Locast Shuts Down, As Yet Again A Bad Interpretation Of Copyright Law Makes The World Worse

from the no-cast dept

A few weeks ago I woke up one day to find the Lake Tahoe region on fire and the New York region underwater. Meanwhile the Supreme Court had just upended decades if not centuries of Constitutional law. But I could learn about none of it from watching local news because Locast had shut down overnight following a dreadful decision by a district court a few days before.

Locast was a service similar to the now-extinct Aereo, although with a few critical legal distinctions necessary for it to avoid Aereo's litigation-obliterated fate. But the gist was the same: it was another rent-an-antenna service that "captures over-the-air ('OTA') broadcast signals and retransmits them over the internet, enabling viewers to stream live television on their preferred internet-connected viewing device" [p. 1-2 of the ruling]. And, like Aereo, it is yet another useful innovation now on the scrapheap of human history.

Absolutely nothing about this situation makes any sense. First, and least importantly, I'm not sure that Locast shutting down wasn't an overreaction to a decision so precariously balanced on such illusory support. Then again, no one wants to be staring down the barrel of potentially ruinous copyright lawsuit under the best of circumstances, but especially not when the judge has arbitrarily torn up all your high cards. Getting out of the game at least helps limit what the damage will be if the tide doesn't eventually turn.

More saliently, it makes absolutely no sense that the plaintiffs, who were mostly some of the largest television networks, would even bring this lawsuit. Services like Locast are doing them a favor by helping ensure that their channels actually get watched. As I've pointed out before, the only reason I ever watch their affiliates is thanks to Locast. Like many others, I don't have my own cable subscription, nor my own antenna. So I need a service like Locast to essentially rent me one so that I can watch the over-the-air programming on the public airwaves I'd otherwise be entitled to see. Suing Locast for having rented me that antenna basically says that they don't actually want viewers. And that declaration should come as a shock to their advertisers, because the bottom line is that without services like Locast I’m not watching their ads.

It also makes no sense for copyright law to want to discourage services like these. Not only are these public airwaves that people should be able to receive using whatever tools they choose, but cutting people off from this programming doesn't advance any of the ideals that copyright law exists to advance. Or, more practically, it deprives people of shared mass media sources and drives everyone instead towards more balkanized media we must find for ourselves online. With lawmakers increasingly concerned about people having to fend for themselves in building their media diets, it seems weird for law to effectively force them to. Especially after decades of policymaking deliberately designed to make sure that broadcast television could be a source of common culture, it would be a fairly radical shift for policy to suddenly obstruct that goal.

As it turns out, though, Congress has not wanted to completely abandon bringing broadcast television to the public. Not even through copyright law, where there's actually a provision, at 17 U.S.C. Section 111(a)(5) ("Certain Secondary Transmissions Exempted"), that recognizes rebroadcasting services as something worth having and articulates the dimensions that such a service would have to meet to not run afoul of the rest of the copyright statute. The salient language:

The secondary transmission of a performance or display of a work embodied in a primary transmission is not an infringement of copyright if [...] the secondary transmission is not made by a cable system but is made by a governmental body, or other nonprofit organization, without any purpose of direct or indirect commercial advantage, and without charge to the recipients of the secondary transmission other than assessments necessary to defray the actual and reasonable costs of maintaining and operating the secondary transmission service.

The Locast service, as provided by its non-profit parent Sports Fans Coalition NY, threaded that regulatory needle. Unfortunately, however, the district court disagreed. But the problem wasn't just that the court disagreed, but that it disagreed by reading into the statute language that wasn't there, and also that wouldn't make any sense to actually be in there for the provision to have any practical utility.

The crux of the decision hinged on how Locast made the money needed to support itself. The service was underwritten in two ways. One way – worth noting for the potential implications of the decision causing Locast to shut down but that was not particularly critical to the holding on its own – is from some other service providers.

SFCNY also generates income through donations from MVPDs, such as AT&T, Promotion and Advancement of Local Opportunities ("PALO") and Liberty Cable vision of Puerto Rico LLC. Some MVPDS integrate the Locast application in their own smart - TV platforms , and in the event of a channel blackout (which may result from a breakdown in retransmission consent negotiations between an MVPD and broadcast owner), those MVPDS can direct their customers to the Locast app so that there is no disruption in their live TV service. [p. 3]

The other was from user donations, and this source of income is what the court took issue with, even though the statute allowed it. Of course, the way the decision reads, the court seemed to be looking for reasons to find Locast outside of the statutory exemption. For example, it took issue with the fact that users could use the service without paying. It didn't like the fact that the service was ostensibly hobbled by periodic interruptions of ads requesting that users pay instead.

To avoid that interruption in service, users can pay $5 a month for "preferred" (i.e., uninterrupted) access to the service, or can request that the service stop displaying the donation requests based on their financial circumstances. Users who choose to pay receive the uninterrupted service for time correlating to the amount of the payment. For example, if the user pays the minimum $5 amount, she receives uninterrupted service for the entire month. [...] The obvious economic fact is that these "donations" are really a scale of fees for uninterrupted service, and it works. At present, Locast is almost fully funded by payments from users. [p. 3]

But as I've noted elsewhere, that concern doesn't make any sense. The statute doesn't obligate a rebroadcasting service to provide its service for free, and it certainly doesn't create any condition for how the service might be offered for free should the service choose to provide such an option. Unfortunately, however, the court seemed to infer there was one, and, moreover, that collecting any money in exchange for the better version of the service somehow amounted to a disallowed commercialized perk it was selling.

