Final Supreme Court Word on Streaming-as-Cable Seen Hinging on Other Circuit Decisions

Whether the Supreme Court takes up FilmOn X's legal fight to be allowed to stream broadcast programming could hinge on a U.S. Court of Appeals for the D.C. Circuit or 7th Circuit ruling, now that the 9th Circuit on Tuesday reversed a lower court ruling that was in FilmOn's favor, legal experts told us. "The decision is a significant setback for streaming services," emailed Rodney Smolla, Delaware Law School dean and writer of an amicus brief in the case on behalf of the broadcaster and copyright holder plaintiffs. The 9th Circuit decision plus the Supreme Court's 2014 Aereo decision means "all the bargaining chips are now owned by the copyright owners, which is likely what Congress intended," he said.

Section 111 of the Copyright Act -- under which cable systems can get compulsory licenses to retransmit content without getting copyright holder OK -- is ambiguous about whether streaming services trying to do something similar qualify as cable systems, the 9th Circuit said in a decision (in Pacer) Tuesday. The judges deferred to the Copyright Office interpretation, which said streaming services like FilmOn don't qualify and thus can't get compulsory licenses. The appeal -- by parties including Fox, NBCUniversal, Open 4 Business Productions, ABC, Disney, CBS Studios and Telemundo -- was of a decision by U.S. District Judge George Wu of Los Angeles that Internet video services should be eligible for similar compulsory licenses as cable systems (see 1507200067).

If Congress wanted Section 111 to cover the entire secondary retransmission universe, it easily could have said so, but it instead specified it applies only to "cable systems," the three-judge panel said. The judges also said it's not clear the Internet qualifies as a "communications channel" under the law's definition of a cable system. They said the Copyright Office has been repeatedly clear that it doesn't believe internet-based retrans systems qualify as cable systems under Section 111. They said the Copyright Act also backs the CO stance to reject internet-based retrans services due to a lack of a localized retrans medium, since Section 111 often uses location-sensitive language like "headends" and "contiguous communities." Ruling were Judges Diarmuid O'Scannlain, Johnnie Rawlinson and Consuelo Callahan, with O'Scannlain writing the decision. The Copyright Office didn't comment.

This "allows the Copyright Office to further its narrow agenda rather than give meaning to the plain language of the relevant statute," FilmOn outside counsel Ryan Baker of Baker Marquart emailed us. He said the company stands by its belief Congress "intended that cable companies could utilize modern communications channels to deliver broadcast television to the American public." Baker said, with the similar issues before the 7th and D.C. circuits, FilmOn X "remains hopeful that those appellate courts will apply the statute as written and shun any attempt to impose extratextual limitations on the compulsory license."

The D.C. Circuit heard oral argument last week in a FilmOn appeal of a 2016 ruling by a U.S. District judge for the District of Columbia that it isn't eligible for a compulsory license (see 1512020060). Appellees in the D.C. Circuit case are an overlapping group of broadcasters and copyright holders including Allbritton, ABC, CBS, Disney, Fox, NBC, Tegna, Telemundo and Universal. FilmOn in the 7th Circuit is appealing a 2016 decision by U.S. District Judge Charles Kocoras of Chicago dismissing FilmOn's suit against Window to the World Communications in which the court said FilmOn wasn't eligible for a copyright license. Oral argument was heard in that case in January.

The Supreme Court has shown an interest in recent years in intellectual property issues that could help lead to the court's granting review, but divining how the justices would view the dispute "is not easy to handicap," Smolla said. He said the 9th Circuit decision rests on judicial deference to CO interpretation, and Supreme Court nominee Neil Gorsuch indicated deference to the interpretative views of agencies "is generally inappropriate."

Public Knowledge submitted amicus briefs on behalf of FilmOn in the D.C. Circuit and 9th Circuit cases, and Senior Staff Attorney John Bergmayer said the 9th Circuit ruling -- while "unfortunate" -- just maintains the status quo since FilmOn hasn't been using a compulsory license to offer online services. He said the ruling "is a lost opportunity for new online competition." PK said the Wu decision could help boost the competitive strength of the streaming market (see 1507170024). The 9th Circuit ruling also doesn't the problem streaming services were left with after the Aereo ruling, in which they carry some of the liabilities that come with being cable systems but none of the benefits like compulsory license, Bergmayer said.