Paper #1: One Medium – Critical Engagement

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The US Supreme Court’s Aereo decision — online television streaming, the Optus TV Now decision and cloud computing Anna Spies KING & WOOD MALLESONS

Key points

• The decision of the Supreme Court of the United

States in American Broadcasting Companies Inc

v Aereo FKA Bamboom Labs Inc (Aereo)1 will be

of interest to clients operating new online tech-

nologies — in particular, cloud computing ser-

vices — although it is not directly applicable to

clients whose services are confined to Australia.

• The decision serves as an important reminder for

clients operating new online technologies to con-

sider how copyright law will apply to the delivery

of a service. The United States Supreme Court’s

decision directs consideration to the “nature or

character” of that service.

• The application of Australian copyright law to

television streaming services was the subject of

the decision of the Full Court of the Federal Court

of Australia in National Rugby League Invest-

ments Pty Ltd v Singtel Optus Pty Ltd (TV Now).2

While some analogies may be drawn between the

TV Now and Aereo decisions, there are important

differences between Australian and US law and

approaches of the courts to the question of copy-

right infringement.

• In considering the risk of a service infringing

the objective character of their services and the

technical operation of that service.

Introduction In June 2014, the Supreme Court of the United States

handed down a highly anticipated copyright decision in

Aereo. The Supreme Court, by a 6-3 majority, found that

Aereo’s internet-based television streaming service infringed

works comprised in television programs. Aereo’s service

used thousands of tiny antennae and individualised

copies and transmissions to allow its subscribers to

stream free-to-air broadcasts to internet-connected devices

such as personal computers or smart phones.

The decision of the US Supreme Court has been

compared to the decision of the Full Federal Court of

Australia in TV Now. However, in contrast to the US

Supreme Court in Aereo, the question before the Full

Court in Australia was whether Optus had made a

reproduction of the television broadcast, not whether the

broadcast had been communicated to the public. Sub-

scribers to Optus’ TV Now service could request to

record and stream television broadcasts. Like Aereo, the

service utilised individualised copies. While a user

request was a necessary precondition for a copy being

made, the court found that Optus infringed copyright —

it captured, copied, stored and made available for a

reward a programme for later viewing by another.

The Full Court’s TV Now decision considered the

question of infringement by examination of the technical

mechanisms by which the Optus service was provided,

as well as by close examination of the terms of the

legislation. However, the nature and character of the

Optus service was relevant to whether the recording was

made jointly by Optus and the subscriber and whether

the recording by Optus fell within the time shifting

exception. In contrast, the Supreme Court emphasised

that it was the intention of the legislature to cover a

service such as Aereo, downplaying the importance of

the technology behind the service. Despite differing

approaches, both the Supreme Court and the Full Fed-

eral Court reached similar conclusions — the Aereo and

Optus TV Now infringed copyright.

While the Supreme Court’s decision, based in the US

direct application to Australian law, the decision will be

of interest to clients operating online services or tech-

nologies, in particular, cloud services. While there has

been some suggestion that both decisions have wider

ramifications for the cloud computing industry, both the

US Supreme Court and the Australian Full Federal Court

were careful to confine their decisions to specific facts

and circumstances of the service that was before them.

intellectual property law bulletin December 2014302

The Aereo service Before considering the Supreme Court’s reasoning, it

is first important to set out the way in which the Aereo

system operated:3

• A subscriber visits Aereo’s website and selects a

TV program that he or she wishes to watch. That

subscriber can only select programs from the

subscriber’s local programming.

• Aereo operates thousands of tiny antennae and

each antenna is allocated to one subscriber at a

time. When a subscriber makes a selection, an

antenna is allocated and tuned to the selected

broadcast.

• The broadcast is transcoded into data that can be

transmitted over the internet. This data is saved

into a subscriber-specific folder on the Aereo hard

drive. Aereo first buffers a few seconds of pro-

gramming, and then this program is streamed to

the subscriber.

• Aereo also permits the subscriber to request that

the broadcast be recorded for viewing at a later

time.

By using this structural set-up for its service, Aereo

only streamed data to a subscriber from that subscriber’s

personal copy, made from that subscriber’s personal

antennae. By reason of this set-up, Aereo claimed that its

streaming service was not a “public performance” of the

television programs. Rather, Aereo argued that it was

merely a high tech equipment provider.

