Aereo fights back by asserting itself as a Cable Company without Cables(!)

Survival instinct prevailed when Aereo recently embraced the US Supreme Court’s ruling which had declared its transmission services illegal in June. Readers may recall that the Court held Aereo’s new-age transmission of TV signal violative of the broadcasters’ public performance rights and, that Aereo was substantially similar to the traditional TV cable system. After ‘pausing’ its services in wake of the judgment, Aereo recently announced that it will now function as a cable company, in lieu of which it will pay the statutory licensing fees and resume its streaming services by  obtaining a legitimate cable companies’ content licence.  It seeks this status via an application for compulsory license to the US Copyright Office under Section 111 of the US Copyright Act. The same was stated in a letter to the Second Circuit which had stayed the litigation on January 2014 pending the Supreme Court’s decision.  Aereo’s intention is to avoid getting injuncted against and having to pay heavy damages for ‘irreparable harm’ suffered by broadcasters. The broadcasters obviously slammed this move, stating that Aereo’s stand on conducting negotiations was inconsistent and evasive; Further, Aereo’s new defence under Section 111 was impermissible because it had explicitly represented that it could not qualify as a “cable system” during the proceedings at the Supreme Court. The letter also stated that Aereo was proceeding to file the necessary statements of account and royalty fees.

Does Aereo qualify as a Cable Company, legally?

While remodelling the business as a cable company may make great business sense, the law will not legitimise this switch easily. The Supreme Court went only as far to call Aereo’s service substantially similar to traditional cable (TV) system, and concluded that Aereo is “not just an equipment supplier and that Aereo “perform[s].” Justice Breyer stated that there was an overwhelming likeness to cable companies, and that the technological differences between Aereo and cable companies were not critical. The Court also disregarded the requirement for physical cables as a necessity to constitute ‘cable system.’ However,  the judgment did not state or imply that Aereo was a cable system in toto, or indicate that Section 111(compulsory licence for cable companies) applied to Aereo. Section 101 is known as the ‘Transmit clause’ under the US Copyright Act, and was introduced against a backdrop of expanding cable networks and was accompanied by a licensing scheme for retransmission via cable. The Transmit clause principles began to be applied in case of online TV streaming to check whether the broadcast work were communicated to the public.  However, the licensing scheme does not apply to online TV streaming, it is squarely limited to cable systems. Therefore, Aereo’s extension of the Court’s finding may not be agreeable to the US Copyright Office, which may deny it a licence under Section 111.

FilmOn’s on to Aereo

Aereo’s legal strategy focused on primarily arguing on the merits of issues at the Supreme Court. This reason was partly because of FilmOn- a service that describes employing Aereo like technology (cheekily christened  AereoKiller, previously, and (Aereo’s investor) before that) was posing stiff competition to Aereo. The broadcasters swooped on FimOn also, who presumably had no qualms about losing the fight to the broadcasters, since FilmOn’s owner Alki David happens to be a media entertainment bigshot who owns several broadcast networks in the US(The conspiracy theory grapevine has it that Alki David was secretly working with broadcast companies to lose Aereokiller’s lawsuits and pre-empt Aereo’s entry with similar technology in those state jurisdictions).

FilmOn seeks refuge under the Cable Company Umbrella (again)

Brushing the conspiracy theorists aside, FilmOn has actually been around for a longer period than Aereo. It provides a variety of TV services apart from its Aereo-esqe streaming services. FilmOn has also embraced the ruling, declaring its newest service as a cable service. Further,it claimed that its latest streaming technology superseded Aereo’s, and preferred to call its TV signal capturing instrument a “Teleporter cum remote antenna”.  It still runs a big risk of being declared illegal, given that the technology has not been tested in the Courts yet.

Alki David had spoken about a long standing broadcasters’ dilemma on treatment of such online TV streaming services as cable companies. In fact, well before Aereo launched, CBS Networks had sued FilmOn arguing that it was not a cable company. On the other hand, more recently the CBS argued that FilmOn was a cable company before the 9th Circuit Bench (case is pending). David insists that FilmOn meets all the criteria of a cable company as per the Aereo ruling and news reports indicate that FilmOn has filed for compulsory licence at the US Copyright Office funder Section 111 of the Copyright Act for the second time now( a similar request in 2011 was filed by Ivi and FilmOn– it was denied).

wonder if FilmOn’s and Aereo’s strategies are indicative of a trend waiting to grip innovation in the online TV streaming space. Will every technology in the niche online TV streaming space have to dress itself as a ‘cable company’ if the US Copyright Office grants Aereo a licence? This has been attempted by the likes of Intel in 2013 and reportedly, Sony is trying the same now. To appreciate this, consider the case of NimbleTV– it operates on a system in same market space and has the same purpose, i.e. online TV streaming.  The difference is that its system requires a customer to have a valid cable subscription, and therefore has escaped legal scrutiny until now.

To conclude, unless the Court accepts Aereo’s newest garb of a cable company and infuriated broadcasters agree to negotiate reasonable license fees for retransmission,  Aereo may have to switch completely to a time-shifted video or playback service or shut shop.

In other news, the Argentinian government in a massive move towards free accessibility broadcast the 2014 FIFA World Cup matches for free on its state run network. Many other countries have done the same-  Russia, England, Portugal, Venezuela, Ecuador, China, Australia, Japan, South Korea, Germany, the Netherlands, Canada, Greece, Switzerland and Poland. Contrast this with the US where watching the matches on ESPN required a cable subscription, and India where the Delhi High Court recently imposed a blanket ban on 200 websites streaming the matches by issuing a John Doe order.

We will keep you updated on the developments on Aereo’s compulsory licence application. You may read the plaintiffs’ and Aereo’s filings before the Second Circuit here.

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