Court Finds Aereo Competitor FilmOn In Contempt For Claiming To Be A Cable Service

from the thumbing-your-nose-not-such-a-good-idea dept

Fri, Jul 25th 2014 6:37pm — Mike Masnick

We had mentioned in passing that wacky Aereo-wannabe FilmOn, run by the eccentric and frequently ridiculous Alki David had declared itself a "cable service" following the Supreme Court's Aereo ruling -- though we pointed out that anything that FilmOn or Alki David says should be taken with a very large dose of salt. Unlike Aereo, who is trying to follow all of the procedures to make sure that it can be classified as a cable service to pay retransmission fees under Section 111, FilmOn just announced that it was a cable service and kept on streaming. And, not surprisingly, one of the courts that had already ruled against FilmOn has found the company in contempt. It probably did not help that the case was before the very same judge who ruled that ivi couldn't qualify as a cable company.

The judge here... is not happy. Judge Naomi Reice Buchwald totally dismisses the idea that the Supreme Court's ruling in Aereo (where it says Aereo is a cable company) actually means that any internet company qualifies for Section 111 compulsory retransmission rates. Basically, we're back to the quantum CATV where it's a cable system for some parts of the law, but not for others.

FilmOn’s second argument is also unavailing because it hinges on a mischaracterization of the holding in Aereo. Defendant is correct that, throughout the Aereo opinion, the Court likened Aereo to a cable company.... But defendant attaches far too much importance to the Court’s analogizing. A series of statements that Aereo (and, by extension, FilmOn, ...) is very similar to a cable system is not the same as a judicial finding that Aereo and its technological peers are, in fact, cable companies entitled to retransmission licenses under § 111 of the Copyright Act. Defendant may argue that the Supreme Court’s language in Aereo implies that FilmOn may be entitled to a license under § 111, but an implication is not a holding.

Once again, it seems that David's brazen and brash responses to legal setbacks are leading to bad law. It's been suggested more than a few times that David's real role here is to be the buffoonish version of Aereo, basically underminding Aereo's much more sound legal reasoning and arguments at every turn, and that may be true again here. The court slams FilmOn for basically lying to the court in claiming that it didn't mean to stream its content into NY where the injunction from this court blocked it. However, the court points to FilmOn's own press release... which "boasts that defendant's mini-antenna technology continued to make available to FilmOn subscribers across the country the local broadcasts of eighteen major American cities, including New York."

The court, at the very least, points out that Aereo seems to understand how this process works, and has temporarily shut down its operations, but FilmOn just kept streaming. Furthermore, the court points out that, as Aereo is attempting to do, to make use of Section 111, you need to first get a license from the Copyright Office.

FilmOn does not have, and has never had, a license from the Copyright Office. Indeed, defendant admits that it did not even apply for a cable license until July 10, 2014, after plaintiff submitted this order to show cause -- a fact that undermines any claim by defendant that it was truly committed to complying with the letter of the law.... Fundamentally, FilmOn cannot choose to ignore the Injunction merely because it anticipated someday being able to retransmit plaintiffs’ content legally.

The court then goes on to point out that the Copyright Office itself has said it doesn't think the Supreme Court's ruling has any impact on the ivi ruling and rejected FilmOn's (and Aereo's) request to be granted a license.

Not only is hope no defense to the violation of an injunction, but defendant’s faith that the Copyright Office would grant it a cable license was misplaced. On July 23, 2014, the Copyright Office, citing ivi, expressed its view that FilmOn, as an internet retransmission service, “falls outside the scope of the Section 111 license,” and that the Office did not “see anything in the Supreme Court’s recent decision in [Aereo] that would alter this conclusion.” ... Thus, not only was FilmOn’s expectation of a license irrelevant, but it was erroneous as well. Moreover, even if the Copyright Office had granted a license to FilmOn, this development would not have excused defendant’s decision to preemptively stream content in violation of the Injunction. The Copyright Office’s decision does, however, provide additional support for our conclusion that FilmOn’s use of the mini-antenna technology clearly falls within the ambit of the Injunction, and defendant should be held in contempt for willfully violating its terms.

