Internet Streaming Isn't the Same as Cable TV, 9th Cir. Rules

More and more Americans are cutting their cables and ditching their TVs, choosing to consume their video entertainment through online streaming services like Netflix or Hulu. But as online streamers begin to encroach on the realm of cable and broadcast TV, are they entitled to the same treatment as companies like Comcast or Viacom?

Not according to the Ninth Circuit. In a ruling this Tuesday, Fox Television Stations v. Aereokiller, the court rejected an attempt by FilmOn, an internet-based TV rebroadcaster, to obtain a compulsory cable license under the Copyright Act of 1976. The court must defer, it explained, to the Copyright Office's determination that internet rebroadcasting just wasn't the same as cable.

FilmOn Argues That It's Cable

FilmOn is an online streaming service that captures broadcast programming and retransmits it online. Through FilmOn, you can watch hundreds of actual TV channels online, much like you can watch broadcast stations over cable.

Sound familiar? It's essentially the same service that was offered by Aereo, an early local-programming-over-the-internet company. In 2014, the Supreme Court ruled that services such as Aereo's count as "performances" under the Copyright Act.

That presents a pretty major problem for FilmOn, as such rebroadcasts would infringe on copyright holder's rights. Indeed, here, several broadcast stations, led by Fox, had sued FilmOn for exactly that.

FilmOn, however, sought a clever way around those claims. Under Section 111 of the Copyright Act, cable systems are eligible for a compulsory license that allows it to retransmit a protected work in exchange for only a small royalty fee. The consent of the copyright holder isn't required.

FilmOn's arguments were originally successful. The district court had ruled that, under the plain language of Section 111 FilmOn qualified as a cable system.

On appeal, the Ninth didn't think the statute was so clear. The Copyright Act defines a "cable system" as a "facility" that "in whole or in part receives signals transmitted or programs broadcast by one or more television broadcast station licensed by the Federal Communications Commission, and makes secondary transmissions of such signals or programs ... to subscribing members of the public for such service."

Deferring to the Copyright Office

Fox argued that "facility" referred to the entire cable system needed to retransmit -- not just the cable company, but the actual wires in the ground. Since FilmOn relies on the internet's infrastructure, rather than its own, it's ineligible under Fox's interpretation.

FilmOn argued that Section 111 entitled any rebroadcaster to a compulsory license, "no matter the technological features or characteristics". Under this interpretation, it doesn't matter if the rebroadcasting happens via cable lines, satellite, or smoke signal.

Finally, the Copyright Office proposed a third reading of the statute. In two sets of rulemaking, from 1992 and 1997, the Copyright Office interpreted Section 111 as applying to "an inherently localized transmission media of limited availability" only. Those rules did not touch on the internet, but rather satellite and microwave retransmissions. Since then, the Copyright Office has repeatedly rejected arguments that internet transmission services are "cable systems."

Given the ambiguity of the statute, the court was required to defer to the Copyright Office, the Ninth explained. Whether one apply Chevron deference, or slightly less-deferential Skidmore deference, the Ninth said, FilmOn loses. When Congress created the cable license, cable was "a highly localized medium of limited availability," the court explained. Further, the Office's narrow reading prevents reading Section 111 to "sweep in every possible transmission technology".

The ruling may sound the death knell for online rebroadcasters, but FilmOn hasn't given up yet. It is currently arguing two similar cases in the D.C. and 7th Circuit, Variety reports, and is hoping to secure a more favorable ruling in those cases.

Related Resources:

• Appeals Court Rules TV Streamers Don't Get Compulsory License to Broadcast Networks (The Hollywood Reporter)
• Catch a Movie With Kozinski: Judge Hosts Movie Nights in 9th Cir. (FindLaw's U.S. Ninth Circuit Blog)
• 'The Hurt Locker' Is Protected Speech, 9th Circuit Rules (FindLaw's U.S. Ninth Circuit Blog)
• Court Says No Trademark Infringement for Copying Karaoke Files (FindLaw's U.S. Ninth Circuit Blog)