Fox v. Dish Revisited or: How I Learned to Stop Worrying About Aereo and Love the Cloud

On January 15th, the news broke that Fox and Dish had settled their carriage dispute, and Dish will now carry Fox’s news and business channels as part of its satellite service. That same day, the parties jointly requested that District Judge Dolly M. Gee put their copyright and contract battle on hold. They told Judge Gee that it’s “highly likely” that they will be able to reach an agreement later this year. Just three days earlier, Judge Gee had issued her decision on the parties’ cross-motions for summary judgment. That opinion, in redacted form, was made public last Tuesday. On the copyright front, Dish was found to have infringed Fox’s reproduction rights with its “Quality Assurance” copies. These were internal copies Dish made to manually mark the beginning and end of programming segments for its AutoHop commercial-skipping feature. Judge Gee brushed aside Dish’s argument that fair use excused its copying: “The QA copies are not transformative.”

On the rest of the copyright claims, however, Dish came out smelling like roses. Judge Gee held that Dish’s Hopper Transfers feature, which let users download recordings from their set-top boxes, its PrimeTime Anytime feature, which let users record the entire primetime lineup of the four major broadcasters, and its AutoHop feature, which let users skip commercials when watching their PrimeTime Anytime recordings, were all noninfringing. Judge Gee also held that Dish’s Hopper with Sling set-top box and Dish Anywhere feature, which let users stream live and recorded content from their set-top boxes over the internet to their personal computers and devices, did not infringe Fox’s public performance rights. For this latter determination, Judge Gee relied heavily on the Supreme Court’s opinion in Aereo from last year.

I wrote about Fox’s public performance claim in an earlier post, and I argued that Dish’s Hopper with Sling combined with the Dish Anywhere feature is noninfringing under the Supreme Court’s reasoning in Aereo. After the Court granted certiorari in Aereo, there was a lot of concern about how a decision against Aereo would affect the public performance analysis, particularly with respect to the cloud. Many of Aereo’s supporters maintained that Aereo’s service was indistinguishable from other cloud computing services, such as Dropbox. During oral argument before the Supreme Court, the cloud once again took center stage as the jurists opined about the broader repercussions of a decision against Aereo. In the Aereo opinion itself, Justice Scalia in dissent complained that the majority’s test “will sow confusion for years to come.” Despite these doomsayers and naysayers, Judge Gee quite easily applied Aereo to find that Dish did not infringe Fox’s public performance rights. Moreover, she did so in a way that provides robust support for the cloud.

The public performance test from Aereo has two elements: (1) whether the service performs, and (2) whether that performance is public. Unless both elements are met, the service does not publicly perform. The test is particularly simple to apply because of the second element. In a typical case, such as here with Fox and Dish, it’s easy to determine whether a performance is public or private—even if we don’t know who is doing the performing. Performances are private, Aereo teaches, when they are transmitted “to individuals in their capacities as owners or possessors” of copies of the underlying works. Performances are public, by contrast, when they are transmitted to those “who lack any prior relationship to the works.” If the performances are private, it doesn’t matter who performs them—whether the service or its users—as either way they are noninfringing.

While the second element is easily applied, the first element proves a bit trickier. The Supreme Court in Aereo reasoned that Aereo performed by analogizing its service to a cable system: Aereo received and retransmitted broadcasts, just like a cable system, and since a cable system performed, Aereo did too. Here, the Court’s analogy to a cable system works exceedingly well for Dish’s initial satellite transmissions to its users. There’s no doubt that Dish publicly performs as it beams down content to its users in the first instance. Dish has licenses for these transmissions, of course, and consequently they were not at issue here. Instead, Fox’s claims were directed at transmissions that occurred after the users had already obtained the content from the earlier satellite transmissions. The identity of the performer in this context turned on the volitional conduct test, which looks at who caused the transmissions to occur.

In his Aereo dissent, Justice Scalia argued that the majority’s two-factored test really had but one element: Once the Supreme Court determined that Aereo performed, that performance was necessarily public. On his view, the second factor collapsed into the first. If anything, however, I think the reverse is likely true—especially in close cases. Whether the service causes the transmissions to occur turns, in no small part, on whether the service is transmitting content to which the user has a “prior relationship.” In other words, if the performances are public, they’re presumably performances caused by the service provider—it’s the one supplying content to members of the public in the first place. Moreover, this holds true no matter who pushes any button.

Perhaps proving Justice Scalia’s broader point, Judge Gee determined that Dish did not perform because it did not “receive programs that have been released to the public and then carry them by private channels to additional viewers in the same sense that Aereo did.” The streaming enabled by Dish’s Hopper with Sling and Dish Anywhere feature “takes place after the user has validly received it,” Judge Gee noted, “whereas Aereo transmitted its programming to users directly, without a license to do so.” The license, of course, was irrelevant to whether Aereo performed, but Judge Gee rather astutely recognized that the Aereo majority applied its own version of the volitional conduct test when it analogized Aereo to a cable system:

The Aereo majority’s analysis can be reconciled with the volitional-conduct requirement for direct infringement. The Aereo Court distinguishes between an entity that “engages in activities like Aereo’s” and one that “merely supplies equipment that allows others to do so.” Id. at 2504. The Court held that a sufficient likeness to a cable company amounts to a presumption of direct performance, but the distinction between active and passive participation remains a central part of the analysis of an alleged infringement.

The Aereo Court cited three points of comparison that established Aereo’s “overwhelming likeness” to traditional cable providers: (1) Aereo sold a service that allowed subscribers to watch television programs almost as they were being broadcast; (2) Aereo used its own equipment, housed in a centralized warehouse, outside of its users’ homes; and (3) by means of its technology (antennas, transcoders, and servers), Aereo’s system received programs that had been released to the public and carried them by private channels to the additional viewers. 134 S. Ct. at 2506.

Judge Gee nailed it. The Supreme Court’s comparison of Aereo to a cable system was its way of telling which side of the active-passive line Aereo was situated, that is, whether Aereo’s volitional conduct was sufficient such that it was directly performing. Dish’s technologies weren’t transmitting content to “additional viewers,” Judge Gee reasoned, so Dish wasn’t another Aereo. Note, however, that these “additional viewers” were simply members of the public, and they had no “prior relationship” to the particular content being streamed. This is the second element seeping into the first: She knew that Aereo performed, while Dish did not, based in part on whether the transmissions were “to the public” under the Transmit Clause. The volitional conduct turned, at least in part, on the publicness of the transmissions. Whether Dish performed was a function of whether the performances were public.

As computing moves further into the cloud, distinctions drawn on whose-hardware-did-what and who-pushed-what-button become harder to discern. Figuring out who caused a transmission to occur when it involves hardware and software utilized by both the service and its users takes on a metaphysical dimension. This is especially true as courts are wont to say it’s one party and not the other. The Aereo majority at least had a known quantity—a cable system—to compare with Aereo. Usually, the volitional conduct analysis is far less certain, and courts end up analogizing to other fact-patterns gleaned from the decisional common law. This is exactly what Judge Gee did. After first applying the specific cable-system-lookalike version of the volitional conduct test from Aereo, she then turned to its more general form. This was necessary because the Aereo test is merely sufficient for determining whether a service directly performs, but it’s not necessary. Other services may directly perform as well, even if they’re not just like a cable system.

