Second Circuit Issues Decision in WNET v. Aereo

April 1, 2013The New York State Bar Association EASL Blog

The Second Circuit's decision in WNET v. Aereo, affirming the denial of a PI, found that the District Court "correctly concluded that Aereo's system is not materially distinguishable from the system upheld in Cartoon Network LP, LLLP v. CSC Holdings, Inc., 536 F.3d 121 (2d Cir. 2008)." Judge Chin dissented.

The Court focused on whether Aereo's service infringes the plaintiffs' public performance right under the Copyright Act. The plaintiffs argued that the "Aereo's transmissions of broadcast television programs while the programs are airing on broadcast television fall within the plain language of the Transmit Clause and are analogous to the retransmissions of network programming made by cable systems, which the drafters of the 1976 Copyright Act viewed as public performances."

Looking at its Cablevision decision and a reading of the Transmit Clause, the Court noted that "the Cablevision court concluded that Cablevision's transmission of a recorded program to an individual subscriber was not a public performance....Each transmission of a program could be received by only one Cablevision customer, namely the customer who requested that the copy be created. No other Cablevision customer could receive a transmission generated from that particular copy."

The Court found that the two key features of the Cablevision system are also present in the Aereo system: (1) the creation of "unique copies of every program a Cablevision customer wished to record," and (2) the "transmission of the recorded program to a particular customer was generated from that unique copy; no other customer could view a transmission created by that copy." As described by the Court, in Aereo's system: "when a ... customer elects to watch or record a program using either the "Watch" or "Record" features, Aereo's system creates a unique copy of that program on a portion of a hard drive assigned only to that Aereo user. And when an Aereo user chooses to watch the recorded program, whether (nearly) live or days after the program has aired, the transmission sent by Aereo and received by that user is generated from that unique copy. No other Aereo user can ever receive a transmission from that copy. Thus, just as in Cablevision, the potential audience of each Aereo transmission is the single user who requested that a program be recorded."

The plaintiffs' argument that Cablevision had a license as opposed to Aereo was rejected, because the Court found there was no public performance and, therefore, no license was needed. The Court also rejected plaintiffs' argument that discrete transmissions should be aggregated to determine whether they are "public performances," noting that this interpretation of the Transmit Clause had been rejected by Cablevision. The Court emphasized that the interpretation adopted by Cablevision "focuses on the potential audience of the performance or work being transmitted, not the potential audience of the particular transmission."

The Court also rejected the plaintiffs' argument that the two cases also should be distinguished because "Cablevision was decided based on an analogy to a typical VCR, with the RS-DVR simply an upstream version, but Aereo's system is more analogous to a cable television provider." The Court explained that its interpretation of the public performance right in Cablevision was not "influenced by any analogy to the stand-alone VCR."

Further, the Court rejected the plaintiffs' analogy of the Aereo system to Internet streaming as a public performance. The Court found that an Aereo' user's "volitional control over how the copy is played makes Aereo's copies unlike the temporary buffer copies generated incident to internet streaming."

The Court found nothing wrong with Aereo designing its system to avoid copyright liability. In this respect, the Court further analogized Aereo to "many cloud computing services, such as internet music lockers..." Despite the plaintiffs' concern, shared by Judge Chin, that complex technological workarounds should not excuse functionality that would otherwise constitute a public performance, the Court observed: "Perhaps the application of the Transmit Clause should focus less on the technical details of a particular system and more on its functionality, but this Court's decisions in Cablevision and NFL, 211 F.3d 10, held that technical architecture matters." In interpreting the public performance provisions of the Copyright Act, the Court noted that "[i]n the technological environment of 1976, distinguishing between public and private transmissions was simpler than today" and new devices such as RS-DVRs and Slingboxes complicate the analysis. Nevertheless, while "Aereo's service may resemble a cable system, it also generates transmissions that closely resemble the private transmissions from these devices."

Lastly, the Court made the interesting observation that "[o]ne panel of this Court...'cannot overrule a prior decision of another panel'....We are 'bound by the decisions of prior panels until such time as they are overruled either by an en banc panel of our Court or by the Supreme Court.'" [Emphasis added] This assuredly is not the end of this issue.

Notable is Judge Chin's strong 27-page dissent, which starts out by characterizing Aereo's system as "a sham. The system employs thousands of individual dime-sized antennas, but there is no technologically sound reason to use a multitude of tiny individual antennas rather than one central antenna; indeed, the system is a Rube Goldberg-like contrivance, over-engineered in an attempt to avoid the reach of the Copyright Act and to take advantage of a perceived loophole in the law." Judge Chin concludes that Aereo's transmission of live public broadcasts over the
Internet to paying subscribers are unlicensed transmissions 'to the public.'"

The decision is available at: WNET v Aereo Opinion-2d Cir 12-2786.pdf