Aereo Oral Argument: But What About the Cloud?

Cross-posted on the Copyhype blog.

The cloud took center stage at the oral argument in the Aereo appeal before the Supreme Court this past Tuesday. Several justices expressed concern over how Aereo’s service can be distinguished from a cloud storage service. As they had argued in their reply brief, the petitioners, represented by Paul D. Clement, note that there’s a difference between a service that allows its users to store and access the content they already possess and a service that supplies the content to its users in the first instance. Clement argues that this distinction flows from the “to the public” language of the Transmit Clause:

Here, I think the ultimate statutory text that allows you to differentiate a cloud locker storage from something like what Aereo does is a language to the public. And I do think that in all sorts of places, including the real world, there’s a fundamental difference between a service that allows – that provides new content to all sorts of end-users, essentially any paying stranger, and a service that provides a locker, a storage service.

And I think if you want a real world analogy off of the Internet, I think it’s the basic decision – the difference between a car dealer and a valet parking service. I mean, if you look at it from 30,000 feet, you might think, hey, both of these things provide cars to the public. But if you looked at it more closely, you’d understand, well, if I show up at the car dealership without a car, I’m going to be able to get a car. If I show up at the valet parking service and I don’t own a car, it’s not going to end well for me. . . .

I think there is a very real way in which you would say, you know, at the end of the day, the car dealer’s providing cars to the public, the valet parking service is not. It’s providing a parking service.

Clement’s “real world analogy” looks at the difference between a car dealer and a valet service. He argues that Aereo is like a car dealer because people go there to obtain a car in the first instance. It’s not like a valet service, where you can only get back the car you dropped off. What makes Aereo different than a cloud storage service like Dropbox is that Aereo supplies the content to its users in the first instance. You don’t go to Aereo to park the car you already own; you go to Aereo to buy the car.

Clement argues that whether a transmission is “to the public” turns on who supplies the content:

If all they can do is, just like the valet car parking service, is get back what they put up there, I think you could easily say that that is not to the public. And that is not just me coming up with a clever distinction. That’s the distinction that’s really been drawn in the real world, because not all cloud computing is created equal, and there are some cloud computing services that use cloud computing technology to get new content to people that don’t have it, and they get licenses. And there is other cloud computing that just has locker services and they don’t think they need a license . . . .

This tracks my own argument, and I think it’s a reasonable line to draw—one that has indeed “really been drawn in the real world.” As I mentioned in my last post, the norm is that a service that supplies the content to members of the public in the first instance—whether by public distribution as with iTunes, by public performance as with Spotify, or by public display as with Westlaw—obtains a license to supply this content. The reason the service needs this license is because the content it supplies is being transferred “to the public” in the first instance, thus making it the quintessential public distribution, performance, or display.

These three exclusive rights (public distribution, performance, and display) are all related in that they make directly liable anyone who supplies the content “to the public” in the first instance. All three rights involve transferring the content from the transferor to the transferee where the relationship between the two is a public one. At the end of the transfer, the transferee obtains the content in the first instance, that is, the content in which the transferee has no prior possessory interest. Without a license (or some other defense), the transferor has violated one or more of the copyright owner’s three exclusive rights to supply the content “to the public” in the first instance.

And this is the difference Clement is talking about. A cloud storage service does not supply the content “to the public” in the first instance. Members of the public use a cloud storage service to store and access the content they already have a possessory interest in. It’s the difference between a library, which publicly distributes a book that it lends out, and a safety deposit box, where I can store a book that I already possess for safekeeping. If I later go to the bank to retrieve the book from my safety deposit box, the bank is not publicly distributing the book. The bank instead is my bailee, and I am merely retrieving my property as a bailor. The relationship, in other words, is one of bailment.

This same distinction based on who supplies the content was invoked by Deputy Solicitor General Malcolm L. Stewart, arguing on the government’s behalf as an amicus curiae in support of the petitioners:

The second thing that I would like to reinforce in Mr. Clement’s presentation is that there is no reason that a decision in this case should imperil cloud locker services generally . . . .