The trick is figuring out where to draw the line, and this is where Judge Gee’s analysis got a tad wonky. She first acknowledged that the “process depends to some extent” on Dish’s involvement. She then concluded that Dish didn’t engage in sufficient volitional conduct to be a direct performer, because “it is the user who initiates the process, selects the content, and receives the transmission.” Of course, the user initiated the process, selected the content, and received the transmission in Aereo, but that didn’t mean that Aereo didn’t directly perform. I initiate the process, select the content, and receive the transmission when I use YouTube, but that doesn’t mean that YouTube doesn’t directly perform. The difference between Dish and Aereo or YouTube is not so much who-causes-what to occur—with all three, it’s a combination of both the service and the user. The difference is that with Aereo and YouTube, the user obtains content in the first instance, but with Dish, the user does not. In other words, it turns on whether the user has a “prior relationship” to the particular content being streamed.

Judge Gee held that Dish didn’t publicly perform because its volitional conduct was somehow insufficient as a matter of law. She could have reached the same conclusion by simply looking at whether the performances-by-transmission at issue were public or private. If private, Dish couldn’t be directly liable for violating Fox’s public performance rights. Since Fox also had argued that Dish was secondarily liable, Judge Gee needed to determine if the performances she had held to be caused by the users were public or private anyway—Dish couldn’t be an indirect infringer unless the users were direct infringers. Judge Gee could have found Dish not liable, either directly or indirectly, by pointing out that the performances were private. There was no need to look at who caused them, much less to say it was the users and not Dish. The problem with her approach is that, down the road, other services can point to this opinion and argue that they aren’t directly performing either, even if the performances are public in that they are supplying content to the users in the first instance.

Judge Gee adopted one of the broader versions of the volitional conduct test, which essentially turns on who pushes the button. The idea is that, no matter what the service does, users cause the copying to occur because they initiate things with the click of a virtual button. This test makes sense, at least somewhat, when it’s the reproduction right at issue. I think the service and the user often both cause the copy to be made, but it’s reasonable to pin it solely on the user since the service can be on the hook for violating some other right. For example, if a user downloads content from a service, the user reproduces and the service distributes. There is little problem in saying that only the user causes the reproduction since the service is still responsible for the distribution—if it is public in that it supplies the content to the user in the first place.

It’s the same thing with Dish. Judge Gee held that the users made the reproductions on their Hopper with Sling set-top boxes. She thought Dish’s volitional conduct was insufficient for it to be the direct cause of the copying. I don’t agree with this approach—especially with the PrimeTime Anytime recordings, which were individually programmed by Dish and which could not be stopped by the users. In the end, though, I don’t think it matters, as Dish would still be potentially on the hook for its satellite transmissions that supplied the users with the content in the first place. These transmissions were public performances, and they were, of course, licensed. Furthermore, Judge Gee held that the reproductions made from these transmissions were themselves fair use, as were the copies of these recordings made with the Hopper Transfers feature. In this way, Judge Gee upheld both time-shifting and space-shifting of the copies that were legally created as a result of Dish’s licensed public performances.

The problem with the who-pushes-the-button flavor of the volitional conduct test comes in saying that only the user causes the distribution, display, or performance when that user obtains content from the service in the first instance. Judge Gee’s intuition that only the user, and not Dish, caused the transmissions to occur with the Dish Anywhere feature was reasonable, but it only failed to be problematic because the content had already been legally obtained by the user. In other words, there was no problem because the performances-by-transmission were not “to the public.” Here, the content was transmitted from the Hopper with Sling set-top box to the user’s personal computer or device. There was some dispute about the extent to which Dish had its hand in things—for example, whether the content ever touched Dish’s servers. But, for the most part, the transmissions were accomplished using equipment in the user’s possession—at least insofar as the sending and receiving devices.

Splitting such hairs, however, can only take us so far. Our intuition may also tell us that the location of the equipment should be of little relevance. Think Cablevision with its DVRs in the cloud. What if Dish’s Hopper with Sling were a cloud-based DVR? What if the playback signal indubitably originated from Dish’s servers? This is where I think the public-private distinction under Aereo can do the heavy lifting. There is no need to figure out who causes the distribution, display, or performance when the content is stored in the cloud. Instead of beginning with the first element of the Aereo test, which looks at whether there is sufficient volitional conduct on the defendant’s part, it’s better to start with the second element, which asks whether the distribution, display, or performance at issue is public or private. If it’s private, then it doesn’t matter who causes it since it’s noninfringing. If it’s public, however, then it implies that the service, which is supplying content to the user in the first instance, is directly causing that distribution, display, or performance to occur.

On its face, Judge Gee’s opinion said nothing about the cloud. Underneath, by contrast, it told us all that we need to know. It’s the first opinion post-Aereo—that I’m aware of—that properly applied the Supreme Court’s public-private distinction under the Transmit Clause. Though, there was some confusion in Judge Gee’s treatment of ownership vs. possession:

DISH subscribers are not “owners” of the copyrighted programming. DISH has expressly disclaimed any ownership rights in the underlying programming, and agreed to various restrictions on its use of the material as a condition of the license. DISH is a licensee, and therefore cannot transfer title or ownership to its subscribers.

DISH subscribers are, however, valid “possessors” of the copyrighted works that are stored in the STB in their home. See Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417, 456, 104 S. Ct. 774, 795, 78 L. Ed. 2d 574 (1984); see also Vernor v. Autodesk, Inc., 621 F.3d 1102, 1112 (9th Cir. 2010) (noting that some users “rightfully possess, but do not own, a copy of copyrighted [material].”).

The first paragraph discussed ownership of the copyright, not the copies. Dish couldn’t “transfer title” to the copyright because it was a nonexclusive licensee—it had no title to transfer. The second paragraph, by contrast, discussed possession of the copies, not the copyright. Judge Gee inadvertently slipped from the copyright to the copies as she switched her focus from ownership to possession. Even if the users had no license under the copyright to make the copies, they ultimately didn’t need one. They were legal possessors of the copies because fair use excused the time-shifting or place-shifting whereby the copies had been made in the first place. The users had neither ownership nor possession of the copyright itself—nor did Dish for that matter. But the issue here was ownership or possession of the copies, not the copyright.

The Supreme Court made the same mistake in Aereo: “Neither the record nor Aereo suggests that Aereo’s users receive performances in their capacities as owners or possessors of the underlying works. This is relevant because when an entity performs to a set of people, whether they constitute ‘the public’ often depends upon their relationship to the underlying work.” The phrase “underlying work” is used in copyright law to refer to the copyrighted work itself—that is, the intangible work that exists the moment it’s fixed in a tangible medium. Neither Aereo nor its users—nor Dish nor its users—had any ownership or possessory interest in the “underlying work.” That was never the issue in either case.

What the Supreme Court really meant to discuss was ownership or possession of copies of the “underlying work.” As Professor Jane C. Ginsburg noted:

The court’s reference to “owners or possessors” is very imprecise; the service’s customer is unlikely to be an owner of “the work” because “the work” is the incorporeal object whose “owner” is the author or other copyright owner. Presumably, the court was positing the request by a customer of a remote storage service to play back a digital copy that she was entitled, by express or implied license, or under the fair use doctrine, to deposit in a digital storage locker.

