text: David Frederick, center, outside counsel with Aereo Inc., speaks to the media with Chief Executive Chet Kanojia, left, and General Counsel Brenda Cotter after the Supreme Court heard arguments in the broadcasters' copyright-infringement lawsuit against Aereo. (Andrew Harrer / Bloomberg / ) 
   
   If you're comfortable with the Supreme Court resolving disputes over technology, the transcript of Tuesday's oral arguments in ABC vs. Aereo should change your mind. 
   
   Admittedly, the case is about copyrights, not circuitry. In particular, the issue focuses on whether Aereo's service violates broadcasters' exclusive rights to transmit works to the public. Yet the inner workings of Aereo's system are crucial to that issue, at least from Aereo's point of view. And the justices struggled to get past a simplistic view of the technology involved. 
   
   For example, at one point Justice Stephen G. Breyer said that unlike a rooftop TV antenna, the tiny antennas that Aereo sets up in a city could "pick up every television signal in the world and send it ... into a person's computer." That's physically impossible, not just because antennas aren't sensitive enough to detect signals from outside the local market but because the world isn't, you know, flat. "And that sounds so much like what a [cable] TV system does or what a satellite system does," Breyer continued, "that it looks as if somehow you are escaping a constraint that's imposed upon them. That's what disturbs everyone [on the court]." 
   
   Everyone outside the court should be disturbed by a question like that. 
   
   At stake here is the degree to which innovative companies are going to have to seek permission from copyright owners to enable people to do in the cloud what they can do for themselves at home. Aereo uses its tiny antennas and circuitry to let people tune in, record and stream local TV programs over the Internet. Because each antenna, recording and stream is initiated and controlled by individual users, Aereo says the online transmissions aren't public performances, they're private ones. The networks counter that if Aereo can do that without obtaining licenses, other pay-TV operators will follow suit, destroying an important revenue stream and pressuring them to abandon free over-the-air broadcasting. 
   
   Justice Sonia Sotomayor opened the session by asking the broadcasters' attorney, veteran Supreme Court litigator Paul D. Clement, why Aereo isn't simply a cable TV company. After all, she said, it has facilities that receive transmissions from broadcasters, then send the programs on to subscribers for a fee. 
   
   Clement's response was that although Aereo is indistinguishable from cable operators in some respects, it isn't one largely because the company doesn't want to be considered one. It fell to Aereo's attorney, David C. Frederick, to point out that Aereo doesn't collect TV programming and retransmit it in bulk to its subscribers, as cable operators do. Instead, it rents equipment to its subscribers, who use it to watch or record one show at a time. Nothing happens unless it's initiated by the user, he said. 
   
   To which Sotomayor responded: "I always thought ... that if I [make a copy] of a record and duplicate it a million times the way you're doing it, and I then go out and sell each of those copies to the public, then I am violating the [Copyright] Act. So why is it that you are not?" 
   
   As the question indicates, Sotomayor didn't quite catch Frederick's point about who was actually making the recordings (Aereo's subscribers) and where they were being transmitted (to themselves). Or maybe she just rejected it as sophistry. Regardless, Frederick said legality of the recordings wasn't at issue because, as the broadcasters recognized earlier in the case, the Supreme Court held in the Sony Betamax case that people have a fair-use right to record TV shows for later viewing. 
   
   The right question was the one Justice Elena Kagan eventually put to Clement: Why should copyright law treat a company that rents people a TV antenna hooked to an Internet-connected DVR different than one that sells people the functional equivalent to install at home? The answer, Clement said, was that a private performance becomes a public one when it's transmitted by a service provider from one place to another, rather than by a viewer to himself. 
   
   Clement's formula ignores the U.S. 2nd Circuit Court of Appeals' ruling in Cartoon Network vs. Cablevision, in which the appeals court ruled that a cable operator's shared DVR didn't violate the networks' copyrights. Under the 2nd Circuit's ruling, who owns the equipment and where it's located are irrelevant to determining whether a performance is public or private. Instead, the court held, what matters is whether the equipment is controlled by users, and whether their recordings and transmissions are theirs alone. If the answer to those questions is yes, then it's a private performance. 
   
