DC Court Finds FilmOn X Internet TV Service is Not a Cable System and Cannot Rely on Statutory License to Retransmit Over-the-Air TV Signals

The US District Court in Washington DC last week decided that FilmOn X could not rely on the compulsory license of Section 111 of the Copyright Act to retransmit the signal of over-the-air television stations to consumers over the Internet. The compulsory license allows a system to rebroadcast copyrighted material without getting express permission from the copyright holder, as long as the service files the rules set out by the statutory provisions that create the license. The DC Court’s decision was the exact opposite of a decision reached in July by a California court which found that FilmOn did fit within the definition of a cable system as set out by the Copyright Act (see our summary of that decision here). Why the difference in opinions over exactly the same system?

Both Courts focused on the language of Section 111 which defines a cable system as follows:

A “cable system” is a facility, located in any State, territory, trust territory, or possession of the United States, that in whole or in part receives signals transmitted or programs broadcast by one or more television broadcast stations licensed by the Federal Communications Commission, and makes secondary transmissions of such signals or programs by wires, cables, microwave, or other communications channels to subscribing members of the public who pay for such service. For purposes of determining the royalty fee under subsection (d)(1), two or more cable systems in contiguous communities under common ownership or control or operating from one headend shall be considered as one system.

Even though both courts looked to this same definition, they reach different conclusions – the principal difference being one over the requirement that, to be a cable system, the company must make “secondary transmissions of such signals or programs by wires, cables, microwave, or other communications channels.” The California court had looked at this definition, and determined that Internet retransmissions of TV programs were in fact secondary transmissions (a secondary transmission being a retransmission of the broadcast) by “wires, cables, microwave or other communications channels” – concluding essentially that the Internet was a communications channel. The DC Court, in contrast, did a far more searching analysis of this statutory language, and found that Internet transmissions don’t qualify as cable systems under this definition.

The DC court first determined that the definitional language requires that the “cable system” itself receive the broadcast signal and make the secondary transmission. That secondary transmission must be not only made by the service claiming to be a cable system, but the transmission must be by means of wires and cables and other systems that the system itself owns and operates. The Court found that the mere reception of the TV signals and their connection to the Internet was not the same as if the system delivered the programming itself using its own cables and wires. While the Internet might use wires, cables, microwaves and similar communications channels, the company claiming to be the cable provider does not itself control these channels when they deliver the programs to subscribers – in fact, once the programming is delivered to the Internet, the service has no role in deciding how that programming gets to the consumer.

The Court pointed to several crucial facts to buttress its decision. First, it looked at history – in particular when satellite television made the same argument that FilmOn makes here. The satellite industry was not deemed to be a cable system under Section 111, as it did not have the local facilities to deliver programming to subscribers. Instead, the nationwide service that was delivered by satellite had to go to Congress to get its own copyright statutory licenses to retransmit broadcast programming, as now embodied in Sections 119 and 122 of the Copyright Act.

The Court also rejected FilmOn’s claims that certain cable systems, in particular Verizon Fios and AT&T U-verse were cable systems delivered over the Internet. The Court said that, while these systems were delivered using IP technology, they were delivered by segregated, private managed networks maintained by Verizon and AT&T. These systems were geographically limited by the areas in which the companies established these managed networks, and the networks were separate and apart from the open Internet. As FilmOn does not have its own managed network, but instead merely transmits the programs over the public Internet over which it has no control, these examples provided it with no support.

The Court also looked at certain judicial rules of construction in deciding how to read the language about “wires, cables, microwave, or other communications channels.” According to the court, where a general phrase, like “other communications channels” follows specifically named items of the same category, the general phrase should be read to include only unnamed items that are similar to the ones that are named. As the named items in this case are all ones that tend to provide a more localized service rather than a national or international one like satellite or Internet connections, the broader phrase “other communications channels” should be read to be referring to other localized communications services. The Court also looked to the context in which this definition appeared, and the references in Section 111 to cable system “headends” as reinforcing the localized concept of the definition of a cable system. Other language from the statutory history of the Copyright Act, and from Copyright Office decisions supporting the local facilities-based definition of a cable system, further reinforced the decision of the DC Court.

While the conflict between the DC and California courts might make it seem as if we are headed for another Aereo-type case (see our summary of the Aereo decision here) where multiple courts make conflicting decisions as to whether Copyright law allows the retransmission of over-the-air television programming, until the Supreme Court intervenes, it seems less likely here. First, we have numerous other reviews of the video marketplace that may well intervene – including the FCC’s own review of whether to treat online video providers (or over-the-top or OTT providers) as MVPDs, which seemingly is on hold for the moment but is nevertheless out there for consideration (see our summary here). The Copyright Office has conducted its own study of the issue, and Congress has been promising reform of the video statutory licenses for several years. Moreover, the California decision may be an outlier (or it could be overturned on appeal), as the DC decision is far more consistent with cases like WPIX v. Ivi, a prior case that determined that online video providers could not rely on the statutory Section 111 license to retransmit television programming. Thus, whether through further court decisions, or through Congressional or other actions, this dispute could be resolved in any number of ways, short of a return trip to the Supreme Court. But it is an issue that will no doubt be revisited in some forum or another in the not too distant future.