Zebersky Payne Shaw Lewenz, LLP Chimes In On the Aereo Battle

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Issue: Whether a company “publicly performs” a copyrighted television program when it retransmits a broadcast of that program to thousands of paid subscribers over the Internet.

The David-and-Goliath battle that pits Aereo, the start-up that pulls TV programming off the airwaves on thousands of tiny antennas and streams it over the Internet to subscribers for a small fee ($8 a month), is up against the broadcast television industry, which argues that Aereo’s business model is a blatant violation of federal copyright laws that could sound the death knell for television as we know it.

The Court seemed to have little love for underdog Aereo. But that didn’t make the case a slam dunk for the broadcasters, because of the Justices’ concern that a ruling against Aereo might have on an industry that didn’t have a lawyer arguing yesterday: “the cloud” used to store files remotely on the Internet. Let’s talk about the argument in Plain English.

First up was former Solicitor General Paul Clement, arguing on behalf of ABC and the other networks. He tried to portray Aereo as the scofflaw in the room, reminding the Court that “Aereo’s business model is to enable thousands of paying customers to watch live TV online.” But he didn’t get far before Justice Sotomayor (quickly joined by Justice Breyer) asked whether a simple way to resolve the case might be to say that Aereo is a “cable company.” That would mean it would have the right to provide programming, but would have to pay a “compulsory license” fee, thereby – or at least those Justices seemed to hope – eliminating the need for the Court to issue a ruling that might affect the very different services involving “the cloud.”

But Clement wouldn’t bite, saying that, even if Aereo were a cable company, “it doesn’t make all these problems go away.” So that brought the argument back to the issue that the Justices would focus on for much of the hour: how can the Court interpret the copyright laws in a way that avoids striking down lots of other businesses, from cloud computing services such as Dropbox to the companies which provide the equipment used to stream content over the Internet? Clement sought to reassure the Court that there is “a fundamental difference between a service that . . . provides new content to all sorts of end-users, essentially any paying stranger” (Aereo, at least in Clement’s view) and “a service that provides a locker, a storage device” (“the cloud”). But in any event, he argued, the Court doesn’t need to decide questions relating to “the cloud” in this case, because “it can just be confident that they are different.”

Representing the upstart Aereo, David Frederick tried to capitalize on the Court’s qualms about the effect of its ruling on “the cloud” right off the bat. He told the Justices that the rule for which the government and the broadcasters were arguing would “absolutely threaten cloud computing”; in fact, he later added, the cloud computing industry was “freaked out about this case” because it had invested “tens of billions of dollars” in reliance on the legal principles Aereo was defending. In particular, Frederick pushed back against the government’s assertion that a ruling against Aereo would not affect “the cloud” because – unlike Aereo’s content — the songs and videos that are stored in the cloud were legally acquired. He told the Justices that cloud providers “can’t tell what is legal or what is not legal.” “Some stuff,” he observed, “could be up there pirated,” but other content “could be up there perfectly licensed.” And if the Court were to interpret the copyright laws too broadly, he warned, the industry would face “potentially ruinous liability.”

It’s true that the Justices will probably not spend a lot of time worrying about the effect of their decision on Aereo, but they are clearly concerned about the effect on “the cloud.” Given their skepticism about whether Aereo’s business model is even legal, my best bet is that the Court will spend the next two months or so drafting an opinion that rules for the networks, but does so in a narrow way that makes clear it does not endanger “the cloud.” We’ll know by the end of June. Stay tuned.

Jordan A. ShawZebersky Payne Shaw Lewenz, LLP Chimes In On the Aereo Battle

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