   Aereo designed its service to comply with the 2nd Circuit's ruling, giving users total control over the equipment and making sure none of the recordings or streams was shared. Several justices focused on that aspect, pressing Frederick to say whether the company had any technological reason to use 10,000 dime-sized antennas. Frederick said it was cheaper to set up tiny remote antennas than to install rooftop ones on Manhattan skyscrapers, and to take a modular approach that could minimize the start-up's costs. That response, however, didn't seem to mollify Chief Justice John G. Roberts Jr. and Justice Antonin Scalia, who suggested that Aereo was just trying to "get around copyright laws." 
   
   One aspect of the case that seemed to help Aereo was the concern expressed by multiple justices about jeopardizing other cloud-based services, such as online storage lockers. Clement tried to reassure them, saying the difference between Aereo and a cloud-based storage service is like the difference between a car dealership and valet parking. One sells you a car, the other simply parks and returns the car you already own. 
   
   That's a powerful metaphor, yet it's not quite apt. Aereo isn't providing the TV programs, the broadcasters are. Its subscribers then use the equipment they rent from Aereo to tune in the program, make a copy and transmit it to themselves. That latter transmission is a private performance, not a public one, and it's separate legally from the public performance the broadcasters make when they put programs on air. 
   
   Frederick said that if Clement was right about Aereo being a content provider, it would mean that any company providing an antenna or a DVR was a content provider. "And if that's true," he argued, "then the implications for the equipment industry are obviously quite massive, and you can understand why that would frighten the cloud computing industry because that turns them into public performers whenever they are handling content." 
   
   A second problem for some justices was Clement's insistence that Aereo, unlike cable operators, wouldn't qualify for a compulsory license to retransmit TV programs if the court ruled in the broadcasters' favor. Under a compulsory license, Aereo would have to pay broadcasters for the content but wouldn't face the daunting task of negotiating for a license from each copyright owner. 
   
   Clement offered cold comfort on that point. "If they actually provide something that is a net benefit technologically, there's no reason people won't license them content," he told the justices. "But on the other hand, if all they have is a gimmick, then they probably will go out of business, and nobody should cry a tear over that." 
   
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   Follow Jon Healey on Twitter @jcahealey and Google+ ||||| Aereo, the streaming video service that everyone’s talking about but few people actually have, defended its existence today in front of the U.S. Supreme Court while lawyers for the nation’s broadcasters and the federal government looked to smash the company’s tiny antennae into bits… legally speaking. 
   
   You can read the whole transcript in this PDF. Like most SCOTUS transcripts, it actually makes for an amusing and thoughtful read, while showing that these hearings are much more about a group of people debating the issue instead of some camera-ready lawyer making a made-for-TV speech that knocks the justices’ socks off. 
   
   Since it will be months before the Supremes get around to issuing their opinion on this case, let’s bide our time with some highlights from today’s arguments… 
   
   OF PHONOGRAPH RECORDS AND COAXIAL CABLE… 
   
   At the core of the broadcasters’ case is whether or not Aereo’s system — which uses arrays of antennae to pick up over-the-air TV signals and send them to paying users — legally constitutes a “public performance.” 
   
   Playing devil’s advocate, Justice Breyer asked the broadcasters’ attorney where one draws the line between actual transmission of a copyrighted performance and merely selling access to copyrighted content. 
   
   “Why isn’t what used to be called a phonograph record store that sells phonograph records to 10,000 customers a public performance?” he inquired (while at the same time showing his age). 
   
   The broadcasters countered that a record store is “not involved in any performance at all” but said the situation might be different for an online music store where one can both buy music and stream it from the cloud. 
   
   “If you provide downloads of music, you get a distribution license or a reproduction license,” explained the broadcasters’ attorney. “If you provide streaming of music where you also have a contemporaneous live performance, then you also get a public performance license.” 
   
   Justice Sotomayor raised the concern that ruling in favor of the broadcasters may inadvertently result in problems for those that provide the required hardware for content delivery. 
   
   She asked how one could write a ruling “so that someone who sells coaxial cable to a resident of a building” or sells passive storage equipment is not “swept up” in this issue. 
   
   “What does the Court do to avoid a definition or an acceptance of a definition that might make those people liable?” asked Sotomayor. 
   
   Once again, the broadcasters argued that hardware providers are not involved in the performance, but is just providing the tools needed for an end-user to access a private performance. 
   
