46)

      In 1790, Congress passed the first Copyright Act, offering protection to narrow categories of works--namely, books, maps, and charts--for a 14-year duration. (47) As technology evolved, copyright expanded dramatically. (48) In 1831, Congress extended the term to 28 years, with an option to renew for another 14 years, and added musical compositions to the list of protected subject areas. (49) In 1909, Congress extended the renewal term to 28 years, and offered protection to all writings at the moment of publication. (50) In 1976, Congress engaged in the most recent major overhaul of the copyright system, broadening copyrightable subject matter to eight liberally construed categories of works, (51) and extended the term to the author's life plus 50 years--or in the cases of works made for hire or anonymous works, for 75 years. (52) Prodded by interest groups, Congress has amended the 1976 Copyright Act numerous times to grant additional protections for authors. (53) Perhaps most substantially, in 1998, Congress extended the term yet again, granting protection to works for the author's life plus 70 years, and in the cases of works made for hire or anonymous works, for a 95-year term. (54) Most scholars agree, in terms of protections for authors, today's copyright law is more...