The Aereo Case - and Prediction

Guest post by Professor Edward Lee of IIT Chicago-Kent College of Law

On April 22, the Supreme Court heard oral argument in an important copyright case involving Aereo, an Internet TV service from Brooklyn that has the financial backing of media mogul Barry Diller. The case has received a lot of media attention because it pits a disruptive Internet startup against the old-line broadcast TV networks. But it also has the potential to transform the cable industry and the way in which people watch TV.


Predicting the winner: A Win for Aereo?

If you want to learn more about the facts and legal issue in the case, jump to the analysis below. Right now, I'm going to cut to the chase and predict a winner. Of course, every appellate attorney knows that predicting the outcome of a Supreme Court case based on how the oral went is perilous, if not foolhardy. But Judge Richard Posner and Professors Lee Epstein and William Landes have analyzed a simple—yet statistically significant—method of identifying the likely winner of a Supreme Court case based on the number of questions the lawyers receive during oral argument. In a nutshell, the party that receives the most questions from the Justices during oral argument is more likely to lose. See Lee Epstein, William M. Landes, & Richard A. Posner, Inferring the Winning Party in the Supreme Court from the Pattern of Questioning at Oral Argument, 39 J. Legal Stud. 433 (2010). Prior studies by others found similar results. Id. at 434 n.1 (citing Shullman, Wrightsman, and Johnson et al.). Even Chief Justice John Roberts arrived at the same conclusion based on his own study of 28 cases. Id.

Based on this crude method of counting up questions, my prediction is that Aereo will win the case. Aereo’s attorney received fewer questions during oral argument than the total questions asked of the opposing side (the attorney for TV networks and the attorney for U.S. government combined): 26 questions for Aereo, and 31 questions for the TV networks and U.S. government. But I'm not as confident in my prediction. Two lawyers represented the side of ABC, whereas Aereo had only one lawyer. If you look just at the lawyers for each party, ABC’s lawyer actually had fewer questions, 23 for ABC to 26 for Aereo. The total number of questions for ABC’s side (including the U.S. government) might be inflated if, for example, the Justices feel obliged to ask each attorney some questions (in which case ABC’s side would have received some extra questions that it wouldn’t have received if only one attorney represented its side at oral argument). Moreover, examining each Justice’s number of questions yields an even 4-4 split: Roberts, Ginsburg, Scalia, and Kennedy asked more questions to Aereo’s side, while Alito, Breyer, Kagan, and Sotomayor asked more questions to ABC’s side. Thomas, as his custom, didn’t ask any questions. Add in the complicating factor that Justice Kennedy’s past voting in cases did not follow the basic pattern of asking the losing side more questions. Id. He’s a swing vote that defies the basic pattern. So, based on the number of questions, we expect a 5-4 or 6-3 decision, but picking the winner might be too close to call.

Of course, this prediction must be taken with a generous grain of salt. The question differential is small here. This method has correctly predicted the winner of only one of the two intellectual property cases the Supreme Court has decided so far this Term. In Medtronic, Inc. v. Boston Scientific Corp., the attorney for the losing side (Boston Scientific) received the most questions (52), four times the amount for the winning side (13). However, in Lexmark Int’l, Inc. v. Static Control Components, both sides received an equal number of questions (33).


Facts

So, what does Aereo do? Aereo provides an antenna and recording service that enables its monthly subscribers to watch and record free broadcast TV programs, including ones aired by ABC, NBC, and CBS.

Aereo’s subscribers pay either $8 or $12 a month for its service. For each subscriber, Aereo assigns a unique antenna that receives the free network TV broadcasts. Aereo also gives space on its servers for subscribers to record and store the shows like a VCR or DVR for later viewing. Aereo is a cloud-based service, and its subscribers do not actually have or see the individual antennas and the storage space that are remotely located at Aereo’s facility.


Legal Dispute

The legal dispute involves whether Aereo needs to have copyright licenses from ABC and the other networks whose programs are used in Aereo’s service. The issue centers around the meaning of the so-called “Transmit Clause” in the definition of public performance that Congress added back in the 1976 Copyright Act (17 U.S.C. 101: “to transmit it to the public ‘by means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times.’”).

ABC and the other networks contend that Aereo is violating their right of public performance by effectively retransmitting their broadcasts to the public, specifically to Aereo’s subscribers.

Aereo, however, responds that its service does not constitute a “public performance” of the broadcast TV shows, but instead, it is merely a private performance of the shows to Aereo subscribers. Aereo’s argument rests on the fact that each subscriber of Aereo watches a unique copy of the shows using her own individually assigned antenna. Aereo believes this cloud-based antenna service should be treated just like antennas on old TVs coupled with VCRs, which enabled people to receive and record network TV broadcasts for private viewing in their homes—all legally without copyright licenses.

In a 2-1 decision, the Second Circuit Court of Appeals agreed with Aereo’s argument, relying on a prior Second Circuit decision in Cablevision. The networks appealed to the Supreme Court, which agreed to hear the case. Subsequently, the U.S. government has taken the position that Aereo violates the networks’ public performance right. The Court’s decision is expected by end of June.


Importance for Businesses

The case involves high stakes for the TV industry. As Bart Lazar, partner at Seyfarth Shaw LLP, explained, “I think the decision has more ramifications for business than necessarily for copyright law because the decision will likely establish the rules of the road for cloud re-transmission of copyrighted content.” If the broadcast TV networks win, “business will ultimately adapt to paying royalties in much the same way other new, potentially disruptive technologies, like satellite TV and music sharing technologies—adapted, by getting licensed.” If Aereo wins, Lazar believes the Court will likely adopt a narrow approach as it did in Twentieth Century Fox v. Aiken, which led to the copyright exemption for public reception of broadcasts on “a single receiving apparatus of a kind commonly used in private homes.” 17 U.S.C. § 110(5)(A).

The decision in Aereo may also impact cloud computing and new businesses. As Naomi Jane Gray, partner at Harvey Siskind LLP, stated, “Whether the Supreme Court rules in favor of Aereo or the networks, the Aereo case has the potential to have a significant impact on copyright law, the future of cloud-based computing, and models of dissemination yet to be invented. Imagine today’s technological landscape had the Supreme Court ruled that the Sony Betamax VCR was infringing back in the 1980’s.

“A decision against Aereo, if broadly drawn, could jeopardize existing cloud-based storage services like DropBox and Amazon Cloud, and could impede the development of technologies that we cannot even imagine today,” Gray explained. “By contrast, a win for Aereo would allow dissemination of content without payment to the copyright owners—assuming the networks do not follow through on their threat to cease over-the-air broadcasts entirely. Thus, even a narrowly drawn decision is likely to have a significant impact on copyright law and future technologies.”