   “That’s different from an ongoing service, like a cable company or like Aereo,” said the broadcasters’ attorney, “who still owns all these facilities and they’re providing, through wire transmissions, these performances on an ongoing basis.” 
   
   AN ISSUE OF LOCATION 
   
   Justice Kagan asked the broadcasters to clarify the importance of distance and location in making this distinction. 
   
   “In other words, if Aereo has the hardware in its warehouse as opposed to Aereo selling the hardware to the particular end-user, that is going to make all the difference in the world as to whether we have a public performance or not a public performance,” she asked. 
   
   JUST SELLING THE HARDWARE… 
   
   Justice Ginsburg asked Aereo why other transmitters, like cable companies and other online services, pay royalties but Aereo should not? 
   
   “The person who sells an antenna to me at the local Radio Shack doesn’t pay copyright royalties,” explained Aereo, which maintains that all it does is rent people a service to access freely available TV feeds online. “A company that provides a rental service for me to put an antenna in my home and install it, they don’t pay copyright royalties either.” 
   
   The broadcasters admit that “if you sell somebody hardware and all they’re doing is transmitting it to themselves at their home, there’s not going to be a transmission that’s chargeable to the person who sold you the hardware,” but countered that by having these streams coming from a remote location “it becomes a public performance on behalf of the sender, but it still would be a private performance on behalf of the receiver.­­” 
   
   OF CAR DEALERS AND CLOUD COMPUTING 
   
   It’s that last distinction that the broadcasters believe allows them to challenge Aereo without putting all cloud-based computing and storage technology at risk. 
   
   “There’s a fundamental difference between a service that… provides new content to all sorts of end-­users — essentially any paying stranger — and a service that provides a locker, a storage service,” argued the broadcasters, who used the analogous comparison of the difference between a car dealer and a valet parking service. 
   
   Both of these services “provide” cars to people, but there’s a huge difference in how they do it. 
   
   “If I show up at the car dealership without a car, I’m going to be able to get a car. If I show up at the valet parking service and I don’t own a car, it’s not going to end well for me,” explained the broadcasters. “At the end of the day, the car dealer’s providing cars to the public, the valet parking service is not. It’s providing a parking service.” 
   
   But Chief Justice Roberts took issue with this analogy, asking if a better comparison might be between a personal garage and one that’s open to the public; i.e., the choice between owning and renting. 
   
   “You can go to RadioShack and buy an antenna and a DVR or you can rent those facilities somewhere else from Aereo,” said Roberts. “They’ve got an antenna. They’ll let you use it when you need it and they can, you know, record the stuff as well and let you pick it up when you need it.” 
   
   Aereo contends that what the broadcasters’ challenge goes too far and puts all of cloud-based tech at risk by trying to argue that having multiple copies stored of the same content somehow makes Aereo a public performer. 
   
   “It means that every time somebody stores something in the cloud — whether it’s a song, a video image or the like — if it happens to be something that somebody else has stored in the cloud, the act of one person initiating it and perceiving it is going to implicate the public performance right,” argued Aereo’s attorney. “And that’s why the cloud computing industry is freaked out about this case, because they’ve invested tens of billions of dollars on the notion that a user-­specific, user-­initiated copy, when perceived by that person, is a private performance and not a public performance.” 
   
   THE DEATH OF THE CLOUD DVR? 
   
   Justice Kennedy asked the broadcasters to distinguish between Cablevision’s cloud-based DVR (whose legality has never been confirmed by the Supremes) and the DVR service offered by Aereo. 
   
   The broadcasters explain that — while still taking issue with Cablevision’s device — the cable company has already obtained licenses for the initial performance of the programming but Aereo has not. 
   
   “Aereo is like if Cablevision… decides, ‘Whew, we won, so guess what? Going forward, we’re going to dispense with all these licenses, and we are just going to try to tell people we are just an RS DVR, that’s all we are, and never mind that we don’t have any licensed ability to get the broadcast in the first instance, and we’re going to provide it to individual users, and it’s all going to be because they push buttons and not because we push buttons.'” 
   
   (Which is just a ridiculous claim, as the content that goes onto the Cablevision DVRs comes from programming aired on Cablevision’s pay-TV network. It doesn’t magically appear there. If Cablevision stopped offering new TV to customers, there would be nothing new to add to the DVRs and the stuff that’s already on there would have already been licensed… making it a locker-type storage device that the broadcasters say they have no problem with.) 
   
