Aereo into the Cloud: Further Thoughts About the Aereo Decision

“The Cable Defense,” “The Cloud” and More about Causation and Copyright

Last time, I tried to make sense of the Supreme Court’s decision in ABC v. Aereo. But there are a couple of major issues that I wasn’t able to touch on: (1) What’s all this about Aereo now saying it’s a cable system? (2) I thought maybe the Aereo decision was going to hurt “Cloud”-based industries? and (3) are we no longer to look “under the hood” of technology to resolve our copyright issues (after the Court dismissed on argument as relying on technology “behind the scenes”)? I also (4) have some further thoughts about the causation requirement in copyright cases (i.e., all that business about “volitional conduct” and “proximate causation”).

These are happy clouds. They threaten rain but were not threatened by the Supreme Court.

1. Is Aereo a Cable System?

As we all know by now, the Supreme Court ruled against Aereo essentially because Congress had set out in 1976 to ensure that cable systems (or, more precisely, their direct technological predecessors, community access TV systems) were “performing,” regardless of whether you thought of them as broadcasters, viewers, or mere conduits. Further, the Court held that such performances were public¹Remember, only public performances are actionable. because Aereo looked a lot like a cable company, and cable companies perform their broadcasts publicly. The dissent mockingly referred to this as a “looks like a cable company” theory.
So, obviously, Aereo must be a cable company because the Supreme Court just held that it looked like one, right? With all of the benefits accruing thereto? Like a handy defense against infringement? Although Congress in 1976 wished to clear up any confusion about whether re-broadcasters like cable companies were “performing” or not, it also wanted to protect the nascent cable industry. So it created a “statutory license” scheme, whereby, if the cable company paid a certain statutorily-defined royalty, it would have an absolute defense against claims of copyright infringement. Congress took away; Congress gave right back.
But copyright law (or any law) isn’t necessarily exactly symmetrical. It’s possible that Aereo was enough of a cable company to found liable—but not quite enough to enjoy the benefits of the statutory license scheme.²This would be consistent the way the Copyright Act is set up: infringement is defined very broadly, with specific statutory exceptions defined very narrowly. The exceptions would be the defenses of fair use and first sale, but those are rooted in common law and the First Amendment. The Copyright Act defines “cable system” in pertinent part as:

a facility, located [somewhere in a U.S. jurisdiction], that in whole or in part receives signals transmitted or programs broadcast by one or more television broadcast stations licensed by the [FCC], and makes secondary transmissions³Defined, in pertinent part, as, “[T]he further transmitting of a primary transmission simultaneously with the primary transmission.” of such signals or programs by wires, cables, microwave, or other communications channels to subscribing members of the public who pay for such service.

