The Supreme Court Kills Aereo Because It Found a Loophole

In the aftermath of Wednesday's 6-3 Supreme Court decision stating that Aereo was in violation of the U.S. Copyright Act, there arose in the tech world an amount of hand-wringing that would make Helen Lovejoy green with envy.

When the decision came down, most media outlets proclaimed the demise of the innovative tech start-up. Others lamented the decision and lashed out at the bipartisan group of justices that wrote for the majority. Still others rushed to argue that no, the decision didn't mean the end of Aereo. A friend of mine, a subscriber to Aereo's service, is in the midst of the traditional five stages of grief. In a single day, he's cycled through denial, anger, depression, and now he's onto the bargaining stage, devising solutions to save the company so convoluted you'd need to divert physicists from the Large Hadron Collider to fully comprehend them.

The dust still hasn't settled and it will be a while before we know if Aereo can survive, but here's what we do know: Aereo used a series of antennaes to pull live broadcast signals out of the air and stream them to its subscribers. It did this without paying licensing fees to the networks who own the shows, unlike other broadcasters. Aereo argued that it was merely an equipment provider and not a broadcaster and therefore didn't need to pay licensing fees (hence why their rates are $8 a month as opposed to Comcast's $99). Six of the SCOTUS justices didn't buy it. Roberts, Ginsberg, Kennedy, Breyer, Kagan, and Sotomayor found that despite the technological back-end that made Aereo so unique, Aereo still functioned largely as a broadcaster of copyrighted material as defined by the 1976 amendment to the Copyright Act. They also said that Aereo was a "public performer" of the copyrighted materials. Taken together, these issues meant that Aereo has been violating copyright law since its inception two years ago.

Clearly, a lot of people don't agree with the decision, and this TechDirt article explains why. In essence, they claim that the SCOTUS used a "looks like something that infringes test" to get to their desired result. They looked at the surface and, without really understanding how the technology works, decided that it must be a broadcaster. Critics of this approach cite this as another example of the anti-technology, intellectual laziness that's hung over this particular line-up of justices for some time.

The critics are right in one regard: in determining a case, the justices should always try their best to understand how a particular technology works. Simply relying on a "looks like" approach is not the way the highest court in the land should operate.

But I'm not convinced that's what happened here. I've read this decision cover to cover (unlike other SCOTUS decisions which can be punishingly long, this one clocks in at a reasonable 35 pages). I wanted to hate the outcome. But to my eyes the justices did in fact understand Aereo's technology. They simply weren't convinced that the technology stood far enough apart from those of more traditional broadcasters to exempt Aereo from having to comply with the Copyright Act. This decision doesn't read like a "if it looks like a broadcaster then it must be" approach. It seems much more logical and considered than that.

However well considered the intentions though, bad law can still come out of it. Whether the Court intended it or not, the decision effectively gives cable companies and broadcasters - powerhouses that already lord over us - even more authority to run the board however they want. As I write this, Fox is using the three-day old Aereo decision as leverage in its legal battle against Dish Network.

It also raises a question of legitimacy, as do most of the recent decisions from this heavily partisan Court. In the decision, the justices state that the decision is narrowly tailored towards rectifying Aereo's specific actions rather than attacking technological advances by other start-ups in general. In other words, it looks like the Court is singling out Aereo for punishment, rather than deciding the law. And it does raise the question as to whether this case was really about technology, or whether it was a facade for something more sinister: loopholes (Scalia says as much in his dissent). Aereo thought it found a technological loophole so that it wouldn't have to pay licensing fees to the networks like Comcast, Time Warner, and AT&T have to. Was this a case of revenge? Were the broadcasters expecting the Supreme Court to act as a bludgeon for their interests? If so, that's the bigger concern.