   Aereo cited the 1984 SCOTUS ruling in favor of Sony, whose Betamax videotapes were going to ruin the Hollywood movie system by allowing people to record things and watch them over and over again… (How much does the studio system thank itself for losing that case?) 
   
   “In Sony, this Court held that consumers have a fair-use right to take local over-the­-air broadcasts and make a copy of it,” argued the company’s lawyer. “All Aereo is doing is providing antennas and DVRs that enable consumers to do exactly what this Court in Sony recognized they can do when they’re in their home… and moving the equipment — the antennas and the DVRs — to the Internet.” ||||| Analysis 
   
   In the digital age, perhaps only someone as old as Justice Stephen G. Breyer (or older) would fret about what might happen to a store that sells “phonograph records.” It is doubtful, in the extreme, whether there are any of those anymore, but no matter: Breyer and other Justices searched on Tuesday for ways to demonstrate that they want to be careful about what they do about today’s modes of entertainment. 
   
   With a new method of watching TV via an Internet connection before the Court for analysis, the Court moved back and forth between killing that novelty by forcing it to pay sizable fees to download copyrighted TV programs, or giving it a fighting legal chance to survive as a cheaper alternative to cable. 
   
   Aside from struggling somewhat to learn just how this new entry in home entertainment actually works, the hour-long hearing in American Broadcasting Companies, Inc. v. Aereo, Inc., found the Court quite worried about “the cloud.” That’s that capacious site, somewhere in the electronic firmament, where all manner of digital expression and indulgences are stored. Maybe even a Super Bowl replay, or two. 
   
   One lawyer sought to persuade the Court that the cloud is falling, so to speak, while another said not to worry about it, and a third said it means nothing legally if it is only used with “a gimmick.” All three of those positions can’t be true, but the Court left little doubt that it will have to spend some time and effort exploring which one of them — if any — can be believed. 
   
   The legal issue before the Court is misleadingly simple: is Aereo violating copyright law with its system of renting out thousands of tiny antennas to a growing throng of customers so they can pick and choose the TV programs they want to watch, pulling them from “the cloud” whenever the mood stirs them to do so? 
   
   Chief Justice John G. Roberts, Jr., repeated several times his perception that the only reason Aereo put that system together was to engineer its way around the copyright laws. And, as a general matter, his skepticism seemed to be fairly widely shared across the bench. 
   
   But there were indications that some members of the Court were thinking that, perhaps, the copyright issue had already been settled in Aereo’s favor six years ago, in a lower court decision that the Justices had in fact chosen then not even to review. 
   
   That ruling goes by the short-form name of Cablevision, because it involved a cable operator’s system of maintaining a computer hard drive at its place of business which allowed customers to call up from storage a desired digital recording for viewing at home, using a copy available only to that one user. 
   
   It was that decision, by the U.S. Court of Appeals for the Second Circuit, that led that court to uphold the legality of Aereo’s system, finding that it, too, depended mainly upon consumer choice, so there was no public performance of the copyrighted material when the customer downloaded it. 
   
   Justice Anthony M. Kennedy suggested that the lawyers pretend that Cablevision was a ruling by the Supreme Court, so what should be made of it in the context of Aereo’s situation? It was the best hope for Aereo, because that company — and its lawyers — have basically argued that the whole legal issue surrounding its system is solved because the individual consumer makes all of the choices; thus, no illegal public performance of copyrighted works. 
   
   But, in the context of the argument Tuesday, that was a fine legal point. Most of the energy, at least from the bench, was about the risk that the Court might rule in this case in a way that would smother the infant of digital innovation in its electronic crib. 
   
   After Justice Breyer first got such a worry on the table with his antique reference to wax recordings of music that are played with a needle, of all things, Justice Sonia Sotomayor did a bit of updating, and asked about the impact on “the Dropbox and the iCloud.” She confessed her concern, saying “this is really hard for me.” She was, of course, looking for reassurance. 
   
   The over-the-air TV broadcasting industry’s lawyer, Washington attorney Paul D. Clement, was not in the reassuring business on Tuesday. He dismissed Aereo as a pirate of copyrighted music, not a simple peddler of hardware that people could use at home to watch TV. “Aereo,” he said, coolly, “still owns all these facilities and they’re providing, through wire transmissions, these performances on an ongoing basis.” 
   
