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Antenna To Internet Re-Transmission Of TV Broadcast Not Copyright Infringement

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The Second Circuit Court of Appeals affirmed the denial of a preliminary injunction, finding that the Aereo’s Internet re-transmission of live TV programs did not infringe on the plaintiff copyright holders’ right to publicly perform.  WNET, et al. v. Aereo, Inc. f/k/a Bamboom Labs, Inc., Case Nos. 12-2786-cv; 12-2807-cv (2d Cir. April 1, 2013) (available here).  WNET and others sued Aereo, Inc. for copyright infringement and moved for a preliminary injunction.  WNET claimed that re-transmissions of programs to Aereo’s customers while the programs were still airing constituted an infringement of WNET’s exclusive right to publicly perform the copyrighted works.  The district court denied the station’s motion, finding that it was unlikely to prevail on the merits of the case under Cartoon Network LP, LLLP v. CSC Holdings, Inc., 536 10 F.3d 121 (2d Cir. 2008) (“Cablevision”).   WNET appealed and the Second Circuit Court affirmed.

Aereo’s services allow its customers to watch broadcast television programs over the Internet for a monthly fee.  Aereo accomplishes this by creating individual copies of the programs Aereo’s customers want to watch via customer-specific micro antennas, and then re-transmitting the programs to that customer.  The copy is saved onto a large hard drive in a directory reserved for the Aereo customer who requested that program.  Aereo has customer-specific antennas, one for each customer, to capture and transmit the programs.  When the customer logs onto Aereo’s website, a program guide appears, and the customer can select which programs to watch.  If the program is currently airing, the customer can watch it or record it for later.  The customer also has the option of recording the program from any point. “Thus the difference between selecting the ‘Watch’ and the ‘Record’ features for a program currently airing is that the ‘Watch’ feature begins playback and a copy of the program is not retained for later viewing, while the ‘Record’ feature saves a copy for later viewing but does not begin playback without further action by the user.”  WNET, Slip Op. P. 7.  Once a customer has watched a program, the copy is deleted (a “play once and delete” function).  Aereo does not permit a customer to watch or record a program that has already aired.  The playback of the program comes from the copy of the live broadcast that Aereo stored on its hard drive.

There are four elements that courts look at when determining whether to issue a preliminary injunction.  First, the plaintiff must show a likelihood of success on the merits.  Second, the plaintiff must demonstrate that he will suffer irreparable injury if the injunction is not granted.  Third, the court must balance the hardships between the plaintiff and defendant.  Finally, the court must consider the effect of the injunction on the public interest.  Under the Copyright Act, the copyright owner has the exclusive right to publicly perform the  literary, dramatic, musical, choreographic, motion picture, or pantomime copyrighted work.  17 U.S.C. § 106(4).  “Perform” is defined as “to recite, render, play, dance, or act [a work], either directly or by means of any device or process or, in the case of a motion picture or other audiovisual work, to show its images in any sequence or to make the sounds accompanying it audible.”  17 U.S.C. § 101.  The definition for “publicly” includes “to transmit or otherwise communicate a performance or display of the work to a place specified by clause (1) or 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.”  17 U.S.C. § 101.  The outcome of this case turned on this “publicly perform” and “Transmit Clause” definition.

In Cablevision, the Second Circuit Court analyzed whether Cablevision’s Remote Storage Digital Video Recorder (“RS-DVR”) infringed the copyright exclusive rights to reproduction and public performance.  The RS-DVR allowed Cablevision to transmit programs as they aired live while simultaneously transmitting the same program to a server, which determined whether any Cablevision customers had requested to record that program.  If a recording was requested, the program was copied onto Cablevision’s remote hard drive for that customer.  The Cablevision Court emphasized the importance of determining who is capable of receiving the transmitted program, which refers to the transmission itself and not the underlying copyrighted work.  Thus, “whether a transmission originates from a distinct or shared copy is relevant to the Transmit Clause analysis because the use of a unique copy may limit the potential audience of a transmission and is therefore relevant to whether that transmission is made ‘to the public.”  WNET, Slip Op. P. 21.  The Cablevision Court concluded that the transmission of a recorded program to one subscriber was not a public performance since each transmission could only be received by one Cablevision customer.

The Second Circuit Court held that the Cablevision case presented four guidelines.  First, courts are directed to consider the potential audience of the individual transmission.  Second, private transmissions should not be aggregated.  Third, private transmissions can be aggregated if the transmissions are generated from the same copy of the work.  Fourth, if anything limits the potential audience of a transmission, it is relevant to the outcome of the case.  The Second Circuit Court noted that the WNET case had the same two factors as the Cablevision case: (1) the systems created unique copies of each requested program a customer wanted to record; and (2) the transmissions of the recorded program to that customer were generated from that unique copy and no other customer could view a transmission by that copy.