The payments defendants elicit from users are charges assessed on users to avoid constant service interruptions, regardless of whether defendants euphemistically call them publicly "recommended donations". Locast users pay the minimum $5 monthly fee in exchange for month- long, uninterrupted service . It is not merely a recurring gift to a charitable cause. It is of no consequence that a number of users employ the service without paying. SFCNY still solicits, and receives, substantial amounts in charges from recipients for its uninterrupted service. [p. 5-6]

On the contrary, the statute expressly says that the service can charge. Yet somehow the court construed the statutory language to prevent the service from actually asking for the money. In the wake of this decision, and before Locast opted to just shut down, the service first considered just not asking for the donations anymore, at least not as persuasively as it had been with the programming interruptions. But it may have opted for a more drastic response because it's questionable whether making this specific adjustment would have actually made the court happy, since the court seemed to have been going out of its way to find the service outside the statute in any way it could.

Including by finding that apparently Locast had made too much money:

In 2020, Locast's total costs (including depreciation) were $2.436 million. According to defendants , those costs "represent what it costs to operate the Locast service in 2020, when the Locast service began operating in 16 markets and gradually expanded to 25 markets." Locast's total revenue in 2020 was $4.519 million, comprised of $4.372 million from users and $147,161 from other sources. On those undisputed facts, in 2020 Locast made far more money from user charges than was necessary to defray its costs of maintaining and operating its service. [p. 6]

But the upshot of the court's reasoning is that service providers could never charge users enough to "defray the costs" of the service unless they used some sort of dynamic pricing, where the service adjusted its monthly charges on the fly to match its current budgetary requirements as divided across the current number of paying users it had in order to make sure it never accidentally collected too much money. The statute, of course, says no such thing. It says service providers can charge users. It is solely the court that has read in these extra requirements, and in a way that effectively nullifies the language Congress included by depriving the "it's ok to charge" language of any meaningful effect. In which case the only way such a service could potentially exist is with a single wealthy benefactor willing and able to underwrite the entire cost indefinitely. And if that were to be the case it would make the existence of such services so unlikely as to be illusory, rather than real things that copyright law enabled.

The court also didn't like what Locast did with its money, having dared to reinvest it in expanding its services to other regions.

Defendants aver that contributions from users are essential to the expansion of the Locast service. They argue that disallowing use of the assessments for that purpose would prevent expansion , which they say was not intended by Congress when granting the exemptions. But under the statute, income made from charges to recipients can only be used to defray the actual and reasonable costs of maintaining and operating the service, not of expanding it into new markets. The argument that Section lll(a)(5) should not "prevent" a natural process of expansion misconceives the statutory structure. Retransmissions (i.e., secondary performances of copyrighted matter) are already penalized ("prevented") by the Copyright Law in its main section. See 17 U.S.C. § 501 ("Anyone who violates any of the exclusive rights of the copyright owner . . is an infringer of the copyright or right of the author, as the case may be."). Nothing in Section 111 specifies that an expansion of the number of infringing transmissions is exempt from that law, and it is not for a court to infer that Congress really meant to allow them. It would have been simple for Congress to add one word to paragraph (5) to make it read ". . costs of maintaining, expanding, and operating the secondary transmission service." But expansion is nowhere mentioned, and it is therefore excluded from the short, tightly-crafted grant of exemptions." [p. 6]

It takes an incredibly limited read of the statute to interpret it this way, with this manufactured focus on "markets." The court seemed to assume that the service was simply born one day with infrastructure that would remain at that exact size forever and ever, regardless of whether it ever made sense to make further capital improvements. But the statute itself is not so prescriptive. It doesn't say that antennas can't be added, nor does it articulate any limitation as to where they can be added, because the rebroadcasting the service is still doing its allowed rebroadcasting regardless of whether its antennas are spaced two inches, two feet, or two thousand miles apart. In holding geographic expansion against the service to find it outside the statute, the court invented a requirement out of whole cloth, in conflict with the rebroadcasting Congress obviously intended to enable in codifying this provision in the first place.

All in all, it is a depressingly bad decision all around. Locast lost, but so did everyone else. Including channels that might have actually liked to have been rebroadcast, which have now lost the viewers who depended on Locast. And including channels that themselves depend on public support to exist, which are now dark to that very public that they need to support them, and whom they are supposed to serve. The plaintiffs have ruined it for everyone, and it prompts the question: if they are so offended by the idea of people being able to tune into their broadcasting, then why don't they give the spectrum back to the public so it that it can be allocated to someone who does want to make sure the public can benefit from broadcasting over its own airwaves? Because with this lawsuit these plaintiffs have ensured that no one can make use of this resource in a way that the public can reliably benefit from. And, sadly, with the court's blessing.

It's hard to say what will happen. There were some rumblings that Locast will appeal, but it might not have to. It finds itself in a terrible litigation position and could quite reasonably try to abandon the fight if it can extract an expedient settlement. That would leave this terrible decision on the books, chilling any other service that might like to avail itself of the rebroadcasting provision of the statute. And what could fix the situation then? Often, when courts get decisions wrong, Congress can go back and write a statute to implement the better policy. But here Congress already wrote that statute, and it just didn't matter.

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Filed Under: copyright, non-profit, over the air tv, streaming, tv
Companies: aereo, locast