FilmOn X, Broadcasters Square Off in Ninth Circuit

Definition of 'communication channel' dominates oral argument
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TV networks took aim at FilmOn X Thursday (Aug. 4) in oral argument before the Ninth Circuit Court of Appeals, with much of the argument focused on whether the internet is a communications channel under Congress' definition of a cable system eligible for a compulsory license under the 1976 Copyright Act.

The argument was in front of the three-judge panel of Diarmuid O'Scannlain, Consuelo Callahan, and Johnnie Rawlinson.

A compulsory license would allow FilmOn X to deliver TV station programming from the major networks at a government-set rate, rather than having to negotiate for it individually.

FilmOn X (formerly Aereokiller), which streams video content online, says it is the equivalent of a cable system and should have the same compulsory license. Fair use groups Public Knowledge and the Electronic Frontier Foundation agree, having filed briefs in support of FilmOn.

Fox and the other Big Four TV nets—with the support of the National Association of Broadcasters and many others—say it is not entitled to the license.

Related: NAB Slams FilmOn X Decision

U.S. District Court Judge George Wu sided with FilmOn X, which prompted Fox and the nets to appeal to the Ninth Circuit to overturn that decision.

In oral argument, the TV networks' lawyer, Neal Katyal of Hogan Lovells, said the fact that FilmOn X "now claims" that it is a cable system "contradicts the text of the Copyright Act, contradicts its purpose and contradicts what every judge looking at this found," except judge Wu.

He said the compulsory license for cable is narrowly defined as "just that," a cable system. He said FilmOn X is trying to convert a "mousehole" of an exception into "an elephant."

Katyal said FilmOn X would have to show that the text of the Copyright Act relating to the license (Sec. 111) unambiguously favors their interpretation, which he called a near-impossible task in light of other judges who have ruled the other way. He also pointed to the Copyright Office's conclusion that internet services aren't covered under Sec. 111.

Judge Callahan pointed out, in the Supreme Court hearing on Aereo, the Supreme Court asked whether Aereo couldn't just get a compulsory license—Aereo said it was not like a cable service, simply a technology for accessing over-the-air TV via the internet.

Katyal said it was telling that after that question was posed, nothing wound up about it in the Supreme Court opinion itself—which went against Aereo—but that there is a footnote about Aereo claiming it was not a cable system.

The networks say that FilmOn X is trying to assert that everything that transmits is a communications channel.

Judge O'Scannlain seemed skeptical about arguing that the internet was not one of the things that was a communications channel. "The Internet is not a communications channel," he asked. "Correct," said Katyal, at least for the purposes of the 1976 Act. O'Scannlain pressed him and the lawyer conceded it could be "in the realm of possibility" but said to read the statute that way would be to read the clause applying the license specifically to "cable" out of the statute.

Katyal pointed to the "local," mom and pop system, language in Sec. 111 and said it was inconsistent with a national service like the internet. He also said that cable got the license in part because it was heavily regulated by the FCC.

Judge Callahan asked what in the definition of cable system supports the networks' argument that a retransmission service must control the means of transmission. Katyal said he did not even have to get to that question because FilmOn X is not a communications channel—geographically located with wires and cables—under the Sec. 111 definition and does not have end-to-end control. He said the language is that a facility must "make a transmission to a subscriber," and FilmOn X does not do that.

Arguing for FilmOn X was Ryan Baker of Baker Marquart.

Baker said three years ago the TV nets were arguing FilmOn X was like a cable system. "Today we agree. We are like a cable company," he said and entitled to the Sec. 111 compulsory license. He said Katyal was trying to insert requirements into the statute that don't exist. For example, he said, there is no requirement under the Sec. 111 definition that there be any local component or control of a transmission path.

He said Congress is aware of language that would have required control of the transmission path to meet the cable definition and didn't use it. Baker was asked whether he thought that it was "unambiguous" that there was no transmission path required. He said yes.

FCC chairman Tom Wheeler proposed defining services like FilmOn X as MVPDs, at least for the purposes of access to programming, but has not followed up with an order.

After the Supreme Court concluded that remote antenna farms collecting TV signals and delivering them to subs over the web was not simply a technology facilitating access to over-the-air TV, FilmON X and Aereo both pushed the FCC to redefine their services as cable systems, but Aereo eventually wound up filing for bankruptcy. 

Baker said that when Congress created the license in 1976, it meant for it to apply to future technologies. He said at the time the disruptive technology was cable. Now, he said, one of the those new technologies is the internet, and it is "undisputed" that the internet consists of wires, cables and microwaves, "the very things that are mentioned specifically in section 111 as being examples of communications channels."