[T]here are obviously services that provide television programming over the Internet. Some of them are licensed because they recognize that they are publicly performing. If a particular company, for instance, recorded television programs and offered to stream them to anyone who paid the fee or offered to stream them for free and make its money off advertising, that would be a public performance because those companies would be providing content to people who didn’t have it.

I think the basic distinction, the one that at least defines the extremes, is the distinction between the company, whether it be Internet-based or a cable transmitter, that provides content in the first instance and the company that provides consumers with access to content that they already have. If you have a cloud locker service, somebody has bought a digital copy of a song or a movie from some other source, stores it in a locker and asks that it be streamed back, the cloud locker and storage service is not providing the content. It’s providing a mechanism for watching it.

Like the petitioners, the government argues that there’s a simple dichotomy between a service that supplies the content to members of the public in the first instance and one that does not. When the service itself supplies the content that its users can stream over the internet, it’s publicly performing. And when the service merely enables users to stream the content that they already possess, it’s not publicly performing. That’s how you can tell the difference between the two.

Not surprisingly, David C. Frederick, representing Aereo, thinks this simple dichotomy just doesn’t work. Justice Kagan asked Frederick why he thinks liability does not turn on who supplies the content:

Mr. Frederick, why isn’t it sufficient to create a line such as the one Mr. Clement said, which said, you know, do you on the one hand supply or provide the content, that puts you in one box; on the other hand, if you are not supplying or providing the content, if the user is supplying and providing the content, and you are just providing the space, a kind of platform for them to do that and for them potentially to share the content, that puts you in another box?

To which Frederick replied:

Well, Justice Kagan, I note that my friend did not reference the words of the Transmit Clause at all when he offered that distinction. And that’s actually quite important, because in order to get there, you have to make up words to put them in the Transmit Clause. But even if you were to think that that was good for a policy reason, you would still have to explain why the hundreds of thousands of people that are subscribers to Aereo’s service don’t have exactly the same fair use right to get over-the-air broadcast content that all of those people who are not Aereo subscribers but they happen to have a home antenna and a DVR. Those people have every bit as right to get that access. And the fact that they are doing it doesn’t make their antenna or their antenna provider a content provider.

As to his first claim, namely, that Clement “did not reference the words of the Transmit Clause,” I don’t think this is true. As noted above, Clement explicitly said his argument flowed from the “to the public” language in the Transmit Clause. What makes it “to the public” is the fact that the content is being supplied in the first instance to members of the public. I would add that this is the same rule that applies whether discussing the public distribution, performance, or display right. We’re interested in whether the transferor has supplied the transferee, a member of the public, with the content in the first instance. That’s what makes it “to the public.”

As to his second argument, I have to first point out that I don’t think there’s any such thing as a “fair use right.” As I explained in a prior post, fair use is a privilege, not a right. There is no affirmative right to make a copy. The only right is the copyright owner’s exclusive right to exclude others from making a copy. Regardless, the question isn’t whether a home user can set up an antenna and DVR to time-shift over-the-air broadcasts. That’s the reproduction right, which does not involve transferring the content from one party to a member of the public. The transfer of the content in that scenario comes from the over-the-air broadcast, which is a licensed public performance on the broadcaster’s part. And it needs to be licensed because the broadcaster is supplying the content “to the public” in the first instance.

But that’s not the issue here with Aereo. The issue is whether Aereo is publicly performing when the content is transmitted from Aereo’s service to members of the public. This is the transmission we are looking at, not the prior over-the-air transmission “to the public” from the broadcaster. The difference between this scenario and the home antenna and DVR scenario is that here Aereo is a middleman between the broadcaster and the member of the public. The transmission doesn’t go directly from the broadcaster to the member of the public; it goes from the broadcaster to Aereo to the member of the public. And the difference between the broadcaster and Aereo is that only the broadcaster has a license to publicly perform, i.e., to supply the content “to the public” in the first instance.

So the question is really whether Aereo is publicly performing by supplying the content to members of the public in the first instance. It seems clear to me that it is. Aereo’s service is “any device or process” that transmits copyrighted works “to the public.” Members of the public use Aereo to obtain the content in the first instance. And the fact that Aereo also enables its subscribers to make copies is beside the point. Those copies are just part of the “device or process” that Aereo uses to supply the content “to the public.” They don’t change the fact that Aereo is still engaging in the quintessential public performance, and Aereo can’t escape liability for copying by way of utilizing more copies.

