By: Matthew Massari and Scott Hervey

ivi, Inc. is either an Internet television revolutionary, or just another soon-to-be defunct Internet copyright pirate. The Seattle-based start-up is taking on television content owners and broadcast giants in order to find out.  In a suit filed in federal district court for the Western District of Washington in late September, ivi says that the Copyright Act specifically allows others to retransmit broadcasters’ signals as long as they pay the fees to the broadcasters as spelled out in the Copyright Act. ivi named ABC, CBS, CW Broadcasting, Disney, Fisher Communications, Fox Television, Major League Baseball, NBC Universal, Twentieth Century Fox, WGBH Educational Foundation, and in the lawsuit.  

In September 2010, ivi launched a new service that streams live television over the Internet from New York and Seattle affiliates of ABC, CBS, NBC, Fox, The CW, and PBS. ivi users download an ivi TV player onto their computers, provide their credit card information and are promised a one-month free trial before having to pay $4.99 a month. The downloadable player is available to pc, mac and linux end users. Currently, the ivi TV player is only available for laptops and desktops, but ivi claims on its website that it is “working hard on ports for mobile phones, PDAs, gaming consoles, television sets, and set-top boxes, just to name a few” and that it “will be adding new [television] markets soon.”

What you watch on ivi TV are original, live, over-the-air television broadcasts from a variety of local television stations. In contrast, archived TV providers such as Hulu and YouTube offer a searchable library of previously-aired TV and clips, which can be viewed only after they are broadcast. The issue is that ivi streams the broadcast television station’s programming without the consent of the affected stations or owners of the copyright in the program. The copyright owners and broadcasters claim ivi’s unauthorized and unlicensed Internet retransmissions constitute copyright infringement.

ivi believes that by retransmitting freely-available, over-the-air broadcasts, it is nothing more than a “passive carrier” and exempt from copyright liability under the 1976 Copyright Act. ivi relies on a potentially powerful exemption to copyright liability: the “passive carrier exemption.”  The exemption makes it lawful to retransmit a transmission intended for the public so long as the retransmitter lacks control over the content of the original transmission or over the recipients of the retransmission.  Although not expressly alleged in its complaint, it appears that ivi is relying on 17 USC 111(a)(3) which provides exemption for retransmission if:

(3) the secondary transmission is made by any carrier who has no direct or indirect control over the content or selection of the primary transmission or over the particular recipients of the secondary transmission, and whose activities with respect to the secondary transmission consist solely of providing wires, cables, or other communications channels for the use of others: Provided, That the provisions of this clause extend only to the activities of said carrier with respect to secondary transmissions and do not exempt from liability the activities of others with respect to their own primary or secondary transmissions;

In order to prevail, ivi must either establish itself as a “passive carrier” under the Copyright Act, or persuade the court that it is subject to the same compulsory license scheme applied to traditional cable and satellite systems.  The history of the treatment of cable television under the current and 1909 Copyrights Acts sheds some light on these issues. 

Cable television, in its early days, involved the capture by the cable operator of broadcast signals and the retransmission of those signals over wires to cable subscribers. The question quickly arose whether cable systems’ retransmission of copyrighted broadcasts constituted “performances” of the copyrighted works and therefore infringed the holders’ exclusive rights. In 1974, the U.S. Supreme Court, reasoning that the role of cable operators was closer to the passive role of a viewer than to the active role of performer, held that there were no performances. See Teleprompter Corp. v. Columbia Broadcasting System, Inc. 415 U.S. 394, 408-09 (1974). The effect of the decision was to allow cable operators to profit from the systematic retransmission of copyrighted works free of liability for infringement. 

Congress ultimately rejected this view and adopted a compulsory licensing scheme aimed at the cable industry in the 1976 Copyright Act. The cable compulsory license applies now to traditional cable systems, private cable systems, and wireless distribution technologies. 17 U.S.C. 111(f).  A separate satellite compulsory license applies to home satellite dishes and direct broadcast satellite technologies. 17 U.S.C. 119.  Together, these two compulsory licenses provide the legal framework under which all currently existing multichannel video programming distribution technologies carry local and distant broadcast channels. It appears that ivi is taking the position that it is subject to the same compulsory licensing schemes. 

The fact that ivi’s particular technology was not specifically contemplated by Congress when enacting the 1976 Act will not end the court’s inquiry of whether it qualifies as a passive carrier. The court will also look to prior case law, which encourages a common sense approach considering the practical consequences of suggested statutory interpretations.  

In 1999, the same New York federal court now hearing the broadcasters’ and copyright owners’ lawsuit against ivi denied the “passive carrier” exemption to a company called Media Dial-Up. See Infinity Broadcasting Corporation v. Wayne Kirkwood d/b/a Media Dial-Up 63 F. Supp. 2d 420 (1999).  Media Dial-Up retransmitted radio broadcasts in remote cities via telephone to its customers who paid a fee for access.  Even though Media Dial-Up met all of the factors that would entitle it to be classified as a passive carrier and enjoy the safe harbor of 17 USC 111(a)(3) – no control over the selection of the primary transmission, no control over the recipients of the secondary transmission and the provision of wires, cables or communication channels for the use of others – the court refused to classify Media Dial-Up as a “carrier.”  The court stated that to construe the word “carrier” in such a way “would do a violence to a fundamental premise of the [Copyright Act].” ”In an era of rapid technological change,“ the court wrote, “possibilities for the capture and retransmission of copyrighted material over the Internet . . . are enormous.”  The court stated that classifying Media Dial-Up as a passive carrier “would threaten considerable mischief.”  The court called this the “common sense” view of the statute. While this case undoubtedly weighs against ivi, we believe that the holding may suffer from flawed analysis. In our view, having met all of the elements of 17 USC 111(a)(3), Medial Dial-Up should have been classified as a passive carrier. In the court’s view, the “practical consequences” outweighed literal application of the law.

Some might argue that broadcasters and content owners should embrace this new media technology. The new distribution medium increases viewership and potentially allows broadcasters to charge higher advertising fees. On the flip side, the loss of control over the distribution of copyrighted content preempts copyright owners’ opportunities to deliver or license their content over new media. For example, many of the major sports leagues have been working on their own delivery of online and mobile streaming of their sports content. As another example, the National Football League has maintained a blackout policy that states that a home game cannot be televised locally if it is not sold out 72 hours prior to its start time. With the aid of ivi TV, Raiders fans might now be able to watch their team’s home games broadcast to out-of-market television stations. 

            The safe harbor provisions of Section 111 address primary transmission, made available to the public at large; free broadcast television. Should ivi be deemed a carrier and entitled to the safe harbor provisions of 17 USC 111(a)(3), content owners, particularly sports leagues, can prevent ivi from streaming live sports events by moving the primary transmission of those events to cable. Section 111(b) notes that a secondary transmission would be copyright infringement when the primary transmission was not to the public at large but is “controlled and limited to reception by particular members of the public.” Cable stations, by their very nature, are not broadcast to the public at large but rather are limited to particular members of the public.  With the ability to pay higher rights fees, the migration of sports content to cable is already well underway. An adverse decision for broadcasters in ivi will only make it harder for broadcasters to attract future sports content.