The judge also calls out David himself for contempt, and in the end orders FilmOn to pay $10,000 per day for nine days. It calculated the nine days from the day Aereo shut down its service until FilmOn also shut down it's offering. Thus a total of $90,000, but it also says the networks can get attorneys' fees as well, so that could add up.

There are legitimate legal questions about whether or not the ivi ruling is still valid, and whether or not an internet streaming company can qualify for Section 111 retransmission rates. But the last company that should be in court defending that position is FilmOn.

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Filed Under: alki david, cable service, contempt of court, naomi recie buchwald, section 111, supreme court
Companies: aereo, filmon, ivi

29 Comments

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That One Guy (profile), 25 Jul 2014 @ 5:58pm

So to sum up:
1. The SC says that Aereo, and by extension similar companies, are like a cable company in what they do, and have to follow the same rules if they want to be legal, based upon not what they do, but what they appear to do.

2. The Copyright Office, who apparently is responsible for issuing licenses to cable companies, claims that just because the SC says a company is like a cable company under the law, doesn't mean they are a cable company under the law, and refuses Aereo's request for a license.

3. Aereo now finds itself with the worst of both worlds, where one party tells them that they are functionally a cable company, and need to follow the rules pertaining to one, and another party tells them that they aren't a cable company, and are therefor barred from doing business like one.

4. For all intents and purposes, the SC, by refusing a hard classification of 'You are/are not a cable company under the law' has made it impossible for Aereo to continue to remain in business.

The result could not have been better for the entrenched cable companies had they been allowed to write the ruling themselves, as beyond just squashing Aereo, the uncertainty brought about by the SC ruling will pre-emptively kill off any potential competition that may have arisen in the future as well.

And that's not even taking into consideration how the idiocy of the 'looks like a duck' argument is going to cause havoc in the future, as what a company does is no longer relevant, only what they look/act like, based entirely on subjective observations by a judge.
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That One Guy (profile), 25 Jul 2014 @ 6:14pm

Show of hands
Also, out of curiosity, how many other people here share the suspicion mentioned in the article, that FilmOn/Alki David are doing what they are not out of hubris, but to sabotage Aereo and other similar services by intentionally getting rulings that can be used against them?
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Anonymous Coward, 25 Jul 2014 @ 7:38pm

Another day, another ounce of respect for copyright lost.
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Whatever (profile), 25 Jul 2014 @ 8:45pm

Re: So to sum up:
I think you miss a step in there, between 1 and 2....

Aereo applies to the FCC to be licensed as a cable operator.

See, the copyright office is doing it exactly right. Are you a cable operator? Show us your license. Don't have one? They you aren't a cable operator.

Aereo's real solution here is to apply to be a cable operator, get declined, and then sue the FCC for failure to follow SCOTUS ruling. At worst, they could force the FCC to finally look at (and potentially license) IP based cable operators, which would be a big step in the direction of supporting true net neutrality, by allowing anyone and everyone to be a cable company and to operate without needing final mile cable.
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Tice with a J (profile), 25 Jul 2014 @ 11:24pm

Re: Re: So to sum up:
A hopeful prospect... and wouldn't that be weird, to see the ruling against Aereo transformed into a mechanism for rescuing net neutrality! I'd love to see that.

But I worry about the prospect of giving the FCC more power to decide who gets to transmit. How easy is it for the FCC to not grant a license to anyone they don't like? How much pressure could legacy industries put on the FCC to deny licenses? If the incumbents can control the licenses, then they're still in charge and this has all been for nothing.
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Tice with a J (profile), 25 Jul 2014 @ 11:29pm

Re: Show of hands
It's quite possible, but I think this is more adequately explained by Hanlon's Razor:
"Never attribute to malice that which is adequately explained by stupidity."
http://en.wikipedia.org/wiki/Hanlon%27s_razor
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Tice with a J (profile), 25 Jul 2014 @ 11:43pm

Re: Re: Re: So to sum up:
Actually, after rereading the Copyright Office's letter, I think they're saying that Aereo cannot possibly be a cable company, no matter what they do:
https://www.documentcloud.org/documents/1222903-aereo-letter.html

So we truly have a worst-of-both-worlds situation: Aereo's business model is something that only cable companies are allowed to do (because it feels so much like cable), but Aereo is not allowed to be a cable company (because it's on the internet instead of cable).