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

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3 thoughts on “Aereo Oral Argument: But What About the Cloud?

  1. A particularly frustrating aspect of this case is that counsel for each party exhibit an uncanny knack of waxing poetic about technical matters that conveys gobbledygook. Geez, any lawyer who deals within the area of patent application preparation and prosecution could run circles around these technical un-geeks.

    It has taken me a while to sort the wheat from the chaff, and I certainly do not profess to be an expert into the nitty gritty details of all the law relevant here (I am well versed in all aspects of copyright law, but winnowing down any issue to such detail is typically reserved for when the need arises because a client matter demands it).

    Please correct me if my “millwork” is off the mark, but it appears to me that the broadcasters are saying “We broadcast our electromagnetic signals to the world via the airwaves, you, AEREO, are able to receive each of our signals on a whole bunch of itty bitty antennas, when one of your subscribers decides to watch a particular signal he/she traipses electronically over to Brooklyn and other locales and electronically requests that signal, you pick one of your then unused itty bitty antennas, tell it to tune to that particular signal, perform whatever needs to be done to that signal so it can be sent (transmitted) to the subscriber in a form that can be viewed by him/her, dump it into a bucket to hold the signal, and then ship it electronically from the bucket to whatever your subscriber happens to be holding in order to view the signal when the subscriber say ‘I want it now’.”

    In this scenario the original transmission was performed, of course, by the broadcaster, it was received by Aereo, and then “forwarded” by Aereo when and as any specific part of the transmission is requested by a subscriber. Yes, the subscriber asked for it, but it is Aereo that then tunes it in, massages it to a form suitable for transmission over the net, and then puts it in a bucket waiting for its electronic trip to the subscriber.

    Aereo, on the other hand appears to be saying “Hold the fort. We are just a bunch of hardware flunkies who rent antennas to people unable to pick up some or all of the broadcasts of your electromagnetic signals. We are just their antenna away from wherever they happen to be standing/sitting (which sometimes a really LONG away from their antenna). Thus, the person receiving the broadcasts in the first instance is them on the itty bitty antennas (yea, we known, we can’t give them their own dedicated one because we need these antennas to handle the needs of others who also want to look at signals) we rent them, and because they are the ones who are receiving the broadcasts in the first instance all they are doing is then watching whatever signal they want in the privacy of wherever they happen to be using whatever display device they happen have in hand. By the way, because they are the ones who are receiving the signals in the first instance, they are absolutely free to record them to watch the signals whenever it suits their fancy because Sony says so in dicta, and we all know that dicta is controlling precedent if you repeat it enough times that is sounds like it was an actual holding concerning the real questions that were presented to the court.”

    I know this is a tediously long tongue in cheek comment, but I am trying to make a point. “It’s a car dealership versus a valet parking service” is not particularly illuminating. “I’m sweating bullets over what this means for the (drum roll, please) ‘cloud’ ‘cuz I do not want to hose things up for others who might do some really cool cloud-stuff in the future. Maybe we should send this back for the trial court to take a look at.” takes judicial posterior protection to new heights.

    I will spare everyone of my analysis of the relevant provisions of Title 17. All I will say is that viewed from 30,000 feet the Aereo business model has the look and feel of every cable, satellite, and community antenna system I have ever seen, but with the additional observation that Aereo must provide equipment that does a whole lot more than merely passing along exactly what was broadcast. The broadcast signal as received must then undergo a complex process of signal processing that ultimately finishes when the signal is now in a condition suitable for watching on a subscriber’s smartphone (because we all know that a smartphone is the perfect vehicle for watching the latest Hollywood blockbuster).

    BTW, whatever the eventual outcome, broadcasters will adapt and thrive because they did not become successful by being financially illiterate. The only one as I see it having a real stake in the outcome is Aereo because it stands to loose everything it has “innovated” if the court holds in favor of the plaintiffs.

      1. Merely FYI, I have always found it useful in matters like this to read contracts between service providers and their customers. This give me a better idea about how a provider views the relationship and its role. On many occasions it has revealed grist for the mill…

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