Supreme Court Deathmatch: Aereo vs. The Entire Broadcast Network Industry

For the last six months, a friend of mine has relentlessly tried to get me to ditch my Xfinity hookup and replace it with Aereo, an online TV subscription service. To hear him tell it, it’s the greatest thing ever invented - immediate and live access to broadcast news, sports, and TV shows from the big 10 networks such as NBC, CBS, ABC, FOX, PBS (no cable channels though), all for a measly $8 a month. I think I’ll wait though. I’m happy with my yesteryear technology and I derive a certain amount of comfort from mindlessly flipping through hundreds of channels I’ll never watch. More importantly, Aereo may not even exist in six months. That’s because tomorrow the Supreme Court will hear oral arguments in the case of American Broadcasting Companies, Inc. v. Aereo, Inc. And if Aereo loses, according to its own CEO, the company is kaput.

For those who don’t know, Aereo is a startup that takes television broadcasts from networks and retransmits them to you live via the internet. You can also store these broadcasts in a cloud-based DVR, all for the cost of two cups of coffee. As it turns out, even though you’re paying Aereo, Aereo is not paying the networks; it's just ripping these broadcast signals out of the air and streaming them to you. That didn’t make the networks too happy, so they banded together and sued Aereo for copyright infringement.

This isn’t an easy case and I don’t envy the justices the amount of work they'll have to even understand the technology at play (read this article if you want to know how behind-the-times the SCOTUS really is). Ultimately, this case turns on whether Aereo’s retransmission of broadcast television constitutes a “public or private performance” of copyrighted works. Private performance is perfectly legal, like when you buy a DVD and show it in your home. Even if you invite 100 friends over to watch, you’re safe. But let’s say you rent a theater and charge for admission - that would make the performance public, and that becomes copyright infringement.

In this case, the networks argue that Aereo’s actions constitute public performance because:

1. Aereo streams “live TV” to a wide variety of subscribers;
2. Aereo charges fees for its services;
3. Unlike other retransmitters, Aereo doesn’t pay licensing fees to the networks for permission to broadcast their content.

In opposition, Aereo argues that it does not transmit “to the public.” It transmits only to its paying user base. Furthermore, the choice about what gets retransmitted at any given time is made by the subscriber, not Aereo. Some lower courts have already sided with Aereo, but if I’m being totally honest, I empathize with the networks, even though siding with a corporate copyright holder gives me the willies. Creating and broadcasting content is back-breakingly hard and terrifically expensive. Even some of those low-budget reality shows for third-rate cable channels that look like they were shot on iPhones… oftentimes they have budgets in the tens of thousands of dollars per  episode. And there are lots of working-class content creators behind those shows. Remember, most people in the entertainment industry aren’t millionaires; they’re regular people working paycheck to paycheck, relying on a steady stream of work from networks and studios to pay their bills. It’s easy to think of the producers and directors and say “who cares?” But the people who get hurt first and hardest are the below-the-line talent: the grips, boom operators, location managers, scouts, production assistants, etc. What will happen to those jobs if the networks believe that pouring money into original content is no longer a profitable business model? And if you’re one of the networks, do you want to continue operating in an industry where it’s permissible for competitors to poach your signal and rebroadcast your content without owing you a fee for your trouble?

I don't know what's going to happen, but in a corporate-friendly court like this one, I can see the Supreme Court buying an argument that Aereo’s continued existence will irreparably harm the bottom lines of not just the networks, but the big telecoms like Comcast and Time Warner (soon to be a single world-killing behemoth). I don’t want to see Aereo go down because the use of technology to better peoples' lives is an intrinsic part of the American ethos. But I also don’t want to see a wholesale dismantling of the entire entertainment industry (alarmist I know, but still possible).

I’ll update this post with some thoughts after Tuesday’s oral arguments. In the meantime, I’m going to stick with my cable hook up, and I’ll tell my friend to  start budgeting for cable again if Aereo goes down the poop chute.

