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Supreme Court Blow to Internet Based Transmission Startups

Contrary to popular belief, Copyright law’s main objective is not to protect the economic interest of copyright holders. ((See Okla. State Univ., Module 1: Purpose of Copyright Law,, (last visited Feb. 13, 2017).)) Instead, the primary purpose of copyright law is to promote the expansion and dissemination of the “useful Arts.” ((U.S. Const. art. I, § 8, cl. 8.)) The Supreme Court’s realist decision in ABC, Inc. v. Aero muddles the goal of Copyright by placing profits over artistic advancement. ((American Broadcasting Companies, Inc. v. Aereo, Inc., 134 S. Ct. 2498 (2014).))

Aero deviates from the previous Second Circuit reasoning in Cartoon Network v. CSC Holdings, LLC. ((Cartoon Network LP v. CSC Holdings, Inc., 536 F.3d 121 (2d Cir. 2008).)) In this manner, Aero creates a fact intensive, realist standard when evaluating television broadcast company’s copyrights and abandons Cartoon Networks’ formalist approach that focused on the mechanical aspects of a company’s underlying technology. ((See Copyright Act of 1976—Transmit Clause—ABC, Inc. v. Aereo, Inc., 128 Harv. L. Rev. 371 (2014).)) Case-by-case, fact intensive standards breed uncertainty, and uncertainty problematically kills innovation in technology start-ups that rely on static legal loopholes to compete with big industry names. ((Id. at 379.))

In Cartoon Network, the Court held that at-home, user initiated DVR systems—stored at Cablevision’s (the defendant’s) central facility—did not infringe Cartoon Networks’ copyright in their TV programs. ((Cartoon Network, 536 F.3d at 121.)) The Cablevision DVR system in question allowed cable subscribers to make copies of TV shows for later viewing. ((Id.)) The individual subscribers’ recordings were stored on separate, personal hard drives housed at Cablevision. ((Id.)) The Court reasoned that the individual copies were initiated by users, stored on personal hard drives that applied to a single user, and therefore, were not publically performed works in violation of § 106 and § 101 of the Copyright Act of 1976. ((Id.))

In contrast, the court held six years later that Aero’s antenna based, internet broadcast system infringed ABC’s copyright. ((American Broadcasting Companies, Inc. v. Aereo, Inc., 134 S. Ct. 2498 (2014).)) Ironically, the start-up’s system was based on the Cablevision DVR system. ((Kevin W. Yoegel, The Aereo Loophole: A Retrospective Inquiry Into the Legality of Antenna Farms and Internet-Based Television, 87 Temp. L. Rev. 339, 358 (2015).)) Aero’s system used thousands of individually assigned antennas to allow its subscribers to select and make personal copies of over-the-air, broadcast television programs. ((Aero, 134 S. Ct. at 2499.)) These user initiated, personal copies were stored on hard drives dedicated to individual customers and housed at Aero’s central warehouse. ((Id.)) The only material difference between the Aero system and the Cartoon Network system is that Aero did not have a licensing agreement with the major broadcasters in place. ((Yoegel, supra note 11, at 360.))

The Court in Cartoon Network used a formalist approach that focused on the actual technology Cablevision used and how it functioned to reach its conclusion. ((Copyright Act of 1976—Transmit Clause—ABC, Inc. v. Aereo, Inc., 128 Harv. L. Rev. 371, 376-77 (2014)).)) It reasoned that Cablevision’s DVR system allowed individual users to record copies for person use; therefore, the performance of these copies was not a public performance. ((Cartoon Network LP v. CSC Holdings, Inc., 536 F.3d 121, 139 (2d Cir. 2008).)) Nonetheless, in Aero, the Court took a different, realist approach. ((Copyright Act of 1976—Transmit Clause—ABC, Inc. v. Aereo, Inc., 128 Harv. L. Rev. 371, 376-77 (2014)).)) It explained that Aero’s system, regardless of technical playback functionality, operated exactly as a cable broadcasting company; therefore, Aero’s system infringed a network’s copyright. ((American Broadcasting Companies, Inc. v. Aereo, Inc., 134 S. Ct. 2498, 2510 (2014).)) The Aero system looked like a cable broadcast system, acted like a cable broadcast system, so it must be a broadcast system. ((Id. at 2515 (Scalia, J., dissenting).))

The Court’s two holdings leave innovative broadcast companies in the dark. The standard set in Aero completely neuters the technology centric approach established in Cartoon Network. As such, budding broadcast companies—such as emerging cloud technology broadcast companies—cannot be certain of their future. This uncertainty dissuades investors and prohibits innovative broadcasting models. In other words, the Court’s most recent treatment of internet broadcast technologies undermines the goals of copyright. Until another internet-based broadcast case reaches the Supreme Court, the future of innovative broadcast companies will remain uncertain.

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