This is exactly what the Supreme Court meant in Aereo, and it’s exactly what Judge Gee meant here with Dish: The users’ preexisting possessory interests in the copies were what made the subsequent performances private. As Judge Gee elaborated:

When an individual DISH subscriber transmits programming rightfully in her possession to another device, that transmission does not travel to “a large number of people who are unknown to each other.” The transmission travels either to the subscriber herself or to someone in her household using an authenticated device. This is simply not a “public” performance within the meaning of the Transmit Clause.

The users’ possessory interests in the copies were easy to ascertain with Dish’s Hopper with Sling set-top boxes. This was because the users each had actual possession of a copy once that copy had been created for the first time. Under the Supreme Court’s test in Aereo, however, even if these copies were stored remotely, such as with a cloud storage service, the users would still have possessory interests in the copies such that subsequent distributions, displays, or performances would be private. And this is why I think Aereo makes the cloud safer than ever: We can tell whether a distribution, display, or performance is “to the public” based on whether the user has a “prior relationship” to the source copy. Judge Gee got it right because she realized that Aereo controls the public-private distinction analysis.

This realization was lost on the district court in the MP3tunes decision that I wrote about last October. The judge there thought that the number of source copies is what matters. It doesn’t. What matters is the “prior relationship” of the user to the content at issue. The number of source copies is irrelevant, and a service can even utilize one master copy that is served to multiple users. Such deduplication is permissible so long as each user has a preexisting possessory interest in the content. There will no doubt be hard cases where the limits of these possessory interests will be tested, but the doctrine post-Aereo is nevertheless clearer than ever. So long as the user has a “prior relationship” to the content at issue, its subsequent distribution, display, or performance back to that user will be private—whether the service directly causes it or not. The cloud has never been safer, thanks to Aereo.

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© 2015 Devlin Hartline. Licensed under the Law Theories Public License 1.0.

En Banc Federal Circuit to Consider Impact of Petrella in Patent Cases

Back in September, I wrote about the Federal Circuit’s opinion in SCA Hygiene v. First Quality.1 There, the circuit panel rejected the appellant’s argument that the Supreme Court’s opinion in Petrella2 —a copyright case—implicitly overruled the en banc Federal Circuit’s opinion in Aukerman3 —a patent case—insofar as the availability of the laches defense to claims for monetary damages is concerned. Earlier this year, the Supreme Court in Petrella held that laches could not be invoked to bar claims for legal remedies, such as monetary damages, within the statutory limitation period for copyright claims. The Federal Circuit in Aukerman, by contrast, had held in 1992 that laches could be invoked to bar claims for monetary damages within the statutory limitation period for patent claims. In my previous post, I argued that the circuit panel in SCA Hygiene should have recognized that Aukerman is no longer good law in light of Petrella—the reasoning of the Aukerman court was explicitly rejected by the Supreme Court in Petrella.

The only conceivable difference between the two cases, I think, is in the statutes limiting claims for monetary damages. The Copyright Act provides: “No civil action shall be maintained under the provisions of this title unless it is commenced within three years after the claim accrued.”4 And the Patent Act provides: “[N]o recovery shall be had for any infringement committed more than six years prior to the filing of the complaint or counterclaim for infringement in the action.”5 The former bars all actions for infringement, while the latter bars only recoveries in actions for infringement. I argued that both represent Congress’s determination of timeliness in such actions, and if it violates separation-of-powers to apply laches with the former—as the Supreme Court indicated in Petrella—then by implication it does so with the latter—though the circuit panel in SCA Hygiene thought otherwise.

Yesterday, the Federal Circuit announced that the circuit panel’s opinion has been vacated because the appellant’s petition for rehearing en banc has been granted. The Court of Appeals requested the parties to file briefs addressing the following two issues:

(a) In light of the Supreme Court’s decision in Petrella v. Metro-Goldwyn-Mayer, 134 S. Ct. 1962 (2014) (and considering any relevant differences between copyright and patent law), should this court’s en banc decision in A.C. Aukerman Co. v. R.L. Chaides Constr. Co., 960 F.2d 1020 (Fed. Cir. 1992), be overruled so that the defense of laches is not applicable to bar a claim for damages based on patent infringement occurring within the six-year damages limitations period established by 35 U.S.C. § 286?

(b) In light of the fact that there is no statute of limitations for claims of patent infringement and in view of Supreme Court precedent, should the defense of laches be available under some circumstances to bar an entire infringement suit for either damages or injunctive relief? See, e.g., Lane & Bodley Co. v. Locke, 150 U.S. 193 (1893).

The first issue simply reiterates what I blogged about previously: Does Petrella implicitly overrule Aukerman? The second issue, citing the Supreme Court’s opinion from 1893 in Lane & Bodley,6 is perhaps just as interesting. I don’t think the Court in that opinion simply permitted the laches defense “to bar an entire infringement suit for either damages or injunctive relief,” as the Federal Circuit now frames it. The defendant there argued that it, as the successor-in-interest to the former employer of the patentee, held an indefeasible implied license to use the patented invention under the shop-right doctrine.7 The Circuit Court below had held that such a license would have been nontransferable, if it ever existed, such that the predecessor-in-interest could not have transferred it to the defendant.8

Given its holding that the defendant could not step into the shoes of its predecessor-in-interest vis-à-vis the patentee, the Circuit Court rejected the defendant’s laches argument:

But it is said that the complainant’s suit must fail, and the complainant be remitted to whatever rights he may have at law, by reason of his laches in pursuing his equitable remedy, the estoppel by conduct constituting a waiver of his equitable rights. These propositions are based upon evidence tending to prove that, although complainant knew that the defendant was making, using, and selling his improvement, he made no objection, set up no claim, made no demand for royalties, but was silent and acquiesced until 1884. It is not necessary to consider the evidence, which is conflicting, in reference to the complainant’s silence and acquiescence. In any light in which it may be viewed, it is insufficient, upon this whole case, inasmuch as the patent and the complainant’s title to it are sustained. . . . The decree will be for an injunction and account, with costs.9

Note the last sentence: The Circuit Court granted the patentee an injunction and an accounting. These were equitable remedies because the patentee brought a suit in equity. The defendant argued that, since the patentee slept on his rights, his only remedies were in an action at law. But since the Circuit Court rejected the laches defense, the patentee was entitled to equitable remedies. Note how this tracks Petrella perfectly: Laches could bar the equitable claims, but not the legal ones.

The Supreme Court reversed, holding that the defendant could step into the shoes of its predecessor-in-interest.10 Given this holding, the laches defense was then back on the table:

Courts of equity, it has often been said, will not assist one who has slept upon his rights, and shows no excuse for his laches in asserting them. The plaintiff’s excuse in this instance, that he preferred for prudential reasons to receive a salary from the defendant rather than to demand a royalty, is entitled to a less favorable consideration by a court of equity than if his conduct had been that of mere inaction.

We are therefore of opinion that the decree of the court below should be reversed, and the record remanded to that court, with directions to dismiss the bill of complaint, and it is so ordered.11

The Supreme Court held that the patentee was not entitled to any equitable remedies because he had slept on his rights. Since the two remedies sought were equitable, laches barred them both. The Court’s holding in Lane & Bodley, however, said nothing about laches being available to bar the patentee’s potential claims for legal remedies. Legal remedies were not discussed because it was not a court of law; it was a court of equity.

Follow me on Twitter: @devlinhartline

© 2014 Devlin Hartline. Licensed under the Law Theories Public License 1.0.

