Aereo — Just the middleman, or a scofflaw? In Plain English

For those of us who grew up adjusting the rabbit ears on our seventies-era televisions (and having to get up to change the channel to one of the other four or five available stations no remote controls!), the service offered by Aereo, Inc., is nothing short of miraculous. For just eight dollars a month, you get the ability to start watching a TV program say, the Super Bowl live on your iPhone while you are out of your house. When you get home, you can pick up seamlessly where you left off on your television or desktop computer. Or, you can record the entire program on a remote DVR assigned to you and watch the whole thing later on.

What could possibly be wrong with Aereos business model? For ABC and the rest of the broadcast television industry, pretty much everything. In their view, Aereo is blatantly violating federal copyright laws (and possibly jeopardizing the entire broadcast industry) by streaming live TV over the Internet without paying the networks for the right to do so. Aereo counters that everything it does is completely legal: the TV programs that it makes available are already broadcast for free over the public airwaves; Aereo is just making it easier and more efficient for its subscribers to watch those programs. Tomorrow, the Supreme Court will hear oral arguments from both sides of the dispute, with a decision expected by summer. Heres the lowdown on American Broadcasting Companies, Inc. v. Aereo, Inc., in Plain English.

Lets start with some basic principles of copyright law. Copyright law is intended to strike a balance. We want to encourage people to write books, compose music, and (among other things) produce TV shows for the public to enjoy. But at the same time, we want to provide an incentive for people to do these things. One way that copyright law does so is by giving the owner of a copyright the exclusive right to perform the work in public. So you cant, for example, perform a copyrighted play without the owners permission which will often require a fee, known as a license.

In 1976, Congress passed new copyright laws to make clear what it means to perform . . . a work publicly. The new laws were in part a response to two Supreme Court decisions that allowed companies to use cables to transmit television programs to viewers who could not pick them up on their antennas. Congress defined the phrase broadly as to transmit . . . a performance . . . to the public, by means of any device or process, whether the members of the public . . . receive it in the same place or in separate places and at the same time or at different times. The 1976 law also defined transmit broadly: to communicate . . . by any device or process which includes technology that had not yet been developed whereby images or sounds are received beyond the place from which they are sent.

Enter Aereo, whose website touts the fact that, if you subscribe to Aereo, there is no new hardware to buy or install. Instead, when you tune in on your iPhone, tablet, computer, or home TV, you are assigned a tiny remote antenna housed with thousands of others at an Aereo facility. That antenna starts making a recording of the program that you want; you can then either start watching the program live (after a few seconds) or save it on a hard drive until you want to watch it later.

ABC, CBS, NBC, Fox, and other broadcasters went to court to stop Aereo from streaming their copyrighted programs to its subscribers. But the court of appeals ruled in Aereos favor, ruling that, because the company is providing each of its subscribers with an individual transmission of a copyrighted program, it isnt transmitting performances to the public; it is just sending out many thousands of separate private performances. A dissenting judge sharply criticized Aereo, writing that its system was a sham because there is no technologically sound reason to use a multitude of tiny individual antennas rather than one central antenna. Both the broadcast industry and Aereo then asked the Supreme Court to weigh in, which it agreed to do in January.

For the broadcasters, this is an easy case that falls squarely within the language that Congress added to the copyright laws nearly forty years ago. When it captures the programs that the industry broadcasts over the air and then re-transmits them to its subscribers over the Internet, the broadcasters argue, Aereo is clearly transmitting a performance to the public. This is so, they contend, even if Aereos subscribers are each receiving separate re-transmissions at their own homes or on their own devices, through their own individual antennas.

The broadcast industry also emphasizes that the networks have invested billions of dollars in programming; they get their investments back through advertising and by licensing the rights to use the programming to, for example, cable companies. They warn that if Aereo wins this case, others will follow. And that, they predict, will harm not only broadcast television by reducing the money that the networks will earn from the companies who do pay to re-transmit their programs but copyright law more generally, as the Aereo system will provide a blueprint to use the Internet to get around other copyright restrictions.

In Aereos eyes, there is nothing public about its transmissions: its equipment allows an Aereo subscriber to receive her own individual transmission of a TV program that has been recorded by her own individual antenna. No one else can watch that particular transmission. Aereo is, it contends, also well within the bounds of the law because the performance that is sent out by the antenna over the Internet is not the performance that the broadcasters sent out over the airways. Instead, its simply a playback of the recording that the subscriber made. And, in any event, Aereo adds, it cannot be liable for violations of the copyright laws because it is just the middleman: its subscribers are the ones who tell Aereos equipment to record the television broadcasts and then play them back on their own devices. In that sense, Aereo contends, it is not really any different from someone who pulls a show off the airwaves using an old-fashioned antenna and then records it on a VCR; the technology is just better.

Aereo also pushes back against the networks dire warnings about the effects of a ruling in its favor, telling the Court both that the networks have no right under the copyright laws to be paid for the re-transmission of their over-the-air broadcasts in the original markets and that most of the networks revenues come from advertising (which also gets shown to Aereos subscribers) anyway. Finally, Aereo counters with its own caveat, cautioning that a ruling against it would gravely threaten computer technology that allows computer users to store copyrighted files like songs and movies in the cloud that is, remotely and use the Internet to play them back on their devices on demand.

The Justices are not known for their technological expertise, so it will be interesting to see how they grapple tomorrow with the issues that this case presents. In addition to lawyers from the networks and Aereo, they will also hear from the federal government, which filed a brief taking the networks side. The government argues that Aereos predictions about the effects of a ruling for the networks on cloud computing are overblown because unlike Aereo — consumers will normally be playing back songs or movies that they have already acquired legally. For a Court that likes to move cautiously when high-tech issues are involved, that may provide exactly the kind of reassurances that the Justices need. Well know much more after the argument tomorrow morning, and well report back in Plain English.