12-2786-cv

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(Related case No. 12-2807-cv)

United States Court of Appeals

for the

Second Circuit
WNET, THIRTEEN, FOX TELEVISION STATIONS, INC., TWENTIETH CENTURY FOX FILM CORPORATION, WPIX, INC., UNIVISION TELEVISION GROUP, INC., THE UNIVISION NETWORK LIMITED PARTNERSHIP and PUBLIC BROADCASTING SERVICE, Plaintiffs-Counter-Defendants-Appellants, v. AEREO, INCORPORATED, f/k/a BAMBOOM LABS, INCORPORATED, Defendant-Counter-Claimant-Appellee.
ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK

BRIEF FOR PLAINTIFFS-COUNTER-DEFENDANTSAPPELLANTS

Richard L. Stone Amy M. Gallegos JENNER & BLOCK LLP 633 West 5th Street, Suite 3600 Los Angeles, California 90071 (213) 239-5100

Paul M. Smith Steven B. Fabrizio Scott B. Wilkens Matthew E. Price JENNER & BLOCK LLP 1099 New York Avenue, NW, Suite 900 Washington, DC 20001 (202) 639-6000

Attorneys for Plaintiffs-Counter-Defendants-Appellants

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CORPORATE DISCLOSURE STATEMENT 1. Pursuant to Rule 26.1 of the Federal Rules of Appellate Procedure, the

undersigned certifies that Appellant WNET is a non-profit education corporation chartered by the Board of Regents of the University of the State of New York, has no parent corporation, and there is no publicly-held corporation that owns more than 10% of its stock. 2. Pursuant to Rule 26.1 of the Federal Rules of Appellate Procedure, the

undersigned certifies that Appellant THIRTEEN (formerly Educational Broadcasting Corporation) is a non-profit education corporation chartered by the Board of Regents of the University of the State of New York. It is wholly-owned by its parent corporation, WNET, a non-profit education corporation chartered by the Board of Regents of the University of the State of New York. 3. Pursuant to Rule 26.1 of the Federal Rules of Appellate Procedure, the

undersigned certifies that Appellant Fox Television Stations, Inc. is a subsidiary of News Corporation, a publicly traded U.S. corporation. No publicly held company owns 10% or more of News Corporation stock. 4. Pursuant to Rule 26.1 of the Federal Rules of Appellate Procedure, the

undersigned certifies that Appellant Twentieth Century Fox Film Corporation is a wholly-owned subsidiary of Fox Entertainment Group, Inc. The parent of Fox

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Entertainment Group, Inc. is News Corporation, a publicly traded U.S. corporation. No publicly held company owns 10% or more of News Corporation stock. 5. Pursuant to Rule 26.1 of the Federal Rules of Appellate Procedure, the

undersigned certifies that Appellant WPIX, Inc. is a wholly-owned subsidiary of Tribune Broadcasting Company, which in turn is a wholly-owned subsidiary of Tribune Broadcasting Holdco, LLC, which in turn is a wholly-owned subsidiary of Tribune Company, which is privately held. 6. Pursuant to Rule 26.1 of the Federal Rules of Appellate Procedure, the

undersigned certifies that Appellant Univision Television Group, Inc. is whollyowned by PTI Holdings, Inc., which is itself wholly owned by Univision Local Media, Inc. Univision Local Media, Inc. is wholly-owned by Univision Communications Inc. Univision Communications Inc. is wholly owned by Broadcast Media Partners Holdings, Inc., which is itself wholly owned by Broadcasting Media Partners, Inc. None of the above entities are publicly traded. 7. Pursuant to Rule 26.1 of the Federal Rules of Appellate Procedure,

the undersigned certifies that Appellant The Univision Network Limited Partnership is owned by Univision Communications Inc. and Univision Networks & Studios, Inc. Univision Networks & Studios, Inc., is itself wholly-owned by Univision Communications Inc. Univision Communications Inc. is wholly owned

ii

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by Broadcast Media Partners Holdings, Inc., which is itself wholly owned by Broadcasting Media Partners, Inc. None of the above entities are publicly traded. 8. Pursuant to Rule 26.1 of the Federal Rules of Appellate Procedure, the

undersigned certifies that Appellant Public Broadcasting Service is a non-profit District of Columbia corporation with no parent corporation and that there is no publicly held corporation that owns more than 10% of its stock.

/s/ Paul M. Smith Paul M. Smith

iii

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TABLE OF CONTENTS CORPORATE DISCLOSURE STATEMENT ......................................................... i TABLE OF CONTENTS ......................................................................................... iv TABLE OF AUTHORITIES ................................................................................... vi JURISDICTIONAL STATEMENT ..........................................................................1 STATEMENT OF THE ISSUES...............................................................................1 INTRODUCTION .....................................................................................................3 STATEMENT OF THE CASE ..................................................................................7 STATEMENT OF FACTS ........................................................................................8 A. Public Performance Rights Under The Copyright Act. ...............................8 B. The Aereo System ......................................................................................11 1. The Aereo Business Model .....................................................................11 2. The Technical Design of the Aereo System ...........................................13 3. Aereo and Cablevision ............................................................................15 C. The District Courts Decision ....................................................................17 SUMMARY OF ARGUMENT ...............................................................................19 ARGUMENT ...........................................................................................................22 I. Standard of Review........................................................................................22 II. The District Court Erred in Concluding That the Broadcasters Are Not Likely to Succeed on the Merits. .....................................................23 A. Aereo Publicly Performs the Broadcasters Copyrighted Programs When It Retransmits Them to Its Subscribers. ..........................23 B. Aereos Argument That It Only Enables Consumers to Receive, Record, and Retransmit Broadcast Programming Is Without Merit. ............................................................................................26 C. Cablevision Does Not Control This Case. .................................................30 1. The District Court Misinterpreted the Significance of Cablevision. ............................................................................................31 2. The District Courts Reading of Cablevision Cannot Be Squared With the Statute, Which Requires the Aggregation of Discrete Transmissions to Particular Members of the Public. .....................................................................................................34 iv

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D. If Upheld, the District Courts Ruling Will Threaten the Economic Viability of Broadcast Television, Contrary to Congresss Intent. .......................................................................................42 III. The District Court Correctly Found That Aereos Service Causes the Broadcasters to Suffer Irreparable Harm. ...................................44 IV. The Balance of Hardships Favors a Preliminary Injunction. .........................49 V. The Public Interest Favors a Preliminary Injunction. .....................................50 CONCLUSION ........................................................................................................51

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TABLE OF AUTHORITIES CASES Arista Records, LLC v. Launch Media, Inc., 578 F.3d 148 (2d Cir. 2009) ........................................................................................................... 38 Cartoon Network LP, LLLP v. CSC Holdings, Inc., 536 F.3d 121 (2d Cir. 2008)........................................ 2, 6, 17, 31, 32, 33, 36, 39, 40 Capital Cities Cable, Inc. v. Crisp, 467 U.S. 691 (1984) .......................................... 9 CBS Broadcasting, Inc. v. FilmOn.com, Inc., No. 10-cv-07532, Order to Show Cause for Prelim. Inj. With TRO (S.D.N.Y. Nov. 22, 2010), ECF No. 8 .................................................................................................. 4-5, 27, 38 Columbia Pictures Industries, Inc. v. Redd Horne, Inc., 749 F.2d 154 (3d Cir. 1984) ..................................................................................................... 34-35 Columbia Pictures Industries, Inc. v. Aveco, Inc., 800 F.2d 59 (3d Cir. 1986) ........................................................................................................... 35 County of Nassau v. Leavitt, 524 F.3d 408 (2d Cir. 2008) ...................................... 23 Fortnightly Corp. v. United Artists Television, Inc., 392 U.S. 390 (1968) .............................................................................................3, 30 Infinity Broadcast Corp. v. Kirkwood, 150 F.3d 104 (2d Cir. 1998) ................30, 37 Salinger v. Colting, 607 F.3d 68 (2d Cir. 2010) ................................................44, 48 Teleprompter Corp. v. Columbia Broadcasting Systems, Inc., 415 U.S. 394 (1974) ................................................................................................... 4 Twentieth Century Fox Film Corp. v. iCraveTV, No. Civ. A. 00-121, 2000 WL 255989 (W.D. Pa. Feb. 8, 2000) ....................................................5, 27, 39 United States v. American Society of Composers, Authors, & Publishers, 627 F.3d 64 (2d Cir. 2010), cert. denied, 132 S. Ct. 366 (2011) ....................................................................................................................... 38 Video Pipeline, Inc. v. Buena Vista Home Entertainment, Inc., 342 F. 3d 191 (3d Cir. 2003).................................................................................... 39 vi