The Supreme Court’s decision The Supreme Court was asked to consider the narrow

question of whether Aereo directly infringed copyright

in the television programs by performing the works

publicly. The Supreme Court did not consider whether a

recording made to be played back at a later time was an

infringement, or whether Aereo indirectly infringed (eg,

by way of contributory infringement).

The majority of the Supreme Court (Justice Breyer

with whom Roberts CJ and Kennedy, Ginsburg, Sotomayor

and Kagan JJ joined), found that Aereo “publicly per-

formed” the copyright works through the operation of its

service and thereby infringed copyright. The majority

found that the technical way in which Aereo’s service

operated could not avoid infringement – the service was

overwhelmingly similar to cable systems, whose activi-

ties Congress had intended to be captured as “public

performances”.

The US Copyright Act provides that the owner of

righted work publicly” (17 USC §106(4)). In 1976, the

“transmit clause” was added to the Copyright Act. This

provides that to perform a work publicly means (among

other things) to transmit the performance of the work to

the public (17 USC §101).

The majority concluded that when read in light of the

purpose of the Copyright Act, the answer was unmis-

takable — an entity that engages in activities like

Aereo’s “performs”. The majority decision rested on the

history and purpose of the transmit clause:

• Congress’ primary purpose in amending the Copy-

right Act in 1976 was to overturn the Supreme

Court’s decision that CATV (community antennae

television) providers did not infringe copyright.4

The amendment meant that to “perform” meant to

show images in any sequence or to make the

sounds accompanying it audible. Under the new

language, both the broadcaster and the viewer of a

television program perform. Congress intended

that the activities of cable systems be brought

within the scope of the Copyright Act.

• Aereo’s activities were “substantially similar to

those of CATV companies that Congress amended

the Act to reach”.5 The technological differences

(including that Aereo’s system was only activated

on a subscriber request) made no difference.

Second, the majority found that Aereo performed the

works “publicly”:

• The fact that each transmission was only to one

subscriber did not mean that the performance was

not to the “public”. Viewed in light of Congress’

objectives, the technological differences did not

matter. Aereo’s commercial objectives were the

same as cable companies and the viewer experi-

ence was the same.6

• The transmit clause suggested that “an entity may

transmit a performance through multiple, discrete

transmissions” because one can transmit or com-

municate through a set of actions.7 The number of

discrete communications does not matter, but the

performance must be of the same work. In addi-

tion, the transmissions can be from the same or

separate copies, so long as the performance is of

the same underlying work.8

• The Aereo subscribers were the “public” — being

a large number of people who are relatively

unknown to each other. They did not receive

performances in their capacities as owners or

possessors of the underlying works — they lacked

any prior relationship to the work.9

In contrast, a strong dissenting opinion (delivered by

Justice Breyer with whom Justice Thomas and Justice

Alioto joined), found that Aereo did not infringe copy-

right, as Aereo did not “perform” the copyright works.

intellectual property law bulletin December 2014 303

The dissent criticised the majority decision for adopting

a “looks like cable TV” standard that will “sow confu-

sion for years to come”.10 Instead, the dissent focused on

the “volitional conduct requirement”, which required a

volitional act directed at the copyrighted material before

direct liability can be imposed. While agreeing that

Aereo’s services should not be allowed, the dissenting

opinion stated that any loophole should have been

closed by Congress.11

The dissent drew an analogy between Aereo and a

copy shop that provides its patrons with a copy card.

Aereo offered access to an automated system which

remained dormant until a subscriber activated it.12 The

performances that occurred were not the result of

Aereo’s volitional conduct because Aereo did not make

the choice of content. Aereo did not capture the full

range of broadcasts, but rather transmitted only specific

programs selected by the user, at specific times chosen

by the user.

Following the Supreme Court’s decision, Aereo applied

in the US Copyright Office for a compulsory licence to

carry broadcasts, arguing that it qualified as a “cable

system”, contrary to Aereo’s position in the hearing

before the Supreme Court. Aereo based its argument on

the Supreme Court’s finding that Aereo was analogous

to a cable service. The Copyright Office rejected Aereo’s

claim and Aereo has applied to the Court for a decision

on this question. The Aereo case has been returned to the

District Court for the Southern District of New York and

we will likely be hearing more in this space.

The Australian law and the TV Now case While the Aereo decision is interesting to consider, it

does not have any direct application to Australian

mance” right does not mirror Australia’s “communica-

tion to the public” right. In addition, the Full Court’s TV

Now decision provides current authority on the question

of the operation of an online recording and streaming

service (albeit the questions before the Full Court and

the Supreme Court were different).