WNET argued that Aereo’s copies allowed its customers to watch nearly live TV, while in Cablevision, the copies could only transmit the program after the original live transmission had finished.  The Second Circuit Court rejected this argument, finding that Aereo’s customers have the same control over the playback as the users in Cablevision, and finding that Aereo’s system of having user-specific antennas ensures that only one copy for one customer is created.   “It is beyond dispute that the transmission of a broadcast TV program received by an individual’s rooftop antenna to the TV in his living room is private, because only that individual can receive the transmission from that antenna, ensuring that the potential audience of that transmission is only one person.  have presented no reason why the result should be any different when that rooftop antenna is rented from Aereo and its signals transmitted over the internet: it remains the case that only one person can receive that antenna’s transmissions.”  WNET, Slip Op. Pp. 29-30.  The Second Circuit Court concluded that Aereo’s service does not infringe WNETS’ public performance right, and affirmed the district court’s holding denying the request for an injunction.

Supreme Court Extends Reach Of The First Sale Doctrine Under The Copyright Act

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The U.S. Supreme Court held that the first sale doctrine under the Copyright Act extends to goods lawfully manufactured abroad and purchased in the United States.  Kirtsaeng v. John Wiley & Sons, Inc., Case No. 11-697 (U.S. March 19, 2013) (available here).  John Wiley & Sons, Inc. (“Wiley”) publishes academic textbooks and often assigns its rights to publish, print, and sell foreign editions of the books to its wholly owned foreign subsidiary (“Wiley Asia”).  Wiley Asia’s books have a warning on them that they are not to be brought into the United States without permission.  Supap Kirtsaeng moved from Thailand to the United States to study mathematics, and purchased English textbooks in Thailand for a lower price than their U.S. counterparts.  Kirtsaeng then sold the books and kept the profits.  Wiley sued, claiming the unauthorized importation and resale of the textbooks was infringing Wiley’s right to distribute under § 106(3) of the Copyright Act and infringed on § 602’s import prohibition.  17 U.S.C.  §§ 106(3), 602.  Kirtsaeng’s defense was that his actions were protected by the “first sale” doctrine under § 109 of the Copyright Act.  The lower court rejected his defense, stating that the first sale doctrine does not apply to goods produced abroad.  At the jury trial, Kirtsaeng was found have willfully infringed on Wiley’s U.S. copyrights.  The appellate court affirmed, finding that §109(a)’s “lawfully made under this title” language implied that the first sale doctrine did not apply to copies of U.S. copyrighted works manufactured abroad.  The Supreme Court reversed, holding that the first sale doctrine applies to copies of a copyrighted work lawfully made abroad.

§ 106 of the Copyright Act lays out the exclusive rights a copyright owner has over the copyrighted work, including the exclusive right to distribute copies to the public.  17 U. S. C. §106(3).  The Copyright Act places limitations on these exclusive rights.  The statutory “first sale” doctrine provides: “Notwithstanding the provisions of section 106(3) [for exclusive distribution rights], the owner of a particular copy or phonorecord lawfully made under this title . . . is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord.”  17 U. S. C. §109(a).  This means that once a copyright owner lawfully sells a copy of the copyrighted work, the purchaser of that copy, and subsequent owners, can dispose of that copy as they wish.  However, §602(a)(1) states that unauthorized importation into the U.S. of copies of a work that were acquired outside of the U.S. is an infringement of the copyright owner’s exclusive right to distribute.  Thus, §602 refers directly to §106(3).  In an older Supreme Court case, the Court held that §602(a)(1)’s reference to §106(3)’s exclusive distribution right incorporates the limitations of §106(3), including the first sale doctrine of §109.  Quality King Distributors, Inc. v. L’anza Research Int’l, Inc., 523 U. S. 135, 145 (1998).  However, the L’anza decision considered a copy that was manufactured in the U.S. and purchased abroad.

The issue before the Supreme Court was whether the first sale doctrine protects a buyer of a copyrighted work lawfully manufactured abroad (whether § 109’s “lawfully made under this title” language creates a geographic limitation on the first sale doctrine).  The Court determined that it did.  “[A] nongeographical interpretation provides each word of the five-word phrase with a distinct purpose. The first two words of the phrase, ‘lawfully made,’ suggest an effort to distinguish those copies that were made lawfully from those that were not, and the last three words, ‘under this title,’ set forth the standard of ‘lawful[ness].’ Thus, the nongeographical reading is simple, it promotes a traditional copyright objective (combatting piracy), and it makes word-by-word linguistic sense.”  Wiley, Slip Op. P. 9.  To support its conclusion, the Court compared § 109(a)’s present language of  “lawfully made under this title” with its predecessor’s  “lawfully obtained” language.  Neither language mentions geography, and Congress had other reasons for editing the language text.

The Court did concede that a non-geographical interpretation would make it nearly impossible for copyright holders to divide foreign and domestic markets.  However, the Court did not see how this theory helped Wiley’s case because nothing in the Copyright Act suggests that a copyright holder is entitled to such a right.  “To the contrary, Congress enacted a copyright law that (through the ‘first sale’ doctrine) limits copyright holders’ ability to divide domestic markets. And that limitation is consistent with antitrust laws that ordinarily forbid market divisions.”  Wiley, Slip Op. P. 32.  As a result, the Court reversed, finding that the first sale doctrine extends to copies of copyrighted materials lawfully manufactured abroad.