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Warner Brothers Entertainment, Inc. v. WTV Systems, Inc., 824 F. Supp. 2d 1003 (C.D. Cal. 2011) .........................................................5, 27, 39 WPIX, Inc. v. ivi, Inc., No. 11-788-cv, __ F.3d __, 2012 WL 3645304 (2d Cir. Aug. 27, 2012) .....................................................................................passim STATUTES 17 U.S.C. 101 ...................................................... 5, 9, 10, 11, 23-24, 25, 26, 34, 35 17 U.S.C. 106(4) ..................................................................................................... 9 17 U.S.C. 111 ................................................................................................5, 9, 28 28 U.S.C. 1292(a) ................................................................................................... 1 28 U.S.C. 1331 ........................................................................................................ 1 LEGISLATIVE MATERIALS H.R. Rep. No. 94-1476 (1976), reprinted in 1976 U.S.C.C.A.N. 5659 ..4, 25, 43, 44 S. Rep. No. 94-473 (1975) ....................................................................................... 25 OTHER AUTHORITIES Eriq Gardner, TV Broadcasters Settle Digital Lawsuit, but Aereolike Service Wont Die (Exclusive), The Hollywood Reporter, Aug. 1, 2012, available at http://www.hollywoodreporter.com/thr-esq/lawsuitalki-david-barry-diller-filmon-357288 .................................................................... 42 II Paul Goldstein, Goldstein on Copyright 7.7.2.2 (3d ed. Supp. 2012), available on LEXIS ...................................................................................... 41 Aereo CEO plans pricing changes, expansion, Radio and Television Business Report, RBR.comTVBR.com (July 27, 2012), http://rbr.com/aereo-ceo-plans-pricing-changes-expansion/ (last visisted Aug. 13, 2012) ............................................................................................ 42

vii

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JURISDICTIONAL STATEMENT Plaintiffs-Appellants WNET, THIRTEEN, Fox Television Stations, Inc., Twentieth Century Fox Film Corporation, Inc., WPIX, Inc., Univision Television Group, Inc., The Univision Network Limited Partnership, and Public Broadcasting Service (collectively, Plaintiffs or Broadcasters) brought suit alleging, among other things, a violation of the Copyright Act of 1976. The district court had jurisdiction under 28 U.S.C. 1331 (federal question). The district court entered an order denying the Broadcasters application for a preliminary injunction on July 11, 2012. The Broadcasters filed a notice of appeal on July 12, 2012. This Court has jurisdiction under 28 U.S.C. 1292(a). STATEMENT OF THE ISSUES 1. Under the 1976 Copyright Act, retransmitting copyrighted broadcast

programming to the public without a license is copyright infringement. Congress enacted this statute to overturn cases holding that it was not infringement for a commercial enterprise to retransmit over-the-air broadcasts that viewers could lawfully have accessed with their own equipment. Did the district court err in finding that because viewers can lawfully access broadcast television on mobile Internet devices using equipment available for purchase, Aereos unlicensed Internet retransmission service is non-infringing?

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2.

Under the Copyright Act, the transmission of a copyrighted work to

the public is a public performance, regardless of the device or process used to make the transmissions, and regardless of whether members of the public receive the performance in the same or separate places, or at the same or different times. Thus, the statute requires that, in analyzing whether a performance is to the public, individual transmissions must be aggregated. Did the district court err in holding that because Aereos system uses hundreds of antennas and unique intermediate copies to make the same broadcast programs available to any or all of its paying subscribers albeit through individual transmissions Aereo does not publicly perform the programming? 3. This Court held in Cartoon Network LLLP v. CSC Holdings, Inc

(Cablevision),1 that Cablevision, a licensed retransmitter, could offer a remote DVR service without obtaining an additional license because, under the facts presented, the transmission of a unique copy of a program from the remote DVR server to the viewers home was not a public performance under the Copyright Act. Did the district court err in holding that, under that decision, Aereo which has no license to retransmit whatsoever is immune from copyright liability for its unauthorized retransmissions of copyrighted broadcast programming simply

536 F.3d 121 (2d Cir. 2008). 2

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because it routes the retransmissions to its subscribers through unique intermediate copies? INTRODUCTION Viewers can receive broadcast television programs over the airwaves for free. Under the Copyright Act of 1976, however, a business engaged in the commercial retransmission of those programs for example, a cable company is deemed to engage in a public performance of that programming and must obtain a license from the programs copyright owners. Defendant-Counter-ClaimantAppellee Aereo, Inc. (Aereo) retransmits broadcast television to its subscribers over the Internet. For $12.90 a month, an Aereo subscriber can receive any show broadcast in the New York market on a smartphone, iPad, or other Internet-enabled device, either watching live as the original broadcast is still airing or recording the program for later viewing. Yet Aereo has no license whatsoever to engage in such retransmissions. One of Aereos justifications is that it is merely enabling its subscribers to do what they would be able to do themselves with technology already on the market i.e., receive broadcast television shows on home antennas and transmit those programs to themselves over the Internet using a device known as a Slingbox. Yet that is exactly the argument that Congress rejected in the 1976 Act, which overturned a pair of Supreme Court cases premised on that very

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reasoning. See Fortnightly Corp. v. United Artists Television, Inc., 392 U.S. 390, 398-99 (1968), and Teleprompter Corp. v. Columbia Broad. Sys., Inc., 415 U.S. 394, 413-14 (1974). Before the 1976 Act, the Court had ruled that a cable company did not need a license to capture over-the-air broadcasts and retransmit them to subscribers, because it was simply doing what viewers could have done for themselves. Congress rejected that equivalency, reasoning that unlike individual viewers, cable systems are commercial enterprises whose basic retransmission operations are based on the carriage of copyrighted program material and . . . copyright royalties should be paid by cable operators to the creators of such programs. See H.R. Rep. No. 94-1476, at 88-89 (1976), reprinted in 1976 U.S.C.C.A.N. 5659, 5703-04. Thus, in the 1976 Act, Congress mandated that a retransmission service engages in a public performance, requiring copyright licenses, when it retransmits broadcast programming to subscribers, even if separate retransmissions go to different people at different places and at different times. Applying that mandate, numerous courts have held that services that transmit video, including broadcast programming, over the Internet without a license infringe on the rights of copyright owners. See, e.g., WPIX, Inc. v. ivi, Inc., No. 11-788-cv, --- F.3d ---, 2012 WL 3645304 (2d Cir. Aug. 27, 2012) (ivi); CBS Broad., Inc. v. FilmOn.com, Inc., No. 10-cv-07532, Order to Show Cause for 4

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Prelim. With TRO (S.D.N.Y. Nov. 22, 2010), ECF No. 8; Warner Bros. Entmt, Inc. v. WTV Sys., Inc., 824 F. Supp. 2d 1003 (C.D. Cal. 2011); Twentieth Century Fox Film Corp. v. iCraveTV, No. Civ. A. 00-121, 2000 WL 255989 (W.D. Pa. Feb. 8, 2000). In ivi, for example, this Court recently addressed a service that, like Aereo, retransmitted broadcast signals over the Internet. In that case, ivi conceded it was engaged in public performance requiring a license; its argument was that it could exploit the statutory license provided by law to cable companies. See 17 U.S.C. 111. The Court disagreed, ruling that the ivi service was infringing. The district court here reached a contrary conclusion regarding Aereo based primarily on the fact that, just prior to retransmitting a show to subscribers, Aereo first makes a unique copy of at least several seconds of that show for each subscriber, and then transmits to its many subscribers from those unique copies. According to the district court, by interposing these intermediate copies in its chain of retransmission, Aereo makes private what otherwise indisputably would have been public performances requiring a license. That reasoning, however, ignores the statute, which by its terms requires the aggregation of individual transmissions to particular recipients, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times. 17 U.S.C. 101 (emphasis added).

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The district court was clear that its ruling was entirely driven by Cartoon Network LLLP v. CSC Holdings, Inc., 536 F.3d 121 (2d Cir. 2008) (Cablevision), explaining: But for Cablevisions express holding regarding the meaning of the provision of the Copyright Act in issue here the transmit clause Plaintiffs would likely prevail. SPA 1 (Slip Op. at 1). At issue in Cablevision was the legality of a cable companys Remote Storage DVR system (RS-DVR), which allowed cable subscribers to record a program on the companys servers and watch it later. Crucially, the cable company already was licensed to retransmit the programming to subscribers in the first instance. The Courts holding simply meant that no additional license was needed for the subsequent transmission of the recorded copy, treating the recording and playback process as the equivalent of a subscriber using an in-home DVR to record and replay a show on his home television set. Noting that each copy on the server was a unique copy available only to one subscriber, the Court concluded that a transmission from the RS-DVR to the subscriber was no different from a users playback from an in-home DVR in the den to a television set in the bedroom, and, accordingly, held that a transmission using that copy is private rather than public. Cablevision thus represents an exception to the general rule, grounded in the statutory text, that separate retransmissions to different people, at different times and to different

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places should be aggregated and viewed collectively as public performances that are infringing if unlicensed. Nothing in Cablevision holds that an unlicensed commercial retransmitter of broadcast shows may avoid obtaining any license at all by interposing unique copies into its chain of transmission to subscribers. Indeed, if such an argument were accepted, it would obliterate copyright owners right of public performance. As Aereo illustrates, it is now cheap and easy to interpose countless digital copies of video content in a retransmission stream to a subscriber. Cable companies, for example, could begin doing the same thing. However, Congress wrote the relevant provisions of the Act broadly, with the intent of preventing technological advances from undermining the copyright owners exclusive right of public performance. Accordingly, the Cablevision decision cannot save Aereo from liability for copyright infringement. STATEMENT OF THE CASE The Broadcasters sued Aereo for copyright infringement on March 1, 2012, and moved for a preliminary injunction barring Aereo from retransmitting any broadcast program to its subscribers either simultaneously with the broadcast or while any portion of that show was still being broadcast.2 After expedited

As we make clear here, the Broadcasters contend that all the unlicensed retransmissions of broadcast works by Aereo are infringing, regardless of any time delay. The preliminary injunction motion sought somewhat narrower relief, but 7

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discovery and briefing, the district court (Nathan, J.) held a two-day evidentiary hearing on the preliminary injunction motion on May 30-31, 2012.3 On July 11, 2012, the court denied the Broadcasters motion despite finding that they had established irreparable harm. The Broadcasters filed a notice of appeal the next day and sought an expedited schedule before this Court, in light of the ongoing irreparable harm they are suffering due to Aereos service. The motion for an expedited appeal was granted on July 30, 2012. STATEMENT OF FACTS A. Public Performance Rights Under The Copyright Act.