As I understand Aereo system, (1) its facilities are located in the U.S., (2) those facilities receive programs broadcast from FCC-licensed TV stations via ordinary over-the-air TV signals, (3) then convert those signals into a digital signals and (4) transmits those converted signals to subscribers, who (5) pay Aereo for those signals, (6) at almost the exact same time as the original TV signals are received (i.e., pretty much simultaneously), via (7) the internet, which is made up of wires and cables. Sounds like Aereo is a cable system?
Not so fast, because the U.S. Copyright Office disagrees. It defines— Wait. You want to know why the Copyright Office even gets to monkey with the statutory definition of “cable system”? That’s because the statutory royalty scheme requires the cable operators to route their royalties through the Copyright Office, which is forced to create rules to make sure the correct amounts are received and then correctly distributed. This gives the Copyright Office “rule-making authority,”⁴In addition, cable systems are (logically enough) closely regulated by the FCC, and the Copyright Office sensibly would like its regulations to work with the FCC’s. in the same way Congress might leave the details of drafting and implementing laws up to agencies like the FDA or the FAA. And when Aereo applied to join the cable statutory royalty scheme, the Copyright office told it no.
So, anyway: we’re told that the Copyright Office won’t process a cable operator’s money unless it’s a “localized retransmission service[]” that are “regulated as cable systems by the FCC.”⁵I say “we’re told” because, while there is plenty of regulations from the Copyright Office relating to “localized transmission services,” I can’t find where the Office insists that cable systems be “regulated as cable systems by the FCC.” The Office’s own definition of “cable system” mentions the FCC but doesn’t limit the term to those regulated by the FCC. I suspect it’s because the FCC closely regulates cable systems and the Copyright Office doesn’t want its regulations to contradict the FCC’s. But the Copyright Office can’t just set down rules willy-nilly. After all, Congress passes the laws; agencies just work on the details.
And, as it happens, the first step of determining whether an administrative regulation must be respected to is to see if Congress has already spoken clearly on the issue before the court. This is known as “Chevron step one,” after the seminal Supreme Court case that tackled the problem of when an agency deserves deference. And, looking at that super broad definition of “cable system,” it seems our question is answered: Aereo is a cable system, and the Copyright Office will just have to deal.
Again, not so fast, because a few years ago, there was a company called “ivi” that streamed television content to subscribers via the internet. It took over-the-air programs and streamed them to anyone with an internet connection and was willing to pay a subscription fee. If you lived in Miami, you could get Seattle programming. How it did so was never quite clear. Rights holders sued, and ivi defended itself by arguing it was really a cable system, entitled to protection under the cable statutory royalty scheme. The trial court and, on appeal, the Second Circuit⁶The same court that got reversed in Aereo., disagreed and put ivi out of business.
In its opinion, the Second Circuit, in an opinion by Denny Chin⁷The same judge who, as a trial judge, was reversed in Cablevision and, as an appellate judge, dissented angrily in Aereo and was sort of vindicated by the Supreme Court., applied the Chevron analysis to the question of whether streaming “free” content over the internet qualifies ivi as a “cable system.” It decided that Congress had spoken clearly on the issue: ivi was definitely not a “cable system.”
The Second Circuit’s opinion is surprisingly thin on facts, but that is apparently because ivi was reticent about describing how it worked, which is an odd⁸Nay, suicidal. strategy for someone bearing the burden of proving that it’s operating a “cable system.” To the court, a crucial aspect of ivi’s system was that it re-transmitted signals the internet nationwide. Deciding that the definition of “cable system” was ambiguous, at least as applied to a nationwide internet-based system, the court looked to the legislative history and concluded that Congress didn’t intend for cable systems to be nationwide. And when you read the cable TV statutory scheme as a whole, it’s fairly clear that Congress expected cable systems to cover discrete areas.
Aereo has some advantages over ivi when it comes to overcoming the Copyright Office’s FCC-licensing rule. Most notably, Aereo isn’t a nationwide system. Aereo limits its subscribers to those who live in the local broadcast area⁹Roughly speaking, you have to live somewhere that could get the over-the-air “free” broadcast, assuming no obstacles., so it’s not a nationwide system. If that obstacle is removed, it would appear that Aereo is operating a cable system under the plain statutory language, thus satisfying the Chevron analysis.
But the ivi opinion has some (sloppy?) language about using the internet:

Congress did not, however, intend for § 111’s compulsory license¹⁰Section 111 is where you’d find the cable royalty scheme to extend to Internet transmissions. Indeed, the legislative history indicates that if Congress had intended to extend § 111’s compulsory license to Internet retransmissions, it would have done so expressly — either through the language of § 111 as it did for microwave retransmissions or by codifying a separate statutory provision as it did for satellite carriers.