  1. SCA Hygiene Products Aktiebolag v. First Quality Baby Products, LLC, 767 F.3d 1339 (Fed. Cir. 2014). 
  2. Petrella v. Metro-Goldwyn-Mayer, Inc., 134 S. Ct. 1962 (2014). 
  3. A.C. Aukerman Co. v. R.L. Chaides Const. Co., 960 F.2d 1020 (Fed. Cir. 1992) (en banc). 
  4. 17 U.S.C.A. § 507(b) (West 2014). 
  5. 35 U.S.C.A. § 286 (West 2014). 
  6. Lane & Bodley Co. v. Locke, 150 U.S. 193 (1893). 
  7. See, e.g., United States v. Dubilier Condenser Corp., 289 U.S. 178, 188-89 (1933) (“Recognition of the nature of the act of invention also defines the limits of the so-called shop right, which, shortly stated, is that, where a servant, during his hours of employment, working with his master’s materials and appliances, conceives and perfects an invention for which he obtains a patent, he must accord his master a nonexclusive right to practice the invention. . . . This is an application of equitable principles. Since the servant uses his master’s time, facilities, and materials to attain a concrete result, the latter is in equity entitled to use that which embodies his own property and to duplicate it as often as he may find occasion to employ similar appliances in his business.”) (citations omitted); see also McClurg v. Kingsland, 42 U.S. 202 (1843); Solomons v. United States, 137 U.S. 342 (1890). 
  8. See Locke v. Lane & Bodley Co, 35 F. 289, 294 (C.C.S.D. Ohio 1888). 
  9. Id. (citation omitted). 
  10. Lane & Bodley, 150 U.S. at 194-201. 
  11. Id. at 201. 

Fifth Circuit Permits Ex Parte Counterfeiter Powerslam

I don’t usually write about trademark law, but there was an interesting opinion out of the Fifth Circuit yesterday that caught my eye. Earlier this year, World Wrestling Entertainment (“WWE”) put on its WrestleMania XXX event at the Superdome in New Orleans, Louisiana. Between ticket and merchandise sales, these events bring big money. Anticipating the inevitable counterfeiting that would take place, WWE turned to the federal district court in New Orleans for preemptive relief. Led by attorney Ray Areaux—Areaux was my professor for trademark and unfair competition law—WWE filed an ex parte motion seeking (1) a temporary restraining order, (2) an order authorizing the seizure of counterfeit goods, and (3) an order to show cause why a preliminary injunction should not issue against the unnamed defendants.

In its memorandum of law in support of the motion, WWE stressed that the order should issue ex parte as “notice to a defendant could result in no relief for the plaintiff because counterfeiters often destroy or hide the counterfeit merchandise.”1 WWE argued that it had complied with all of the requirements of Section 1116(d) of Title 15, which provides that “the court may, upon ex parte application, grant an order . . . providing for the seizure of goods and counterfeit marks . . . .” WWE urged the court to make the injunctive relief applicable nationwide, as it planned to host live events in other cities through March of 2015. The requested relief was limited in both time (to within a fourteen-day period) and scope (to within a five-mile radius of the events).

Despite having been granted such ex parte relief several times in the past, District Judge Ginger Berrigan of the Eastern District of Louisiana denied WWE’s motion.2 Judge Berrigan held that WWE had failed to adequately describe the defendants:

The problem with Plaintiff’s request is apparent once one recalls that the order it requests is not directed against a single named, identified, or even described person—all the defendants are John Does, and Plaintiff provides no particular information about the identity of any of them. At best, Plaintiff defines Defendants almost tautologically: Defendants are anyone who would be a proper defendant within broad geographic and temporal limits. Yet without knowing who (not even necessarily a name, but some information about) “the person against whom seizure would be ordered,” the Court cannot possibly evaluate the above requirements, and certainly not based on “specific facts.” Yet all Plaintiff has provided the Court by way of description is, in essence, “Some unidentified people we think might sell merchandise we think is counterfeit around WWE events across the nation during the next year.”

In Judge Berrigan’s opinion, WWE’s proposed order “puts the cart before the horse” as “[t]he Court may ‘not grant an application’ under Section 1116(d) ‘unless’ requirements dependent on the identity of Defendants are satisfied.” She thought it “impermissible bootstrapping” to permit WWE “to use a seizure order to develop the facts necessary to satisfy the statutory prerequisites to issue a seizure order.” Despite acknowledging that these “fly-by-night operators” cause “real harm” to WWE, Judge Berrigan was concerned that WWE’s proposed order “runs afoul not just of statutory text, but potentially of limits on the very power of the Court such as ripeness, due process, and personal jurisdiction.” As such, she chose not to exercise her discretion to enter the requested order.

Recognizing the importance and novelty of the legal issues presented, however, Judge Berrigan certified her opinion for interlocutory appeal:

As the Court indicated above, it is sympathetic to Plaintiff’s dilemma—how can Plaintiff, and many in Plaintiff’s situation, such as the NFL, NBA, NASCAR, and touring musicians, gather the “specific facts” necessary for relief when the kind of bootlegger it confronts is a moving target? Moreover, a number of district courts have provided relief (albeit without reasons) similar to that which gives the Court pause here. The Court is therefore of the opinion that the issues discussed in this order “involves a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation.” 28 U.S.C. § 1292(b).

The Court is hopeful that the Court of Appeals for the Fifth Circuit will accept this certification given the prominent role that New Orleans (and other cities in the Fifth Circuit, though the Court must confess a partiality to New Orleans) plays in hosting events where the kind of bootlegging Plaintiff alleges occurs. Additionally, other courts have noted that cases such as this rarely proceed to final judgment because the alleged bootleggers do not appear . . . . Accordingly, interlocutory certification is perhaps the only method available for Courts of Appeals to provide guidance (which the Court has not been able to find in any circuit) on the kind of relief Plaintiff requests.

The day after Judge Berrigan issued her opinion denying WWE’s motion, WWE filed a motion and memorandum for reconsideration. The day after that, Judge Berrigan denied the new motion,3 again citing the plaintiff’s inability to adequately describe the defendants:

There is no doubt that, as Plaintiff explains, Congress intended to expand the remedies available to trademark holders confronting counterfeiters by providing them a mechanism to obtain ex parte seizure orders. But the ability to obtain a seizure order without notice is not the same as the ability to obtain a seizure order without identifying the “person” against whom it is directed.

On interlocutory appeal to the Fifth Circuit, WWE’s luck changed. In a per curiam opinion released yesterday,4 a panel comprised of Circuit Judges Higginbotham, Jones, and Higginson—Judge Higginson was my evidence professor before being nominated to the Fifth Circuit by President Obama—vacated Judge Berrigan’s opinion denying WWE’s motion for ex parte relief. This marks the first time, to my knowledge, this issue has been reached by a federal appellate court. The Fifth Circuit disagreed with Judge Berrigan’s assessment:

The district court’s granular focus on the “identity” of unnamed Defendants misinterpreted the statutory requirement and its application here. The district court is correct that ex parte seizure orders should not be granted at will, and it commendably gave the requirements careful attention. It is the case that the Act constrains the issuance of such orders with certain procedural protections for the persons against whom they are issued. The district court concluded that it could not, ex ante, identify the persons against whom orders would issue as required by section 1116(d), an appropriate concern but one not present on the specific facts here.