In the TV Now case, Optus operated “TV Now”, a

subscription service which enabled a subscriber to have

free-to-air television programs recorded as and when

broadcast and then played back at the time of the

subscriber’s choosing on a mobile device or personal

computer. When a subscriber pressed “record”, the TV

Now system made four copies of a broadcast on Optus’

servers. When the subscriber chose to watch the pro-

gram, the system detected the kind of device the

subscriber was using and streamed the data in a suitable

form to the user’s device.

Optus argued that the recordings were made and

played by the subscribers and thus fell within the time

shifting exception in s 111 of the Copyright Act 1968

(Cth). Optus said that it simply provided the automated

service through which the recording could be made.

The Full Court found that the TV Now service

infringed copyright in the television broadcasts. The

maker of the recording was Optus, or in the alternative,

Optus and the subscriber. The service that Optus offered

to a subscriber was to make and make available a

recording of the broadcast that was selected by the

subscriber.

The Court referred to a number of reasons why Optus

was the maker (or joint maker) of a copy and the maker

was not the subscriber alone. These included:

• The essence of the word “make” is the idea of

making (ie, creating or producing) a physical thing

(ie, the embodiment of the copyright subject

matter). 13 It was inappropriate to introduce voli-

tional conduct jurisprudence from the US into the

concept of the word “make”.14

• While the subscriber pressing “record” may have

triggered a sequence of actions which resulted in

copies being made, it did not necessarily follow

that the subscriber alone made the copy.15

• While the action of the subscriber was a pre-

requisite to a copy being made, the Optus system

itself was designed in a way that makes Optus the

“main performer” of the act of copying.16 Once

the subscriber pressed “record”, the server com-

menced an automated process of the capturing of

the broadcast and embodying its images and

sounds in the hard disk.

In summary, the Full Court held that Optus was not

merely making its system available, but it captured,

copied, stored and made available for a reward, a

programme for later viewing by another.17

In addition to the emphasis of the Full Court on the

technical operation of the service, the Full Court con-

sidered the nature of the TV Now service as a whole. It

concluded that the relationship between the parties was

a contract by Optus to provide a service in which

provided recordings for viewing of programmes the

subscriber required to be recorded.18 Optus had solicited

the subscriber utilisation of its service and designed and

maintained a system for the making of recordings. While

the subscriber instigates the copying, it is Optus which

effects it.

The private copying exception in s 111 of the

Court found that s 111 was not intended to cover

commercial copying on behalf of individuals.19 Optus

made no use of the copies itself, and its purpose in

providing the service was to derive market advantage in

the digital TV industry.

intellectual property law bulletin December 2014304

The Full Court accepted that the objectives of the

Digital Agenda amendments to the Copyright Act included

technological neutrality. However, the court found that

the clear legislative purpose of the time shifting excep-

tion could not be overcome by a desire for legislative

neutrality. The Full Court stated that if confined words

of a statute are to be given a more extended scope, the

language must be capable of sustaining such an exten-

sion and there must be some indication of how the

legislature would wish to extend the confined scope of

the statute. If a choice is to be made to extend or modify

an exception such as s 111, that requires a legislative

choice to be made, not a judicial one.

At first instance, Justice Rares found that Optus had

not made a communication to the public of the broad-

casts.20 Although this finding was appealed to the Full

Court, the court’s finding on infringement by way of

reproduction was sufficient to allow the appeal and the

Full Court did not find it necessary to decide this

question.21

Implications for cloud computing Cloud computing services will be interested in the

potential ramifications of the Aereo decision. Before the

Supreme Court, a number of amici briefs submitted that

a finding that Aereo infringed copyright would have

broad and chilling ramifications for emerging technolo-

gies, especially cloud computing. The TV Now case was

also said to have potential implications for cloud-based

services.

However, both the majority of the Supreme Court and

the Full Court of the Federal Court of Australia were

careful to confine their decision to the specific facts and

circumstances of the case.

The majority of the Supreme Court stated that while

Congress intended the Transmit Clause to apply to cable

companies and their equivalents, it did not intend to

discourage or to control the emergence or use of

different types of companies or services. The majority

stated that questions involving cloud computing and

other novel technologies should await a case in which

those questions are squarely raised. The majority noted

a number of factors22 that may provide some comfort to

cloud service providers:

• The history of the transmit clause informed their

conclusion about Aereo, but does not determine

whether different types of providers in different

contexts also “perform”.