The Broadcasters own the copyrights to a large number of the programs broadcast by television stations over the air to viewers. Although those programs are made available to viewers for free over the airwaves, that does not mean that a business may retransmit the same programs to other viewers without a license. Copyright owners of motion pictures and other audiovisual works possess the

the permanent relief that the Broadcasters seek is an injunction against all unlicensed retransmissions.
3

The preliminary injunction motion was filed jointly with the plaintiffs in a parallel action filed by the American Broadcasting Companies, Inc. et al., District Court Case No. 12-cv-1540-AJN (S.D.N.Y.). The court ultimately issued a single opinion applicable to both cases. See SPA 1 (Slip Op. 1). Plaintiffs in both cases have appealed to this Court, Case Nos. 12-2786-cv and 12-2807-cv, and this Court has ordered that the appeals be heard in tandem, Dkt. 78. 8

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exclusive right to perform the copyrighted work[s] publicly. 17 U.S.C. 106(4). Under the so-called Transmit Clause, that exclusive right of public performance includes the right to transmit or otherwise communicate a performance or display of the work . . . to the public, by means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times. Id. 101. Legitimate retransmission services such as cable and satellite companies which take over-the-air broadcasts and retransmit those broadcasts to their subscribers comply with the law by obtaining licenses to do so, often paying substantial royalties.4 The requirement that they do so was deliberately imposed by Congress, which disagreed with the Fortnightly and Teleprompter cases in which the Supreme Court had treated cable companies as non-infringers on the ground that they merely assisted their subscribers to receive the same free broadcast programming that the subscribers could have received on their own using antennas. See Capital Cities Cable, Inc. v. Crisp, 467 U.S. 691, 709-10 (1984) (Prior to the 1976 revision, the [Supreme] Court had determined that the retransmission of distant broadcast signals by cable systems did not subject cable

The statute carves out a narrow exception for certain secondary transmissions. 17 U.S.C. 111. That exception is not at issue in this case. 9

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operators to copyright infringement liability because such retransmissions were not performances within the meaning of the 1909 Act. In revising the Copyright Act, however, Congress concluded that cable operators should be required to pay royalties to the owners of copyrighted programs retransmitted by their systems on pain of liability for copyright infringement.) (citing Teleprompter, 415 U.S. 394, and Fortnightly, 392 U.S. 390). Under the Transmit Clause, a retransmission service engages in public performance even if it divides its transmissions to subscribers into individual streams, sending them to separate places . . . at different times. 17 U.S.C. 101 The statutory language establishes that the separate streams, sent by a commercial service profiting from retransmissions, must be viewed in the aggregate as a public performance. Congress also recognized that technology would evolve and therefore wrote the statute to be explicitly technology-neutral, so that infringement analysis would not turn on the particular technical characteristics of the device or process used to retransmit the programming. The Transmit Clause encompasses transmissions made via any device or process, id. (emphasis added), and the statute defines device or process to include those now known or later developed. See 17 U.S.C. 101 (defining to perform . . . publicly as transmit[ting] or otherwise communicat[ing] a performance . . . of the work . . . to

10

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the public, by means of any device or process); id. (defining device and process to include one now known or later developed). B. The Aereo System.

Aereo retransmits broadcast television programming over the Internet to subscribers wireless and other Internet-enabled devices such as personal computers, smartphones, and iPads. Subscribers pay Aereo a monthly fee to have access to the Aereo website, where they can scroll through Aereos guide of television programs that are being aired currently or that will be aired at a later time, and select programming either to watch in real time (called the Watch Now service) or to record for later viewing (called the Record service). Unlike cable and satellite companies, however, Aereo has not obtained a license for the right to retransmit broadcast television programming to its subscribers. JA 246-47 (Aereo Am. Answer 34).5 1. The Aereo Business Model.

Aereos main selling point is its retransmission of live broadcast programming to subscribers Internet-enabled devices. Indeed, Aereos ability to provide Internet access to live broadcast television is a key differentiating factor between Aereo and other online video services. See JA 302 (Potenza Decl. Ex. 1); JA refers to Joint Appendix. Two versions have been made available to the Court a public version, using the numbering A-###, and a confidential version, using the numbering CA-###. 11
5

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see also, e.g., JA 466 (Potenza Decl. Ex. 25) ([L]ive sports is a core part of our value proposition.); JA 443 (Potenza Decl. Ex. 23). Aereos advertising to the public confirms that its business model is built around the retransmission of the Broadcasters programming to its subscribers. Aereos market strategy was live television online anywhere in New York. JA 301 (Potenza Decl. Ex. 1); JA 1573 (5/30 Tr. 197-98 (Kanojia)). The website advertises All the broadcasts NBC, ABC, CBS, PBS, FOX, CW & over 20 local channels!, JA 357 (Potenza Decl. Ex. 5), and a core message on Aereos website is Live broadcast TV meets the Internet. Finally. JA 302 (Potenza Decl. Ex. 1); JA 1570 (5/30 Tr. 188 (Kanojia)) (Aereos core message is live TV meets the Internet, finally). Aereo competes directly with cable companies and licensed Internet video providers, such as Hulu. As Aereos web homepage puts it, With Aereo you can now watch live, broadcast television online. On devices you already have. No cable required. JA 355 (Potenza Decl. Ex. 4). Aereos business plan is to use [b]roadcast to bring [subscribers] in, JA 401 (Potenza Decl. Ex. 12), and then sell access to additional programming that Aereo will acquire through negotiated agreements with cable networks and other media content owners. Id.; see JA 1573-74 (5/30 Tr. 200-01 (Kanojia)). Aereos own surveys conclude that approximately 30% of its subscribers will terminate their cable, satellite, or Internet video subscriptions. JA 1573-74 (5/30 Tr. 209 (Kanojia)); see also SPA 12

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42 (Slip Op. at 42). The district court found that part of the idea behind Aereo was to allow customers to bypass cable companies to watch broadcast television, including live television, and the record is replete with other evidence that Aereo recognizes that its service will likely prompt cable subscribers to cancel their subscriptions. SPA 42 (Slip Op. at 42). 2. The Technical Design of the Aereo System.

At Aereos site of operations in Brooklyn, Aereo receives over-the-air broadcast television with its antennas, converts that programming into digital format appropriate for Internet transmissions, and then transmits the programming over the Internet to its subscribers. Antennas. The most efficient design for Aereos system would involve a single antenna structure, but Aereo designed its system in a far more complicated manner. Rather than use a single antenna, Aereo instead uses hundreds of miniature antennas, each the size of a dime. JA 1543 (5/30 Tr. 77 (Kelly)); JA 396 (Potenza Decl. Ex. 10); see also JA 1830 (Plaintiffs Hr. Ex. 75, 60); JA 1898 (Plaintiffs Hr. Ex. 76, 54); JA 1529 (5/30 Tr. 23-24 (Englander)). It rotates the use of the antennas among its thousands of subscribers as they log in to watch broadcast programming. JA 1542 (5/30 Tr. 75, 76 (Kelly)); JA 1799, 1822 (Plaintiffs Hr. Ex. 75, 3(a), 48). When a subscriber accesses the system, Aereo assigns a particular antenna from its pool of antennas to that subscriber for that 13

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session. JA 1529 (5/30 Tr. 75, 76 (Kelly)); JA 1799, 1822 (Plaintiffs Hr. Ex. 75, 3(a), 48). Once the show ends or the user stops watching, that antenna is returned to the pool, and is made available to other subscribers as they access the system. JA 1542 (5/30 Tr. 75-76 (Kelly)); JA 1824 (Plaintiffs Hr. Ex. 75, 54). Conversion and Transmission. The broadcast signals received by Aereos antennas are fed into a computer system that converts the broadcast signal to different digital format. JA 1543-44 (5/30 Tr. 80-84 (Kelly)); see also JA 1822, 1830 (Plaintiffs Hr. Ex. 75, 49, 59). The digital data, in turn, is sent to another computer server where it is copied onto a hard drive within a directory assigned to a particular subscriber. JA 1545 (5/30 Tr. 85-86 (Kelly)); JA 2070-75, 2080-81 (Plaintiffs Hr. Ex. 85).6 Once a sufficient amount of data has accumulated in that intermediate copy at least six or seven seconds of programming the intermediate copy is then read into a RAM memory buffer that packages the data into a special format necessary for transmission over the Internet. JA 1545 (5/30 Tr. 85-87 (Kelly)); JA 2071-76, 2082 (Plaintiffs Hr. Ex. 85). Aereo then sends that data to the subscriber over the Internet. JA 1545 (5/30 Tr. 85-87 (Kelly)); JA 2074-75 (Plaintiffs Hr. Ex. 85). This process is continuous as further content is