Protecting The Brand: Why Letting You Hate King Joffrey Is A Baller Move By HBO

I don't watch Game of Thrones and I never read the books, but even I know King Joffrey is a nasty little shit. That's because everyone, up to and including HBO, keeps telling me. A few weeks ago, HBO did something quite interesting; in anticipation of the upcoming fourth season of the show, the network sponsored a twitter “roast” of Joffrey Baratheon, King of Westeros. The premise is this: fans of the show would tweet horrible things about the horrible king using the hashtag #RoastJoffrey.  The best tweets would be compiled by HBO at www.RoastJoffrey.com. Here are some I picked out at random:

 If you’re a fan of brand protection (and who isn’t these days?) then you should reserve a space of honor for HBO. See, people hate Joffrey... and hating Joffrey has become something of a national pastime  (here’s a Facebook page with the elegant and appropriate title Fuck You, Joffrey Baratheon). The hatred has become so intense that you have to feel bad for actor Jack Gleeson. By all accounts, he’s a nice kid, but the character he plays is such a schmuck that Gleeson can't even watch his own performance. He's even vowed to quit acting when his tenure at GoT ends in order to devote himself to charity work.

Anyway, the Twitter roast proves that HBO knows how to have fun. Furthermore, it shows that HBO understands the fans are going to build a community around the show anyway, so it might as well be a part of that. By joining in the fun of hating Joffrey, HBO is aligning itself with the fans ("we're fans of these characters, just like you!") and in the process, it is building brand loyalty among the audience. Why is that so important? Because if you like HBO you're less likely to steal from them. It's a simple, but effective, truth. If you think HBO cares about your fandom (and word is that they really do care, this isn't just a hollow put on), you're less likely to illegally download the show and more willing to buy the DVDs and all that delicious GoT merchandise.

In reality, there’s no evidence that illegal downloading actually harms large corporate copyright holders (and at least one study shows that illegal downloads actually increase legal sales by 2%), but why take the risk, especially when positioning yourself with the fans is so easy? To me this is a no-brainer. When the fans like you, they’re less likely to steal from you. HBO gets that, and as a result they’re going to let you hate on King Joffrey with the fury of 1,000 suns. I think it’s a good trade-off.

Reading Contracts Sucks But You Should Do It Anyway Or MTV Will Broadcast Your Address To A Million People

Let's do some role-playing. Pretend you're a young man named Tristan Watson who has agreed to participate in an MTV reality show called True Life: I'm a Chubby Chaser, a doc about men who prefer dating large women. Let's also pretend you agree to do the show on the condition that MTV withholds your identity, referring to you only as "Tee" during the broadcast. This agreement is made via handshake, but the anonymity clause is never incorporated into the final written contract, which you sign. Once the show airs, you discover that not only is your full name used, but MTV also broadcasts your address and even your apartment number. You receive death threats and you lose your job. You sue the network for lying to you about its promise of anonymity and for all the harm it has wrought in your life, but because the contract also includes an agreement that you "will not sue the network for any reason," you lose big time.

Sadly, this is no game. There is a real Tristan Watson and everything I just said actually happened to him. Watson's experience is not a novel one. Contracts that broadly favor one side happen quite a bit in the entertainment world where one party (i.e. MTV) has considerably more bargaining power than the other (i.e. Watson). These lopsided contracts are even more prevalent in the nonsensical world of reality TV, where American teens will sign away their birthright for a chance to become a celebrity and the networks make absolutely no attempt to be reasonable in contracting with said teens. Unfortunately for Watson and those like him, even if the contract hadn't contained a promise not to sue, there are two inter-related concepts in contract law that ensure he was destined to lose his lawsuit against MTV.

1. Absent extraordinary circumstances such as fraud, U.S. courts presume that every party to a contract has read and understood the terms. So pleading ignorance when you discover you agreed to something you didn't intend almost never works. Had Watson taken a few minutes to read the contract before signing it, he would have discovered that the anonymity clause was nowhere to be found and might have avoided the drama following his appearance on True Life. This is a shining example of why you should always always always read your contract, even the ones you write yourself.
2. In situations where two parties agree verbally to a term, but never actually integrate it into the final contract, that term is not considered valid once the contract is written and signed. This is called the parol evidence rule, and it's almost impossible to overcome if incorporating that term would change the contract.

