This is a risky exercise. Jurists often like to play devil’s advocate when they question lawyers in open court. But the comments that Supreme Court justices made today in the hearing pitting Aereo against broadcasters likely will provide the only clues about what investors and others should expect ahead of a ruling expected in June. Guggenheim analyst Paul Gallant says he senses that “a majority of Justices would shut down Aereo if there were no potential implications on cloud storage.” But if that’s an open question, then “our guess is that the Court will find some way to thread the needle and say that Aereo is inconsistent with the 1976 Copyright Act, or send the case back to the lower courts with some negative (but not conclusive) commentary toward Aereo.”
The basic debate: Aereo says it’s merely a technology provider that enables subscribers to privately exercise their right to view signals from the free, public airwaves. Broadcasters counter that Aereo steals their content by packaging and reselling programming to the public without paying.
Justice Sonia Sotomayor: Why aren’t they [Aereo] cable companies?… I’m looking at the – everybody’s been arguing this case as if for sure they’re not. But I look at the definition of a cable company, and it seems to fit. …
Justice Elena Kagan: 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.
Chief Justice John Roberts: You can park your car in your own garage or you can park it in a public garage. You can go to RadioShack and buy an antenna and a DVR or you can rent those facilities somewhere else from Aereo. They’ve – 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.
Justice Antonin Scalia (to Aereo lawyer David Frederick): Mr. Frederick, your — your client is — is just using this for local signals –
David Frederick: Yes.
Scalia: — right now. But if we approve that, is there any reason it couldn’t be used for distant signals as well?
Scalia: Possibly what? There is possibly a reason, or it could possibly be used?
Frederick: It can’t be used for distance, but it implicates –
Scalia: What would the difference be. I mean, you could take HBO, right? You could – you could carry that without — without performing.
Frederick: No, because HBO is not done over the airwaves. It’s done through a private service.
Justice Ruth Bader Ginsburg (to Aereo): You are the only player so far that doesn’t pay any royalties at any stage –
Roberts (to Aereo): All I’m trying to get at, and I’m not saying it’s outcome determinative or necessarily bad, I’m just saying your technological model is based solely on circumventing legal prohibitions that you don’t want to comply with, which is fine. I mean, that’s — you know, lawyers do that.