On Friday, the U.S. Supreme Court agreed to hear the Aereo case. The move was viewed by some as a surprise. Without a final verdict in any of the cases regarding Aereo in the lower courts, or a clear split among the federal appeals circuits, some observers thought the court would prefer to wait for more litigation to play out before taking up the case.
They were wrong. Now, the high court could hold a hearing and rule on the case as soon as mid-year.
No court has yet held a complete trial on whether Aereo's service infringes the copyright of local TV stations and their content suppliers. The companies that own those stations and the major TV networks have alleged just that in a handful of courthouses across the country, but the ruling that the Supreme Court will review concerns a request for a preliminary injunction. Broadcasters had asked a federal judge in New York to block Aereo from operating while a trial was held. The judge declined to issue that injunction and the broadcasters appealed to the U.S. Appeals Court for the 2nd Circuit -- the same court that set the precedent Aereo relied on when it successfully argued that broadcasters shouldn't get an injunction. That precedent was set in an opinion involving remote-storage DVRs called Cartoon Network LP v. CSC Holdings Inc., typically referred to as just Cablevision.
The 2nd Circuit upheld the lower court's decision to deny the injunction sought by broadcasters. Those broadcasters again appealed, this time to the Supreme Court. Last month Aereo took the somewhat unusual step of supporting their call for the Supreme Court's review of the issue.
At issue is the distinction between a public and private performance of a copyrighted work under the Transmit Clause of the Copyright Act. Both sides have expressed complete confidence in their arguments. I have no idea how the court will rule and predicting the outcome of a Supreme Court case is a risky game, especially when the case has not yet been briefed or argued. But it's worth examining some of the ways the court could resolve the case. Here are a few possible outcomes. If I missed any, please contribute your ideas in the comments section below.
The court could find Aereo's service is illegal and overturn part of the 2nd Circuit's Cablevision opinion. This is precisely what the broadcasters want. In a footnote to its petition for certiorari -- the filing it made before the Supreme Court asking it to take the case, the broadcasters spelled this out. "Petitioners submit that a decision from this Court finding error in Cablevision's construction of the Transmit Clause and holding that Aereo is engaged in an infringing public performance would not need to address the entirely distinct question of how the Transmit Clause or other portions of the copyright act, properly constructed, apply to a licensed provider that offers a remote storage DVR service such as that at issue in Cablevision."
The court could find Aereo's service is illegal but not touch Cablevision. This is the path recommended by the company Cablevision (NYSE: CVC) itself in a white paper published in December. The company argued that the broadcasters' interpretation of their public performance rights would threaten established online business models, such as selling downloads of music. Cablevision argued that the question of legality of the copies Aereo makes of broadcast programming should be answered before addressing the public performance question. "Subscribers have no fair use right to make copies merely so they can receive programming over an unlicensed television delivery service," the Cablevision white paper said. "A court should hold Aereo's system unlawful on that basis without even reaching the public performance issue."
The court could broadly uphold the legality of Aereo's service. In other words, Aereo wins. Aereo has argued that its system does not transmit a public performance and that its users control and "transmit" the programming. If the court finds those arguments persuasive, it could rule in favor of Aereo just as the federal district court and 2nd Circuit already have. Such a ruling would surely prompt a strategic reaction from broadcasters. Some have already suggested they could move valuable programing away from their free over-the-air broadcasts were it to happen. They might also turn to Congress for help, where some form of video legislation is expected by the end of 2014 when a satellite TV law expires.
The court could narrowly rule on the preliminary injunction and leave broader questions about Aereo's legality unsettled. This could go two different ways. The Supreme Court could uphold the lower courts' decisions not to grant an injunction without weighing in more fully on Aereo's legality, or it could overturn those decisions and order those courts to enjoin Aereo from operating and continue with the case. Neither party seems to be asking for either of these outcomes, but that doesn't mean they can't happen. These may be unlikely scenarios. Why would the court agree to hear the case if it only planned to address a minor element of it? We won't know whether the court is thinking along these lines until it rules.
The Supreme Court's decision to take the case is already reverberating in some of the related cases playing out in lower courts. On Monday, broadcasters asked the U.S. Court of Appeals for the D.C. Circuit to pause proceedings on an appeal related to FilmOn X, the company formerly known as Aereokiller that has introduced an Aereo look-alike service and drawn several lawsuits of its own. A similar request was lodged with the U.S. District Court of Massachusetts. There, broadcasters and Aereo jointly asked the court to stay proceedings until the Supreme Court rules. "Once the Supreme Court has weighed in on the primary issues in this case, the disposition of the remaining matters should be clear and efficient," the filing said.
The same day, the federal judge in New York whose ruling on the injunction is now before the Supreme Court denied motions for summary judgment each party had filed in the case and invited them to refile those motions after the high court rules. The judge also directed the parties to submit a joint letter saying whether they think the proceedings should be paused during the Supreme Court's review.
Presumably, both broadcasters and Aereo will want to put that litigation -- and all the costs associated with it -- on hold until June. Aereo has just raised another $34 million to fund its operations. If nothing else the court's action on Friday will help the company burn less cash through the summer. -- Josh