Taken out of context, this language appears to hold that any use of the internet to re-transmit signals automatically takes the system out of the definition of “cable system.” That would be fatal to Aereo. Fortunately, I’m fairly certain that the Second Circuit didn’t mean to pronounce such a per se rule. It was contrasting the internet’s nationwide reach with the “localized” nature of traditional cable systems. After all, the definition of “cable system” included, in the original 1976 Act, “wires, cables or other communications channels,” and any signals sent through “the internet” is physically sent through what would colloquially be described as “wires” and “cables.” What Judge Chin appears to be getting at is that, if Congress intended for “the internet” as a system unto itself to be a “cable system,” it would need to say so more explicitly, not that there’s something about the internet as a communications channel that somehow taints things that would otherwise be “cable systems.”¹¹I’m giving Judge Chin a little benefit of the doubt here. I think he knows how the internet works and, for all the talk about “the cloud,” there’s still an actual physical “backbone” comprised wires and cables. His chief difficulty in the ivi case was that ivi was reticent about how it operated, a puzzling and ultimately suicidal strategy, considering that it bore the burden of proving that it met the requirements of being a “cable system.” ivi didn’t give enough information to determine whether it had “facilities” (surely, it did!), implying that its “facility” was the internet itself. Wha? I’m sure there’s a good reason for ivi’s strategy, or perhaps its explanations have been distorted by the record.
Even if Aereo is found to be a cable system, it will have some difficult practical hurdles to overcome. There’s a reason why most people don’t just decide to start cables systems, other than just the difficulty of laying down the network. It will enter a maze of regulations promulgated by the FCC, which give the broadcasters tools to make life difficult for Aereo, such as forcing it to accept expensive bundles.

2. What About the Cloud?

I never really understood how the Aereo case was a threat to “cloud computing.” Aereo was a case about performance, where it really mattered who was doing the performing. As I explained last time, it normally doesn’t matter who is performing the “volitional act” that causes the copyright infringement. If one party isn’t “pushing the button,” it’s almost certainly going to be knowingly helping the button-pusher enough to be liable for secondary liability. Aereo was unusual because, if the viewer was found to be the one causing the performance, Aereo wouldn’t be liable even under secondary liability because there would be no direct infringer.¹²Recall that there is no secondary liability without an identifiable direct infringer. The viewer’s performance wouldn’t be public, and you have to have a direct infringer to have secondary liability.
By contrast, most copyright questions of cloud computing involve the reproduction right¹³The reproduction right was implicated in Aereo, because Aereo makes a copy of programs it’s been asked to perform, but the plaintiffs deliberately avoided that issue. Wonder why. (and maybe the distribution right). To be clear, by “cloud computing,” I mean the use of multiple computer systems connected together by the internet (or similar packet-switched network) to store and/or process information, using an algorithm to determine which connected computer system or systems would be most efficient at storing and/or processing the information at a particular time. The key is that you don’t know precisely which computer system is currently storing or processing your information, though you might know the set of computer systems that could be. If you are storing data in a secure, remote facility somewhere, that’s not “cloud computing” because you know what computer system is holding your data, even though you used the internet to transfer the data there.
Thus, cloud computing involves lots of copying of information. If you are storing a song file in a “cloud system,” the song file will be copied over and over again as it is shunted from computer system to computer system (to say nothing of backups). This is because nothing is really “shunted” in a computer network. It’s copied, transferred to another system, copied there, and perhaps the original is deleted or wiped. From your point of view, when you look for your song on whatever local software you use, it’ll look like the same copy is just sitting there, but in reality, it’s being “shunted” from system to system depending on where there’s space, the distance to your system, and other considerations.
The fact is we don’t really know if cloud computing services are legal or not. We strongly suspect they are, but no court has said so. We strongly suspect that it’s a fair use to make copies of digital files for personal use in order to enjoy the same work on multiple devices using different file formats—known as “space shifting” (when you move it to a new device) and “format shifting” (when you convert a file to a different format so you can enjoy it). We strongly suspect this because it feels a lot like the “time shifting” found to be a fair use in the Betamax case.
But we don’t know for sure. And, no, Diamond Rio does not hold as much. Diamond Rio wasn’t about space shifting. The most you can say about Diamond Rio is that the Ninth Circuit was kind of throwing it out there that “space shifting” was a fair use the same way “time shifting” was. Cablevision doesn’t help because fair use was not even discussed.¹⁴Strange thing: the plaintiffs agreed not to raise secondary liability if the defendants didn’t raise fair use, so Cablevision tells us nothing about either The RIAA itself has gone back and forth about whether it’s OK to rip songs from legitimately-purchased CDs to use in one’s own personal MP3 player, which is pretty much ground zero for “space-shifting” arguments.¹⁵In Atlantic Recording Corp. v. Howell, the RIAA had the defendants dead-to-rights on ripping, but didn’t pursue that theory of infringement, instead focusing on the fact that they had placed the ripped songs in a public folder (which theory failed, by-the-bye). Nowadays, it says doing so is illegal but “won’t usually raise concerns” (i.e., it’s illegal but they’ll refrain from suing you—usually).
Some say that the DMCA safe harbor is a further backstop against threats to cloud computing. I suppose it is, but only on a practical level: sending out lots of takedown notices are just harder than just suing the cloud services providers. But if rights holders started forcing DropBox and Amazon Cloud Player to remove their user’s copyrighted content, that would be an existential threat to those services and to cloud computing everywhere. Remember, the DMCA safe harbor doesn’t make “storage at the direction of a user” legal; it just immunizes the one providing the storage from liability provided they obey some important regulations.

