Aereo confounds the Court

On the same day that she issued a historically important dissent in defense of affirmative action, U.S. Supreme Court Justice Sonia Sotomayor showed that she’s the court’s resident techie. In oral argument in the case of ABC v. Aereo, she invoked Dropbox, iCloud, Simple.TV and Nimble TV. Oh, and she has Roku, too. I bet she installed it herself.

Admittedly, being the most technologically savvy justice is a low bar on a court that doesn’t even stream the audio of its oral arguments. Justice Antonin Scalia asked a hypothetical question that depended on the assumption that HBO, the ultimate cable company, was broadcast over the airwaves.

The high-end of the Supreme Court bar didn’t seem much better. Paul Clement, the former solicitor general who was representing ABC, had pretty clearly never heard of Roku. Malcolm Stewart, a deputy solicitor general who may be the greatest government advocate of his generation, was stymied by Sotomayor’s references to other streaming television services.

The Supreme Court and its bar are, in other words, supremely unprepared to reason about a case that potentially involves the entirety of the booming cloud storage industry. As the old adage goes, hard cases make bad law. Weird or confused facts make even worse law. The Supreme Court better figure things out.

The Aereo case is itself a bizarre anomaly, because it’s about a product that exists solely to get around the copyright laws. In practice, Aereo is a service that lets you stream broadcast TV to your computer or tablet. When an ordinary streaming service does the same thing, it must get permission from the broadcasting networks and (normally) negotiate a fee. The same goes for a cable company that wants to transmit broadcast channels: it must obtain “retransmission consent” and pay for it.

The founders of Aereo discovered, or rather may have discovered, a loophole. Instead of directly streaming broadcast content that the company itself gathers from a single antenna, Aereo (available in limited cities now) sells the user a dime-sized antenna that itself captures the broadcast signal, then transmits it to a remote DVR that sits on Aereo’s servers. From there the viewer can access the content almost immediately, or at a later time.

The real purpose of the model is for Aereo to be able to claim that it isn’t retransmitting broadcast content. All Aereo is doing, according to its extremely clever lawyers, is renting you an antenna in providing remote DVR service in the cloud which you can access at your leisure. As a result, the company asserts, it is not providing a “public performance” of the broadcast material in the way that a cable company does under the terms of the federal Communications Act. It is simply allowing you, the viewer, to make private recording for your own private use – and therefore need not get consent for retransmission or pay the cable companies a fee.

The justices may not have understood the technology, but they did seem to grasp that all of Aereo’s share value depends on whether they buy this novel argument. Chief Justice John Roberts drew laughter when he put it bluntly: “I’m just saying your technological model is based solely on circumventing legal prohibitions that you don’t want to comply with, which is fine. I mean, that’s, you know, lawyers do that.”

All this would be humorous indeed if it weren’t for the implications of the decision for cloud storage more generally. What if the court were to hold that Aereo’s technology does count as a public performance of the broadcast? Might that imply that, under the same law, every remote storage provider was also retransmitting whatever content the user stored on it? That would in turn require permission in the form of a fee from the original content provider – a disaster for the emerging cloud storage field.

The justices repeatedly made analogies for cloud storage of third-party content purchased by the user, from valet parking to that hoary legal favorite, the bailor who gives his property to the bailee for safekeeping until he needs it back.

To their credit, the justices were clearly nervous about reaching a holding with implications for technologies they couldn’t quite grasp. “I’ve read the briefs fairly carefully,” Justice Stephen Breyer told Frederick, “and I’m still uncertain that I understand it well enough.” Throughout the argument, the justices seemed to be seeking for ways to slap down Aereo without affecting the industry more broadly.

Meanwhile, Aereo’s counsel hammered home the risk of an over-broad decision. In the end, Aereo’s legal strategy – which is identical to its business strategy – depends on the court recognizing its own incompetence and leaving the firm alone rather than making bad law by shutting it down. The chutzpah takes your breath away.

But unless Justice Sotomayor can think of a way out, convince her colleagues and explain the cloud to them in the process, Aereo’s strategy might just work.