To be precise, because higher quality video requires a faster Internet connection, three different intermediate copies are made at different quality levels to accommodate different Internet speeds; this process is termed transcoding. JA 1544-45, 1548 (5/30 Tr. 84-85, 100 (Kelly)); JA 2070 (Plaintiffs Hr. Ex. 85). 14

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received by Aereos antennas, copied to the hard drive, and read into RAM for packaging and transmission to users over the Internet. See JA 2080-81 (Plaintiffs Hr. Ex. 85). The intermediate disk copy continues to accumulate as a show is broadcast. For subscribers using the Watch Now mode, the intermediate copy is automatically deleted when the program or session ends. JA 1824 (Plaintiffs Hr. Ex. 75, 53); JA 1551-52 (5/30 Tr. 112-114 (Kelly)). For subscribers using the Record mode, the intermediate copy is retained on Aereos system rather than being automatically deleted when the show ends, and the copy is not sent to the RAM memory buffer or transmitted to the subscriber until the subscriber requests it. See JA 1546, JA 1551-52 (5/30 Tr. 89, 112-14 (Kelly)); JA 2071-76, 2082 (Plaintiffs Hr. Ex. 85); JA 1819, 1824 (Plaintiffs Hr. Ex. 75, 43, 53). Although Watch Now and Record are presented by Aereo as two separate services, as a technical matter, an Aereo subscriber can watch live programming through the Record mode, by first requesting a recording of a program and then watching the program live as it is being recorded. JA 1554 (5/30 Tr. 121 (Kelly)). 3. Aereo and Cablevision.

Aereos system was specifically designed in an effort to make it superficially resemble the RS-DVR service at issue in Cablevision. Before Aereo designed its service, Aereos CEO directed his chief technology officer to study the 15

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Cablevision case. JA 1586 (5/30 Tr. 249 (Lipowski)). Aereo used Cablevision as a blueprint for its system design, in the hope that it could engage in Internet retransmission of broadcast programming without paying any license fee. JA 40506 (Potenza Decl. Ex. 13); cf. JA 1568 (5/30 Tr. 178-80 (Kanojia)). It is undisputed that Aereos use of miniature antennas (as opposed to a shared antenna) and creation of intermediate copies for each subscriber (as opposed to a shared master copy that is read into the RAM memory buffer) are not necessary for Aereos retransmission service, JA 1545 (5/30 Tr. 87-88 (Kelly)); JA 1640 (5/31 Tr. 314-315 (Horowitz)); JA 1837 (Plaintiffs Hr. Ex. 75, 71). Rather, Aereo purposely designed its system in an inefficient manner solely to claim that its retransmissions to subscribers constitute discrete private performances under Cablevision and therefore do not infringe on the Broadcasters copyrights. JA 40506 (Potenza Decl. Ex. 13); JA 2097-99 (Plaintiffs Hr. Ex. 87) (Bingham instructed by Kanojia to use multiple small antennas and to keep the antenna feeds separate in designing the circuit boards in order to comply with copyright laws); see JA 372 (Potenza Decl. Ex. 8). Aereo even limited its operations so as to remain solely within this Courts jurisdiction, knowing that this Circuits Cablevision ruling provided the only even arguable basis for its being able to operate without a license. See JA 372 (Potenza Decl. Ex. 8). Aereo chose to locate its antennas in Brooklyn, and although those 16

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antennas are capable of receiving broadcast television from New Jersey, Aereo has refused to make those broadcast channels available to its subscribers. Id. Further, Aereo has made its service available only to individuals with a New York address. JA 1565 (5/30 Tr. 166-167 (Kanojia)). And, rather than expand to markets in other Circuits with promising demographics for its service, such as Chicago or Boston, Aereo instead focused on New York, Connecticut, and Vermont. JA 1586 (5/30 Tr. 250-51 (Lipowski)); JA 883 (Chan Decl. Ex. 6); see also JA 874-75 (Chan. Decl. Ex. 6). C. The District Courts Decision.

The Broadcasters filed suit two weeks before the Aereo service was launched in New York City, claiming (among other things) that it violated their exclusive right of public performance. Their motion for a preliminary injunction based on that claim was denied on July 11, 2012. In its opinion, the court found that Aereos service caused the Broadcasters irreparable injury, but held that the Broadcasters were not likely to succeed on the merits of their public performance claim. The district courts decision turned entirely on its analysis of this Courts opinion in Cablevision, 536 F.3d 121. Despite recognizing that Aereo did not have a license like Cablevisions to transmit copyrighted works, the district court nonetheless treated Cablevision as controlling. It reasoned that, like the RS-DVR 17

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system at issue in Cablevision, Aereos system creates a unique copy of each television program for each subscriber who requests to watch that program, and each transmission that Aereos system ultimately makes to a subscriber is from that unique copy. SPA 20 (Slip Op. at 20). Further, the transmission of the unique copy is made solely to the subscriber who requested it; no other subscriber is capable of accessing that copy and no transmissions are made from that copy except to the subscriber who requested it. Id. The court also derived from Cablevision the principle that a service cannot be infringing if it merely does what individual viewers could do for themselves using home equipment. Id. at 20-21 (Slip Op. at 20-21). Finally, the court also found it relevant that each copy made by Aereos system is created from a separate stream of data received by an antenna temporarily assigned to a particular user. Id. at 22 (Slip Op. at 22) (emphasis in original). Believing that it was constrained by Cablevision, the district court therefore held that Aereos transmissions to its subscribers were not public performances. The district court made clear that, [b]ut for Cablevisions express holding regarding the meaning of the provision of the Copyright Act in issue here . . . Plaintiffs would likely prevail on their request for a preliminary injunction. SPA 1 (Slip Op. at 1).

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Finally, although recognizing that it was unnecessary to reach the remaining preliminary injunction factors, the district court nonetheless found that Plaintiffs will suffer irreparable harm in the absence of a preliminary injunction. SPA 39 (Slip Op. at 39). In so doing, the court explained the devastating hardships Aereo imposes on appellants: First, Aereo will damage Plaintiffs ability to negotiate with advertisers by siphoning viewers from traditional distribution channels. Id. Second, by poaching viewers from cable or other companies that license Plaintiffs content, Aereos activities will damage Plaintiffs ability to negotiate retransmission agreements. Id. at 40 (Slip Op. at 40). Third, by disrupting appellants ability to capitalize on their own investments in internet streaming architecture, Aereos activities will in turn undermine Plaintiffs own agreements with their online transmission partners. Id. at 42 (Slip Op. at 42). However, the district court concluded that these harms were nonetheless insufficient to overcome what it perceived to be a controlling decision in Cablevision. Id. at 44 (Slip Op. at 44). SUMMARY OF ARGUMENT Aereo receives broadcast television signals on antennas it owns. It processes those signals so that they are capable of retransmission over the Internet. It then retransmits those signals to its subscribers Internet-enabled devices. And it attracts subscribers to its service by selling access to the Broadcasters

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programming but without ever obtaining a license or paying the Broadcasters a penny for the use of their works. That conduct is squarely prohibited by the Copyright Act. The district court erred in finding that Cablevision authorized this conduct. Cablevision involved a remote DVR service offered by a cable company as an adjunct to its licensed business of retransmitting broadcast programming. The case did not overturn Congresss determination that commercial retransmissions of over-the-air broadcasts must be licensed even when consumers could receive the same programming for free using their own equipment. Nor did it hold that an unlicensed third party can transform an illegal retransmission business into legal conduct merely by interposing unique copies of the programming just prior to its retransmission. The district courts analysis ignores the nature of Aereos business and instead focuses on each particular final transmission to a particular subscriber in isolation. The plain language of the Copyright Act, however, makes clear that separate transmissions that go to different people, at different times, and in separate places, must be aggregated and treated collectively as a public performance. Accordingly, courts applying the Copyright Act (in contexts other than Cablevision) do not focus narrowly on the final transmission to the individual user, but instead consider that final transmission in the context of the alleged 20

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infringers conduct as a whole. Cablevision represents an exception to the general rule that separate transmissions must be aggregated, but that exception should not be extended beyond the particular circumstances in that case. Indeed, if one were to focus narrowly on each final transmission in isolation from all other final transmissions, then the exception created in Cablevision would swallow the rule created in the statute. The final link in any wire-based retransmission could be regarded as private, because that final link is always to an individual subscribers television or other viewing device, and that signal cannot be received by any other subscriber. Moreover, it would do little good to confine the exception to transmissions originating from individually assigned copies. Because digital technology makes it effectively costless to create thousands of copies of copyrighted works, such a rule would still allow retransmitters to circumvent copyright law. Yet Congress drafted the public performance right in order to prevent its erosion by technological advances. In sum, where it appears that the alleged infringer has built a business around the unlicensed retransmission of programming owned by others, courts must aggregate those final transmissions and treat them as a public performance, as Congress directed, regardless of the particular features of the systems design. Although the district court erred concerning the merits of the Broadcasters legal position, it correctly found that Aereo causes the Broadcasters irreparable 21

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injury. As this Court recently found in affirming a preliminary injunction entered against ivi another company that retransmitted live broadcast television to subscribers over the Internet streaming copyrighted works without permission . . . would drastically change the industry, to plaintiffs detriment. ivi, 2012 WL 3645304, at *9. As this Court held, [t]he absence of a preliminary injunction would encourage current and prospective retransmission rights holders, as well as other Internet services, to . . . retransmit[] plaintiffs copyrighted programming without their consent. . . . Continued live retransmissions of copyrighted television programming over the Internet without consent would thus threaten to destabilize the entire industry. Id. Moreover, plaintiffs losses would be difficult to measure and monetary damages would be insufficient to remedy the harms. Id. The balance of hardships and the public interest also favor a preliminary injunction. See id. Those conclusions are equally applicable here. Accordingly, this Court should reverse the district courts denial of a preliminary injunction. ARGUMENT I. Standard of Review. To prevail on a motion for preliminary injunction, the movant must demonstrate: (1) likelihood of success on the merits; (2) irreparable harm in the absence of an injunction; (3) a balance of hardships tipping in [its] favor; and (4) non-disservice of the public interest by issuance of a preliminary injunction. ivi,

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2012 WL 3645304, at *2. When reviewing a district courts denial of a preliminary injunction, [this Court] review[s] the district courts legal holdings de novo and its ultimate decision for abuse of discretion. County of Nassau. v. Leavitt, 524 F.3d 408, 414 (2d Cir. 2008) (quotation marks omitted). The district court abuses its discretion when its decision rests on an error of law or a clearly erroneous factual finding. ivi, 2012 WL 3645304, at *10. II. The District Court Erred in Concluding That the Broadcasters Are Not Likely to Succeed on the Merits. A. Aereo Publicly Performs the Broadcasters Copyrighted Programs When It Retransmits Them to Its Subscribers.

