US Cablevision Decision Has Implications For Cloud Computing, Online Advertising

A recent United States Supreme Court order letting stand a decision that a proposed remote digital video recorder does not violate copyright law has major implications for internet “cloud computing” and advertisers, intellectual property lawyers say.

US cable operator Cablevision Systems Corporation announced plans in March 2006 to market a “remote storage DVR system” (RS-DVR) to allow customers without a stand-alone DVR to record cable programmes on central hard drives it kept at a “remote” location, according to the 4 August 2008 decision [pdf] by the US Court of Appeals for the Second Circuit. Subscribers could request playback of the programmes on their home television, using only a remote control and a standard cable box outfitted with RS-DVR software.

Cablevision notified its content providers of its proposal but did not request licences to use their programming, the appeals court said. Major broadcast and cable channels – including Cable News Network, Twentieth Century Fox Film Corporation, Disney Enterprises and Turner Broadcasting System, Inc. – sued in federal court, claiming the RS-DVR would directly infringe their rights to reproduce and publicly perform their protected works.

Lower Court Decision

That direct infringement would happen in three ways, plaintiffs argued. RS-DVR would briefly cache data in the buffers integral to the system, enabling Cablevision to make copies in violation of their exclusive reproduction right. Copying programmes on the hard disks used for playing back the content would also directly infringe that right. And transmitting the data from the server hard disks to customers who requested a playback would breach the public performance right.

The district court agreed, barring Cablevision from operating the system without licences. It rejected Cablevision’s argument that the data were not copies as defined in the Copyright Act and that the amount of copying made during the data-buffering process was negligible.

The court also ruled that because the copying was done by Cablevision, not individual subscribers, the cable operator was involved in direct infringement of the reproduction right. It dismissed Cablevision’s argument that playback transmission of a programme was made not to the public but exclusively to a particular customer.

Cablevision appealed. The Second Circuit reversed the decision on all counts and, on 29 May 2009, the US high court declined to review the case.

Novel Stance on Public Performance

The real significance of the decision lies in its unprecedented analysis of the public performance right, a US intellectual property lawyer said. Holding that programmes called up individually by subscribers are private performances not subject to copyright paves the way for other “online digital storage locker” (or cloud computing) services to roll out without the need for content licences, he said.

One such initiative is the Digital Entertainment Content Ecosystem (DECE), an attempt by copyright owners, consumer electronics makers, information technology (IT) companies, internet service providers and others to give consumers a totally interoperable media experience, the IP lawyer said. DECE will allow a consumer to purchase a DVD, put it into a DECE device, move the content to an online storage locker, hook a portable media player into the internet, and download the movie, presumably for a fee, he said.

The DECE consortium was expected to make a preliminary announcement in January 2009 but is now apparently shooting for 2010, the lawyer said. The Cablevision decision allows DECE to offer its service without paying performance right royalties, he said. However, if another US circuit court disagrees with the Second Circuit, the issue could land in the Supreme Court, he said.

Many lawyers expect royalty collecting societies and other rights holders to look for a similar case in another jurisdiction to set up such a conflict, and to push Congress to make such services public performances, the IP lawyer said.

Good News for Cloud Computing

The Cablevision ruling is good for IT companies moving into cloud computing, said Dow Lohnes PLLC attorney James Burger, who represents technology companies in IP and content licensing matters. If the court had found Cablevision guilty of direct infringement for giving its customers the RS-DVR data storage system, system operators storing consumers’ legally acquired entertainment media in the internet cloud could have faced the same claims, he said.

Also important for potentially significant future internet business models is the Second Circuit’s ruling that caching content for 1.2 seconds or less is so transitory as not to result in a copyright violation, Burger said. Anyone who knows how a computer works understands that it makes cache copies of any data it processes, he said. In an increasingly mobile world, products and services in the cloud that manipulate consumers’ legitimately acquired media and deliver it to them anytime, anywhere and in any format are likely, he said. All will require transitory caching of content at every stage, he said.

Bad News for Advertisers

The “back-story” of why Cablevision’s proposal so upset content owners is that viewers of RS-DVR programming will be able to fast-forward through advertisments, said Robins, Kaplan, Miller & Ciresi LLP intellectual property attorney Christopher Larus.

Now that this kind of technology has won approval, as least from the Second Circuit, it will gain traction in the US, he said. Advertisers whose revenue streams have traditionally been tied to broadcast content will have to come up with more targeted ways to reach consumers, he said.

For non-US companies considering similar technologies, the Supreme Court’s action also leaves open the possibility that other circuits will reach different results, Larus said, adding that any business seeking to assess how its service might be viewed in the United States will continue to face uncertainty.