The district court’s concern overlooks a predicate established in this case: WWE does not license third parties to sell merchandise at live events. Rather, it makes its own merchandise sales directly. The resulting confined universe of authorized sellers of WWE merchandise necessarily “identifies” any non-WWE seller as a counterfeiter. WWE cannot know in advance the specific identities of counterfeiters who will present themselves at any given event, but it does know that any non-affiliated seller at or near an event is almost certainly a counterfeiter.

In this case, therefore, the “person[s] against whom seizure would be ordered” are readily identifiable as any non-affiliated person purporting to sell WWE merchandise at or near a live WWE event. Provided that observation of unauthorized sales themselves is sufficient to identify a counterfeiter, as in this case, we see no reason why the district court cannot evaluate the requirements for ex parte seizure and temporary restraining orders to issue. We conclude from the record that WWE has met its burden under section 1116(d), and that the orders sought here should issue.

The Fifth Circuit found that, at least on the facts of this case, it was a simple matter to identify counterfeiters: Anyone not affiliated with WWE selling goods at an event “is almost certainly” an infringer because WWE doesn’t “license third parties to sell merchandise at live events.” In a footnote, the Fifth Circuit brushed aside the impact on legitimate resellers: “WWE can readily identify the unauthorized designs of counterfeit merchandise, and the Act’s wrongful seizure provisions would entitle the harmed reseller to a cause of action for any damages.” The Fifth Circuit remanded the case to the district court, where it “is free to modify the proposed order or to draft its own order as it sees fit, consistent with the ex parte seizure provision of the Act and with this opinion.” Presumably, Judge Berrigan will now grant WWE’s requested relief, and it can powerslam counterfeiters at its live events as they continue through March of next year.

Follow me on Twitter: @devlinhartline

© 2014 Devlin Hartline. Licensed under the Law Theories Public License 1.0.

  1. See, e.g., Senate-House Joint Explanatory Statement on Trademark Counterfeiting Legislation, 130 Cong. Rec. H12076, at 12080 (Oct. 10, 1984) (“The purpose of the ex parte seizure provision is to provide victims of trademark counterfeiting with a means of ensuring that the courts are able to exercise their jurisdiction effectively in counterfeiting cases. Testimony before both the House and Senate Judiciary Committees established that many of those who deal in counterfeits make it a practice to destroy or transfer counterfeit merchandise when a day in court is on the horizon. The ex parte seizure procedure is intended to thwart this bad faith tactic, while ensuring ample procedural protections for persons against whom such orders are issued.”). 
  2. See World Wrestling Entm’t, Inc. v. Doe, Case No. 14-cv-00688, 2014 U.S. Dist. LEXIS 45326 (E.D. La. Apr. 1, 2014). 
  3. See World Wrestling Entm’t, Inc. v. Does, Case No. 14-cv-00688, 2014 U.S. Dist. LEXIS 48754 (E.D. La. Apr. 3, 2014). 
  4. See World Wrestling Entm’t v. Unidentified Parties, Case No. 14-30489, 2014 U.S. App. LEXIS 21001 (5th Cir. Nov. 4, 2014). 

No Lemonade For Aereo’s Lemons

Over at the Volokh Conspiracy blog, Professor David Post laments “our incoherent copyright law.” His case in point: The opinion and order issued last week by District Judge Alison J. Nathan granting a preliminary injunction against Aereo.1 Professor Post claims that “the Copyright Act is an incoherent mess” since, in his opinion, Judge Nathan held that Aereo “may be a ‘cable system’ for purposes of determining whether it is infringing, but it’s not a ‘cable system’ for purposes of determining eligibility for the statutory license.” Professor Post explains:

[T]he Copyright Act not only says that cable system re-transmissions are infringing, but it also, importantly, provides them with a compulsory statutory license, at a fixed rate, to do so, in sec. 111 of the Act. That is, Congress didn’t merely make cable systems liable for infringement – it provided them with a defense to an infringement claim (provided that they paid the statutorily-set royalty to the copyright owners). So Aereo said, in effect: OK, if we’re a cable system, we can (like other cable systems) continue to re-transmit these signals to our customers (just like the cable companies do), so long as we pay the royalty.

Contrary to Professor Post, I don’t think there’s anything “incoherent” about Judge Nathan’s holding that Aereo is not a “cable system,” as that term is defined in Section 111. Curiously, Professor Post declares the result “bizarre and counterintuitive” without supplying any of Judge Nathan’s reasoning. The problem with Professor Post’s approach stems from his premise, namely, that the Copyright Act “says that cable system re-transmissions are infringing.” But that’s not what the Transmit Clause in Section 101 says. It instead broadly defines what it means “[t]o perform . . . a work ‘publicly.’” And while all cable systems may publicly perform under the Transmit Clause, it doesn’t follow that only cable systems publicly perform thereunder. A different type of service—one that isn’t a “cable system,” as Aereo is not—may publicly perform as well.

Professor Post claims that Judge Nathan held that Aereo “may be a ‘cable system’ for purposes of determining whether it is infringing,” but that’s not what she said. Nor is it what the Supreme Court held in Aereo III. The Court instead simply deduced that Aereo performs because it “acts like a CATV system.” The Court’s reasoning can be boiled down to a syllogism: Since cable systems perform, and since Aereo is functionally equivalent to a cable system, it follows that Aereo performs. But saying that Aereo “acts like” a cable system for the purpose of determining whether it performs under the Transmit Clause has nothing to do with whether Aereo is a “cable system,” a term of art, under Section 111. It makes little sense to argue otherwise.

Yet, in the district court, Aereo argued that if it’s a cable system under the Transmit Clause, then it’s a “cable system” under Section 111. Judge Nathan soundly rejected this logic:

Doing its best to turn lemons into lemonade, Aereo now seeks to capitalize on the Supreme Court’s comparison of it to a CATV system to argue that it is in fact a cable system that should be entitled to a compulsory license under § 111. This argument is unavailing for a number of reasons.

To begin with, Aereo’s argument suffers from the fallacy that simply because an entity performs copyrighted works in a way similar to cable systems it must then be deemed a cable system for all other purposes of the Copyright Act. The Supreme Court’s opinion in Aereo III avoided any such holding.

Indeed, the Supreme Court consistently stated throughout its opinion that Aereo’s similarity to CATV systems informed its conclusion that Aereo performs, not that Aereo is a cable system. . . .

But the Supreme Court in Aereo III did not imply, much less hold, that simply because an entity performs publicly in much the same way as a CATV system, it is necessarily a cable system entitled to a § 111 compulsory license. . . . Stated simply, while all cable systems may perform publicly, not all entities that perform publicly are necessarily cable systems, and nothing in the Supreme Court’s opinion indicates otherwise.

The issue before the Supreme Court was whether Aereo publicly performs under the Transmit Clause, not whether it’s a “cable system” under Section 111. That the Court did not consider the Section 111 defense is Aereo’s own fault—it never argued that it’s a “cable system” under Section 111 in the first place. Arguing that it’s a “cable system” would have meant conceding the one thing it didn’t want to admit, namely, that it publicly performs. Aereo’s strategy, until recently, has been to deny that it publicly performs at all.