3. Behind the Scenes?

I’m pretty sanguine about Aereo, all things considered. No sense “shouting at the wind,” right? But there was one passage that jumped out at me and smacked me. When the majority addressed the point that each Aereo subscriber accesses only an antenna dedicated to the subscriber, which, Aereo and the dissent argued, meant that the performance originating from that antenna was not “public,” the Court argued:

In terms of the Act’s purposes, these differences do not distinguish Aereo’s system from cable systems, which do perform “publicly.” Viewed in terms of Congress’ regulatory objectives, why should any of these technological differences matter? They concern the behind-the-scenes way in which Aereo delivers television programming to its viewers’ screens. They do not render Aereo’s commercial objective any different from that of cable companies. Nor do they significantly alter the viewing experience of Aereo’s subscribers. Why would a subscriber who wishes to watch a television show care much whether images and sounds are delivered to his screen via a large multisubscriber antenna or one small dedicated antenna, whether they arrive instantaneously or after a few seconds’ delay, or whether they are transmitted directly or after a personal copy is made? And why, if Aereo is right, could not modern CATV systems simply continue the same commercial and consumer-oriented activities, free of copyright restrictions, provided they substitute such new technologies for old? Congress would as much have intended to protect a copyright holder from the unlicensed activities of Aereo as from those of cable companies.

Surely the Court doesn’t mean what it sounds like it means here? It sounds as though we judge infringement from the point of view of the user’s experience and pay no attention what goes on “behind the scenes.” If that were a holding, much of copyright law would be upended.

• For example, no user notices that a software application is being copied from storage into memory. From her point of view, it just “turns on.”
• No user notices that to enjoy digital content a copy must be made (and therefore licensed). She just thinks she “owns” the content and can treat it as she’d treat a book or CD.
• No user of Dropbox notices that her content is being “shunted” (i.e., copied) from system to system. To her, it’s just “there.”
• To a consumer, it shouldn’t matter whether your DVR player is sitting at home or at your cable provider’s offices, but some plaintiffs once thought it made a huge difference.

