American Broadcasting Companies vs. Aereo, Inc.

A couple of weeks ago, overshadowed by the Hobby Lobby decision, SCOTUS handed down a copyright decision that may substantially limit the ability of transmitters to transmit copyrighted broadcasts without a license to do so.

In American Broadcasting Cos. v. Aereo, Inc., 573 US ___ (2014), Aereo is a subscription broadcasting service that sold “…to its subscribers a technologically complex service that allows them to watch television programs over the internet at about the same time as the programs are broadcast over the air.” Slip Op. at 1. The technology is detailed in the case, so I do not reproduce it here; suffice it to say that through a complex series of technological events, each Aereo subscriber ends up having his or her own dedicated antenna through which copyrighted content is streamed to one computer only. The US District Court for the Southern District of New York, affirmed by the US Court of Appeals for the Second Circuit, found that this technology does not infringe the rights of the copyright holders of the shows that Aereo streams to its users because, first, Aereo does not “perform” within the meaning of the Copyright Act and, second, even if it does “perform,” it does not do so “publicly” because there is a dedicated antenna connected to only one computer, making the streaming a private showing, thus falling outside the “public” performance requirement of the Act to qualify as infringement.

SCOTUS disagrees. In a 6-3 decision delivered by Justice Breyer (the dissent comprises Justices Scalia, Thomas and Alito; all others concur in the majority opinion), the Court decreed that the 1976 Copyright Act was put in place, in large part, to overturn their decision in Fortnightly Corp v. United Artists Television, Inc., 392 US 390 (1968), which held that community-antenna television falls outside of the scope of the Copyright Act of 1952. Given the clear intent of Congress to make such activities fall very definitely within the scope of the Copyright Act, and given that Aereo’s activity are not substantially different from those of Fortnightly, the Court felt duty-bound to overturn the Court of Appeals for the Second Circuit’s holding that Aereo’s activities do not infringe copyright. SCOTUS holds for the plaintiff in determining whether (a) Aereo “performs” within the meaning of the Act and (b) Aereo performs “publicly” within the meaning of the Act.

There is language in the case that indicates that this case can be read narrowly, but this case puts rebroadcasters on notice: The act of rebroadcasting is a “transmission” within the meaning of the Act, and the viewer and broadcaster “perform publicly” within the meaning of the Act.

I advise my clients that it’s always easiest, best, cheapest to get a license to use the copyrighted works of others. This case just goes to show that this advice is still good.

The oral arguments on both sides are actually interesting for those of us who like copyright matters.

Who Owns the Posting

Suppose you run an internet site that accepts postings from users. Suppose some of those postings are pretty good. Users voluntarily and without payment post to your website.

Who owns the postings?

The answer to this question depends on the Terms of Use on your website and how users access your site.

The author of the posting owns the original copyright in his or her posting. For the website owner to obtain copyright in the author’s posting, there needs to be a written transfer of copyright interest, which can be done with a “click-through” contract for users to access the posting capabilities of the website. It has to be worded correctly, though; this is not a do-it-yourself opportunity. You need your copyright lawyer to draft this clause for you.

Creating the click-through contract does NOT give copyright to the website owner for materials posted before the website requires the click-through contract to access the web posting capability transfers copyright. For those postings, if the website owner wants copyright ownership, the website owner must obtain and register with the US Copyright Office a signed document transferring copyright from the original author of the post.

If the postings can be published as a “collection,” then the website owner may — MAY — own the copyright in the collection, depending on several factors.

Beatles Collection DOES Have Protection Under Copyright tried. They sold digital copies of Beatles music without proper licensing. They can’t do that.