Unable to find anything in Aereo III indicating that it is in fact a “cable system” under Section 111, Aereo posited that certain statements made by the Justices during oral argument prove that its newly-found Section 111 defense excuses its otherwise-infringing conduct. Of course, as Judge Nathan acknowledged, statements made at oral argument have no “legal effect,” and “only the Justices’ written opinions have the force of law.” More damaging to Aereo’s cause, Judge Nathan noted that “the statements of the Justices at oral argument cut against its position because the statements indicate that the Justices were certainly aware of the possibility of the § 111 defense and did not address it in the opinion.” To this I would add that the Court didn’t address the Section 111 defense because Aereo made the strategic choice not to present it.

Even more desperate than its claim that some offhand and out-of-context remarks made at oral argument prove a defense that it had expressly disavowed, Aereo argued that the Second Circuit’s opinion in ivi is not on point.2 There, the Second Circuit had held that “Congress did not intend for § 111’s compulsory license to extend to Internet retransmissions.” Confronted with this binding precedent contravening its Section 111 argument, Aereo declared that Aereo III overruled ivi by implication. Judge Nathan rejected this claim as well:

But the Supreme Court did not mention ivi or ivi’s holding, and . . . nothing in the Supreme Court’s opinion can be read as abrogating ivi because the Supreme Court limited its holding to a finding that Aereo performs like a cable system for purposes of the transmit clause, not that it is a cable system entitled to a § 111 license. Thus, ivi remains good law and binding precedent here.

Additionally, Aereo argued in the alternative that ivi is distinguishable on the merits. According to Aereo, “the unrestricted nature of ivi’s transmissions was the determinative fact for the Second Circuit, which noted that Section 111’s compulsory license scheme was intended to support local market—rather than national market—systems.” Thus, Aereo hypothesized that the fact that it only transmits content its users can receive in their home markets means that everything the Second Circuit said in ivi about Section 111 does not apply to its service. Since ivi transmitted content to anyone, anywhere—not just content available in its users’ home markets—Aereo argued that ivi is inapposite.

Reading the ivi decision, I don’t see how Aereo could possibly argue that this home market distinction is “the determinative fact” that obviates everything else the Second Circuit said about Section 111 and internet retransmissions. With even the most charitable eye, I can’t conceive of how ivi can be read to turn on this lone distinction. Judge Nathan agreed:

To the contrary, the geographic reach of internet retransmission services was but one of many factors the Second Circuit considered in reaching its holding that § 111 does not cover internet retransmission services. . . . Only at the end of its step two analysis did the Second Circuit note that “[m]ore broadly, the Copyright Office has maintained that § 111’s compulsory license for cable systems is intended for localized retransmission services; under this interpretation, Internet retransmission services are not entitled to a § 111 license.” . . . This reference to the possible geographic reach of ivi’s system provided an additional point of distinction between Internet retransmission and traditional cable systems, but it was not “the determinative fact” for the Second Circuit.

In sum, Judge Nathan rejected all of Aereo’s Section 111 arguments: The Supreme Court never said that Aereo is a “cable system” under Section 111—its focus was on the Transmit Clause because that is what the parties had argued. Nothing the Justices said at oral argument changes this—in fact, the Justices conspicuously failed to mention Section 111 in the opinion despite the issue having been discussed at oral argument. And most devastatingly, Aereo could find no support for its argument that ivi is no longer good law or that ivi does not apply to its own internet retransmissions. I think Judge Nathan got it right on all counts, and I don’t see anything “incoherent” about it.3

Aereo threw out some other arguments that Judge Nathan easily dismissed. For example, Aereo contended that it qualifies for the safe harbor under Section 512(a) of the DMCA. This is the safe harbor that applies to services that act as mere conduits of content. The obvious problem for Aereo is that it does more than act as a mere conduit—it stores the content as well. Furthermore, Aereo’s own actions are sufficiently proximate such that it publicly performs, that is, it causes the transmissions to occur. Judge Nathan observed that Aereo, consistent with Aereo III, could not seek refuge in this safe harbor:

Aereo’s service uses antennas to capture over-the-air broadcasts and then transcodes and buffers the broadcasts before sending them to a “server, where a copy of the program is saved to a large hard drive in a directory reserved for [a given] Aereo user.” . . . In other words, Aereo stores and provides links to copyrighted material. . . .

§ 512(a)(1) states that the safe harbor will only be available if “the transmission of the material was initiated by or at the direction of a person other than the service provider.” This was essentially the defense that Aereo has asserted all along: it only acts at the direction of its users, who do the “performing” when they click play on Aereo’s site. The Supreme Court rejected this defense and expressly held that Aereo performs.

What’s more, Judge Nathan noted that Aereo never asserted that it qualifies for the Section 512(a) safe harbor in the first place since it never claimed to have a repeat infringer policy in place pursuant to Section 512(i): “Failure to have in place such a policy is thus an absolute bar to asserting any defense under § 512.” So not only did Aereo not qualify for the safe harbor because it failed to allege one of its prerequisites, the safe harbor would not have protected Aereo even if all of the prerequisites had been met. And this followed from the fact that Aereo is not a mere conduit of content, as it, quite remarkably, still claimed to be—the Supreme Court’s opinion in Aereo III to the contrary notwithstanding.

Turning to irreparable harm, Judge Nathan saw no reason to revisit her earlier holding in Aereo I that the plaintiffs had established that they would suffer irreparable harm in the absence of a preliminary injunction.4 As to the balance of hardships, however, Judge Nathan found that things were now different. In Aereo I, the plaintiffs had been deemed unlikely to succeed on the merits under the Second Circuit’s reasoning in Cablevision. As such, Judge Nathan had rejected the plaintiffs’ contention that Aereo’s hardships were not cognizable since they were alleged to be founded on infringement. With Aereo’s affirmative defenses under Sections 111 and 512(a) now rejected, Judge Nathan made short work of Aereo’s argument that the plaintiffs are unlikely to succeed on the merits:

In light of the Supreme Court’s holding, Plaintiffs have demonstrated a likelihood of success on the merits, and Aereo has not demonstrated a likelihood of success on the merits of its novel affirmative defenses.

And given the plaintiffs’ likelihood of success on the merits post-Aereo III, Judge Nathan held that the balance of hardships now favors the plaintiffs:

[A]s the Second Circuit has held, “[i]t is axiomatic that an infringer of a copyright cannot complain about the loss of ability to offer its infringing product.” ivi, 691 F.3d at 287. The Supreme Court has concluded that Aereo performs publicly when it retransmits Plaintiffs’ content live over the Internet and thus infringes Plaintiffs’ copyrighted works. In light of this conclusion, Aereo cannot claim harm from its inability to continue infringing Plaintiffs’ copyrights. . . . Aereo cannot claim significant hardship if an injunction issues, while Plaintiffs can still claim harm if an injunction does not issue. Thus, the balance of hardships tips in Plaintiffs favor.

Turning to the scope of the preliminary injunction, Judge Nathan held the plaintiffs “to their earlier decision, strategic or otherwise, to seek a preliminary injunction limited in scope to enjoining retransmission of their copyrighted works while the works are still being broadcast.” Thus, Judge Nathan only enjoined Aereo’s near-simultaneous transmissions, though she did make the injunction applicable nationwide. Whether Aereo’s time-shifted transmissions should also be enjoined will have to wait until the district court considers granting a permanent injunction. In a previous post, I argued that these time-shifted transmissions are infringing as well. And it’s interesting to note that Aereo does not appear to be offering time-shifted transmissions at this time. Perhaps it’s because Aereo realizes that these time-shifted lemons don’t make lemonade either.

