Online Streaming TV Service Injunction Upheld by Second Circuit

By J. Bradford Currier, Marc Martin, and Marty Stern

Online services may not stream copyrighted television programming without the programmer’s consent under a decision recently issued by the United States Court of Appeals for the Second Circuit. The case involved, which offered users the ability to stream television broadcast stations online by downloading a desktop application and paying a monthly subscription fee. The Second Circuit’s decision represents a major victory for broadcasters and television programmers, which are currently involved in a number of lawsuits against television streaming services, and creates substantial legal hurdles for so-called “online cable operators.”

A group of television stations and programmers filed suit against ivi in 2010, alleging that the service violated their programming copyrights. In response, ivi argued that it was a “cable system” entitled to a compulsory license under the Copyright Act to transmit the programming as long as it paid royalties to the U.S. Copyright Office. Additionally, ivi stated that it was not subject to the Federal Communications Commission’s retransmission consent rules normally applicable to cable operators because it operated solely as an online service. Consumer groups supported ivi during the lawsuit, arguing that Internet-based retransmission services keep cable and satellite rates in check by enhancing competition. A New York federal court issued a preliminary injunction against ivi in early 2011, relying heavily on the Copyright Office’s interpretation of the compulsory license statute to conclude that the service did not constitute a cable system for the purposes of the Copyright Act. The injunction did not reach the issue of whether ivi was subject to the FCC’s retransmission consent rules.  

The Second Circuit affirmed the lower court’s grant of a preliminary injunction, ruling that television stations and programmers would suffer irreparable harm if the ivi service were allowed to operate. While the Second Circuit recognized that the compulsory license statute was unclear regarding whether an online streaming service qualified as a cable system, it noted that Congress had not extended the definition of cable system to Internet-based services. The court found that the compulsory license regime was designed to facilitate “localized” retransmission of broadcast programming, and that Congress did not intend to give online streaming services a worldwide license to retransmit programming without consent. The court also supported the lower court’s reliance on the Copyright Office’s determination that internet-based retransmissions are “vastly different” from other systems, such as cable services, that are eligible for compulsory licensing. The Second Circuit concluded that streaming television programming online “threaten[ed] to destabilize the entire industry,” by undermining programmers’ negotiation position for retransmission and advertising revenues, potentially transmitting programming earlier than its scheduled broadcast time, and eliminating incentives for television programmers to develop localized news or public interest content.

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