Good News, Bad News – Aereo and ReDigi

This past week saw two interesting and important court decisions come down, both relating to copyright in the digital space. One involving innovative ‘online broadcaster’, Aereo, brought goods news, while the other, involving digital music reseller ReDigi, brought some not so good news. Lets start with the good.

Aereo

Aereo is an interesting service which was sued in 2012 by a group of TV broadcasters including Fox, ABC, CBS, NBC, among others. Aereo allows customers to watch broadcast TV, both live and recorded, through their computers, tablets and other internet enabled devices. Each Aereo subscriber rents an individual TV antennae with an attached DVR (video recorder) in Aereo’s New York warehouse, which can then be transmitted over the internet to whatever device the customer wishes to view it on. Plaintiffs of the case argued that the Aereo retransmission of these broadcasts constituted a ‘public performance’ which would violate current copyright statutes. However, Aereo argued, and the appeals court for the second circuit agreed 2-1, that because each Aereo customer was issued their own individual antennae and DVR, the retransmissions were a ‘private performance’ and did not come under the purview of the same copyright protections. While housing thousands of separate antennas and DVRs in a warehouse is clearly an inefficient way to deliver the service that Aereo offers (the same service could be provided with a single antenna and server), the design was intentional and meant to protect the company from this very barrage of legal challenges that it is now facing from incumbent broadcast networks. A 2008 ruling in Cartoon Network, LP v. CSC Holdings (Cablevision), which dealt with a remote DVR system that Cablevission offered to its customers, laid the precedent that engineering a system where each customer had his/her own copy of recorded shows stored for his/her use only would prevent the courts from viewing the system as transmitting a public performance, which would require licensing fees like the fees cable companies pay to carry broadcast channels in their lineup.

In one sense Aereo has developed an extremely technologically inefficient product in order to take advantage of a seeming loophole in copyright law. In another sense if recording broadcast TV to a VCR tape or a DVR is legal, there should be no reason that storing that equipment centrally and accessing it remotely via the internet should have any bearing on its legality. Regardless, the ruling pushes back against content owners’ pattern of knee-jerk accusations of illegality to any innovative technology in the space based on copyright grounds. A few examples from history…

Yes, these media companies actually argued at the time that VCRs and MP3 players were illegal technologies that should be banned.

These broadcast networks and other established industry incumbents need to understand that not every technology that threatens their current business model are illegal under the law. Copyright law does not entitle these corporations to forever enshrine their current business models.

Greg’s Take On Aereo

While I’m pleased with the outcome of the case and the analysis of the opinion, it is disconcerting, to say the least, to see such a “Rube Goldberg-like contrivance” (to quote the dissenting justice) designed for the sole purpose of remaining within the law, and that a more efficient version of the same product would be illegal. Like the ReDigi case, discussed below, the Aereo situation highlights the difficulties of interpeting the spirit of a law that was written with analogue technologies in mind to our new digital world.

Another item to note was, that while I’m not an expert, the Aereo case seems very similar to the case surrounding a product named Zediva, which mimicked Aereo except that instead of a customes renting an antenna and a DVR at a centralized location, Zediva rented out a DVD player that movies could be streamed from. My layman’s analysis sees very few differences between these two services except for two possibly significant ones. The first is that Zediva was created after Netflix, Hulu, etc., which were well established systems that media companies were profiting heavily from, and which would have potentially been put in jeopardy by the new paradigm that Zediva was employing (using physical DVDs to avoid paying licensing fees like those that are Netflix’s biggest cost). Conversely, the broadcast industry does not currently offer an Aereo competitor. While this shouldn’t make a difference in the eye of the law, I think judges and the public have internalized the narrative that all new innovative and disruptive media technologies violate the law and steal customers away from ‘legal’ industry backed services. The fact that Aereo isn’t taking customers away from any pre-existing product offered by the networks makes it easier for them to argue that they are ‘truly innovating’ and not just ‘stealing’. Second, Aereo is backed by old media mogul Barry Diller (founder of Fox Broadcasting Company), which gives Aereo a ‘respectable’ face compared to the young ‘radical’ silicon valley types that usually head up disruptive tech companies like Aereo.

Other Recommended Coverage of Aereo Case: AP, NPR Morning Edition, Tech Dirt, EFF, All Things D,

ReDigi

Also early this month a district court ruled on the case of Capitol Records v. ReDigi. ReDigi was a service that allowed customers to resell their legally purchase iTunes songs. The system would verify the user had legally purchased the song, copy that song into to the ReDigi marketplace before finally removing the original copy from the sellers computer. ReDigi explains below…

The record industry was none too pleased with the prospect of an emerging used music marketplace that could potentially compete with digital retail sellers like iTunes or Amazon Mp3. In the analogue world there exists the concept of the first sale, which allows purchasers of products to ostensibly do what they want with the product they’ve purchased, including lending it to friend, or reselling it to someone else. The first sale doctrine itself came under fire in the recent Supreme Court case of Kirtsaeng v. John Wiley & Sons, where a student was being sued for reselling textbooks he had bought abroad. The first sale doctrine was soundly protected in a 6 to 3 ruling. However, when it came to digital music files in the ReDigi case, the court ruled that reselling digital music this way violated copyright protections because Redigi was actually selling a ‘copy’, or reproduction as it is known in copriyght law, of the original iTunes mp3 (Technically iTunes doesn’t sell mp3 files but rather m4a files). ReDigi employed several defenses such as Fair Use, and less well-known provisions (Section 117) that applies to ‘Computer Programs’, in this case the mp3, that allows for copies if it is an essential step in utilizing the program. There are other specific interesting legal issues and analysese surrounding this case, but the main takeaway was that the court, agreeing with a 2001 Copyright Office report on the Digital Millennium Copyright Act, does not recognize a first sale principle for digital goods.

This result is troubling as it essentialy sets up the demise of used book stores, used music shops, video game rentals and trading establishments, and possibly even libraries as our books, music, video games and more move from physical goods, covered by first sale, to digital ones. As Amazon explores technology to patent the reselling and lending of eBooks and libraries fight for the first sale doctrine rights that have allowed them to lend books and exist for thousands of years, it seems more and more likely that these secondary markets will exist only in so far as the publishers and copyright holders wish them to (which presumably is not all).

Greg’s Take On ReDigi

The ruling coincides with a larger pattern where by people opt for the convenience of digital media and cloud technologies with the tradeoff of losing much of the control, rights, and privacy they once enjoyed as it relates to these products. In fact, the very definition of the nature of ownership seems to be shifting. With extensive rules, terms of service, and end-user license agreements (EULAs) on almost everything we consider our property (cell phones, iTunes, e-readers, Gmail, cars) we are actually shifting away from being owners of our property to being merely licensees, renting these products at the mercy of their corporate owners.

Other Recocmended Coverage and analysis of ReDigi Case: TechDirt, Eric Goldman, Aaron Sanders, James Grimmelmann

Conclusion

While the Aereo victory was a step in the right direction, its narrow implications compared to the broad negative impact of the ReDigi ruling illustrate the tenacity and influence of copyright maximalists.

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