Second Circuit affirms that Internet streaming is not cable broadcasting

In 2010, ivi launched a television streaming service that provided subscribers access to television stations. The streaming service provided a national footprint for television access and harkened a potentially new chapter for TV distribution. As the court noted, “within five months of its launch,
ivi had offered more than 4,000 of plaintiffs’ copyrighted television programs to its subscribers.”

In WPIX v. ivi, the Second Circuit held that the new chapter must be written by Congress.

ivi had claimed the right to stream the television content pursuant to section 111 of the Copyright Act that allows cable companies to rebroadcast television signals in their local area upon payment of a compulsory or statutory fee. ivi took the position that it met the definition of cable system so that it could opt into the compulsory payment system.

Based on the statute and congressional hearings, the regulations provide the following definition for a cable system:

A cable system is a facility, located in any State, Territory, Trust Territory, or Possession, 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. A system that meets this definition is considered a “cable system” for copyright purposes, even if the FCC excludes it from being considered a “cable system” because of the number or nature of its subscribers or the nature of its secondary transmissions.

The Second Circuit agreed that the language was ambiguous, so it applied the Chevron test to determine whether Congress was clear, and if not, was the agency regulation correct.

If the intent of Congress is clear, that is the end of the matter; courts must give effect to the unambiguously expressed intent of Congress.  If we determine that Congress has not directly addressed the precise question at issue, we proceed to Chevron step two, which instructs us to defer to an agency’s interpretation of the statute, so long as it is reasonable. [WPIX v. ivi, quoting Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467, 842-43 U.S. 837 (1984) (other quotations omitted).]

The court had a difficult time believing ivi had a facility located in a particular state as required or that the Internet was a “facility” as required under the statute, but more importantly it found that the language was not meant to be broadly construed. Despite case law holding that satellite transmissions were within the ambit of section 111, Congress disagreed and instead added section 119 to specifically address satellite retransmissions. Congress also added the work “microwave” by amendment rather than relying on a more general reading of the statute and regulation.

Against this backdrop, the legislative history strongly suggested that Internet broadcasting was not an included subcategory under the “other communications channels.” Had Congress intended Internet broadcasting it had many opportunities to add the language.  Under the second part of the Chevron test, the Copyright Office uniformly stated in both regulation and congressional testimony that Internet broadcasting was not subject to the statutory provisions.

Although the case remains at the preliminary injunction stage, the unequivocal position of the Second Circuit would make future success for ivi very unlikely.

Undoubtedly the technology is rapidly shifting and the time is coming for Apple, Google, Microsoft and other Internet/Mobile companies to rewrite the social contract between audiences and broadcasters, but that revision will not be based on existing statutory licensing schemes. Instead it will require either new, directly negotiated distribution agreements – or more likely triggered by creation of high quality content that originates on the Internet/Mobile platforms. If the “broadcasters” are “streamcasters” then the new model will evolve quickly. Until then cable will still have the upper hand.