WASHINGTON, DC -- The Supreme Court, grilling lawyers for TV-streaming service Aereo and the broadcast TV companies seeking to shut it down, focused Tuesday on issues of private versus public performance, universal uncertainty about risks to cloud computing, and the difference between true innovation versus technological cleverness to avoid paying for content.
At stake in the copyright case is how people watch and pay for TV in the digital age, and how the companies that create content are compensated. The case could also call into question the legality of cloud-computing services unrelated to TV, something several justices brought up with both sides.
During oral arguments, Aereo's lawyer attempted to frame the company as an equipment-rental service with no copyright responsibilities, rather than a content provider. Meanwhile, counsel for the broadcasters said Aereo's attempt to argue that it doesn't publicly perform programming is "like magic."
The Supreme Court's decision isn't expected for several weeks.
The case before the court seeks to resolve whether Aereo -- a new service that streams over-the-air television to local paying subscribers via the Internet -- infringes on the copyrights of the TV companies that create and broadcast that programming. This hinges on the question of whether Aereo enables private performances by its members or if it is publicly performing the programming itself.
Aereo claims that these are private performances and that it isn't infringing copyright. The company sets up an individual antenna that a subscriber tells what to do, and it makes a dedicated recording of the content when the customer tells it to.
The broadcasters, including CBS, which owns CNET, claim Aereo is publicly performing their TV broadcasts and infringing copyright. Aereo owns the antennas its subscribers use, they say, and as a whole the delivery of the programming through Aereo is indistinguishable from cable and satellite operators' public performances of the same programming, which those pay-TV providers shell out a lot of money for.
Justices Stephen Breyer and Sonia Sotomayor raised worries about the case's implications for cloud computing services like a Cablevision cloud-based DVR or a storage site like Dropbox.
Breyer, and later Justice Elena Kagan, pressed the broadcasters and Aereo to explain why Aereo is any different from a cable service. Breyer said what "disturbs" him and the rest of the bench is that Aereo looks and sounds so much like a cable service but "it looks as if somehow you are escaping a constraint that's imposed upon them," namely, paying royalties.
But Breyer said the threat to cloud computing could be just as unsettling.
"What disturbs me on the other side is I don't understand what the decision for you or against you, when I write it, is going to do to all kinds of other technologies," Breyer said to Aereo's lawyer. "I've read the briefs fairly carefully, and I'm still uncertain that I understand it well enough. That isn't your problem, but it might turn out to be."
The broadcasters response to effects on other cloud businesses was that "not all cloud computing is created equal," according to Paul D. Clement, the lawyer for the networks. A key difference between Aereo and a remote DVR service like Cablevision's is that Cablevision pays license fees; Aereo does not. He compared Aereo to a valet service that starts operating a Zipcar business on the side with the cars it parked.
David C. Frederick, the lawyer who represented Aereo, said "the cloud computing industry is freaked out about this case because they've invested tens of billions of dollars on the notion that a user-specific, user-initiated copy, when perceived by that person, is a private performance and not a public performance," and therefore not subject to licensing fees. Calling Aereo illegal threatens that, he said.
Copyright experts expected Justices Ruth Bader Ginsburg and Breyer to provide clues into how the court may approach the case. The two are reputed to be the most vocal on the bench about copyright issues. Breyer is known to be skeptical of valuing copyright over innovation. But he repeatedly raised his worries about a service like Aereo endangering the everyday ways Americans enjoy content and possibly harming the ways companies distribute it.
Why so many antennas?
Ginsburg and Chief Justice John Roberts pressed Aereo about whether there was any real reason for the company's use of multiple antennas, other than avoiding the reach of the Copyright Act. Roberts said it looked as though Aereo's technological model is based on getting around copyright prohibitions it doesn't want to comply with. "Which is fine," he said. "You know, lawyers do that."
Frederick responded that there were other technological advantages to Aereo's setup, such as the fact that it provides the same capabilities as having an antenna and DVR in your home but at a lower cost, with more convenience and with replication in the cloud.
Ginsburg noted that of all the players that transmit content, Aereo is the only one that doesn't pay for licensing. Frederick said that the person who sells an antenna in a Radio Shack doesn't pay copyright royalties either.
Justice Elena Kagan questioned both sides to determine how Aereo is different from services that store content and organize it for people to find, like the service Grokster that the Supreme Court found to be a copyright infringer in 2005.
For Aereo, the Supreme Court's decision means the company's life or death, with Chief Executive Chet Kanojia having said Aereo has no Plan B. In addition, Aereo and others claim the case could imperil cloud computing services unrelated to TV, some of which are fundamental to how people use the Internet.
For the broadcasters, a decision that found Aereo legal would mean the company could continue to grow without paying them. More significantly, the TV companies fear that other pay-TV providers, like cable and satellite companies, could set up Aereo-like systems and stop paying them too. The payments, called retransmission fees, are small compared with networks' advertising revenue, but the fees are growing rapidly.
After oral arguments, the broadcasters' lawyer, Clement, said the networks are "very happy to be in court today and we're pleased with the way the court considered the arguments," according to a statement.
Aereo's lawyer, Frederick, said in a statement that the company is "confident, cautiously optimistic, based on the way the hearing went today that the court understood that a person watching over-the-air broadcast television in his or her home is engaging in a private performance."
Update, 11:45 a.m. PT: Adds further details of oral arguments.