Joshua Bornstein writes:
President Trump’s recent nomination of Judge Brett Kavanaugh to fill Justice Kennedy’s seat on the United States Supreme Court has caused some concern about his potential impact on the future of copyright law. This is because Judge Kavanaugh could be joining the ranks of Justices Roberts, Thomas, and Gorsuch who are all noted skeptics of the doctrine known as “Chevron deference.” How this may impact copyright law requires a brief review of history.
In 1803, the United States Supreme Court held in Marbury v. Madison that it is was the role of the judiciary “to say what the law is.” In other words, Congress writes the law and judges determine what the law means whenever the law, as written, is ambiguous. In 1984, however, the Supreme Court loosened that rule in Chevron USA Inc. v. Natural Resources Defense Council by holding that courts should defer to administrative agencies that interpret the statutes that grant them their authority when the intent of Congress is ambiguous and where the interpretation is reasonable or permissible. Put differently, sometimes, the executive branch gets “to say what the law is” and judges should defer to those agencies so long as their interpretation makes sense. The deference courts give to administrative agencies is known as “Chevron deference.” How the Supreme Court approaches “Chevron deference” could affect the ongoing battle between cable companies and Internet-based streaming services.
A recent line of copyright cases has involved the issue of whether companies that stream content over the Internet fall within the meaning of a “cable system” under copyright law. Section 111 of the 1976 Copyright Act defines a “cable system” as any “facility” that retransmits shows “by wires, cables…or other communication channels.” What “other communication channels” Congress intended to include within the definition of a “cable system,” however, is seemingly ambiguous. The issue, then, is who gets to decide “what the law is” in the face of this ambiguity.
If a company is considered a “cable system,” then it is afforded certain rights. Specifically, a cable system is eligible for a so-called “compulsory license” that allows it to retransmit “a performance or display of a work” that had originally been broadcasted by someone else without having to get the consent of the copyright holder. To do this, the cable system need only pay a statutory fee to the Copyright Office.
After the cable system pays the fee and complies with other regulations, it is protected from infringement liability. In addition, the royalty payments cable companies pay through compulsory licenses are much smaller than what they would have to pay if they were forced to negotiate with individual content owners to obtain licenses. Simply put, it’s good to be a “cable system.”
In 2014, the Supreme Court decided a case called American Broadcasting Cos. v. Aereo, Inc. Aereo devised a novel means to deliver content over the Internet, which was to lease an individual antenna and DVR to each of its customers. In response to the inevitable infringement lawsuit by the copyright owners, Aereo argued that its retransmissions were not a “public performance” of the copyrighted content (which would constitute copyright infringement) but that it was merely an “equipment provider.”
The Supreme Court ruled that Aereo’s retransmissions were “performing” the broadcasters’ copyrighted material and it was, therefore, infringing. In reaching its decision, the Supreme Court noted Aereo’s “overwhelming likeness to cable companies.” This language – the “overwhelming likeness to cable companies” – opened up a new argument by likening streaming operations to cable companies.
Capitalizing on this, a company called FilmOn, which is an Internet-based television streaming service, sought a compulsory license from the Copyright Office, but was ultimately rejected. A lawsuit ensued and the case went before the Ninth Circuit Court of Appeals. FilmOn argued that “wires, cables…and other communications channels” found in Section 111 should include Internet-based retransmission services. The Ninth Circuit, however, recognized the statutory ambiguity in Section 111 and turned its attention to the Copyright Office’s interpretation for guidance. The Ninth Circuit concluded as follows:
FilmOn and other Internet-based retransmission services are neither clearly eligible nor clearly ineligible for the compulsory license § 111 makes available to “cable systems.” The Copyright Office says they are not eligible. Because the Office’s views are persuasive, and because they are reasonable, we defer to them.
In other words, the Ninth Circuit deferred to the Copyright Office to reach its decision; “Chevron deference” was applied. It is worth noting that the issues raised by FilmOn have been litigated in other circuit courts as well, and could, one day, make its way before the Supreme Court. It is very possible, therefore, that the Supreme Court will not afford the Copyright Office the same type of deference that lower courts have given it, especially because Justices Roberts, Thomas and Gorsuch have been noted skeptics of the doctrine of “Chevron deference.” Adding Judge Kavanaugh to the bench could mean that the Supreme Court may ultimately decide itself, rather than defer to the Copyright Office, whether Internet-based retransmission services fall within the meaning of a “cable system” under Section 111. The outcome of such a ruling could have a momentous impact on the entertainment industry.
Joshua A. Bornstein is an associate in the firm’s Entertainment Department, based in its Los Angeles office.