   Sensing, perhaps, that he needed to make things simpler, Clement tried to show the distinction through a “real-world analogy” between a car dealer and a vendor of a valet parking service. Both of them, he said, provide cars to the public, but the dealer is providing a car, while the valet parker provides a service. Aereo, he implied, is a service provider, not just a product dispenser. 
   
   The exchanges continued in that vein with a federal government lawyer, Deputy Solicitor General Malcolm L. Stewart, who is mostly siding with the broadcasters. He seemed to have a little less technical knowledge than some of the Justices, but that did not much deter him from suggesting that the Court need not worry much in this case about “the cloud,” which he seemed to prefer calling “pure cloud locker service.” 
   
   He was candid enough, though, to tell Justice Kennedy that, if the Court interprets the Cablevision decision as validating the individual consumer as the one who chooses to “perform” a copyrighted work, then “it’s hard to see how you could rule in favor of our position here.” 
   
   Aereo’s lawyer, Washington attorney David C. Frederick, could not have had a better lead-in to his argument than Stewart’s concession. Aereo’s whole case, he made clear throughout his argument, depends upon the Court looking at Aereo’s system as seeing only the end-user, calling up his or her own downloads for private viewing. 
   
   All that his client does, Frederick said, “is attempting to entice consumers to replicate on the cloud what they can do at home at lower cap costs and more efficiency.” It’s like using the Internet, he added: “You can’t do multiple channels on the Internet anyway. You can only do a single video stream at a time. So whether you have one big antenna or whether you have lots of little antenna [as Aereo does], you still have to compress the signal and only one can go over the Internet at a time.” 
   
   His ultimate rhetorical weapon, though, given the concerns of the Justices about where this case potentially might lead, was a repeated suggestion that “the cloud computer industry” is deeply worried about how the Court might rule. 
   
   If what Aereo does is illegal, he argued, “every time somebody stores something in the cloud, whether it’s a song, a video image or the like, if it happens to be something that somebody else has stored in the cloud, the act of one person initiating it and perceiving it is going to implicate the public performance right, . . . that’s why the cloud computing industry is freaked out about this case.” 
   
   No more so, it seemed, than the Justices themselves. 
   
   Recommended Citation: Lyle Denniston, Argument analysis: Slipping down the digital slope, SCOTUSblog (Apr. 22, 2014, 5:26 PM), http://www.scotusblog.com/2014/04/argument-analysis-slipping-down-the-digital-slope/
target: – The Supreme Court heard oral arguments yesterday in ABC v. Aereo, a much-watched case that could have big implications for both cloud computing and broadcast television—implications the justices didn't seem comfortable with. Aereo allows users to record broadcast TV online and watch it at their leisure. The major broadcast networks are suing it for copyright violation, and stand to lose billions in fees cable companies pay to carry their programming. Aereo says it's simply renting users the equipment to do online what they can legally do at home. Here's how the arguments went: "If you're comfortable with the Supreme Court resolving disputes over technology, the transcript of Tuesday's oral arguments … should change your mind," writes Jon Healey at the LA Times. Stephen Breyer at one point made an analogy to "what used to be called a phonograph record store." He also worried that Aereo's antennas could "pick up every television signal in the world," which isn't true, Healey pointed out, "because the world isn't, you know, flat." The justices seemed skeptical of Aereo's business model. "It's not logical to me that you can make these millions of copies and essentially sell them to the public," Sonia Sotomayor said. John Roberts said the company was only using thousands of small antennas, instead of a few big ones "to get around copyright laws," the Wall Street Journal reports. But the justices also seemed genuinely worried that their decision could stifle innovation. Sotomayor asked what effect this would have on "the Dropbox and the iCloud." When the broadcasters' lawyers told them to "just be confident" that Aereo's service was different, Samuel Alito said, "I don't find that very satisfying. … I need to understand what effect it will have on these other technologies." Aereo's best hope is that the justices adhere to a lower court's Cartoon Network vs. Cablevision ruling, which held that customers could make DVR recordings on Cablevision's hard drives, writes Lyle Denniston at SCOTUSblog. At one point, Anthony Kennedy suggested lawyers pretend that decision had come from the high court. Ultimately, the justices didn't seem to like their options. "This is really hard for me," Sotomayor confessed. "I don't see how to get out of it," Breyer agreed.