Follow me on Twitter: @devlinhartline

© 2014 Devlin Hartline. Licensed under the Law Theories Public License 1.0.

  1. See Am. Broad. Companies, Inc. v. Aereo, Inc., Case No. 12-cv-1540, 2014 WL 5393867 (S.D.N.Y. Oct. 23, 2014). 
  2. See WPIX, Inc. v. ivi, Inc., 691 F.3d 275 (2d Cir. 2012), cert. denied, 133 S.Ct. 1585 (2013). 
  3. I should note that I’m not claiming that ivi was decided correctly. I’m merely saying that Judge Nathan properly concluded that ivi remains good law and that it’s dispositive here. 
  4. See Am. Broad. Companies, Inc. v. Aereo, Inc., 874 F. Supp. 2d 373, 397-400 (S.D.N.Y. 2012). 

MP3tunes and the Ghost of Cablevision

On September 29th, District Judge William H. Pauley, III, issued his memorandum and order in Capitol Records v. MP3tunes,1 as many have reported. However, as I read the decision, I’m surprised at Judge Pauley’s holding that certain parts of Cablevision are still good law after the Supreme Court’s opinion in Aereo. Specifically, Judge Pauley distinguished Aereo and held that its interpretation of the public-private distinction under the Transmit Clause is not controlling precedent. Respectfully, I think that’s bunk.

The defendant, Michael Robertson, argued that he could not be secondarily liable for violating the plaintiffs’ public performance rights since the third-party websites linked-to from his MP3tunes platform were not themselves directly infringing. In analyzing the direct liability of these third-party websites, Judge Pauley turned to the Second Circuit’s analysis of the public performance right in Cablevision. The Cablevision court held that “under the transmit clause, we must examine the potential audience of a given transmission by an alleged infringer to determine whether that transmission is ‘to the public.'”

In the Second Circuit’s opinion, since “the use of a unique copy may limit the potential audience of a transmission,” such use is “therefore relevant to whether that transmission is made ‘to the public.'” The Cablevision court read into the Transmit Clause a distinction between public and private performances based on the use of a single source copy for each transmission: “it seems quite consistent with the Act to treat a transmission made using Copy A as distinct from one made using Copy B.” When there’s a one-to-one relationship between the source copy and the user, the Second Circuit held, the performances are private.2

But the Cablevision court implied that things would be different if one source copy were used to make multiple transmissions to multiple users. In that case, the performances would be public, even though the “potential audience of a given transmission” would still be limited. This rule would apply, for example, if a video-on-demand service such as YouTube were to use only one source copy for multiple performances. Even if each transmission reaches only one person, the fact that each transmission arises from the same source copy means that the performances are nonetheless public. That’s the Second Circuit’s theory of the public-private distinction under the Transmit Clause.

Judge Pauley applied this analysis to the third-party websites in MP3tunes:

Robertson argues that third-party websites did not publicly perform the works-in-suit. Public performance means, inter alia, to (1) perform or display the work in a public place or in a place where a substantial number of persons is gathered or (2) to transmit or display the work in or to the public by means of any device or process. (See Charge at 31.) “[U]nder the transmit clause, [courts] must examine the potential audience of a given transmission by an alleged infringer to determine whether that transmission is ‘to the public.’ ” Cartoon Network LP, LLLP v. CSC Holdings, Inc., 536 F.3d 121, 137 (2d Cir.2008). “Both factors—the identity of the transmitter and the source material of the transmission—limit the potential audience of a transmission … and are therefore germane in determining whether that transmission is made ‘to the public.’ ” Cartoon Network, 536 F .3d at 138. In the context of this case, a third-party domain hosts a single master copy that is available for transmission to anyone on the Internet.

Having determined that these third-party websites used a “single master copy” for their multiple transmissions, Judge Pauley found that they were direct infringers—thus making Robertson an indirect infringer. The problem with this is that the Supreme Court in Aereo completely rejected this “single master copy” theory from Cablevision. While one can certainly argue that Aereo is distinguishable to the extent its analysis focused on functional equivalence to a cable system, its interpretation of the public-private distinction under the Transmit Clause, by contrast, applies wherever there is a performance-by-transmission (or a display-by-transmission, as discussed below).

In Aereo, the Supreme Court held that a performance is not private simply because there is a one-to-one relationship between the source copy and the user. In other words, the Court held that the public-private distinction under the Transmit Clause does not turn on the “potential audience of a given transmission,” with an exception for multiple transmissions arising from one source copy, as the Second Circuit had indicated in Cablevision. Under the Supreme Court’s interpretation of the Transmit Clause, even multiple transmissions made from multiple copies, one for each user, can be public performances as well:

The text of the Clause effectuates Congress’ intent. Aereo’s argument to the contrary relies on the premise that “to transmit … a performance” means to make a single transmission. But the Clause suggests that an entity may transmit a performance through multiple, discrete transmissions. That is because one can “transmit” or “communicate” something through a set of actions. . . .

The Transmit Clause must permit this interpretation, for it provides that one may transmit a performance to the public “whether the members of the public capable of receiving the performance … receive it … at the same time or at different times.” § 101. Were the words “to transmit … a performance” limited to a single act of communication, members of the public could not receive the performance communicated “at different times.” Therefore, in light of the purpose and text of the Clause, we conclude that when an entity communicates the same contemporaneously perceptible images and sounds to multiple people, it transmits a performance to them regardless of the number of discrete communications it makes.

We do not see how the fact that Aereo transmits via personal copies of programs could make a difference. The Act applies to transmissions “by means of any device or process.” Ibid. And retransmitting a television program using user-specific copies is a “process” of transmitting a performance. A “cop[y]” of a work is simply a “material objec[t] … in which a work is fixed … and from which the work can be perceived, reproduced, or otherwise communicated.” Ibid. So whether Aereo transmits from the same or separate copies, it performs the same work; it shows the same images and makes audible the same sounds. Therefore, when Aereo streams the same television program to multiple subscribers, it “transmit[s] … a performance” to all of them.

Aereo teaches that the public-private distinction under the Transmit Clause doesn’t turn on the number of source copies used, and that holding is not limited to services that look like cable systems—it applies to Transmit Clause analysis generally. While Judge Pauley may have reached the right result in finding that the third-party websites were direct infringers of the plaintiffs’ public performance rights, his reliance on Cablevision’s ghost led him astray when it came to Robertson’s own direct liability for violating the plaintiffs’ public display rights.

Due to its parallel construction, the Transmit Clause applies with equal force to performances and displays accomplished via transmissions. What’s “to the public” for the public performance right is “to the public” for the public display right:

To perform or display a work “publicly” means . . . to transmit or otherwise communicate a performance or display of the work . . . 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.

Judge Pauley held that Robertson did not directly infringe the plaintiffs’ public display rights because he used individualized source copies for each transmission:

Robertson contends that MP3tunes did not publicly transmit cover art because MP3tunes created a separate copy of each album cover for each user. Each time any user uploaded a track, MP3tunes’ software automatically searched for and retrieved cover art, regardless of whether other users had that cover art in their lockers. (Tr. 345:2–347:1 (Horowitz).) MP3tunes saved the cover art on its servers. (Tr. 345:12–15 (Horowitz).) Only one user was capable of receiving each copy. (Tr. 346:20–347:1 (Horowitz).) Because there was no master copy of the cover art, MP3tunes cannot be held directly liable for a public display of cover art. see Cartoon Network, 536 F.3d at 139; cf. MP3tunes I, 821 F.Supp.2d at 649–50 (holding that MP3tunes could not be directly liable for violations of Publishers’ public performance rights in musical compositions because MP3tunes did not use a master copy).