Taken together, the Aereo and ivi rulings create an environment where competition is treated as theft. This is very bad news.
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Anonymous Coward, 26 Jul 2014 @ 2:31am

so, exactly who are the dummies, the Supreme Court, the lower courts or the companies? there needs to be finalisation of this with a definitive decision made. even better would be for the entertainment industries , cable companies etc to compete against new services rather than trying to prevent any competition by any means they can think of. obviously, all these prospective services are something, either cable services or not, but they are definitely something!
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Anonymous Coward, 26 Jul 2014 @ 5:41am

Re: Re: So to sum up:
"Aereo applies to the FCC to be licensed as a cable operator."

Is there such a thing as a "cable operator" license?
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Anonymous Coward, 26 Jul 2014 @ 5:45am

Re: So to sum up:
"2. The Copyright Office, who apparently is responsible for issuing licenses to cable companies, claims that just because the SC says a company is like a cable company under the law, doesn't mean they are a cable company under the law, and refuses Aereo's request for a license."

The SC says that Aereo should be treated like a cable company under the law even if it isn't actually a cable company. The Copyright Office is refusing to do that.
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Anonymous Coward, 26 Jul 2014 @ 5:52am

ham radio
Can't we all just use ham radio to transmit television?
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David, 26 Jul 2014 @ 7:57am

Something's unconstitutional?
"...promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries..."

So here we have a promoted Science and useful Art (ivi, Aereo, and FilmOn) - and it's being intentionally prohibited by the law. I would argue that somewhere, some law must be unconstitutional since there is a conflict that doesn't allow them to operate (they are/aren't a cable service).
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Whatever (profile), 26 Jul 2014 @ 8:34am

Re: Re: Re: So to sum up:
http://www.fcc.gov/encyclopedia/cable-system-registration

That's the size of it. I think the copyright office would have a harder time finding a way to deny them if they did this step.
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Whatever (profile), 26 Jul 2014 @ 9:37am

Re: Something's unconstitutional?
You would be right if the "art" wasn't getting distributed in other manners. Aereo and such are delivery methods, not so much art itself. Perhaps the methods of transmission / encoding may be art, but just taking something that is already available and making it more available doesn't meet the standard.
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John Fenderson (profile), 26 Jul 2014 @ 1:07pm

Re: Re: Something's unconstitutional?
"Useful arts" is not referring to art. It's referring to something more akin to engineering (the skills and methods of practical subjects such as manufacture and craftsmanship) .
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Anonymous Coward, 26 Jul 2014 @ 1:22pm

"...where it says Aereo is a cable company>>>"

I do not believe the Supreme Court said any such thing.
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That One Guy (profile), 26 Jul 2014 @ 2:57pm

Re:
Unfortunately, no, not outright. If they had, plainly stating that Aereo either was, or was not a cable company, then the ruling wouldn't be as problematic(you'd still have the idiocy of the 'looks like a duck' legal test, but at least Aereo wouldn't have been left in legal-limbo).

Rather, they ruled that Aereo acted like a cable company(ignoring all those pesky technical details), and should thus have to follow the related rules and laws as such. This puts Aereo in the difficult position of both being a cable company, and not being a cable company, depending on which government agency you ask, making complying with the SC's ruling problematic to put it mildly.
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John Fenderson (profile), 26 Jul 2014 @ 4:17pm

Re:
No, what the court said is even worse: they're a cable company when being such results in a decision the court wants to reach, and they're not otherwise.
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Whatever (profile), 27 Jul 2014 @ 7:11am

Re: Re: Re: Something's unconstitutional?
Yes, I understand that - and the art of "streaming video" or whatnot isn't some new advancement that is being impeded by Aereo's legal issues, so copyright in that sense has nothing to do with it. IPtv, streaming, and all that stuff is already well known.
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Mike Masnick (profile), 27 Jul 2014 @ 1:51pm

Re:
I do not believe the Supreme Court said any such thing.