Look I get it. Reading contracts is no fun. They're boring, they're long, they contain a lot of junk, and they're usually written in legalese, making them tough to understand. Believe it or not, lawyers hate reading contracts for the same reasons. It's true! Why do you think we charge you so much money to draft and review your agreements? Because it sucks!! That's why mobile apps specializing in generating simple contracts (like Shake) are making a big splash nowadays.

Sucky or not, however, there's no getting around it. Whether you're a high-bargaining party or a low-bargaining party, then only way to preserve your interests is to get comfy reading contracts. There's no better way to ensure that harmful provisions weren't snuck in there when your back was turned. Because once you put your signature on that piece of paper, that's all she wrote my friend. You are bound to the terms in that contract whether or not you read it.

[Author's Note: I should add that if Watson could prove MTV acted fraudulently, the entire contract would be invalidated, including the promise not to sue the network. Since Watson lost his lawsuit, I'm guessing that he couldn't meet that burden.]

Vince Gilligan Thinks Piracy Helped Breaking Bad, Turns Out He Might Be Right

Vince Gilligan, the genius/ creator/ writer/ director/ dark wizard behind Breaking Bad said this in an interview with the BBC last week:

If I’m being honest I see that the illegal downloading led to a lot of people watching the series, becoming aware of the series who otherwise would not have been... I see that in some ways illegal downloading has helped us, certainly in terms of brand awareness, so that’s a good side.

At first I met this statement with a heavy dose of skepticism. It's not exactly like Breaking Bad went unnoticed for the last six years... it was a monstrous hit, critically and commercially. A cultural touchstone, it's repeatedly mentioned in the same breath as The Wire and The Sopranos as one of the greatest modern television shows of all time. Whatever awareness could be raised by illegal downloads surely pales in comparison to the massive word of mouth and AMC's multi-media marketing push.

But instead of writing another anti-piracy screed like I did last year, I decided to do some research. And against the odds (and my own prejudices), I discovered that Gilligan may in fact be right. Two years ago, the Swiss government commissioned a study measuring the effect of copyright-infringing downloading. The result? Piracy actually does help copyright holders (take that Congress)! The study, released by the European Commission Joint Research Centre, found that users who download content illegally are actually 2% more likely to pay for content because the money they save on illegal downloads ends up getting spent on other content. Additionally, they often use the illegal downloads to sample material before they buy, helping to spread the word about lesser-known artists in the process. According to the researchers:

It seems that the majority of the music that is consumed illegally by the individuals in our sample would not have been purchased if illegal downloading websites were not available to them. The complementarity effect of online streaming is found to be somewhat larger, suggesting a stimulating effect of this activity on the sales of digital music.

It's worth pointing out several caveats: (1) this study is considered highly controversial in a lot of circles, (2) the focus of the study was on music downloads and did not extend to other digital content, and (3) all of the subjects in the study were Swiss citizens who are generally WAY more law abiding than Americans.

Even still, it's a tempting theory. While I'm not convinced illegal downloads could raise much awareness for a show with the brand recognition Breaking Bad has, you can see where this might benefit artists who don't have the reach or cultural cache that Gilligan commands. After all, with increased awareness comes greater financial success.

But that doesn't mean Gilligan approves of piracy:

The downside is that a lot of folks who worked on the show would’ve made more money, myself included. But you know, like with most things, there’s two sides to the coin. We all need to eat, we all need to get paid, and I get paid very well, I can’t complain.

Which is exactly why pirating content is not something I can ever really support. Sure, Gilligan and stars Bryan Cranston and Aaron Paul are making bank no matter how often the show is stolen (the finale was illegally torrented half a million times), but most of the people who worked on that show aren't making Cranston-money. They're working stiffs like you and me. Money not spent on a show they worked hard on is money they don't get to see. And most artists don't ever get to work on something as high profile as Breaking Bad, so they'll feel that loss all the more.

