The Stream Runs Downhill: Part 3

Today we will conclude our overview of the court's four-part decision in the Hearst v. Aereo copyright infringement case. If you recall, last week we concluded with the court's denial of Hearst's final two claims.

The court then turned to the question of whether Hearst had adequately shown that irreparable harm would be caused absent an injunction, and found that it had not. Hearst first claimed that allowing Aereo to continue its streaming service would leave Hearst unable to maintain its negotiating position in regards to the sale of rebroadcasting rights and the pursuit of other streams of revenue. While the court conceded that Aereo’s service might, in time, weaken Hearst’s ability to negotiate with rebroadcasters, it also noted that because these contracts were only re-negotiated every few years, rather than constantly, that the irreparable harm would likely not occur before the litigation ran its course, making a preliminary injunction unnecessary for preventing this damage.

Hearst next claimed that there would be irreparable harm to its advertising revenue, as advertising rates were based on viewership ratings, and those ratings did not measure those viewers who used streaming services such as Aereo. The court noted that Nielsen, the foremost ratings agency, had recently begun to count online viewers as part of its ratings, and thus ruled that Hearst had not shown irreparable harm from that source either. Finally, the court ruled that Hearst’s claim that Aereo’s service would harm Hearst’s efforts to create its own online streaming service was defective as well, as Hearst’s plans for such a service were too inchoate to be irreparably harmed at this time.

Having failed the first two prongs of the preliminary injunction test, the final two factors were more perfunctory than dispositive. The court, in two paragraphs, noted that the balance of harm does not appear to clearly favor either party, and the public interest similarly “cuts both ways.” In the end, it found that neither factor did much to change its earlier conclusions, and so ruled that because Hearst had failed to show a likelihood of success on the merits, and failed to show irreparable harm, its request for a preliminary injunction was denied.

What does this case mean in a larger context? For one, it is clear that attempts to use decades-old law to regulate cutting edge technology are bound to create serious problems of interpretation. The Copyright Law regarding these issues as cited by the court comes from 1976, when cable television was still in its infancy, and has not truly evolved to keep up with the times. The court’s ruling can be interpreted in different ways. Some will argue that it allows emergent forms of technology to effectively flout copyright laws and profit off the protected material of others due to unforeseen loopholes in the law. Others will take the opposing view, that the courts are unwilling to force new forms of technology into an antiquated regime of law, and will instead allow them to innovate new forms of content distribution until some elected body makes the conscious decision to regulate these new technologies.

 

The Stream Runs Downhill: Part 2

Last week’s post focused on the court’s rejection of Aereo’s motion to change venues. But that was all the good news that the Hearst Group would receive that day, as the court next denied its request for a preliminary injunction. As is mandated in these cases, the court looked through the four-part test for granting preliminary injunctions, and found that there were insufficient grounds to enjoin Aereo’s activities while the litigation was ongoing.

First, the court examined the likelihood of success on the merits, noting that, in the 1st Circuit, at least, this factor is the most important. At this point, the technological advancements of the past few years run headlong into the decades-old body of copyright law. The court first concedes that the 1st Circuit has never ruled whether the use of a DVR-like device infringes on the right of the copyright holder, more specifically, whether Aereo’s interception and conversion of the broadcast into a digital and recordable form infringes on the copyright holder’s exclusive right to control the public transmission of its works.

Lacking any direct precedent of its own, the court turned to the 2nd circuit, which had previously ruled that a DVR, in effect, created a personal recording of the broadcast, and then transmitted that personal copy to the viewer, meaning that it did not publicly re-transmit the broadcast, and so did not infringe on any copyright. Aereo, as the court noted, had already successfully defended its service in the 2nd circuit, and had won because the court found that its service was sufficiently similar to the earlier DVR case and that, therefore, no infringement had taken place. More specifically, that court had noted that Aereo only allowed viewers to view those digital copies that Aereo had specifically prepared for them at their request, and that each copy was unique.

In that decision, however, there had been a dissent, which argued that, due to advances in technology, it no longer made sense to determine whether a transmission was private by the nature of the copy, but instead whether or not the viewer saw what was, essentially, a public broadcast to begin with. They also noted that some district courts have appeared amenable to determining the nature of a broadcast by how it was originally transmitted rather than how it was ultimately received.

The court, however, found that attempting to use Hearst’s proffered interpretation would force an untenable construction of the Copyright Act, and so reverted to the 2nd Circuit’s ruling on the matter, finding that Hearst was not likely to prevail on its claim that Aereo had infringed on Hearst’s copyright through unauthorized retransmission.

The court next examined whether it was likely Hearst would prevail on a claim that Aereo had infringed on its copyright through unauthorized reproduction of Hearst’s broadcasts. The question here came down to a question of whether or not this type of copyright infringement could occur without volitional conduct by Aereo. As Aereo’s system automatically responds to user commands, Aereo itself lacks any sort of volitional conduct. According to Aereo’s argument, such a requirement is necessary in an infringement case, as otherwise innocent technology providers could be held liable for the wrongful acts of those using their products, such as a copy machine owner being held liable when a third party uses that machine to copy copyrighted material.

From its ruling, it is clear the court felt at least slightly uncomfortable with this aspect of the case, noting that the 1st Circuit has not yet ruled that volitional conduct is a necessary element, but other circuits have. The court ultimately decided that it was likely that some sort of volitional conduct element would be necessary in an infringement claim, but punted the issue, explaining that later discovery may change the contours of that particular claim, and it was a closer call than the unauthorized retransmission claim. That said, the court found that the likelihood of success on the merits was not high enough on this claim either to justify a preliminary injunction.

