ivi TV: Live Network Television on the Net Without Negotiation?

Daniel E. Schnapp
HHR Advisories & Publications

A new Internet-connected software application, called "ivi tv" http://www.ivi.tv/, was released this week that allows pc, mac and linux end users to stream live feeds from over-the-air television stations to their computers anywhere in the world, including feeds from ABC, CBS, Fox, NBC, PBS, Telemundo, Univision and others. The small Seattle-based start-up behind the service, Ivi, Inc., currently charges user $4.99 a month for access, with the option to add DVR functionality for an extra 99 cents, and plans to expand the service to mobile devices and other platforms in the coming months.

Unlike other online content distributors, the start-up has allegedly sidestepped negotiating with the copyright holders for the license of its programming, and has instead elected to wager its future on a seemingly liberal interpretation of certain provisions of the Copyright Act (the "Act"), which permit qualifying "cable systems" to rebroadcast over-the-air television signals upon the payment of certain statutorily mandated revenues. Specifically, the Act's compulsory licensing scheme (see Section 111) allows cable systems to carry distant broadcast signals while compensating copyright owners for the public performance of their works, without the transaction costs associated with marketplace negotiations for the carriage of copyrighted programs, and instead requires that the cable system remit a fixed portion of their revenues for the retransmission of such programming to the copyright holders. Based on statements from ivi, Inc.'s management, the company has already taken steps to comply with the requirements under Act, and is apparently taking the position that its service does, in fact, qualify as a "cable system".

The company's current position appears to be in part attributable to the Act's expansive definition of a "cable system", which includes "any facility… that 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."  The legislative intent behind the foregoing definition and the enactment of the statutory licensing scheme over 30 years ago (decades before the advent and commercialization of the Internet) was to benefit traditional cable and satellite companies operating in a heavily-regulated industry under the jurisdiction of the FCC, including a slew of rules and requirements under the Communications Act, such as programming exclusivity, sports blackouts, network non-duplication, signal quota, must-carry, and others.  The statute was not designed to provide a means for Internet-based services like "ivi tv" to avail themselves of the statutory licensing scheme by labeling themselves a "cable system" on the one hand, while at the same time finding refuge from the corresponding restrictions on MVPDs under the Communications Act because the regulation of programming retransmitted via the Internet falls outside the scope of the FCC's jurisdiction.

This approach has been attempted before, albeit unsuccessfully.  A similar start-up, iCravetv.com played an analogous tune in 2000. Hailed as the first service to put a broad range of ordinary TV stations on the Internet–from the Simpsons to Major League Baseball games–the Toronto-based service launched to international press and huge amounts of Web traffic. They too made similar arguments regarding the contours of compulsory licensing under Canadian copyright law, but failed to quash a swift petition for a temporary restraining order initiated by United States movie studios, television studios, sports leagues and broadcasters and the iCraveTV.com service agreed to permanently shut its doors.  Notably, the petition for the temporary restraining order called the business venture "one of the largest and most brazen thefts of intellectual property ever committed in the United States."

Since the iCraveTV case, the U.S. Copyright Office's Register of Copyright has repeatedly reiterated that the compulsory licensing scheme under Section 111 of the Act is inapplicable to Internet transmissions:  "..[T]he section 111 license does not and should not apply to Internet transmissions" and that "if there is to be a compulsory license covering such retransmissions, it will have to come from newly enacted legislation and not existing law."  Most poignantly, the Copyright Office has explicitly stated that it opposes any circumstance (as in the case of "ivi tv" or iCraveTV.com) where "any online content aggregator would have the ability to use a statutory license to sidestep private agreements and [be] free from any of the limitations imposed on cable operators and satellite carriers by the Communications Act and the FCC's rules."   In fact, the Copyright Office openly opposes an Internet statutory license that would permit any website on the Internet to retransmit television programming without the consent of the copyright owner, stating that "such a measure, if enacted, would effectively wrest control away from program producers who make significant investments in content and who power the creative engine in the U.S. economy."

In addition, the Copyright Office has also warned that any possible expansion of the statutory licenses to the Internet will implicate and may contradict certain international obligations, including various bilateral and multilateral trade agreements that prohibit statutory licensing of television signals over the Internet.  Specifically, the U.S. has obligations under the Berne Convention, the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs), and WIPO Copyright Treaty that relate to broadcasting and Internet transmissions, including several free trade agreements with foreign nations which contain the obligation that "…neither Party may permit the retransmission of television signals (whether terrestrial, cable, or satellite) on the Internet without the authorization of the right holder or right holders, if any, of the content of the signal and of the signal…"

Against this backdrop, even if Ivi is able to successfully defend any copyright infringement claims and challenges to its current position regarding the applicability of the compulsory licensing provisions under Section 111 of the Act, we suspect (and Ivi has even suggested) that, like  iCraveTV, the company may be on the wrong end of a barrage of claims asserted by television networks, movie studios, sports leagues, broadcasters, syndicators and others in the entertainment industry alleging that the operation of the service as currently conducted amounts to and/or results in unfair competition, tortious interference with contractual relationships, trademark infringement and dilution, false designation of origin or false representation with regard to sponsorship or authorization, etc. Additionally, until and unless Congress decides to amend the Act to clarify the legislative intent concerning the scope of the compulsory license under Section 111, any challengers to the law will need to be in a position to withstand the full weight of the United States entertainment industry which drives a substantial portion of the U.S. economy.

We will obviously keep an eye on future developments in connection with this fledgling service and the entertainment industry's forthcoming response.