In retransmitting an over-the-air television broadcast to its subscribers, Aereo is plainly engaging in a public performance that, under the Copyright Act, must be licensed by the copyright owners. The Copyright Act gives copyright owners exclusive rights . . . to authorize the public display of [their] copyrighted content, including the retransmission of [their] broadcast signal[s]. ivi, 2012 WL 3645304, at *2 (quoting EchoStar Satellite LLC v. FCC, 457 F.3d 31, 33 (D.C. Cir. 2006)) (alterations and ellipses in original; internal quotation marks omitted). The Transmit Clause defines to perform a work publicly as: [T]o transmit or otherwise communicate a performance or display of the work . . . to the public, by means of any device or process, whether the members of the public capable of receiving the performance . . . receive it in the same place or in separate places and at the same time or at different times. 23

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17 U.S.C. 101. In other words, one publicly performs a work when one (1) transmits a performance of the work (2) to the public (3) by means of any device or process. And a performance can be to the public regardless of whether it is received by different members of the public at different places and at different times. Here, Aereo (1) retransmits broadcast programming over the Internet (2) to any member of the public who wishes to subscribe to Aereos service (3) by means of its system for capturing over-the-air broadcasts, transforming them to digital format appropriate for transmission over the Internet, and transmitting them to subscribers. Congress wrote the statute to ensure that the exclusive right of public performance would not turn on the inner workings of the technology used to transmit the performance. The term transmit is defined broadly to encompass the communication of a performance . . . by any device or process whereby images or sounds are received beyond the place from which they are sent. Id. (emphasis added). And Congress understood that technologies would evolve and accordingly defined the terms device and process flexibly to refer to a device or process now known or later developed. Id. (emphasis added). The House Report underscores that intent: The definition of transmit . . . is broad enough to include all conceivable forms and combinations of wires and wireless communications media, including but by no means limited to radio and television broadcasting as we know them. Each and every 24

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method by which the images or sounds comprising a performance or display are picked up and conveyed is a transmission, and if the transmission reaches the public in any form, the case comes within the scope of [the statute]. H.R. Rep. 94-1476 at 64, reprinted in 1976 U.S.C.C.A.N. at 5678 (emphasis added).7 Because the statute is intended to cover any device or process for transmitting copyrighted programming to the public, 17 U.S.C. 101 (emphasis added), it makes no difference that the device or process used by Aereo to send the programming to its subscribers is a set of circuit boards with hundreds of little antennas instead of one big antenna. Nor does it matter that Aereo interposes intermediate copies for each user in its transmission stream, instead of simply retransmitting a master copy of the broadcast.

See also H.R. Rep. 94-1476 at 63, reprinted in 1976 U.S.C.C.A.N. at 5677 (A performance may be accomplished either directly or by means of any device or process, including all kinds of equipment for reproducing or amplifying sounds or visual images, . . . and any other techniques and systems not yet in use or even invented.) (emphasis added); S. Rep. No. 94-473, at 60 (1975) (A performance may be accomplished either directly or by means of any device or process, including all kinds of equipment for reproducing or amplifying sounds or visual images, any sort of transmitting apparatus, any type of electronic retrieval system, and any other techniques and systems not yet in use or even invented.). 25

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B.

Aereos Argument That It Only Enables Consumers to Receive, Record, and Retransmit Broadcast Programming Is Without Merit.

Aereo designed its system not to achieve efficiency but to create the impression that it is merely supplying equipment (i.e., individualized antennas and copying devices) that is actually used by its subscribers. But there is no basis for treating Aereo differently from any other unlicensed retransmission service just because, instead of using a single antenna to capture broadcast signals, Aereo uses hundreds of antennas that it rotates among its subscribers, and instead of retransmitting a broadcast signal directly to its users, it first interposes an intermediate copy for each user and then retransmits from the copy. These technological nuances, which are largely invisible to users, cannot be outcomedeterminative because Aereo clearly remains a retransmission service. Congress emphasized that the Transmit Clause applies to retransmissions through any device or process, 17 U.S.C. 101, and it further defined device or process broadly and in a way that does not turn on technological details in order to prevent just this kind of technical circumvention. See id. Here, the fact that Aereo is transforming a broadcast signal into a digital format for Internet distribution further underscores why Aereo cannot rely on its hundreds of antennas as a basis for escaping copyright liability. Aereo is not simply a passive intermediary between its antennas and its subscribers mobile 26

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devices. Even if one were to accept Aereos fiction that each of those antennas really were rented to a particular individual subscriber in actuality, the antennas are part of a pool shared by Aereos subscribers Aereo still processes the signal received by the antennas into digital format for Internet distribution and then retransmits the digitized data across the Internet. It cannot escape responsibility for its retransmissions on the theory that it is merely providing an antenna that the subscriber will then use to receive a broadcast signal for him or herself. Any other result would be untenable. If Aereo were able to circumvent the Broadcasters exclusive right of public performance merely by multiplying the number of antennas it uses or by interposing copies into its transmission stream, technological developments would make that right a dead letter. Cf. JA 1674 (5/31 Tr. at 452) (district court stating that to accept Aereos argument would mean that technology has beat the public performance restriction). Many courts, including this one, have consistently assumed or held that unlicensed Internet video services are prohibited by the Copyright Act. See ivi, 2012 WL 3645304, at *2, *8; FilmOn.com, Inc., No. 10-cv-07532, ECF No. 8; Warner Bros. Entmt, Inc., 824 F. Supp. 2d 1003; Twentieth Century Fox Film Corp., 2000 WL 255989. Yet Aereo has provided a roadmap that could be replicated endlessly.

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Indeed, if Aereos logic were accepted, even cable companies which were the direct target of the Transmit Clause could evade the statutory licensing scheme set forth in 17 U.S.C. 111 simply by erecting antenna farms and making a unique copy for each subscriber of the broadcast programming they transmit to subscribers across cable wire.8 A cable companys retransmission of such a copy would then no longer be a public performance, and no license would be required, contrary to the unequivocal intent of Congress. As a practical matter, Internet retransmission services like Aereo, freed of the need to obtain retransmission licenses, would be even more harmful than unlicensed cable services. Because Aereo uses the Internet for its retransmissions, it not only competes with the original over-the-air broadcast and with licensed retransmitters like cable companies, but also competes with, and seeks to supplant, licensed Internet video services like Hulu, which pay for the privilege of presenting the Broadcasters programming. ivi, 2012 WL 3645304, at *8-9. In so doing,

Indeed, most cable and satellite companies already provide subscribers with settop receivers that use DVR functionality to automatically copy programs before transmitting them on to the television for live viewing. This automatic copying is what allows viewers to pause and rewind shows that they are watching live the same functionality that Aereo provides using server-based intermediate copies. If Aereo were to prevail here, cable and satellite companies might well claim that they are free to retransmit broadcast programming without a license because the automatic copies made to enable viewers to pause and rewind live television are legally indistinguishable from the server copies that were the linchpin of the district courts decision here. 28

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Aereo deprives the Broadcasters of all control over the time and place of presentation of their copyrighted works, allowing viewing anywhere in the world at any time, on any device.9 It is hard to imagine a clearer violation of the rights of copyright owners under the Act. Aereo also contends, and the district court seemed to agree, see SPA 20-21 (Slip Op. 20-21), that even if Aereo remains a retransmission service, it is doing nothing more than allowing its subscribers to do what they could have done on their own using separately purchased antennas, DVRs, and Internet transmission equipment. That argument, however, parallels the Supreme Courts reasoning in Fortnightly, which Congress deliberately overturned in enacting the Transmit Clause. The Supreme Court had reasoned that a community access television (CATV) service did not involve a public performance because it did no more than its subscribers could have done on their own: [A] CATV system no more than enhances the viewers capacity to receive the broadcasters signals; it provides a well-located antenna with an efficient connection to the viewers television set . . . . If an individual erected an antenna on a hill, strung a cable to his house, and installed the necessary amplifying equipment, he would not be performing the programs he received on his television set. The result would be no different if several people combined to erect a
9