O'Scannlain pointed out that the language talks about secondary transmissions by wires, cables or microwaves, adding: "Are you suggesting that making secondary transmissions by internet includes wires, cables and microwaves."

"I'm arguing that the internet is an example of another communications channel," Baker said. 

O'Scannlain asked if all those were part of FilmOn X's system and Baker said yes. "It strains logic not to include the internet in the definition of communications channels," he added.

Baker said that the Copyright Office has not rejected FilmOn X's petition for a compulsory license but has instead waited to see what the courts will ultimately decide.

O'Scannlain pointed to seven decisions in the area of compulsory license, with the Wu decision granting the license to FilmOn X the only outlier.

Courts signaling no license for online streamers include the Second Circuit federal appeals court in the 2012 Ivi decision, which the judges referred to during argument, though FilmOn X says that case was different, and a D.C. U.S. district court last November.

"Various district courts have all ruled the other way. What's your response," asked O'Scannlain.

Baker said there were important distinctions between its case and Ivi, first and foremost there was no evidence of any physical facility other than the internet. "FilmOn X has a building within each community into which we retransmit, which receives the signals broadcast over the air by FCC-licensed broadcast stations," he said, then retransmits those signals to the end user.

He pointed out that Judge Wu had ruled that FilmOn X had those facilities.

O'Scannlain pointed out that Sec. 111 talks about "a cable system," and it sounded like FilmOn X was multiple cable systems. Baker said it could be interpreted that way, but that it was a distinction without a difference. The key, he said, was that each of those has the facilities to receive and retransmit.

Baker said that Katyal suggested that because FilmOn X uses the internet it is global, not local. "FilmOn X has not had any intention of transmitting outside of its communities and, in fact, has developed technology that will geo-restrict to the communities in which it receives those signals," said Baker. He pointed out that all of the appellants in this case already offer their content over the internet, referring to the TV Everywhere model of making traditional cable lineups available over the internet to subs.

Baker said all FilmOn X is trying to do is make a public good—broadcast TV—more available over the internet, "where most people do their business today... It's the public's right to access free-to-air television."

He said that there might be rulings about microwaves and satellites not being cable systems, but no such ruling has yet been made about the internet.

Congress could just straighten all of this out for us, said Callahan. "Yes, it could," said Baker. "They're just not doing anything as usual," she asked. Baker said they weren't doing anything about it because Sec. 111 language already unambiguously includes the internet. The Copyright Office is looking to the courts, not Congress, to interpret the language of the statute.

Callahan said she had trouble calling it unambiguous when six other judges have seen it a different way. She said both sides have made good cases, which suggests to her it is ambiguous.

Katyal, in rebuttal, said there is a reason why all the courts but the outlier have ruled in the TV networks favor.

The compulsory license is a narrow exception for transmissions by cable systems, not transmission by anyone, he said. "FilmOn would gut that narrow exception."

Rawlinson asked Katyal what his response was to Baker's point about his clients already broadcasting over the internet. He said they do under market conditions and contracts but not a compulsory license, which is a forced transaction. That, he said, is a very different thing.

The FCC's set-top box rules even made a guest appearance in the arguments. Katyal said the Copyright Office's longstanding position is that internet facilities do not qualify for Sec. 111 licenses, adding that: "Even yesterday, the copyright office sent a letter to Congress [on the FCC's set-top-box rules] reaffirming this position."

Katyal said that the internet is not inherently localized and that Copyright Office reports to Congress—advising that internet distributors were not cable systems in terms of the license—were equivalent of formalized rulemakings since Congress invited them and comment was solicited.

Katyal also pointed out that a district court rejected FilmOn X's arguments about georestriction, saying those services were not even turned on and even then were not inherently localized simply because they were putting a technological constraint on where they could be viewed.

Katyal disputed the argument that Congress was trying to future-proof some broad definition of communications channels. In Sec. 111, he said, Congress did not include language, as it did in another section, about "any device or process now known or future developed, that kind of tech-agnostic reading they are saying is somehow in Sec. 111." He said that section, "from title to text is all about very tech-specific things. Satellites, microwaves, headends, wires, cables. It's not this open-ended invitation to do anything."

Broadcasters' brief in FilmOn X's challenge to the D.C. Circuit ruling against the license are due Aug. 17.

(Photo via Tori Rector's FlickrImage taken on July 21, 2016 and used per Creative Commons 2.0 license. The photo was cropped to fit 3x4 aspect ratio.)

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