Here's what I wrote last year on this topic and even in light of the Swiss study, I stand by these words:

[W]hen you legitimately purchase copies of movies and music, you’re telling the artist that you support her. You put her in a place financially where she can continue generating the stuff you love.  When you steal a movie or piece of music, you’re telling the artist that you don’t care if she can make a living and you’re threatening her ability to continue generating that work.  Help me keep artists working and put a stop to the torrenting.

Tortious Interference on Parks and Recreation: How Rent A Swag Can Fight Back Against Tommy's Closet

[Parks & Recreation is the best comedy on TV these days, so in honor of its new season, I've taken a look at one story issue that's been bugging me since last season's finale.  Enjoy!]

Tortious interference occurs when a person intentionally damages the  business relationships of another.  Parks & Recreation occurs at 8:00pm, Thursday nights on NBC.  The former is a type of civil liability imposed on one party who financially harms another party.  The latter is an exceptionally sweet and intelligent sitcom that none of you are watching.  What do the two have in common?  A lot, surprisingly.

Last season, Tom Haverford - played by Aziz Ansari as a pop-culture obsessed, clothes horse, mogul wannabe - started a business called Rent-a-Swag, a store where the "teens, tweens, and in-betweens" of Pawnee, Indiana could rent "the dopest shirts, the swankiest jackets, the slickest cardigans, the flashiest fedoras, the hottest ties, the snazziest canes and more!"  Per the store's fake website, "before you waste your money on something that won't fit in a month, or fight with your parents over that sick velvet blazer they won't buy for you - step into Rent-A-Swag."  It's a good idea, right?

Anyway, the business took off and Tom was thisclose to leaving his job at the Parks and Recreation Department.  Unfortunately, Tom discovered that a competitor opened a rival store directly across the street called Tommy's Closet.  The competitor (whose identity I won't reveal here) informed Tom that Tommy's Closet was designed specifically to drive Rent-a-Swag out of business.

I don't know how the Parks & Recreation writers intend to resolve the situation (it will likely be sweet and goofy), but if I was Tom's attorney, I would advise him to sue the pants off (hehe) the owner of Tommy's Closet.  In tort law, there's something called tortious interference with an expected economic advantage and it gives business owners a way to stop those who maliciously attempt to drive expected consumers away from their business.  To win, Tom would have to prove that:

1. Tom had a reasonable expectation of economic benefit from the operation of Rent-a-Swag,
2. The competitor had knowledge of that expectation,
3. The competitor intentional interfered with Tom's expected economic benefit, and
4. Tom suffered economic damage as a result of the interference.

It wouldn't be very entertaining to watch, but Tom would most assuredly win a lawsuit against his competitor.  First, Tom had a good reason to expect an economic benefit; he was already receiving it!  His business was booming during the tail end of Season 5.  Tom was even able to hire employees and pay dividends to his stockholders.  Second, the competitor told Tom (in front of other people, I might add... witnesses!) that he was aware of Rent-a-Swag's financial success.  In fact, during the Season 5 finale, he tried to buy Rent-a-Swag from Tom because it had become a known moneymaker.  Third, the competitor admitted his desire to drive Tom out of business out of a misplaced sense of revenge and was actively luring customers away with free pizza and prizes.  Finally, we see in the Season 6 opener that Tommy's Closet had succeeded in drawing customers away from Rent-a-Swag; the episode shows Tom alone in his store, all the customers having fled across the street.  Tom has clearly suffered an economic damage.

While these kinds of malicious actions are rare, they do happen.  Therefore it's important for all artists and small business owners to be aware that there are options available to them should they become victims of tortious interference.  As a rule, the law doesn't look kindly upon those who open a business solely to spite another business.  In the real world, Tom has options - and so do you.  Of course, this is TV and I'm sure that whatever the Parks & Recreation writers come up with, it will be a hell of a lot funnier than watching this play out in a courtroom.

[You can also make a credible argument that Tom has a trade dress claim - a form of trademark infringement that protects a store's interior design - against the competitor since we learn that the interior of Tommy's Closet looks exactly like the interior of Rent-a-Swag.]