U.S. District Judge Josephine Staton Tucker, who ruled that violated the copyrights and presented unfair competition to music company EMI Group and others, is quite correct. Although the judgment she issued does not specify damages for infringement and for unfair competition, the fact that created and distributed digital files of Beatles music, evidently based on the complete CD collection of their music makes them liable for what would seem, from an outside viewpoint, to be enhanced damages. This site sold some 67,000 copies for 25¢ per track. iTunes, which has properly licensed the Beatles’ music, sells each track for $1.29.’s owner, Hank Risan, evidently tried to bamboozle the judge by calling his activities “psycho-acoustic simulation”; he claims that this activity results in unique copies of copyrighted music. However, the key word in that sentence is “copies”; Mr. Risan’s “psycho-acoustic simulation” is nothing more than a derivative work; the right to produce derivative works belongs exclusively to the copyright holder.

I don’t know whether BlueBeat might have fared better with a fair use defense. My guess is probably not. However, there are some uses of Beatles’ music that are educational, and the attorney might have stood a better chance of convincing the skeptical District Judge with the “fair use” defense. I dunno; maybe he did pull that rabbit out of the hat. I haven’t read the pleadings.

Anyway, it’s an interesting case, and the judgment gives the remaining live Beatles and the estates of the Beatles who have passed on some good news for the holidays. The judgment also reasserts my faith in the system, which has gotten somewhat battered of late.

Taxing the Internet

The US Supreme Court yesterday (25 January 2010) decided Hemi Group, LLC v. City of New York,, ___ US ___ (2010). (The link goes to the slip opinion of the Court, which is a .pdf).

Hemi Group sells cigarettes over the internet. They are based in New Mexico, well outside of the usual jurisdictional reach of New York City and its ordinances.

New York City has a city ordinance putting a surcharge tax of $1.50 per pack on all cigarettes sold within the five boroughs.

New York City likes the $1.50 it gets for every pack of cigarettes sold in the City; that’s a lot of $1.50 payments rolling in, and it produces significant income to the City. They are backed up by federal law: the Jenkins Law 15 U. S. C. §§375-378, requires out-of-state sellers to
submit customer information to the States into which they ship cigarettes, and New York State has agreed to forward that information to the City.

Hemi Group sells its cigarettes over the internet without registering with anybody and they certainly do not disclose their customer list to some City agency. After all, customer lists are commonly acknowledged to be trade secrets, and Hemi’s customers don’t need the City chasing them down to tax them for their packs of cigarettes: why should Hemi divulge just so New York can collect its surcharge?

New York City sued Hemi Group, LLC under RICO to recover the lists to enable them to go after the City residents who bought tax-free cigarettes.

The City’s theory went something like this:

Hemi committed fraud by selling cigarettes to City residents and failing to submit the required customer information to the State. Without the reports from Hemi, the State could not pass on the information to the City. Therefore, some customers who were legally obligated to pay the cigarette tax to the City failed to do so. Because the City did not receive the customer information, it could not determine which customers had failed to pay the tax. Without that information, the City could not pursue those customers for payment. The City thereby was injured in the amount of the portion of back taxes that were never collected.

It turns out that the City chose the wrong statute under which to sue. RICO requires a direct causation link between the deed and the harm. There are just too many layers here, since the Jenkins Act goes through the State. Thus, under RICO, not only must “but-for” causation exist, but also proximate causation must be very proximate, especially when dealing with a case that transcends jurisdictional lines over the internet.

On the surface (and I haven’t had the chance yet to read this case much below the surface), I like this case. RICO is a tough statute that carries some stiff penalties, as well it should: racketeering and corruption are things that, as a society, we’d like to discourage. However, RICO is just a wee bit too much for a firm that simply fails to register with a state before doing business in that state. Heck, if RICO applies every time a business does business across state lines without registering first, many, if not most, small enterprises would be promptly out of business because their owners would be in the federal pen. This is true more than ever with the geographic seamlessness of the internet; people in California can get to the website of a small business here in Schenectady just as easily as can the next door neighbor to the business. Does the internet mean that every small business has to register in every state? This case, on first reading, indicates probably not. Thank goodness.