In fact, we know Congress was very interested about what happened “behind the scenes” because Congress specifically understood that software had to be copied from storage to memory and that such copying could be an infringement¹⁶Depending on whether you think a few seconds’ storage in volatile memory is “fixation.”. That’s how, among other things, we ended up with § 117 (a/k/a the “essential step defense”).
The Court must have meant that, for purposes of whether you “look like a cable system,” your commercial purposes are paramount. But, my goodness gracious, it does matter whether you “substitute new technologies for old.”
The question is whether it should matter what happens “behind the scenes.” The fact that consumers and many business professionals don’t know precisely how their favorite technologies handles copyrighted digital information is a major reason why copyright law has become so counter-intuitive and difficult for consumers to follow (let alone have an informed policy discussion about). To a consumer, the ability to re-sell books is normal¹⁷In fact, it’s rooted in law older than the Constitution: the right to “alienate” property., so re-selling digital content should also be normal—and it shouldn’t just disappear when you cross national borders.
I’d be curious what a “technology agnostic” copyright act might look like.

4. A Further Clarification About Proximate Causation

First of all, I have to qualify something I said about proximate causation in my last post. It’s not present in every tort action, just those based on common law, such as negligence, battery, even products liability and privacy torts (the newest ones I can think of).
Statutory torts, however, are a different kettle of fish. Congress (and presumably state legislatures) can and do legislate causation standards even broader than proximate causation. In CSX Transportation v. McBride, the Supreme Court upheld a jury instruction that the defendant’s negligence “must play a part—no matter how small—in bringing about the injury,” based on the statutory language, “…for such injury or death resulting in whole or in part from the [defendant’s] negligence.” This was over the strong dissent of Chief Justice Roberts, who argued that proximate causation was such a strong common-law concept that this statutory language wasn’t clear enough to abrogate it. In New York v. Shore Realty, which Justice O’Connor cited in Sweet Home, the Second Circuit held that a property owner can be liable for environmental damage simply by virtue of being a property owner—essentially a kind of vicarious liability.
In Babbitt v. Sweet Home Chapter, by contrast, Justice O’Connor, writing for the majority, argued in dicta¹⁸I.e., a part of the opinion that has no binding authority, though it can be quite persuasive to courts. against the dissent’s complaint that her interpretation of a strict-liability statute would give rise to limitless liability. Where Congress is silent about causation, she suggested, you substitute proximate causation.