Despite Aereos purported attempts to impose geographical limitations, Aereos own expert admitted that he was able to access Aereos service from as far away as the Virgin Islands. JA 1644 (5/31 Tr. at 331 (Horowitz)). 29

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cooperative antenna for the same purpose. The only difference in the case of CATV is that the antenna system is erected and owned not by its users but by an entrepreneur. Fortnightly, 392 U.S. at 400-01 (footnotes and internal citations omitted). Congresss main purpose in enacting the Transmit Clause in 1976 was to reject the Courts equivalence between, on the one hand, a private individual using his or her own equipment to receive broadcast television signals, and, on the other hand, a commercial service retransmitting broadcast television signals to its subscribers. See ivi, 2012 WL 3645304, at *4-5; supra pp. 8-11. And Congresss judgment that a license is required for the latter would not have been any different if the retransmitter in Fortnightly had been able to place a thousand antennas on its hilltop rather than one, and string a dedicated wire from each antenna to each one of its subscribers. A commercial retransmitter may not avoid the need to obtain a license by claiming to stand in the shoes of its subscribers. See Infinity Broad. Corp. v. Kirkwood, 150 F.3d 104, 112 (2d Cir. 1998) ([C]ourts have rejected attempts by for-profit users to stand in the shoes of their customers.) (citing Princeton Univ. Press v. Mich. Document Svcs., 99 F.3d 1381, 1389 (6th Cir. 1996) (en banc)). C. Cablevision Does Not Control This Case.

Rather than follow or even analyze the statutory language that Congress wrote in light of a clearly expressed purpose, the district court instead rested its 30

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decision entirely on this Courts opinion in Cablevision. See SPA 1 (Slip Op. at 1) (But for Cablevisions express holding . . . Plaintiffs would likely prevail.). But there is no reason to extend the narrow decision in Cablevision, involving a service that served the same function as an in-home DVR and was an adjunct to a licensed cable service, to effectively eliminate the protections Congress created in the Transmit Clause. Cablevision did not hold that a business engaged in the retransmission of broadcast television to subscribers can circumvent the need for a license by creating unique intermediate copies and then using the copies rather than the original signal as the direct source of its retransmissions. The district court erred in extending Cablevisions logic beyond the circumstances of that case. 1. The District Court Misinterpreted the Significance of Cablevision.

At issue in Cablevision was the legality of a cable companys RS-DVR, which allowed cable subscribers (1) to record programming that the cable company was already licensed to transmit to the public, (2) to store that recorded programming remotely on the cable companys server, and (3) to watch the programming only after the original broadcast had finished airing and only on the television connected to the same set-top box authorized to receive the original transmission in the subscribers home. In essence, the RS-DVR mimicked the operation of an in-home DVR or VCR from a remote location. 31

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Because the cable company was licensed to retransmit broadcast programming to its subscribers, the only question was whether an additional license was needed for the viewer to play back the programming that he or she had recorded. See Cablevision, 562 F.3d at 123 (noting Cablevisions numerous licensing agreements to retransmit copyrighted . . . television programs). This Court held that no additional license was needed, and added that it could reach that conclusion without analyzing the contours of [the] phrase [to the public] in great detail. Id. at 138. The Court explained that it was relevant not dispositive that an individual viewer played back a unique copy of programming that he himself had made. Id. (the use of a unique copy may limit the potential audience of a transmission and is therefore relevant to whether that transmission is made to the public) (emphasis added). It reasoned that, because only the subscriber who had requested a copy to be made was capable of receiving the transmission of that copy, each transmission of recorded programming constituted a separate and private performance: [W]e find that the transmit clause directs us to identify the potential audience of a given transmission, i.e., the persons capable of receiving it, to determine whether that transmission is made to the public. Because each RS-DVR playback transmission is made to a single subscriber using a single unique copy produced by that subscriber, we conclude that such transmissions are not performances to the public, and therefore do not infringe [on] any exclusive right of public performance. 32

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Id. at 139. The Court did not hold, however, that a business without a license to retransmit programming in the first instance could avoid the need to obtain one merely by interposing unique copies of the programming in its stream of transmission. Nothing in the opinion suggests that unique copies inserted in a stream of transmission are imbued with alchemical properties that transform an unlawful retransmission into a lawful one or eliminate the statutory mandate to aggregate retransmissions made to different people, at different times, in different places. At a minimum, programming must be authorized to be retransmitted to the point of copying or it is plainly part of an unauthorized public performance. The district court nevertheless overlooked that crucial difference and read Cablevision to hold that, in assessing whether a performance is to the public, a court can look only to the final link in a chain of transmission, in isolation from any other transmissions and without regard to the nature of the service being offered. The district court concluded, based on that interpretation of Cablevision, that if each particular final transmission could only be received by a single viewer and came from a separate copy, then the transmission necessarily was a private performance. SPA 16 (Slip Op. at 16) (Because the Second Circuit considered the relevant performance to be the discrete transmission of each users unique playback copy of the television program to that user, the potential audience 33

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capable of receiving that performance was limited to that user, and each such performance was private, not public.). That was error. 2. The District Courts Reading of Cablevision Cannot Be Squared With the Statute, Which Requires the Aggregation of Discrete Transmissions to Particular Members of the Public.

The district courts extension of Cablevision to hold that an unlicensed retransmitter of broadcast programming can transform a public performance into a private one merely by interposing unique copies into its chain of transmission cannot be squared with the statute. Congress made clear that a transmission is not necessarily private even when it can only be received by a particular individual; to the contrary, the rule set forth in the statute is that discrete transmissions to particular members of the public must be aggregated and viewed collectively as constituting a public performance. See 17 U.S.C. 101 (a performance is public . . . whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times.). The case law applying this statutory provision including that cited with approval by this Court in Cablevision makes clear that, in assessing whether retransmissions constitute a public performance, courts should look to the nature of the business at issue and to the audience for those retransmissions taken as a whole. For example, in Columbia Pictures Industries, Inc. v. Redd Horne, Inc., 34

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749 F.2d 154 (3d Cir. 1984) a case cited favorably by Cablevision, 536 F.3d at 138 the Third Circuit found a public performance when a video rental store operator transmitted the content of a videotape to a television set housed in a private viewing booth. The court could have concluded that, because only those sitting in the private viewing booth were capable of receiving any particular transmission, the store was engaged only in serial private performances. But the court instead analyzed the case functionally, aggregating various individual transmissions and treating them collectively as a public performance. See Redd Horne, 749 F.2d at 159 (noting that a performance can be public whether the members of the public capable of receiving the performance . . . receive it in the same place or in separate places and at the same time or at different times (quoting 17 U.S.C. 101), and holding that [a]lthough [the store] has only one copy of each film, it shows each copy repeatedly to different members of the public. This constitutes a public performance.); see also Columbia Pictures Indus., Inc. v. Aveco, Inc., 800 F.2d 59, 63 (3d Cir. 1986) (Our opinion in Redd Horne turned not on the precise whereabouts of the video cassette players, but on the nature of [the] stores.). To be sure, Redd Horne placed some emphasis on the fact that the store owner had replayed the same copy of each film to multiple viewers. 749 F.2d at 159. But that fact cannot be dispositive of the public performance analysis. After 35

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all, each time the film was played, the store owner engaged in a separate transmission capable of being received only by those viewers who were at that moment sitting in the private booth. The fact that those multiple transmissions all stemmed from the same copy did not make any of those separate transmissions less private, when viewed in isolation from one another. Nevertheless, the court chose instead to view those separate transmissions in the aggregate. Likewise, the case would not have come out any differently if, with the aid of twenty-first century computer technology, the store owner had made a separate copy of the movie on a computer for each customer viewing the video, and then streamed the digital copy (instead of the master copy) into the private viewing booth.10 In those circumstances, the unique digital copy would not in substance limit the potential audience of the store owners performance, so it should be disregarded. See Cablevision, 536 F.3d at 138 (the use of a unique copy may limit the potential audience of a transmission and is therefore relevant to whether that transmission is made to the public) (emphasis added).

Indeed, in the digital age, where copies are effectively costless (especially if the copy is erased at the end of the transmission), Aereos copies do not serve any audience limiting role. Every Aereo subscriber is capable of receiving a transmission of the same programming at the same time. In that sense, the physical copy in Redd Horne, which could only be viewed by one person at a time, limited the audience more than the multiple copies used by Aereo. 36

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Similarly, in Infinity Broadcast, there was no question that the defendant was engaged in a public performance when it offered a dial-in system that allowed subscribers to listen to radio broadcasts by telephone. Radio receivers were placed in various cities and connected to telephone lines; each telephone line had a dedicated receiver/tuner. Subscribers received a list of confidential telephone numbers for the receivers, and upon calling one of the telephone numbers, the subscriber could tune the associated receiver to a desired radio frequency using his or her telephone keypad, and then receive a retransmission of the local radio broadcast on that frequency. Although each particular retransmission could be received only by the single subscriber on the other end of the telephone line, the nature of the defendants business which retransmitted copyrighted radio broadcasts to any member of the public who wished to become a subscriber, 150 F.3d at 110 made it sensible to aggregate those particular retransmissions and treat them collectively. See id. at 111 (Kirkwood is selling Infinitys copyrighted material in a market that Infinity, as the copyright owner, is exclusively entitled to exploit. Kirkwood . . . replaces Infinity as the supplier of those broadcasts to meet the demand of his customers.); id. at 110 (describing defendants service as providing his subscribers with access to every radio station in the cities [it] serves).

