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Back to Normal: No Compulsory License for Internet Streaming

Back to Normal: No Compulsory License for Internet Streaming by Johannes Munter

April 11, 2017

You remember when a US district court in California decided that FilmOn X, an online live-streaming service, was entitled to a compulsory license and was within its rights in broadcasting live-TV to paying customers without negotiating separate licensing agreements with the broadcasters? The decision surprised copyright holders, small and large, due to its potentially wide-reaching impact and how outside the mainstream the outcome was. In short, the decision threatened to undermine the tremendous growth and innovation in the online television ecosystem that has occurred in recent years. Thank goodness, then, for the Ninth Circuit, which delivered good news a few weeks ago.

U.S. copyright law provides that copyright owners have the exclusive right to perform their works to the public. Section 111 of the Copyright Act provides a limited exception to this right in the form of a compulsory license that allows “cable systems”, as defined in the section, to retransmit copyrighted works that are originally transmitted by broadcast stations—think Fox, ABC, CBS, or NBC—at a rate set by the government.

In its March 21, 2017, decision, the U.S. Court of Appeals for the Ninth Circuit reversed the earlier decision by Judge Wu of the District Court for the Central District of California. Following a thorough individual analysis of the arguments made by both the plaintiffs and FilmOn X, as well as the interpretation of the Copyright Office, the Ninth Circuit found that internet-based streaming and retransmission services do not fall under the definition of “cable systems” under section 111 of the Copyright Act. As a result, such services are required to negotiate contracts with broadcasters and content owners in order to retransmit copyrighted broadcasting content. This is in line with current practice – indeed with how to the internet ecosystem has operated for more than a decade – as well as with the clear statutory language and purpose of the Copyright Act. The decision also brings the Ninth Circuit in line with the approach adopted by every other court that has considered the issue and to the views of the Copyright Office.

While Judge Wu’s district court ruling largely dismissed the legislative history, the Copyright Office’s longstanding interpretation, and the canon of narrow construction of grants of compulsory licenses, the appeals court supported many of the arguments made by the Copyright Alliance in its amicus brief to the court. Although the court considered legislative history as it was raised by the parties, it dismissed it as non-conclusory. However, with regards to the narrow construction of compulsory licenses and the weight given to the Copyright Office, the court agreed with the plaintiffs.

First, acknowledging that the fundamental purpose of the Copyright Act is to protect content creators and, consequently, to incentivize creativity, the court noted that compulsory licenses represent a limited exception to the otherwise broad rights enjoyed by copyright holders to decide who uses their works. As a result, any statutory grants of compulsory licenses should be interpreted narrowly. Since there was no clear evidence that Congress had supported expanding the compulsory license regime to internet services – indeed, the Congress had declined to touch the relevant provisions even when amending the statute itself – the courts were required to construct the grant narrowly and not read new services into it.

Secondly, and arguably more importantly, the Ninth Circuit agreed with other federal courts that the Copyright Office’s longstanding construction of the statute should be given considerable weight in deciding the issue. Although the court seemed to lean towards the copyright holders in any case when interpreting the plain language of the statute, it acknowledged that there was some ambiguity and, in that situation, the Copyright Office interpretation should govern. This is a major holding that reinforces the Copyright Office’s position as an expert agency charged with interpreting  the Copyright Act due to its long history of advising Congress and administering and construing the Act.

In addition, the Ninth Circuit also acknowledged the importance of complying with our international obligations, many of which prohibit issuing compulsory licenses to internet services. While not decisive in the resolution of this case, compliance with international commitments – together with many of the other issues discussed here – came up again recently in the DC Circuit Court’s hearing on the same FilmOn X issue a few weeks ago (check out our blog post on that hearing).

The DC Circuit is still mulling its decision. In the meantime, copyright holders can just hope that the DC Circuit has learned the same lessons as the Ninth Circuit. If it ain’t broke, don’t fix it.


Johannes Munter is a law student at the George Washington University Law School in Washington, DC. and an intern at the Copyright Alliance during the Fall/Winter 2016.