Court Says You Can't Innovate If It Would Negatively Impact NBC's Business Model

from the of-course-not dept

While there's been a fair amount of focus lately on the legal status of Aereo, the company offering broadcast TV over the internet by setting up a bunch of individual antennas and letting people access them online, there's also the ivi case. ivi, if you don't remember, offered what sounds like a very similar service to stream broadcast TV over the internet (for a fee). However, it used a completely different legal theory, believing it had found something of a loophole in the Copyright Act; namely Section 111 which allows cable providers to rebroadcast content for a compulsory payment to the Copyright Office.

The district court was not impressed, and basically said that ivi was trying to do an impressive tapdance -- defining itself as a cable provider to be able to use Section 111, but then claiming it was not a cable provider under the Communications Act. On appeal, ivi has lost again (pdf and embedded below), as the appeals court went a simpler route, and pointed out that reading the legislative history of Section 111 makes it clear that it was not intended to be used by services over the internet.

While I had bounced around on this earlier, I actually think that the court is probably right here, in terms of what Congress' intent was.

There still are some troubling parts to the ruling, mainly concerning purely faith-based claims by Judge Denny Chin that a service like ivi creates irreparable harm to the TV networks. Chin specifically claims that if ivi streams the videos online it hurts the networks:

First, ivi's live retransmissions of plaintiffs' copyrighted programming over the Internet would substantially diminish the value of the programming.

I don't see how that's true at all -- and it's certainly not obviously true. In fact, it could increase the value of the programming by making it easier and more convenient for more people to watch. Judge Chin tries to back up this statement by arguing that because the TV guys often sell ads targeted at specific segments and times, this could mess with that:

Plaintiffs broadcast their copyrighted programming to various communities at different scheduled times, for example, based on time zone or local network provider. For this reason, negotiated Internet retransmissions -- for example, on Hulu.com -- typically delay Internet broadcasts as not to disrupt plaintiffs' broadcast distribution models, reduce the live broadcast audience, or divert the live broadcast audience to the Internet.

If ivi were allowed to continue retransmitting plaintiffs' programming live, nationally (and arguably, internationally), over the Internet, and without plaintiffs' consent, ivi could make plaintiffs' programming available earlier in certain time zones than scheduled by the programs' copyright holders or paying retransmission rights holders. ivi's retransmissions of plaintiffs' copyrighted programming without their consent thus would devalue the programming by reducing its "live" value and undermining existing and prospective retransmission fees, negotiations, and agreements. ivi's retransmissions would dilute plaintiffs' programming and their control over their product.

But... that makes no sense. If that's true, then one could just as easily make the same argument about VCRs or DVRs. Yes, they disrupt the "traditional" way that a certain industry's business model works, but that doesn't necessarily mean that it's automatically diminishing the value of the original. After all, the TV guys made the same arguments about both VCRs and DVRs and now most of them admit that the DVR has actually helped their business by increasing the value of shows by making them more easily watchable by people. There's no reason to think the same thing wouldn't be true here.

In the end, as we argued from the beginning, the situation with ivi and Aereo (and Zediva and others) is silly. They're all looking for loopholes in the law to do what should clearly be allowed anyway. But because of the ridiculously expansive nature of copyright law, which is allowing legacy players to kill off new technologies, such things aren't allowed. And we end up with results like this, where an interesting concept (even if it tried to jump through crazy legal hoops) is flat out declared to break the law and shut down. Innovation be damned. NBC has to sell you more diapers via the commercials it's always sold in prime time. And you're not allowed to mess with that.

Filed Under: cable systems, copyright, innovation, online, streaming, tv networks
Companies: ivi