• An entity only transmits when it communicates

contemporaneously perceptible images and sounds

of a work.

• The “public” does not extend to those who act as

owners or possessors of the relevant work.

• The majority had not considered whether the

public performance right is infringed where the

user pays for something other than a transmission

of a work — such as storage of content.

In contrast, the dissenting opinion was that the

majority’s opinion would cause significant uncertainty:

“It will take years, perhaps decades, to determine which

automated systems now in existence are governed by the

traditional volitional-conduct test and which get the

Aereo treatment”.23 The dissent warned that the decision

may affect cloud storage providers, given the impreci-

sion of the result-driven rule.

Similar to the majority of the Supreme Court, the Full

Court was careful to limit its decision to the Optus

service:

We should emphasise that our concerns here have been limited to the particular service provider-subscriber rela- tionship of Optus and its subscribers to the TV Now Service and to the nature and operation of the particular technology used to provide the service in question. We accept that different relationships and differing technolo- gies may well yield different conclusions to the “who makes the copy” question.24

Each service must therefore be considered on its own

particular facts and circumstances — taking into account

both the technical mechanisms by which the service

operates and the character of the service. While at

present there are some potential uncertainties for cloud

service providers, it is worth noting that the Australian

recently examined by the Australian Law Reform Com-

mission (ALRC). In February 2014, the ALRC recom-

mended that the Copyright Act be amended to include a

“fair use” exception which would include the illustrative

purpose of “non-commercial private use”. The fair use

exception recommended by the ALRC is intended to

cover services such as pure storage in digital lockers.25

Until a fair use exception or a specific fair dealing

exception is introduced into Australian law that is

sufficiently flexible or sufficiently express to encompass

cloud services, there will remain legal uncertainties for

companies providing cloud services in Australia.

While Aereo is unlikely to have immediate implica-

tions for cloud computing providers whose services are

confined to Australia, the decision serves as an important

reminder to providers of new technologies that they

must undertake a careful examination of how copyright

law will apply to the delivery of their service.

intellectual property law bulletin December 2014 305

Anna Spies

Solicitor

King & Wood Mallesons

[email protected]

www.kwm.com

King & Wood Mallesons acted for Australian Football

League and Telstra Corporation in the Optus TV Now

case.

Footnotes 1. American Broadcasting Companies, Inc v Aereo Inc 573 US

____ (2014).

2. National Rugby League Investments Pty Ltd v Singtel Optus

Pty Ltd (2012) 201 FCR 147; 289 ALR 27; [2012] FCAFC 59;

BC201202435.

3. This description is drawn from Aereo per Justice Breyer with

whom Roberts CJ and Kennedy, Ginsburg, Sotomayor and

Kagan JJ joined, above, n 1, p 2–3.

4. Above, n 1, p 7 per Justice Breyer.

5. Above, n 1, p 8 per Justice Breyer.

6. Above, n 1, p 12, per Justice Breyer.

7. Above, n 1, p 13, per Justice Breyer.

8. Above, n 1, p 14, per Justice Breyer.

9. Above, n 1, p 15, per Justice Breyer.

10. Above, n 1, p 1, per Justice Scalia, with whom Justice Thomas

and Justice Alioto.

11. Above, n 1, p 12, per Justice Scalia.

12. Above, n 1, pp 5–6, per Justice Scalia.

13. Above, n 2, at [58].

14. Above, n 2, at [63].

15. Above, n 2, at [59].

16. Above, n 2, at [60] and [66].

17. Above, n 2, at [68].

18. Above, n 2, at [73].

19. Above, n 2, at [73].

20. Singtel Optus Pty Ltd v National Rugby League Investments

Pty Ltd (No 2) (2012) 199 FCR 300; 285 ALR 157; [2012]

FCA 34; BC201200207.

21. Above, n 2, at [100].

22. The arguments regarding cloud computing and these factors

were noted in above, n 1, at p 15–17, per Justice Breyer.

23. Above, n 1, p 11, per Justice Scalia, with whom Justice Thomas

and Justice Alioto joined.

24. Above, n 2, at [100].

25. Australian Law Reform Commission, Copyright and the Digi-

tal Economy — Final Report (2014), p 241.

intellectual property law bulletin December 2014306