The court then quickly disposed of the final two claims made by Hearst on technical grounds. First, it claimed that, because Aereo was streaming the works rather than authorizing them for download, it is considered to be ‘performing’ rather than ‘distributing’ for the purposes of copyright law, and so cannot be found to have violated Hearst’s exclusive right to distribute its copyright works. Second, it ruled that although Aereo does convert its broadcasts into a different formats in order to allow it to be streamed, that act does not create a derivate work under the meaning of the Copyright Act, and so Hearst was also unlikely to prevail on a claim charging Aereo with infringing on Hearst’s exclusive right to create derivative works from its copyrighted material. In all, the court found that Hearst was unlikely to prevail on any of its claims on the merits, a crippling blow in its quest to gain a preliminary injunction.

 

The Streams Run Downhill: Part 1

Today’s blog post will focus on yet another online television streaming case. In a recent decision by the Federal District Court in Massachusetts, a company owning a local broadcast network found itself unable to get a preliminary injunction to stop a new start-up from converting its signals into a digital, streaming format.

The set-up of the case is interesting, in that it shows how changing technology can, in some cases, create new conflicts. Aereo, the defendant in this case, had recently begun a new service that allowed users, for a fee, to receive digital versions of broadcast television signals that they could either watch live or save on a DVR system for later viewing. To accomplish this goal, Aereo had set up a number of antennae around Boston in order to receive the broadcast signals for digital conversion. The Hearst Group, a media conglomerate that counts WCVB-TV in Boston as one its holdings, brought suit in the District Court of Massachusetts, alleging copyright infringement by Aereo, and further filed for a preliminary injunction to stop Aereo’s service while the litigation was ongoing. Aereo responded by asking the court to transfer the case to the Southern District of New York, where the company was incorporated.

As a preliminary matter, the court first rejected the motion for transfer. It explained that even though Aereo was incorporated in New York, and the Hearst Group had its place of principal business there as well, the Hearst Group’s choice of venue would have to be given deference unless Aereo could show some reason why the action should be transferred. In this case, since the Hearst Group’s claim was restricted to Aereo’s conversion of signals only from WCVB, based in Boston, and since Aereo did a great deal of business in the city, there was no sufficient reason to transfer the case. Further, as the court pointed out, the litigation was in an advanced enough stage that the transfer would have the pernicious effect of delaying the litigation, which the court also deemed to be a factor in denying Aereo’s request. Looking at the rest of the decision, it is clear that at least one reason for Aereo’s attempt to move venue is that the 2nd circuit, which encompasses New York, had a more substantial body of favorable precedent than the 1st Circuit, and, in addition, Aereo had already prevailed in a similar suit in the 2nd Circuit just months prior.

Next week we will begin to review the court's process in reaching its decision.

 

Fox Broadcasting v. Dish Network

Recent developments in broadcasting technology have changed the way that people watch television. Unsurprisingly, however, there has been some push back from traditional broadcasters, who see their business model as being under siege from these new innovations. We have written about one such case in our last couple posts. The recent case of Fox Broadcasting v. Dish Network is one example of this type of clash.

The defendant, Dish Network, had recently introduced a service, “Autohop”, that allowed customers to fast-forward through commercials on certain shows they had digitally recorded previously. Fox Broadcasting, which derives a great deal of its revenue through the sale of ad time, sued Dish Network in the Federal  district court in Central California, claiming a breach of the contract between Fox Broadcasting and Dish Network, as well as copyright infringement. Fox also sought preliminary injunction to stop the Autohop service while the case was still pending.

The district court used the four-factor test for determining whether or not a preliminary injunction was warranted, and ultimately decided that it was not. The first factor, whether Fox had established a likelihood of success on the merits of the case, was likely the most dispositive. This factor turned on whether or not it was DirectTV, or the consumer, that was party that made the digital copy of Fox’s programming for later viewing. In order for Fox’s copyright infringement case to be likely to succeed, it would have to show that it was DirectTV making those copies, and thus directly infringing its copyright. In support of its position, Fox argued that since it was DirectTV that operated the system that made the copies possible, and set rules such as how long the copies would last in the memory, as well as editing the start and end times of the recorded shows, that it should be judged to be directly responsible for making the copies. The district court disagreed with this assessment, and instead ruled that this fact pattern was more akin to a person making a copy of a show on a VCR, and that it is the end user who is making the copies, and who be most likely liable for a direct infringement suit.

The court next turned to whether or not Fox could show a likelihood that DirectTV had was liable for secondary copyright infringement by facilitating the direct copying of its users. As there was no real question that the users in question were copying Fox’s copyright material, the burden shifted to DirectTV to show that the users were protected by fair use. The long-held precedent is that a person is entitled, under the doctrine of fair use, to record a program for the purpose of time-shifting. Fox argued, however, that fair use did not allow customers to skip commercials or build a library of recorded programs. When the Betamax case was decided, the technology had not yet reached the point where either of purposes was feasible and so that court had not ruled on whether they were permissible under fair use or not. As to the matter of skipping commercials, the court was not sympathetic to Fox’s argument, noting that, although Fox owned the copyright to the television shows being recorded, it did not own the copyright to the commercials being skipped, and could not sue for copyright infringement under that theory.

The court then examining DirectTV’s AutoHop program under the Fair Use factors. First, the use was noncommercial; it was done by private consumers for their own viewing convenience, not as a commercial activity. Next the court looked at the “nature of the work” and “amount of substantiality of the work shown”, ultimately concluding that, even though the users in question copied the entirety of the material copyrighted by Fox, they had been invited to watch this event free of charge, and merely copied the work in order to make its viewing more convenient. Finally, the court looked at the last factor, how the use would affect the market for this work, which they ultimately concluded would not be adversely affected by the commercial skipping technology. Next week’s blog post will focus on the next steps that the court took in coming to the conclusion.