Court Rules that Online Streaming Services Do Not Qualify for Cheap Cable License Rights

Guy watching something on computerThe Ninth Circuit has reversed a federal judge's decision that online streaming services should be considered the equivalent of cable networks and thus entitled to cheap compulsory licenses of copyrighted content owned by broadcast networks.

The case pitted Fox and other broadcast networks against the internet streaming service FilmOn and others.

Performance Rights

Copyright law gives the owner of copyrighted material certain exclusive rights, including the right to "perform" the material. A broadcast of a copyrighted work — whether over the airwaves, over cable, or over the internet — is considered a performance.

Anyone who performs a copyrighted work without the permission of the copyright owner is liable for copyright infringement (unless certain exceptions apply).

Compulsory Licenses

As the Ninth Circuit noted,

Under § 111 of the [US Copyright] Act, a “cable system” is eligible for a so-called compulsory license that allows it to retransmit “a performance or display of a work” that had originally been broadcast by someone else—even if such material is copyrighted — without having to secure the consent of the copyright holder. So long as the cable system pays a statutory fee to the Copyright Office and complies with other regulations, it is protected from infringement liability.

The court also noted that these compulsory license rights are very desirable:

Compulsory licenses are highly coveted, in no small part because, according to the Copyright Office, the royalty payments the Act requires cable companies to pay are “de minimis” when compared to the gross receipts and revenues the cable industry collects, a gap suggesting that the government-set rates fall well below market levels.

Thus, if a company like FilmOn wishing to rebroadcast over-the-air programming via internet isn't eligible for a compulsory license, it would have to pay much higher market rates for the rights.

What's "Cable"?

A "cable system" is defined by the Copyright Act as:

a facility, located in any State, territory, trust territory, or possession of the United States, that in whole or in part receives signals transmitted or programs broadcast by one or more television broadcast stations licensed by the Federal Communications Commission, and makes secondary transmissions of such signals or programs by wires, cables, microwave, or other communications channels to subscribing members of the public who pay for such service.

In the original FIlmOn decision, as Variety reported, a US District Court ruled that copyright law doesn't distinguish between traditional cable providers and online services when it comes to compulsory retransmission licenses.

The judge wrote:

Courts consistently reject the argument that technological changes affect the balance of rights as between broadcasters and retransmitters in the wake of technological innovation

However, the Ninth Circuit disagreed, deferring to Congressional intent and to the US Copyright Office:

FilmOn and other Internet-based retransmission services are neither clearly eligible nor clearly ineligible for the compulsory license § 111 makes available to “cable systems.” The Copyright Office says they are not eligible. Because the Office’s views are persuasive, and because they are reasonable, we defer to them.

As noted by the Hollywood Reporter, the appeals court decision was a victory for traditional broadcasters like ABC, CBS, Fox, and NBC — and bad news for some streaming companies.

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