Closing the cable television statutory licensing loophole

Over the last few months, FilmOn and ivi, two Internet-based services that retransmitted broadcast television stations from multiple cities, have been effectively shut down by preliminary injunctions issued by a U.S. Federal court. In both cases, the issue was that the U.S. Copyright Office has a regulation dating back more than 20 years (Section 111 of the Copyright Act) permitting cable systems to retransmit broadcast signals locally in return for the payment of statutory royalties to the Copyright Office. That regulation was effectively superseded by the Communications Act of 1996, which requires cable and satellite systems to obtain permission from and pay compensation directly to broadcast stations in order to retransmit their signals.

In ivi's case in particular, the company argued that it was a cable system for the purposes of Section 111 of the Copyright Act, but it wasn't a cable system under the definition of the Federal Communication Commission, and therefore wasn't subject to the Communications Act of 1996. In both ivi's and FilmOn's cases, the Federal court ruled that they weren't cable systems under any established definition, and therefore weren't entitled to take advantage of Section 111. They could negotiate directly with television stations for retransmission rights, as IPTV operators such as Verizon and AT&T do, but they had no right to retransmit their signals under a statutory license.

Both cases are still in litigation and have not been finally decided by the courts, but an action announced last week by the U.S. Copyright Office may may the entire argument moot. The right of satellite services such as Dish Network and DirecTV to retransmit signals from broadcast stations outside a subscriber's local area was renewed last year, in the Satellite Television Extension and Localism Act of 2010 (STELA). A section was included in STELA that requires the statutory licensing requirements in Section 111, as well as additional requirements in Sections 119 and 122 (covering satellite services), to be phased out, and it gives the Copyright Office responsibility for coming up with a phase-out plan. Here's what the section says:

Not later than 18 months after the enactment of this Act, and after consultation with the Federal Communication Commission, the Register of Copyrights shall submit to the appropriate Congressional committees a report containing the following:

1. proposed mechanisms, methods, and recommendations on how to implement a phase-out of the statutory licensing requirements set forth in sections 111, 119, and 122 of title 17, United States Code, by making such sections inapplicable to the secondary transmission of a performance or display of a work embodied in a primary transmission of a broadcast station that is authorized to license the same secondary transmission directly with respect to all of the performances and displays embodied in such primary transmission

2. any recommendations for alternative means to implement a timely and effective phase-out of the statutory licensing requirements set forth in sections 111, 119, and 122 of title 17, United States Code

3. any recommendations for legislative or administrative actions as may be appropriate to achieve such a phase-out

Last week, the Copyright Office announced a timetable for requesting comments and replies to comments to help it formulate a phase-out plan. By the time the FilmOn and ivi cases wind their ways through the Federal court system, it's likely that the phase-out plan will be adopted, and even possible that the phase-out date will be reached. Thus, even if they win in court, there won't be any statutory license, and they'll still have to negotiate station by station for retransmission rights and compensation.

ivi TV could be "off the air" soon

Yesterday, a Federal judge in Seattle dismissed a suit filed by ivi TV, the company that sent programming from broadcast stations in New York, Seattle, Los Angeles, Chicago and other markets over the Internet without permission. The court ruled that ivi improperly filed the case in Seattle to avoid being sued by broadcasters and networks in New York.

FilmOn, which followed ivi into the U.S. market, was enjoined from retransmitting most U.S. broadcast networks last year. The Seattle lawsuit was the only thing preventing the broadcast stations and networks from demanding the same relief from ivi. Now that the way is clear for a trial in New York, ivi could be enjoined from broadcasting most of its stations and networks in as little as a week.

Ivi can still argue that the U.S. Copyright Office gives it the right to retransmit broadcast signals, but most of its subscribers will drop the service while the arguments go on. It's unlikely that ivi has the financial resources to fight a drawn-out court battle, so the Seattle court's decision is likely to be the beginning of the end for ivi.

Section 111 of the Copyright Act is alive and well

In this week's videoblog, I did a piece about FilmOn.com, a U.K. company that's streaming broadcast signals from television stations in Los Angeles, as well as a variety of cable networks, across the Internet. Like ivi, FilmOn.com is depending on Section 111 of the U.S. Copyright Act, which requires television broadcasters to grant statutory (mandatory) licenses to retransmit their signals to cable systems, in return for payments made to the Copyright Office and distributed to broadcasters.

Some people (including myself) have argued that Section 111 was superseded by the 1996 Telecommunications Act, which gives broadcasters control over whether or not their signals can be retransmitted by cable systems and similar services. The Act also allows broadcasters to specify the price for retransmission rights, which is paid directly to broadcasters, not to the Copyright Office.

Last week, however, the Copyright Office issued two notices in the Federal Register: Distribution of the 2008 Cable Royalty Funds and Distribution of the 2008 Satellite Royalty Funds.  Note that the Copyright Office is still collecting royalties, and so far as they're concerned, Section 111 is still in full effect. Here's a direct quote from the Federal Register posting:

"Each year cable systems must submit royalty payments to the Register of Copyrights as required by the statutory license set forth in section 111 of the Copyright Act for the retransmission to cable subscribers of over-the-air television and radio broadcast signals. See 17 U.S.C. 111(d).  These royalties are then distributed to copyright owners whose works were included in a qualifying transmission and who timely filed  a claim for royalties. Allocation of the royalties collected occurs in one of two ways.  In the first instance, these funds will  be distributed through a negotiated settlement among the parties. 17 U.S.C. 111(d)(4)(A). If the claimants do not reach an agreement with respect to the royalties, the Copyright Royalty Judges (‘‘Judges’’) must conduct a proceeding to determine the distribution of any royalties that  remain in controversy. 17 U.S.C. 111(d)(4)(B)."

"The 'Phase I Parties' are the Program Suppliers, Joint Sports Claimants, Public Television Claimants, Commercial Television Claimants (represented by National Association of Broadcasters), Music Claimants (represented by American Society of Composers, Authors and Publishers, Broadcast Music, Inc., and  SESAC, Inc.), Canadian Claimants, National Public Radio, and the Devotional Claimants. In Phase I of a cable royalty distribution proceeding, royalties are allocated among certain categories of broadcast programming that have been retransmitted by cable systems. The categories have traditionally been movies and syndicated television series, sports programming, commercial and noncommercial broadcaster-owned programming, religious programming, music, public radio programming, and Canadian programming."

Now, that pretty much covers every kind of programming and every kind of broadcaster. If broadcasters are relying on the Telecommunications Act, why are they still collecting royalties from the Copyright Office? It could be that there are broadcasters who don't bother to negotiate for retransmission compensation who still want to claim the statutory royalties from the Copyright Office. Nevertheless, it adds an interesting dimension to the ivi and FilmOn.com story