Symposium: Aereo decision injects uncertainty into copyright

Mitch Stoltz is a  Staff Attorney at the Electronic Frontier Foundation

Wednesday’s decision in American Broadcasting Cos. v. Aereo raises a big question about the right sources of interpretive authority in copyright cases.  Justice Breyer’s majority opinion, finding that Aereo performed television programs publicly, was driven by legislative history and first principles, with analysis of the statutory text an afterthought.  That approach turned a pure question of statutory interpretation into something more like common law adjudication.  This is a departure from Justice Breyer’s past decisions on copyright, which have generally put the text first. If the new approach becomes the norm in Aereo’s wake, it could transform copyright into a more flexible but also far more unpredictable legal regime.

U.S. copyright law is partly a codification of some common law concepts, and in many areas it leaves room for common-law-like analysis, where judges render decisions from “reason and experience” with little guidance from Congress.  Many copyright cases to reach the Court in recent decades dealt in these areas:  fair use, a flexible limitation on copyright’s scope based on broad guidelines, and secondary liability, a judge-made collection of doctrines for when and how to hold those at a remove from actual infringement responsible.  Fair use, which reached the Court in Sony Corp of America v. Universal City Studios and Campbell v. Acuff-Rose Music, uses a balancing process that resembles an equity analysis, weighing four non-exclusive factors.  Secondary liability, which the Court tackled in Sony and in MGM v. Grokster, is rooted in the common law of torts and agency.  The flexibility of these parts of copyright, and the lack of any guidance in the statute, led the Court to use copyright’s first principles (promoting the progress of knowledge; rewarding creativity), analogies to patent and tort law, and economic and policy considerations to inform its decisions.

Other cases have involved simply applying the words of the Copyright Act – often convoluted and imprecise but not, on their face, inviting judicial discretion or common-law-style adjudication.  Kirtsaeng v. John Wiley & Sons, Justice Breyer’s most recent copyright opinion before Aereo, was such a case.  It turned on whether the “first sale” doctrine, a defense codified in statute, applied to works first published abroad.

Aereo appeared to be the second kind of case.  The question on appeal did not involve fair use, secondary liability, or any affirmative defense.  It was, instead, a threshold question at the heart of every copyright lawsuit:  did the defendant’s actions with regard to the plaintiff’s creative work fall within the categories that are reserved exclusively to the copyright holder?  Specifically, did Aereo’s system “perform” copyrighted works “publicly” by means of “transmissions”?  On this question, Congress did not explicitly ask the courts to balance anything, nor to fill any decisional gaps with rules derived from the common law.

But the majority’s approach in Aereo transformed interpretation of the transmission clause into a common-law-style exercise in judicial discretion. Justice Breyer’s opinion begins, as would a tort or contract question of first impression, with an animating principle:  that “one of Congress’s primary purposes” in enacting the Copyright Act of 1976 was to establish that cable systems made public performances that were subject to copyright and required a license.  He then concludes that Aereo’s system is “substantially similar” to a cable system and is thus making public performances.  To that point, the opinion does not grapple with the words of the Copyright Act at all.

When it does turn to a textual analysis, the opinion makes clear that its reading of Congress’s words is being steered entirely by the “similar to cable” principle it began with.  Although Justice Breyer acknowledges that Aereo’s system works very differently from a cable system, he finds the differences “not critical” because of the “similarities . . . considered in light of Congress’s basic purposes.”

This outcome-driven textual analysis leads the Court into strange territory.  The Copyright Act defines a public performance in part as “to transmit or otherwise communicate a performance . . . of [a] work . . . to the public.”  In order to conform to the conclusion, already established, that Aereo resembles cable and must be treated the same, the opinion asserts that a series of phone calls made to different people but expressing the same idea are a single “performance,” and that multiple showings of a play constitute a single performance as well.  Thus, said the Court, multiple transmissions of the same work by the same entity constitute “a performance of a work.”  This tortures the meaning of the word “performance,” or renders it superfluous in the statute.

This is very different from Justice Breyer’s approach when he wrote for the majority in Kirtsaeng.  In that opinion, he began with a close reading of the text of another Copyright Act section.  “The language of §109(a) read literally,” he wrote, favored the defendant’s interpretation and “provides each word . . . with a distinct purpose.”  A look at legislative history and the potential consequences of the decision followed, but unlike in Aereo, they served only to confirm the textual analysis.

Wednesday’s decision, with the tail of “purpose” wagging the dog of statutory text, penalizes Aereo for relying on a plausible definition of the word “performance.”

If the statutory language can’t be relied on, what rule will apply?  The opinion sets out guidelines that more closely resemble the open-ended fair use analysis, or perhaps the proximate cause analysis in a tort case.  A system makes public performances if a court determines that it falls in the “context” of cable and has “substantial similarity” to that business.  In reaching that conclusion, future courts can look to whether the user is the “owner or possessor” of the digital audio or video being transmitted, and whether the user “pays primarily for something other than the transmission of copyrighted works.”  And these vague criteria are to be applied “in light of [the] statute’s basic purposes.”

Transforming a firm statutory rule into an equitable collection of factors to be weighed in light of first principles certainly gives courts more flexibility to address new technologies, just as the fair use doctrine does. But with flexibility comes uncertainty, and with uncertainty comes litigation. Defining the bounds of “similarity” to a cable system will require much litigation, and cases comparing cloud storage systems and other new technologies against cable systems will be complex and expensive.

An interesting option remains to Aereo as a result of the Court’s new approach.  The 1976 Copyright Act included both the “Transmit Clause,” which required cable systems to obtain licenses for copyrighted programs, and a compulsory license, Section 111, which granted such a license to cable operators who comply with a complex set of conditions.  In 2011, another Internet TV startup, called ivi, launched a service similar to Aereo’s but without the multiple-antenna setup.  ivi’s position was that it was a “cable system” under the Copyright Act, and that it was entitled to use the Section 111 license. The Second Circuit, relying largely on a legal opinion by the U.S. Copyright Office, held that the Internet is very different from a cable system and that ivi could not use the statutory license.

The Aereo opinion seems to overrule the ivi decision by holding that Internet-based video streaming is substantially similar to cable regardless of any technological differences. Justice Breyer’s opinion also noted that the Transmit Clause and Section 111 were part of the same enactment and gave effect to the same congressional intent to regulate cable companies’ relationship with producers. If Aereo is similar enough to cable to fall within Congress’s intent to impose copyright restrictions, it would seem to follow that Aereo can use the license that Congress provided. By paying a fee and complying with that section’s requirements, Aereo just might get back into the law’s good graces.