Supreme Court Says Aereo Is Illegal, but the Cloud Is Safe for Now

The US Supreme Court ruled that Aereo violates copyright law by transmitting broadcast television over the internet, siding with America’s largest media companies in a case that will shape the future of TV. But the 6-3 decision (pdf) took pains to say it would not affect other cloud storage services, like Dropbox or Apple’s iCloud, as many people feared.

Aereo, a small startup based in New York, almost certainly won’t survive the court’s decision. The company previously said it had “no plan B” if its current service were deemed illegal. Barry Diller, its lead investor, told CNBC after the court’s ruling: “We did try, but now it’s over.”

Aereo CEO Chet Kanojia issued a statement that suggested his company would continue in some form: “We are disappointed in the outcome, but our work is not done.  We will continue to fight for our consumers and fight to create innovative technologies that have a meaningful and positive impact on our world.”

The case attracted interest because Aereo is favored by cord cutters who don’t want to pay for television and increasingly prefer to watch video over the internet. The major US broadcast networks all sued Aereo. It developed into an interesting legal case because Aereo’s service seemed at once perfectly legal and obviously an attempt to skirt copyright law.

Anyone in the US can stick an antenna in the air to watch broadcast television for free. And courts had previously ruled that it’s OK to record live TV, store the programming in the cloud, and watch it later. Aereo does both of those things. It has put tiny antennas on rooftops in 11 American cities to pick up TV signals, which it then transmits over the internet. Customers pay Aereo $8 to $12 a month to watch live and recorded broadcast television.

But part of the US Copyright Act of 1976 was written explicitly to prevent cable companies from doing that. In its ruling, the court found that Aereo functions like a cable company: “Behind-the-scenes technological differences do not distinguish Aereo’s system from cable systems,” justice Stephen Breyer wrote. As a result, the court found, Aereo’s service constitutes a “public performance” of television for which it needs a copyright license.

Aereo had argued that it’s more like an equipment provider: Its customers rent tiny antennas, which are connected to a DVR and attached to a very long cord. But because that cord is actually the internet, the case threatened to implicate other cloud technology, as well.

“The Court vows that its ruling will not affect cloud-storage providers and cable-television systems,” justice Antonin Scalia wrote in a dissenting opinion, “but it cannot deliver on that promise given the imprecision of its result-driven rule.” He mocked the majority’s finding that Aereo resembles a cable company, saying it would “sow confusion for years to come.”

Underlying the back-and-forth between Scalia and Breyer is a long-running dispute about how to interpret legislative statutes like the Copyright Act. Breyer’s interpretation takes into account that Congress, in 1976, intended to prevent more-or-less exactly what Aereo is now doing. Scalia—along with justices Samuel Alito and Clarence Thomas, who joined him in the dissent—think the only thing that matters is the strict text of the law.

In Scalia’s reading of the text, Aereo is not a cable company but more “akin to a copy shop” and “like a VCR or photocopier.” By finding otherwise, Scalia wrote, the court risks implicating other technology by creating a vague new standard.

It will take some time to determine the reach of the court’s decision beyond Aereo, though it’s worth noting that Scalia has a habit of overstating the potential impact of decisions he doesn’t agree with. Breyer’s majority opinion, for its part, said the cloud was not on trial in this case: “We have not considered whether the public performance right is infringed when the user of a service pays primarily for something other than the transmission of copyrighted works, such as the remote storage of content.”

The key phrase in the decision appears to be “contemporaneously visible,” a fancy way of saying “live.” It’s borrowed from an earlier copyright ruling by a US appeals court. The implication appears to be that Aereo could avoid being like a cable company if it simply didn’t offer the option to watch live TV.  That’s how Scalia interprets it, at least: “Aereo would be free to do exactly what it is doing right now so long as it built mandatory time shifting into its ‘watch’ function.”

Aereo does currently function as a cloud DVR in addition to a live TV service. A previous ruling by an appeals court, which the Supreme Court did not address, found that cloud DVRs did not violate copyright law. The majority opinion alludes to this possibility but doesn’t address it: “The subscriber may instead direct Aereo to stream the program at a later time, but that aspect of Aereo’s service is not before us.”

In ruling against Aereo while sparing the cloud, the court borrowed heavily from arguments made by the US government and Cablevision, a US cable company. Both had suggested ways that the justices could rule narrowly and avoid implicating other technology.

Lower courts had sided with Aereo. Now the startup, which had raised nearly $100 million in venture capital funding, will almost certainly have to shut down. But about 90 minutes after the Supreme Court’s ruling, Aereo could still be used to watch The Price is Right on CBS…