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 MP3.com, 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 MP3tunes.com. 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.

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  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.” 

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