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."
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.