No it just says that Aereo has such an "overwhelming likeness to... cable companies" that it has to live under the Congressional change to copyright laws that impact cable TV providers.

If that's the case, seems like it pretty much is calling them a cable company. It's saying they're subject to THAT law that applies to cable companies. If that's the case, shouldn't it also mean that other laws that refer to cable companies *also* apply to it?
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John Fenderson (profile), 27 Jul 2014 @ 6:38pm

Re: Re: Re: Re: Something's unconstitutional?
Well, let's take streaming video as an example, then. The "useful art" isn't just the invention of streaming video, it's the techniques and methods of accomplishing streaming video. Techniques and methods are very rarely static, even with technologies that are as old as mankind. Techniques and methods are constantly undergoing advancement and innovation, even if the thing they are being employed to do isn't in itself new or innovative.
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Whatever (profile), 27 Jul 2014 @ 9:17pm

Re: Re: Re: Re: Re: Something's unconstitutional?
I agree.

The issue however is that the copyright issue at hand isn't the streaming itself, rather the use of copyright content.

The other point would be that the streaming and such would be more likely covered under patent, and as such would be subject to prior art.

The argument made seems to be that in enforcing copyright laws, they copyright office is stopping advancement of the useful arts by not allowing this type of streaming. It's an invalid argument because they are not stopping the streaming or it's advancement, only telling them that they cannot stream this material without a license. The useful art (innovation in streaming) would not be lost if they streamed other licensed or CC content. The argument as a result is pretty much a fail.

Aereo could be back in business tomorrow, streaming only CC content. I don't think there is a big enough market there to make it worth it, but that's the case.
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TKList (profile), 27 Jul 2014 @ 9:35pm

Deregulate the Cable TV Industry
Deregulate the Cable TV industry
It is bad and excessive regulation that is stifling competition in the Cable TV industry.
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Michael, 28 Jul 2014 @ 6:58am

Re: Re:
That is WAY too logical of an argument.
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Michael, 28 Jul 2014 @ 7:44am

Re: Re: Re: Re: So to sum up:
I cannot see the copyright office denying them their licensing if they have a license as a cable operator. The FCC not licensing them risks having SCOTUS overrule them (which seems reasonably likely), so it does not seem far-fetched that the FCC will look at what is going on and grant them a license just to avoid the embarrassment of having the courts tell them they have to.

Of course, the FCC has done plenty of self-serving things that later turned out to be embarrassing.
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Michael, 28 Jul 2014 @ 7:46am

Re: ham radio
I don't think your plan is kosher.
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John Fenderson (profile), 28 Jul 2014 @ 8:18am

Re: Re: Re: Re: Re: Re: Something's unconstitutional?
"The argument made seems to be that in enforcing copyright laws, they copyright office is stopping advancement of the useful arts by not allowing this type of streaming."

I agree that this argument is specious -- I was really veering off into a more generalized comment.

"Aereo could be back in business tomorrow, streaming only CC content."

True. They could also be back in business tomorrow selling hamburgers -- that would be almost as relevant to what they were trying to do as streaming CC content.
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Whatever (profile), 28 Jul 2014 @ 10:00am

Re: Re:
If that's the case, shouldn't it also mean that other laws that refer to cable companies *also* apply to it?

They very likely would... as soon as they become a licensed cable company. Pretty much everyone else can deny them license and permission until they are an actual cable company, and not just "sort of like" a cable company.
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Michael, 28 Jul 2014 @ 10:10am

Re: Re: Re: Re: Re: Re: Re: Something's unconstitutional?
Would they have a warehouse full of tiny individualized grills for cooking the hamburgers?
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