5. A Further Thought about Proximate Causation

One might point out that the Copyright Act doesn’t set forth a specific causation element as between the defendant’s actions and the determination of infringement, though it does as between the determination of infringement and actual damages. OK, that came out a little confusing. Put it this way. You can think of copyright law as having two causation links. The first link is between the defendant’s act (pushing the button, setting up the remote DVR, etc.) and whether that act is infringing or not. The second link is between the defendant’s act and the harm the plaintiff suffered (e.g., the plaintiff lost royalties she might have collected).
With most torts, we don’t normally think of that first link as causation but with whether the act is a “bad act,” i.e., the sort of act that could make one liable. For example, we don’t normally ask whether the nature of a defendant’s act “caused” that act to be considered negligent: it’s either negligent or it’s not. When we think of causal links, we typically think of them running between the bad act and the harm suffered by the plaintiff. Copyright is different because, although you have the option of proving actual damages (e.g., the infringer avoided paying you royalties you normally collect), you don’t need to prove any harm at all. Harm isn’t an element of a claim for copyright infringement. If you timely registered your copyrighted work, you’d be eligible for, at the very minimum, $250¹⁹The normal statutory minimum is $750, but it may be reduced to $250 if the infringement is found to be “innocent.” per work infringed, even if you suffered not even the slightest inconvenience.²⁰Having said that, if an act of infringement is truly harmless and meaningless, such as taking a picture of your children clambering on a copyrighted public sculpture, the defense of de minimis would be applicable.
If we think of copyright law as collapsing culpability with harm, then perhaps Terry Hart is right and copyright law’s causation standard should be old-fashioned, common-law proximate causation. This would, in my opinion, increase the reach of copyright law tremendously (which doesn’t, by itself, make it wrong, but gives us pause). Take the classic example of a copy shop²¹If you remember such things.. You provide copying machines and don’t much care what your customers copy, so long as they pay you. You may not be aware of a specific instance of copyright infringement, but you know it’s bound to happen. And when it happens, could not a jury²²Hart suggests that NetCom and CoStar were properly decided under the principles of “proximate causation” and, therefore, we don’t need a separate concept of volitional conduct. But those cases were decided on summary judgment on causation grounds. Under proximate causation, a classic jury question, those motions would have had to be denied (disastrous results, in my opinion) because, though remote, the causal links aren’t so remote a jury couldn’t find proximate causation. say you caused the infringement, even if you weren’t specifically aware?
Too remote, you say? Then consider the best-known of the common-law strict-liability torts: product liability. Do you need to know that the specific item is defective to be liable? No. All that needs to be shown is that it was defective when it left your control and that the defect caused the injury. You don’t even need to have manufactured it—selling it is enough. You just need to have had control over the item. You’d better be very careful. Courts reason thus: it’s better to put the burden of ferreting out defective products on those who manufacture and sell them, not on the consumer, because, by the time the consumer realizes it’s defective, he’s probably already been injured or killed by it. A lot of copyright owners see copyright infringement the same way—maybe not as dire, but close.
I was going to say that proximate causation would eat away at the concept of contributory infringement, which requires a showing of knowledge in exchange for a broader causation requirement (you just need to contribute to the infringement, not cause it directly). But really, it would just create a lot of overlap. Contributory infringement would still be useful because, if you could prove knowledge, it’d be an easier route than direct infringement.
The other way to look at copyright law’s lack of a harm element (and commensurate causation element) is to say: look, you’ve already got it easy, copyright law. Even a plaintiff in a products-liability case has to prove harm, which means proving that the defect proximately caused the injury, which can be difficult, especially if there were other possible causes. By contrast, a copyright owner just has to prove infringement. No bothersome intent requirement. No need to prove harm²³Practically speaking, after eBay, this isn’t 100% true, since courts no longer seem to presume irreparable harm for purposes of issuing injunctions. It’s worth emphasizing the difference between harm as an element of a tort, which must be proven like any other element for there to be liability, and harm as a measure of damages, which you only get to if you’ve established liability but only need prove are non-speculative.
Is it crazy to “tighten up” copyright’s causation requirement to “make up for” lack of a harm requirement? Not really, if we remember why proximate causation was conceived in the first place. The point of proximate causation wasn’t to expand liability but to limit it. When Palsgraf, the seminal case on proximate causation, was decided, it was apparently a viable legal theory that causation be limited only by the plaintiff’s ability to draw factual linkages from the bad act to the harm, no matter how remote. If your bad act caused a freak fire that destroys a whole town, you’d be liable without proximate causation. But another limit on (civil) liability is harm. Civil law normally doesn’t award damages or injunctions without a showing of harm (or at least imminent harm, in the case of injunctions) because the point of civil law is first and foremost to compensate for injuries (not to punish the bad actor). Take that limitation away, and liability expands²⁴Again, subject to the de minimis defense.. To compensate, perhaps copyright needs a causation standard more stringent than proximate causation.
None of this helps us decide exactly where we should draw the causation line for copyright infringement. And, fortunately, normally it doesn’t matter, thanks to secondary liability. But the question comes up often enough. I happen to like my “who pressed the button” theory because it’s easy to apply, but even I have to admit it’s probably just a convenient shorthand for a more nuanced concept. Even Cablevision, the case on which I base this theory, suggests (in dicta) that there might be a point at which “one’s contribution²⁵Odd choice of wording, there, ”contribute.“ to the” infringement “may be so great that it warrants holding that party directly liable … even though another party has actually” carried out the infringing act. More recently, the Ninth Circuit, in rejecting Fox’s request for a preliminary injunction against Dish’s “Hopper” service, (again in dicta) refined this concept in terms of exercising control over the process that leads to infringement.
Thanks for reading!

Rick Sanders

Rick is currently General Counsel for Software Freedom Conservancy. Previously, he has been practicing law as an intellectual-property litigator since 2000.