WNET v. Aereo, Inc.

In case of first impression, district court dismisses unfair competition claim based on defendant’s re-transmittal of broadcast signals for New York-area television stations over the Internet to defendant’s subscribers, holding that Copyright Act preempts the state-law claim even if the re-transmittals involved “private performances” of copyrighted works.

Plaintiffs, a group of corporate entities engaged in the production, marketing, distribution, and transmission of television programs, filed a suit against defendant Aereo, an Internet-based service that collects broadcast television signals from New York-area television stations and re-transmits them to Aereo subscribers, asserting copyright infringement related to the alleged reproduction and public performance of the shows, as well as a state law claim, styled as in the alternative, asserting unfair competition related to non-public performances of the shows.

Aereo moved for judgment on the pleadings on plaintiffs’ unfair competition claim, arguing that the claim sought to vindicate rights equivalent to those provided by the general scope of copyright law and was therefore preempted under the Copyright Act's express preemption provision. Plaintiffs countered that their unfair competition claim for non-public performances was an alternative to their federal copyright claim, in the event that the court concluded that Aereo's service did not infringe plaintiffs' copyrights because it involved only non-public performances, and that a non-public performance was not “equivalent” to any of the exclusive rights protected by federal copyright law and therefore subject to state law.

Assuming solely for purposes of the motion that Aereo's service involved private performances not actionable under the Copyright Act, the court reasoned that the issue turned “exclusively on a question of statutory interpretation—one of first impression in the Second Circuit—regarding the breadth of preemption under § 301 of the Copyright Act: does a state law unfair competition claim founded on the private performance of copyrighted works seek to vindicate rights that fall into the general scope of the exclusive rights created by the Copyright Act?” After surveying the language structure of § 301, its legislative history, and relevant Second Circuit decisions, the court found that it did.

Under Second Circuit precedent, preemption is determined by a two-prong test: the claims must meet both the subject matter requirement (the claims involve works protected by federal copyright law) and general scope requirement (the acts that violate state-created rights would, by themselves, infringe one of the exclusive rights already protected by copyright law – reproduction, adaptation, performance, distribution or display.). The Second Circuit also applies the “extra elements” test in its general scope analysis – the claim will not be preempted if it includes any extra elements that make it qualitatively different from an infringement claim under the Copyright Act.

The court agreed with defendant Aero that the language of § 301 preempting state-law claims for rights “equivalent to any of the exclusive rights within the general scope of copyright as specified by section 106” referred broadly to the kinds of rights protected by § 106, not just those specific and exclusive property rights enumerated in the statute – in this case, performance rights generally rather than public performance rights specifically. Preemption under the Copyright Act therefore extends to those state laws that seek to impose liability for misappropriation of a person's creative works based on the performance of those works, both public and private.

The court likewise rejected the plaintiffs’ argument that the statutory language "equivalent to" the general scope of those rights specified in § 106, should be construed as “identical to” those precise rights. Noting the existence of multiple and varied dictionary definitions of “equivalent,” the court reasoned that, had Congress intended the narrow scope of preemption that plaintiffs’ asserted, it could have drafted § 301 without the words "general" or "equivalent to," but it did not. “Congress having decided to include these modifiers, the [c]ourt is bound to give the words "equivalent to" and "general scope" appropriate significance.

The court did acknowledge that the language of § 301 was not unambiguous, given that Congress did decline to create an exclusive property right over the purely private viewing of copyrighted performances, and that the statute could reasonably be read to support either plaintiffs' or Aereo's position (although the court believed that the better-reasoned position was that Congress likely intended preemption to extend to state-law claims imposing liability for private performances of copyrighted works). It concluded however, that the legislative history of the Act, including the stated intent by Congress to create a national uniform system of federal copyright law, supported the determination that the Copyright Act preempts plaintiffs’ unfair competition claim.

Finding the Second Circuit cases cited by the parties to be unpersuasive, in part because they did not squarely confront the preemption question, the court nonetheless concluded that the Second Circuit would extend preemption under the Copyright Act to unfair competition claims. The Second Circuit had not restricted preemption to the precise scope of the protections provided by the Copyright Act, as the plaintiffs advocated, and had held in other cases that preemption under § 301 was broader than those state law claims for which a successful copyright claim can be stated. The court also looked to cases applying the “extra element” test for an indication of the types of claims that the Second Circuit had found not preempted by § 301 because they were “qualitatively different.” According to the court, qualitative differences are differences in kind, rather than in degree or scope. Noting that the Second Circuit had ruled that unjust enrichment claims were not “qualitatively different” from copyright claims, the court reasoned that the appellate court would similarly agree that the plaintiff’s claims of unfair competition also would be preempted by the Copyright Act. The court also noted that Second Circuit had already extended preemption to unfair competition claims involving misappropriation of plaintiff’s works because the these claims satisfied the general scope requirement. Acknowledging that these cases were not directly on point, because they involved exclusive rights enumerated under § 106, the court reasoned that Second Circuit's analysis in these cases focused on the nature of the misappropriation claim and the similarity of those claims to the protections afforded by the Copyright Act, and not on whether a particular state law misappropriation claim precisely overlapped in scope with one of the specific rights enumerated under § 106. The court concluded: “Even though the [c]ircuit has not considered the precise issue before the Court, the analytical implication of these cases supports the conclusion that [p]laintiffs’' alternative claim is preempted.”