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Other cases decided in this Circuit also confirm that a service involved in retransmitting video programming, including broadcast television, over the Internet to the public is engaged in a public performance. Indeed, in ivi, decided by this Court only a few weeks ago, an Internet retransmission service materially identical to Aereo did not even dispute that their retransmissions were public performances. ivi, 2012 WL 3645304, at *2. Likewise, in United States v. American Society of Composers, Authors, & Publishers, 627 F.3d 64 (2d Cir. 2010), cert. denied, 132 S. Ct. 366 (2011), this Court stated that all parties agree that Internet stream transmissions . . . constitute public performances. Id. at 74. The fact that every Internet transmission is by nature a one-to-one transmission from a unique buffer copy did not change the analysis. In Arista Records, LLC v. Launch Media, Inc., 578 F.3d 148 (2d Cir. 2009), the Court also recognized that individualized audio streams on the Internet are public performances. Similarly, in FilmOn.com, Inc., the Southern District enjoined an Internet retransmission service from streaming over mobile telephone systems and/or the Internet . . . any of the broadcast television programming in which any plaintiff owns a copyright. FilmOn.com, Inc., No. 10-cv-07532, ECF No. 8, at 2. Courts in other Circuits likewise have treated Internet video streaming as a public performance, even though each transmission was sent to a single recipient and thus could have been regarded as private. In Warner Brothers, for example, 38

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the court considered a service that streamed movies over the Internet to subscribers from a bank of DVD players operated by the defendants. Only a single subscriber could view the DVD being played on a particular DVD player at the same time. The court nonetheless held that Defendants transmissions are to the public because the relationship between Defendants, as the transmitter of the performance, and the audience, which in this case consists of their customers, is a commercial, public relationship. 824 F. Supp. 2d at 1010; see also Video Pipeline, Inc. v. Buena Vista Home Entmt, Inc., 342 F.3d 191 (3d Cir. 2003) (affirming injunction against Internet video streaming service for, inter alia, infringement of the public performance right); Twentieth Century Fox Film Corp., 2000 WL 255989 (enjoining Internet video retransmission service). Notwithstanding the statutes default rule in favor of aggregating discrete transmissions made to members of the public and treating those transmissions as a public performance, this Court adopted a different approach in the unique circumstances presented in Cablevision, where the RS-DVR service was offered as an adjunct to licensed cable retransmissions and provided subscribers no more than the functionality available using an in-home DVR or VCR. See Cablevision, 536 F.3d at 124 (noting that the RS-DVR service was tantamount to an in-home DVR moved up the wire to Cablevisions head-end); id. at 136 (comparing RS-DVR subscriber to a consumer who records a program in his den and plays it back to 39

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a television in his bedroom). Analogizing the transmissions at issue to the replay of a recording made using a VCR for time-shifting purposes, the Court deemed it logical to treat the functionally identical replay of a program recorded through the RS-DVR service as a private performance. Nothing in Cablevision, however, requires that analysis to be applied beyond the facts of that case and certainly not to a service that never obtains any license to deliver programming in the first instance. According to the district court, aggregating particular transmissions would require it to look upstream, rather than downstream as Cablevision requires. SPA 21 (Slip Op. at 21). That is incorrect. In Cablevision, this Court held that in assessing whether a performance is to the public, one should consider only the defendants own transmissions constituting that performance and not the potential audience of an upstream transmission by a third party. 536 F.3d at 136. Otherwise, there could be no purely private transmission, and indeed, a hapless customer who records a program in his den and later transmits the recording to a television in his bedroom would be liable for publicly performing the work simply because some other party had once transmitted the same underlying performance to the public. Id. That analysis, however, has no bearing on the Broadcasters argument here. The Broadcasters are not asking the court to look to any upstream third party 40

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transmissions. Rather, the Broadcasters argue that it is contrary to the law and makes no logical sense to focus only on each final link in the transmission chain in isolation (i.e., the transmission from the intermediate copy to just one viewer), or on each stream of transmission in isolation (i.e., the stream from a particular antenna through Aereos system to a subscriber) to determine whether Aereos transmissions are to the public. Rather, Aereos system including its multiple antennas and its intermediate copies is the device or process it uses to retransmit broadcast programming to its subscribers, and the audience for those transmissions must be viewed as a whole. A contrary approach would lead to absurd results and would take cable, satellite, and Internet retransmissions completely out of the Copyright Act, as the final link in those transmissions is always to a single user. See II Paul Goldstein, Goldstein on Copyright 7.7.2.2 (3d ed. Supp. 2012), available on LEXIS (Since Cablevisions transmissions like On Commands were indisputably so individuated that no member of the public likely would ever receive the single transmission in a place or time different from the one in which he first received it, the result of the Cablevision courts approach, equating transmission with performance, is effectively to exclude from the scope of the public performance right every instance of on demand performance for example, two people across the country from each other watching the same film transmitted by an on-demand movie service at different 41

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times that Congress intended to include by adding to the definition of public performance in the same place or in separate places and at the same time or at different times.). D. If Upheld, the District Courts Ruling Will Threaten the Economic Viability of Broadcast Television, Contrary to Congresss Intent.

Congress enacted the Transmit Clause in large part in order to protect free and over-the-air television from the commercial free-riding and grave economic harm threatened by the Supreme Courts holdings in Fortnightly and Teleprompter. See supra pp. 8-11. Yet, if upheld, the district courts evisceration of the public performance right will have precisely the devastating consequences that Congress sought to avoid. As found by the District Court and reaffirmed last month by this Court in ivi, Aereo directly and irreparably harms the ability of over-the-air broadcasters to collect compensation for their copyrighted works, and [t]his harm is not speculative. SPA 41 (Slip Op. at 41). Already, Aereo has announced plans to expand its service, and copy-cat services have already announced similar ambitions.11 See ivi, 2012 WL 3645304, at *8-10. If Aereo and other services like

See, e.g., Aereo CEO plans pricing changes, expansion, Radio & Television Business Report, RBR.comTVBR.com (July 27, 2012), http://rbr.com/aereo-ceoplans-pricing-changes-expansion/ (last visited Sept. 13, 2012); Eriq Gardner, TV Broadcasters Settle Digital Lawsuit, but Aereo-like Service Wont Die (Exclusive), The Hollywood Reporter, Aug. 1, 2012, available at 42

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it are permitted to engage in unlicensed retransmissions of broadcast television, the result would be (as this Court recently found in ivi) the destabiliz[ation of] the entire industry. ivi, 2012 WL 3645304, at *9. First, Aereo competes with and seeks to replace licensed retransmission services like cable companies. See SPA 41-42 (Slip Op. at 41-42). It thereby threatens to eliminate a revenue stream that Congress specifically created in recognition of the fact that commercial retransmitters derive substantial economic value by marketing programming that is created and owned by others, and should compensate the copyright owners for the use of that programming. See H.R. Rep. 94-1476, at 88-89, reprinted in 1976 U.S.C.C.A.N. at 5703-04. Second, Aereo makes its retransmissions of copyrighted programming across a different medium, the Internet, that the original broadcast was never intended to reach. Consumers see Internet delivery as a different value proposition and will pay separately for it. The Broadcasters are actively trying to commercialize that distribution channel through licensed services such as Hulu, Netflix, and Amazon. Aereo seeks to take for itself the economic value of Internet delivery of the Broadcasters programming. By retransmitting the Broadcasters programming over the Internet without authorization, Aereo usurps the

http://www.hollywoodreporter.com/thr-esq/lawsuit-alki-david-barry-diller-filmon357288 (last visited Sept. 13, 2012). 43

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Broadcasters commercial opportunity to sell their programming through that different and valuable commercial distribution channel. Congress has clearly and unequivocally expressed its intentions in enacting the Transmit Clause: to require commercial enterprises whose basic retransmission operations are based on the carriage of copyrighted program material to obtain authorization and pay copyright royalties . . . to the creators of such programs. See H.R. Rep. 94-1476, at 88-89, reprinted in 1976 U.S.C.C.A.N. at 5703-04. The task of this Court is to apply the Copyright Act in a manner that is most faithful to that intention. III. The District Court Correctly Found That Aereos Service Causes the Broadcasters to Suffer Irreparable Harm. Although the district court erred in evaluating the merits, it correctly found as a matter of fact that the Broadcasters in this case will suffer irreparable harm in the absence of an injunction against Aereos retransmission of their copyrighted programming over the Internet. The relevant harm is the harm that (a) occurs to the parties legal interests, such as a property interest in copyrighted material, and (b) cannot be remedied after a final adjudication, whether by damages or a permanent injunction. Salinger v. Colting, 607 F.3d 68, 81 (2d Cir. 2010) (footnote omitted). In other words, irreparable harm may be found where the loss is difficult to replace or measure, or where plaintiffs should not be expected to suffer the loss. ivi, 2012 WL 3645304, at *8 (citing Salinger, 607 F.3d at 81). 44

