The U.S. Supreme Court heard a case in April that could have ramifications for cloud service providers and consumers who store legally acquired copyrighted material in the cloud. The case involves a suit by major TV networks against Aereo, which lets consumers watch over-the-air broadcasts on Internet-connected devices.
Both sides concede that consumers have the right to access over-the-air TV channels via an antenna. However, consumers don’t equip their mobile devices with VHF rabbit ears or UHF loops.
Aereo claims it rents its thousands of antennas and digital-video recorders to its subscribers and therefore has no need to compensate broadcast networks with the retransmission fees that cable companies pay.
Aereo likens its service to cloud storage service, and companies including Google and Amazon that let consumers store legally acquired copyrighted material in their clouds fear that a decision against Aereo could find themselves in legal jeopardy.
The oral argument before the court by David C. Frederick on behalf of Aereo touched on technical issues. He asserted, “We are not a cable service…. Aereo is an equipment provider. Nothing happens on Aereo’s equipment until a user initiates the system.” Justice Ruth Bader Ginsburg asked if there was a technically sound reason for the use of multiple antennas, to which he responded that “…individual antennas provide the same utility at lower costs…than one big antenna.” He cited additional practical considerations. Erecting a single large antenna in New York City, he said, requires numerous permits.
Chief Justice John Roberts was not appearing to buy this argument, saying “…there’s no technological reason for you to have 10,000 dime-sized antenna [sic], other than to get around the copyright laws.” But even with similar skeptical questioning by Justice Antonin Scalia, Frederick stuck to his argument, saying, “We wanted to tell consumers you can replicate the experience [of having your own antenna and DVR] at very small cost. You know you have a right to put an antenna on your roof and put a DVR in your living room. We can provide exactly the same antenna and DVR for a fraction of the cost by putting it over the cloud.”
The Chief Justice persisted. “All I’m trying to get at, and I’m not saying it’s outcome determinative or necessarily bad, I’m just saying your technological model is based solely on circumventing legal prohibitions that you don’t want to comply with, which is fine. I mean, that’s—you know, lawyers do that,” he said, to laughter.
To which Frederick responded that the technological approach Aereo takes makes it easy to add modules as business expands—just as cloud companies add servers. “That is the technological reason the cloud works as it does, Mr. Chief Justice,” he said. Frederick tried hard to keep the cloud issue before the court.
Justice Elena Kagen raised the point that from the standpoint of menus, the Aereo service looks to the customer like cable service, to which Frederick responded that the menus simply facilitated the use of Aereo’s equipment.
In rebuttal, Paul D. Clement, representing the petitioners, contended that Aereo is much more than a passive bystander, performing many actions behind the scenes after consumers press a button and before programming appears on their screens.
It’s an interesting case. As the Chief Justice noted, lawyers routinely work to circumvent legal prohibitions. And so-called financial engineers structure products to circumvent regulations and taxes. Why not let real engineers do the same?
So I’d favor a ruling in support of Aereo, but I expect the justices will craft a narrow decision against Aereo that doesn’t implicate cloud services in general.