The Supreme Court's Aereo decision won't stop the future

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Chet Kanojia, founder and CEO of Aereo Inc. | AP file photo/Bebeto Matthews

The problem of having rights is that they’re all just hypothetical until you try to use them and see what happens. An argument might ensue, then lawyers get involved, and then it’s up to the courts to confirm that the thing you did is something that people should be allowed to continue to do.

And so, Aereo, the clever, $8-a-month live TV streaming service, got its day in the Supreme Court and lost, in a 6-3 judgment. Aereo CEO and founder Chet Kanojia released a statement on the company blog: “Today’s decision by the United States Supreme Court is a massive setback for the American consumer. We’ve said all along that we worked diligently to create a technology that complies with the law, but today’s decision clearly states that how the technology works does not matter.”

“Are we moving towards a permission-based system for technology innovation?”

At issue: Was it rebroadcasting broadcast TV programming to Aereo subscribers (which, without paying licensing fees, represented a violation of copyright) or was it simply using technology to lease antenna equipment and software to individuals?

It seems to represent a broader issue: “Will new products and services for streaming content get a chance to establish themselves and flourish, or will the cable and broadcast industries always be like Ma Bell in the ’70s, refusing to innovate and improve service to customers because, in the absence of any pressure from newer, more relevant delivery systems, they don’t have to?”

Aereo violates broadcasters’ copyrights: Supreme Court

Read the Supreme Court decision

This ruling isn’t exactly shocking. Aereo was trying something bold. From the day the company was founded, it surely knew that a legal challenge was inevitable and that Aereo couldn’t fully launch until — unless — the highest court ruled in their favor.

But it’s still surprising. Aereo religiously developed the service on the right side of the Copyright Act’s “Transmit Clause.” Aereo was only ever allowing one user access to one antenna; broadcasts couldn’t be viewed outside of that station’s market; and any DVR recordings that the user created was only ever available to that single user. It installed tens of thousands of microantennas in each city where the Aereo service was initially available.

So if Aereo was careful to follow the “one to one” model, then why did it lose the case? Here we come to the troubling bit: The majority decision seems to come down to “we know rebroadcasting when we see it.” There’s a lengthy discussion of the finer points of the Transmit Clause of the Copyright Act and how Aereo is, in the eyes of the court, retransmitting content to the public.

“Insofar as there are differences,” the majority opinion states, speaking of previous rulings in which a service was determined to be a rebroadcaster, ”those differences concern not the nature of the service that Aereo provides so much as the technological manner in which it provides the service. We conclude that those differences are not adequate to place Aereo’s activities outside the scope of the Act.”

At least the ruling acknowledges the seriousness of the issue and tries to limit its reach. “We agree that Congress, while intending the Transmit Clause to apply broadly to cable companies and their equivalents, did not intend to discourage or to control the emergence or use of different kinds of technologies. But we do not believe that our limited holding today will have that effect.” It also states that this ruling shouldn’t be used to restrict how customers can view content that they own.

The ruling also makes it clear that it’s impossible to try to regulate future technologies, and suggests that each new service can only be tested on its individual merits:

“We cannot now answer more precisely how the Transmit Clause or other provisions of the Copyright Act will apply to technologies not before us. We agree with the Solicitor General that ‘(q)uestions involving cloud computing, (remote storage) DVRs, and other novel issues not before the Court, as to which “Congress has not plainly marked (the) course,” should await a case in which they are squarely presented.’ ”

Justice Scalia, in his dissenting opinion, is dismissive (and almost derisive) of the networks’ claim that Aereo violates their rights by “performing” their programs “publicly.”

“That claim fails at the very outset,” he writes, “because Aereo does not ‘perform’ at all. The Court manages to reach the opposite conclusion only by disregarding widely accepted rules for service-provider liability and adopting in their place an improvised standard (‘looks-like-cable-TV’) that will sow confusion for years to come.”

The ruling is nothing but bad news for Aereo and its customers. Barry Diller, media mogul and major Aereo investor, told CNBC this morning, “We did try, but it’s over now.” There’s simply no way for Aereo to continue to operate without working with broadcast networks and local TV stations.

The rest of us should be a concerned about how this ruling could affect future startups. The Sony Betamax case and the ruling that allows cable companies to provide DVR service to its subscribers seemed to lay down guidelines defining how a new technology can manipulate copyrighted content without infringing on copyright. The Supreme Court has now made it difficult for a startup to guess what’s going to hold up in court — and thus, they’ve made it more difficult to get funding.

And that’s the real damage done by this ruling: confusion, doubt, and lack of confidence in creating new ideas. It’s a frustrating decision. Some networks warned that if they lost this case, they would have become cable-only operations to defy Aereo and its successors access to over-the-air broadcasts. Yeah, right. It’s far more likely that they would have tried to find a way to render Aereo irrelevant — meaning that they would have created innovative, consumer-friendly TV services of their own.

Future services are now in doubt. I frequently record my favorite shows over-the-air and archive them as video files on a home media server that lets me stream my library everywhere I go. If the networks get bold, could they force the server’s maker to remove that feature, or check for copyrighted material? What about a company that wants to make a home broadcast DVR, which captures over-the-air content from an antenna inside the owner’s home, stores it on a local hard drive, and streams it to a phone app?

Neither of these devices appears to violate the Transmit Clause (one user recording one copy of a TV show, for his or her personal consumption; can’t be more explicitly in compliance than that). But today’s Aereo ruling establishes that all products and services that manipulate cable and broadcast programming need to pass a nebulous smell test. You don’t build a house on top of property that you’re 95 percent sure you own and you don’t start a company on an idea that you’re only 95 percent sure the Court will endorse.

Even if a new idea is pure as snow, just the threat of prolonged litigation can smother great ideas before they even leave the whiteboarding stage. The Supreme Court has just handed cable and broadcast networks a big, ugly stick.

Before they start swinging that around, however, cable and broadcast networks would do well to remember that any kind of control over a market is an illusion. They need to seriously think about why so many seasoned former TV executives decided to invest in Aereo, and why so many users signed up for it.

It’s quite simple. Regardless of today’s ruling, people will be watching TV through a system quite like Aereo in five years’ time. The networks can continue to hope differently, but if they wait too long, it’ll be an illegal system of piracy that’s so easy to use that everybody will want to use it and so decentralized that it can never be shut down.

The music industry thought they could limit the impact of digital music through suing the makers of digital music services and devices instead of buying into the future. Look how well that worked for them. If the networks have any sense at all, they’ll work in haste to create an Aereo-like system that copyright holders can participate in and profit from.

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