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In finding irreparable harm, the district court recognized that Aereos service will harm the Broadcasters in numerous ways. Aereos service will damage the Broadcasters ability to negotiate business with advertisers by siphoning viewers away from traditional distribution channels measured by Nielsen ratings, SPA 39 (Slip Op. at 39), and will further harm the Broadcasters by poaching viewers away from retransmission companies in the cable industry or otherwise that legally retransmit the Broadcasters programming via negotiated licenses. Id. at 40 (Slip Op. at 40). In fact, the crux of Aereos business model is to get viewers to cut the cord and move away from cable and other companies that have legal licenses to retransmit the Broadcasters content. See, e.g., JA 355 (Potenza Decl. Ex. 4). Moreover, by wresting control over the Broadcasters content, then entering the Internet streaming market in competition with the Broadcasters, Aereos service undercuts the substantial financial resources, marketing and demographic research, and goodwill invested by the Broadcasters in this emerging market. SPA 42 (Slip Op. at 42). The district court also correctly found that the Broadcasters did not unduly delay in bringing an action to enjoin Aereo. While certain of the Broadcasters may have been aware of Aereos existence during the year leading up to the filing of Broadcasters claims, the evidence clearly showed, as the district court found, that litigation was not necessary until it became clear that Aereo posed a viable threat 45

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of harm, and thus it was not unreasonable for [the Broadcasters] to wait until Aereos February 2012 announcement . . . to conclude that Aereo posed a substantial and imminent threat of irreparable harm. SPA 46 (Slip Op. at 46). Until that point, Aereos service had only been available in beta testing to a limited number of people. Id. at 45-46 (Slip Op. at 45-46). As the district court held, [a] contrary holding would require plaintiffs to rush to court at the first sign of potential infringement, even if the prospect of harm is remote, which would both undermine the requirement that irreparable harm be imminent, and waste valuable judicial resources. See id. at 47 (Slip Op. at 47). The district courts finding of irreparable harm is in direct accord with this Courts recent decision in ivi. In ivi, this Court upheld a finding of irreparable harm resulting from ivis live retransmission of copyrighted programming over the Internet because such retransmissions would substantially diminish the value of the programming, and those losses would be difficult to measure and insufficiently remedied by monetary damages. ivi, 2012 WL 3645304, at *8. ivi confirms the district courts finding in this case that the usurpation of broadcasters retransmission consent substantially and irreparably harms television broadcasters. The ivi decision illuminates the full magnitude of the harm inflicted by a service like Aereo not only upon the Broadcasters, but to the industry writ large. In assessing the harm caused by ivis service, this Court recognized that such a 46

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service would drastically change the industry if allowed to continue unabated. ivi, 2012 WL 3645304, at *9. Specifically, The absence of a preliminary injunction would encourage current and prospective retransmission rights holders, as well as other Internet services, to follow ivis lead in retransmitting plaintiffs copyrighted programming without their consent. The strength of plaintiffs negotiating platform and business model would decline. The quantity and quality of efforts put into creating television programming, retransmission and advertising revenues, distribution models and schedules all would be adversely affected. These harms would extend to other copyright holders of television programming. Continued live retransmission of copyrighted television programming over the Internet without consent would thus threaten to destabilize the entire industry. Id. Moreover, precisely because the harms inflicted by ivis service would affect the operation and stability of the entire industry, monetary damages would be inadequate to remedy the injuries that would befall the broadcasters in that case were ivi not enjoined. Id. at *10. The Broadcasters in this case, like the ivi plaintiffs, derive value from control over how their programming is distributed. They rely heavily on advertising revenue, which is often determined by the number of viewers and their demographic profiles, as tracked by Nielsen measurements of traditional distribution channels. See ivi, 2012 WL 3645304, at *8-10. In addition, retransmission consent agreements are a substantial and growing revenue source. Id. Thus, just as ivis service threatened to dilute the value of the plaintiffs programming, Aereos retransmission of the Broadcasters copyrighted 47

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programming without their consent devalue[s] the programming by reducing its live value, lessening the Broadcasters ad revenue, and undermining existing and prospective retransmission fees, negotiations, and agreements. Id. at *9. Aereos retransmissions dilute plaintiffs programming and their control over their product no less than ivis did. See id. While the district court correctly held that Aereos service irreparably harms the Broadcasters, it incorrectly found that such irreparable harm was not sufficient to merit a preliminary injunction. As the district court itself acknowledged, [t]he showing of irreparable harm is perhaps the single most important prerequisite for the issuance of a preliminary injunction. SPA 39 (Slip Op. at 39) (citing Rex Med L.P. v. Angiotech Pharms. (US), Inc., 754 F. Supp. 2d 616, 621 (S.D.N.Y. 2010) (quoting Kamerling v. Massanari, 295 F.3d 206, 214 (2d Cir. 2002))). Moreover, a finding of irreparable harm reflects that the Broadcasters are suffering harm to their legal interests that cannot be remedied after a final adjudication. Salinger, 607 F.3d at 81. Courts must pay particular attention to whether the remedies available at law, such as monetary damages, are inadequate to compensate for [the] injury. ivi, 2012 WL 3645304, at *8 (quoting Salinger, 607 F.3d at 80). As this Courts recent decision in ivi showed, the harm posed by Aereos service is immense and potentially immeasurable, reaching beyond the Broadcasters own businesses to wreak havoc on the industry as a whole. Indeed, Aereo has plainly 48

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stated that if not enjoined, it intends to expand its operations beyond its limited market within the year. SPA 41 (Slip Op. at 41). Its ability to expand rapidly is evidenced by its growth over the course of the preliminary injunction proceedings alone Aereo grew from 100 users to 3,500 users in a matter of months. SPA at 42 (Slip Op. 42). In the absence of an injunction, Aereo will continue to cause serious harm to the Broadcasters, and to the broadcast television industry as a whole, which cannot be adequately remedied at a later time. IV. The Balance of Hardships Favors a Preliminary Injunction. Although the district court found the balance of hardships did not tip decidedly in favor of Plaintiffs, SPA 49-50 (Slip Op. at 49-50), this conclusion was expressly premised upon the finding that Aereo operated a lawful service, which would be harmed if enjoined. See id. For the reasons set forth above, Aereo is in fact engaged in copyright infringement. Accordingly, as this Court held in ivi, Aereo cannot be legally harmed by the fact that it cannot continue streaming plaintiffs programming, even if this ultimately puts [Aereo] out of business. ivi, 2012 WL 3645304, at *10 (quotation marks omitted). Rather, [i]t is axiomatic that an infringer of copyright cannot complain about the loss of ability to offer its infringing product. Id. (quotation marks omitted). In this case, the balance of hardships, therefore, clearly tips in plaintiffs favor. Id.

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V.

The Public Interest Favors a Preliminary Injunction. The district court correctly determined that the public interest favors

enjoining Aereos service. SPA 51-52 (Slip Op. at 51-52). As this Court has explained, [c]opyright law inherently balances the two competing public interests presented in this case: the rights of users and the public interest in the broad accessibility of creative works, and the rights of copyright owners and the public interest in rewarding and incentivizing creative efforts. ivi, 2012 WL 3645304, at *11. But [t]he service provided by [Aereo] is targeted more towards convenience than access, and the public will still be able to access plaintiffs programs through means other than [Aereos] Internet service. Id.; accord SPA 51 (Slip Op. at 51) (There is a logical gap one that Aereo and Amici fail to bridge between any public interest in receiving broadcast televisions signals generally and the public interest in receiving them from Aereos particular service.). As a result, [p]reliminarily enjoining defendants streaming of plaintiffs television programming over the Internet, live, for profit, and without plaintiffs consent does not inhibit the publics ability to access the programs. ivi, 2012 WL 3645304, at *11. Nor, of course, does [a] preliminary injunction . . . affect services that have obtained plaintiffs consent to retransmit their copyrighted television programming over the Internet. Id. The public interest therefore overwhelmingly weighs in appellants favor. 50

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CONCLUSION For the foregoing reasons, the district courts order denying a preliminary injunction should be reversed. September 14, 2012 Respectfully Submitted, /s/ Paul M. Smith Paul M. Smith Richard L. Stone Amy Gallegos JENNER & BLOCK LLP 633 West 5th Street Suite 3600 Los Angeles, CA 90071-2054 (213) 239-5100 Paul M. Smith Steven B. Fabrizio Scott B. Wilkens Matthew E. Price JENNER & BLOCK LLP 1099 New York Ave. NW Suite 900 Washington, DC 20001 (202) 639-6000

Attorneys for Plaintiffs-Counter-Defendants-Appellants

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FEDERAL RULE OF APPELLATE PROCEDURE FORM 6. CERTIFICATE OF COMPLIANCE WITH RULE 32(a) Certificate of Compliance with Type-Volume Limitation, Typeface Requirements and Type-Style Requirements 1. This brief complies with the type-volume limitation of Fed. R. App. P. 32(a)(7)(B) because this brief contains 11,883 words, excluding the parts of the brief exempted by Fed. R. App. P. 32(a)(7)(B)(iii). This brief complies with the typeface requirements of Fed. R. App. P. 32(a)(5) and the type style requirements of Fed. R. App. P. 32(a)(6) because this brief has been prepared in a proportionately spaced typeface using Microsoft Word 2007 in 14 point Times New Roman.

2.

Dated:

September 14, 2012

By:

/s/ Scott B. Wilkens Scott B. Wilkens

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CERTIFICATE OF SERVICE I HEREBY CERTIFY that on September 14, 2012, a true and correct copy of the foregoing was served on all counsel of record in this appeal via CM/ECF pursuant to Local Rule 25.1(h).

Dated:

September 14, 2012

By:

/s/ Scott B. Wilkens Scott B. Wilkens

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