What you need to know about Aereo's Supreme Court case

Is Aereo a cable company or an antenna company? The distinction will make all the difference.

Published: June 24, 2014 04:30 PM

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Update 6/25/14: Today the Supreme Court ruled 6 to 3 against Aereo, in favor of broadcasters. The decision is a major blow to the streaming service. We'll have analysis on what the case means to you; check back soon.

The Supreme Court is close to ruling on a tussle between television broadcasters and Aereo, a two-year-old company that owns thousands of little, dime-sized antennas in cities across the country. The equipment captures over-the-air signals, then stores the content and streams it to Aereo’s customers, who pay $8 or $12 a month for the service, depending how much content they want.

The plaintiffs in American Broadcasting Companies vs. Aereo say that the company is retransmitting copyrighted programming without paying for it, a violation of copyright law. Essentially, the companies say, Aereo is acting like a cable company, transmitting TV shows to consumers and collecting fees for the service. The difference is that cable companies pay about $3 billion a year for the privilege. Aereo pays nothing.

But Aereo argues that it’s nothing like a cable company; it’s just renting out antennas and cloud storage. After all, a homeowner can buy and install an antenna to tune in local broadcasts, and then record the programs. By that logic, there’s no reason a homeowner should be blocked from renting an antenna and data storage from Aereo—it’s just an antenna with a really, really long cord.

So is Aereo a cable company, or an antenna company? That’s the essence of the decision the Supreme Court has to make. A number of legal commenters are predicting that the Court will decide for the plaintiffs, but using the narrowest possible language, to try to avoid stifling digital innovation, particularly in cloud services. If Aereo wins, the broadcasters could seek help from Congress.

Interested in handicapping the legal back-and-forth? Here’s what you need to know.   

Copyright law

The law governing copyrights is a 366-page document that covers everything from printed works to live performances of plays and music to broadcasting. The law protects the copyright holder’s exclusive right “to perform the copyrighted work publicly.” According to Section 101 of the law, that means:

"To transmit or otherwise communicate a performance or display of the work to a place specified by clause (1) or to the public, 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."

A cable company blasts out the same programming to all of its customers, and that’s defined as a public performance. The plaintiffs say that’s what Aereo is doing. The company disagrees, arguing that its customers are individually tapping into broadcasts using the company’s equipment, just the way they would if they bought their own antennas and recording equipment. Under the company’s logic, even if thousands of people watch the same local news program, that constitutes many private performances, not one big public performance.

Another section of U.S. copyright law defines cable companies (which are required to pay retransmission fees) in the following way.

"(3) Cable system.— A “cable system” is a facility, located in any State, territory, trust territory, or possession of the United States, that in whole or in part receives signals transmitted or programs broadcast by one or more television broadcast stations licensed by the Federal Communications Commission, and makes secondary transmissions of such signals or programs by wires, cables, microwave, or other communications channels to subscribing members of the public who pay for such service."

Again, does that accurately describe Aereo? It’s an open question.

Cablevision precedent

The Aereo case also involves a 2008 legal decision that OK'd the use of remote DVRs. In that lawsuit, the Cartoon Network claimed that Cablevision was infringing on copyrights by offering its customers cloud storage of television programming.

Private recordings of television programming had been approved by the courts in 1984, back in the Betamax days, but the plaintiffs argued that Cablevision was essentially creating additional performances of the content whenever viewers tapped into the programming.

Cablevision won, successfully arguing that its service was conceptually the same as having a DVR in your living room. (It’s worth noting that Cablevision doesn’t think this is a meaningful precedent, and it dislikes the comparison between its service and Aereo—after all, the Cablevision content had already been paid for.)

Implications for cloud computing

During oral arguments in April, the Supreme Court justices asked a lot of questions about how a ruling against Aereo could affect cloud computing. The concern seemed to be that if Aereo isn't allowed to store copyrighted material for its customers, a service such as Dropbox may not be allowed to, either.

The broadcasters argued that Dropbox’s customers are uploading their own material to the cloud—hopefully they own the rights to it, but if not, there’s no way for Dropbox to know. There are a number of good explanations of this issue online. This discussion by Lee Gesmer, a Boston attorney, leans toward dismissing the cloud argument as a bit of a straw man.

But companies that depend on cloud computing actually are worried. They argue that it’s not always so clear-cut whether a company or a person is controlling what gets saved to the cloud. Among the many briefs filed by outsiders on both sides of the issue is one by the Computer and Communications Industry Association and Mozilla. It argues that cloud-based music lockers would be threatened by a decision against Aereo, along with companies such as Simple.tv. Like Aereo, that company enables consumers to capture over-the-air broadcasts, recording them and sharing them with all of their devices over the Internet. The difference is that the equipment for Simple.tv resides in the user’s home.

The Supreme Court doesn't say in advance just when it's going to rule on each case, but the current term is ending next week. Observers say they think the court could push this decision to the very end of its schedule.

—Jerry Beilinson

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