This week the Supreme Court ruled in a long-awaited case that the Aereo video service, which facilitates users’ access to remote broadcast TV signals without remitting retransmission fees to the signal owners, infringed the public performance rights of broadcasters.
In our view, the Supreme Court decided correctly, and not simply by finding Aereo in violation of the law, but also by tailoring the decision such that it is not a threat to the development of cloud computing and other new technologies.
In fact, the court specifically said, “Questions involving cloud computing, DVRs, and other novel issues not before the Court . . . should await a case in which they are squarely presented.”
Aereo’s loss is a victory for the rule of law. Under a system that protects property rights, you can’t build a business simply by taking someone else’s property as your primary product. What Aereo was doing was selling something to customers that wasn’t theirs to sell—pure and simple.
It’s important to note that the Court’s decision doesn’t invalidate any true innovation by Aereo—it just requires Aereo to pay retransmission fees to signal owners, just as other video providers do.
The contrary spin is that the Supreme Court sided with entrenched large business interests and against a disruptive innovator. But “innovation” and “disruption” are not get-out-of-jail free cards. You must act within the law, and Aereo knew from Day 1 that its model was a potential copyright violation and a lawsuit waiting to happen. All observers knew that Aereo would first have to succeed in the courts before the business model could be judged a success or failure, but that is not necessarily an indication that the laws are wrong—it’s an indication that Aereo’s model was an unlikely risk to begin with.
Finally, the Aereo case is another reminder of the need to reform our regulatory regime for the video marketplace. The problem isn’t copyright, but rather a number of outdated and ill-conceived policies that predate today’s diverse and highly competitive video marketplace. Video reform will be a major effort and shouldn’t be attempted simply as piecemeal add-ons to existing legislation subject to a schedule compressed by the upcoming election.
The United States has the most innovative economy in the world, and the Aereo decision doesn’t change that—in fact, it makes innovation more likely, because it proves that innovators can continue to count on property rights and the rule of law in the United States.
June 26, 2014