Fox Television Stations, Inc., et al. v. Aereokiller, LLC, et al.: Ninth Circuit Holds FilmOn X Not a “Cable System” Entitled to Compulsory License; Implicates Federal Agency Deference Doctrines

In 2014, the United States Supreme Court, in American Broadcasting Companies v. Aereo, Inc., held that unlicensed re-broadcasts of copyrighted content over the Internet constituted public performances of copyrighted works in violation of content owners’ exclusive rights under the Copyright Act; as part of its discussion, the Court analogized services like Aereo’s to “cable services.”  Emboldened by the Court’s comparison, Aereo competitor FilmOn X (formerly Aereokiller) took the “cable services” ball and ran with it.  FilmOn X has sought to brand itself as a “cable service” under § 111 of the Copyright Act, a status that would entitled it to re-transmit performances of copyrighted works without securing prior consent if it complies with certain regulations and pays a minimal statutory fee – the “compulsory license.”  FilmOn X is now fighting high-stakes copyright battles before several federal appellate courts around the country.  On March 21, the Ninth Circuit dealt a blow to FilmOn X’s western front, becoming the second federal court of appeals (along with the Second Circuit in WPIX, Inc. v. ivi, Inc.) to hold that Internet re-transmitters do not constitute “cable systems” under the Copyright Act.

District Court Holds FilmOn X Qualifies as “Cable System” Under § 111 of Copyright Act

Much like Aereo, FilmOn X uses antennae to capture over-the-air broadcast programming – much of it copyrighted and owned by the appellants – and retransmits that captured programming over the Internet to paying subscribers without the consent of, or payment to, the copyright owners.  After the Aereo Court held that such re-transmissions violated copyright owners’ public performance rights, FilmOn X claimed, as a new defense, its eligibility for a compulsory license under § 111.  In a ruling at odds with every other federal court that has decided the issue (including the Second Circuit, Southern District of New York, District of D.C., and Northern District of Illinois), the U.S. District Court for the Central District of California granted FilmOn X’s motion for summary judgment, holding that it qualified as a “cable system” based on what the lower court deemed to be the plain meaning of § 111.   The Ninth Circuit fundamentally disagreed, holding that the language of § 111 was not clear in favor of either party.

Neither Fox Nor FilmOn X Convince the Court of Their Interpretations of § 111

The court set up its argument by dissecting each side’s interpretation of the law.  First, it disagreed with Fox’s argument that a “cable system” under § 111 must have complete control over the facilities which it uses to receive and secondarily transmit its broadcasts, and FilmOn X cannot control the Internet – its means of retransmission.  The court explained that there was insufficient support in § 111’s text to clearly indicate the need for such extensive control over all technological means.

The judges were similarly unconvinced that § 111 compelled the opposite conclusion, rejecting FilmOn X’s contention that § 111 was meant to grant a compulsory license to any facility that retransmits broadcast signals notwithstanding its technological characteristics.  If Congress had intended to do so, the court held, it could have done so clearly, and would have had no reason to provide a separate compulsory license regime for satellite carriers.  The court even went so far as to question whether FilmOn X’s sweeping reading of section 111 would “undermine the balance of interests Congress attempted to strike when it designed § 111,” and note, citing an 1804 Supreme Court case, that FilmOn X’s interpretation of § 111 could risk placing the United States in violation of certain treaty obligations.

Deeming § 111 Ambiguous, Ninth Circuit Turns to Copyright Office for Guidance; Reverses District Court’s Ruling

Faced with an ambiguous statute, the Ninth Circuit – like the Second Circuit in ivi – turned to the Copyright Office for guidance.  For 25 years, the Copyright Office has opined that, to qualify as a “cable system,” a “provider of broadcast signals [must] be an inherently localized transmission media of limited availability,” and for 20 years, the Copyright Office has stated that Internet-based retransmission services do not qualify as “cable systems.”  Rather than deciding which of two types of discretion to afford the Copyright Office’s position – as doing so would have forced the court to unnecessarily address larger Constitutional issues – the court opted for the more stringent standard (known as Skidmore deference) because, even under a less deferential standard, the outcome would be the same: the Ninth Circuit agreed with the Copyright Office.

Under the Skidmore standard, an agency interpretation of a statute “will depend on the thoroughness evident in its consideration, the validity of its reasoning, [and] its consistency with earlier and later pronouncements.”  The Ninth Circuit deferred to the Copyright Office’s decision to reject “cable system” status to Internet-based retransmitters such as FilmOn X because they do not use localized retransmission mediums; the court explained that this position was carefully considered and adequately supported by the text, structures, and principles behind the Copyright Act.  Specifically, § 111 indicates a desire for “cable systems” to have a decidedly local presence – the precise opposite of the Internet at large.  The Copyright Office, per the court, has consistently maintained this positions since 1992, and since 1997 has consistently rejected the notion that Internet-based retransmitters should be considered “cable systems.”  Considering the ambiguity of § 111 and the parties’ respectively plausible interpretations of that section, the Ninth Circuit relied on federal agency deference to break the deadlock, reversed the district court, and rejected FilmOn X’s attempt to hide behind the compulsory license of a “cable provider” as a shield from copyright liability.

Conclusion

Now that the two most prominent copyright Courts of Appeal have weighed in on the “cable systems” issue, it remains to be seen whether the other FilmOn X appeals now pending in the Seventh Circuit and D.C. Circuit will also rely on agency deference to reach their decisions, and whether another trip to the Supreme Court is imminent.  Interestingly, in passing on the question of the appropriate level of deference, the Ninth Circuit in Fox took a notably different (and perhaps more cautious) approach from the Second Circuit in ivi, which reflexively relied on the more deferential standard of Chevron deference to defer to the Copyright Office’s pronouncements.  Given the recent media attention on doctrines of agency deference resulting from Supreme Court Nominee Judge Neil M. Gorsuch’s reported skepticism of, and potential desire to change, those doctrines, the Ninth Circuit’s decision takes on an added element of interest beyond just copyright law, in that it could conceivably have farther-reaching implications if it ever reaches the nation’s highest court, with or without its ninth seat filled.

Cowan, DeBaets, Abrahams & Sheppard LLP – which has drafted and filed amicus briefs in all three FilmOn X appeals – will continue to post updates on developments in the pending appeals as well as any further action in the Fox Ninth Circuit case.