Judge Pauley’s “cf.” at the end references his earlier holding in 2011 in the same litigation:

EMI argues that MP3tunes’ storage system violates its right to public performance because, much like Robertson’s earlier effort at online music storage with, MP3tunes employs a “master copy” to rebroadcast songs to users who uploaded different copies of the same song. EMI relies on the Second Circuit’s holding that a cable provider did not violate television studios public performance rights in its digital recording and play back services because the cable provider did not use a master copy to play back shows recorded by their viewers. Cartoon Network, LP v. CSC Holdings, Inc., 536 F.3d 121, 138 (2d Cir.2008). EMI’s argument, however, mischaracterizes MP3tunes’ storage system. The record demonstrates that MP3tunes does not use a “master copy” to store or play back songs stored in its lockers. Instead, MP3tunes uses a standard data compression algorithm that eliminates redundant digital data. Importantly, the system preserves the exact digital copy of each song uploaded to Thus, there is no “master copy” of any of EMI’s songs stored on MP3tunes’ computer servers.

How a “standard data compression algorithm that eliminates redundant digital data” differs from a “master copy,” I truly don’t know. It seems to me that they’re the same thing—if all of the “redundant digital data” is eliminated, what’s left is a “master copy.” Regardless, while Cablevision’s read of the public-private distinction under the Transmit Clause as turning on the number of source copies may have been good law in 2011, that’s no longer true today. Judge Pauley’s holding that Robertson didn’t directly infringe the plaintiffs’ public display rights because “there was no master copy of the cover art” simply can’t be reconciled with the Supreme Court’s holding in Aereo that the number of source copies doesn’t matter under the Transmit Clause.

The plaintiffs in MP3tunes argued that Aereo’s interpretation of the Transmit Clause should be applied to both the public performance and the public display analysis, but Judge Pauley brushed this aside:

Plaintiffs also argue that the Supreme Court’s opinion in Aereo establishes that the third-party websites performed the work publicly. But the Supreme Court expressly excluded “novel issues not before the Court, as to which ‘Congress has not plainly marked [the] course.’ ” Am. Broad. Cos. v. Aereo, Inc., 134 S.Ct. 2498, 2511 (2014). Because the third-party domains here are not “substantially similar” to a community antenna television provider, they are beyond Aereo’s reach. See Aereo, 134 S.Ct. at 2506. ***

Further, as described earlier, Aereo does not buttress Plaintiffs’ argument because its holding was explicitly limited to technologies substantially similar to the one before the Supreme Court. Aereo, 134 S.Ct. at 2506, 2510–11. Therefore, Robertson’s motion for judgment as a matter of law is granted as to MP3tunes’ liability for public display rights in cover art.

Indeed, the final section of the Supreme Court’s opinion in Aereo discussed the intended reach of its holding. It began by noting that its conclusion that Aereo performs doesn’t necessarily mean that other services also perform:

Aereo and many of its supporting amici argue that to apply the Transmit Clause to Aereo’s conduct will impose copyright liability on other technologies, including new technologies, that Congress could not possibly have wanted to reach. We agree that Congress, while intending the Transmit Clause to apply broadly to cable companies and their equivalents, did not intend to discourage or to control the emergence or use of different kinds of technologies. But we do not believe that our limited holding today will have that effect.

For one thing, the history of cable broadcast transmissions that led to the enactment of the Transmit Clause informs our conclusion that Aereo “perform [s],” but it does not determine whether different kinds of providers in different contexts also “perform.” For another, an entity only transmits a performance when it communicates contemporaneously perceptible images and sounds of a work. See Brief for Respondent 31 (“[I]f a distributor … sells [multiple copies of a digital video disc] by mail to consumers, … [its] distribution of the DVDs merely makes it possible for the recipients to perform the work themselves—it is not a ‘device or process’ by which the distributor publicly performs the work” (emphasis in original)).

The Court was able to determine that Aereo performs because of its functional equivalence to a cable system, but as it noted, that wouldn’t necessarily be true for “different kinds of providers in different contexts.” That said, however, the Court reiterated its definition of what it means to “perform” under the Transmit Clause: “an entity only transmits a performance when it communicates contemporaneously perceptible images and sounds of a work.” That definition of performance-by-transmission applies whether the service is functionally equivalent to a cable system or not.

By the same token, the Court then discussed its definition of “the public” under the Transmit Clause:

Further, we have interpreted the term “the public” to apply to a group of individuals acting as ordinary members of the public who pay primarily to watch broadcast television programs, many of which are copyrighted. We have said that it does not extend to those who act as owners or possessors of the relevant product. And we have not considered whether the public performance right is infringed when the user of a service pays primarily for something other than the transmission of copyrighted works, such as the remote storage of content. See Brief for United States as Amicus Curiae 31 (distinguishing cloud-based storage services because they “offer consumers more numerous and convenient means of playing back copies that the consumers have already lawfully acquired” (emphasis in original)). In addition, an entity does not transmit to the public if it does not transmit to a substantial number of people outside of a family and its social circle.

Nothing in that passage demonstrates that the Court’s understanding of “the public” is limited to services that are functionally equivalent to a cable system. On the contrary, the Court stated affirmatively that “the public” does not include “those who act as owners or possessors of the relevant product.”

Lastly, in the passage quoted by Judge Pauley, the Court stated that it wasn’t deciding cases not before it:

We cannot now answer more precisely how the Transmit Clause or other provisions of the Copyright Act will apply to technologies not before us. We agree with the Solicitor General that “[q]uestions involving cloud computing, [remote storage] DVRs, and other novel issues not before the Court, as to which ‘Congress has not plainly marked [the] course,’ should await a case in which they are squarely presented.” Brief for United States as Amicus Curiae 34 (quoting Sony, supra, at 431, 104 S.Ct. 774 (alteration in original)). And we note that, to the extent commercial actors or other interested entities may be concerned with the relationship between the development and use of such technologies and the Copyright Act, they are of course free to seek action from Congress. Cf. Digital Millennium Copyright Act, 17 U.S.C. § 512.

While it’s true that, as Judge Pauley noted, the Court indicated it was not deciding “novel issues” that were not before it, that doesn’t mean that its entire interpretation of the Transmit Clause should be dismissed as inapplicable to MP3tunes. On the contrary, the Court reiterated its definitions of “perform” and “the public” in the very section where it discussed the intended reach of its holding. The Court didn’t create a special interpretation of the public-private distinction under the Transmit Clause for cable systems and Aereo-lookalikes, as Judge Pauley seemed to think. The Supreme Court’s analysis applies no matter which technology is at issue, including Robertson’s MP3tunes.

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© 2014 Devlin Hartline. Licensed under the Law Theories Public License 1.0.

  1. Capitol Records, Inc. v. MP3tunes, LLC, Case No. 07-cv-9931, 2014 WL 4851719 (S.D.N.Y. Sept. 29, 2014). 
  2. It should be noted that the Second Circuit somewhat cabined things: “This holding, we must emphasize, does not generally permit content delivery networks to avoid all copyright liability by making copies of each item of content and associating one unique copy with each subscriber to the network, or by giving their subscribers the capacity to make their own individual copies.”