Copyright Arbitrage in Action

Meet Aereo, a new way to watch TV on the Internet. Aereo plans to capture over-the-air TV signals and stream them to customers in the New York area. Aereo’s low, low $12-a-month prices are made possible by the fact that it doesn’t pay licensing fees: Aereo insists that everything it’s doing is legal under copyright law because Aereo gives each user her own individual TV tuner. That’s right, Areeo is filling a Brooklyn office with thousands of TV antennas.
 
In any sane world, Aereo would not exist. There is no practical reason to use thousands of tiny antennas rather than a few good ones; reencoding the same signals again and again is pure waste. And sending these signals from Aereo’s premises to customers’ homes over the Internet is intensely silly, given that these customers already have the option of video service from their cable companies.
 
But our world is demonstrably insane; witness the Copyright Act. One-to-many retransmission are governed by the complex “retransmission consent” rules at the intersection of copyright and communications law. But one-to-one transmissions of the sort Aereo is making are arguably not “public performances” under the Second Circuit’s 2008 Cartoon Network decision. More antennas, less risk. Aereo is engaged in copyright arbitrage: it’s trying to stitch together a chain of explicitly legal acts until it reaches a result that would be infringing if done directly.
 
It’s hardly alone. ivi tried (and failed) to pull an Aereo by calling itself a “cable system” under Section 111 of the Copyright Act. ReDigi is trying to cobble together Cartoon Network and a few other precedents to make something that looks like digital first sale. Zediva tried to run this one in reverse: it filled a data center with DVD players in an attempt to bootstrap first sale rights (in the DVDs) into streaming video-on-demand. I could go on.
 
None of these businesses ought to exist. In a world where copyright and communications law worked cleanly, copyright owners would be licensing their works over efficient transmission paths directly to users. These technical workarounds would be unnecessary. Of course, this point can be taken in one of two ways, depending on whether you think these entrepreneurs are a second-best response to a legal system that makes arbitrary distinctions or taking unfair advantage of a legal system that makes arbitrary distinctions. But either way, their proliferation is an indication of just how badly the wheels are coming off the bus of copyright law’s conceptual framework.

The preceding is re-published on TAP with permission by its author, Professor
James Grimmelmann. Copyright Arbitrage in Action was published March 4, 2012 on The Laboratorium and cross-posted from PrawfsBlawg. The Laboratorium publishes under the Creative Commons License.