FilmOn Not Entitled To Cable License, Appeals Court Says

Siding with TV broadcasters, a federal appellate court said Tuesday that online video distributor FilmOn X is not entitled to a compulsory cable license that would enable it to stream TV programs.

The ruling, issued by a three-judge panel of the 9th Circuit Court of Appeals, reversed a decision issued last year by U.S. District Court Judge George Wu in Los Angeles. The appellate judges said in a 25-page opinion that they were deferring to the U.S. Copyright Office's determination that streaming video distributors aren't entitled to compulsory licenses.

The appellate ruling marks the latest chapter in a battle dating to at least 2010 over whether FilmOn, owned by billionaire Alki David, can legally stream TV programs to consumers without the broadcasters' consent.

Initially, the company launched a streaming service that relied on a system similar to the defunct ivi TV, which attempted to distribute television online. Like ivi, FilmOn X argued that it should be considered a "cable system," and entitled to a compulsory license.

The companies lost that battle in 2012, when the 2nd Circuit Court of Appeals in New York ruled that ivi wasn't a cable system because it didn't limit its streams to specific geographic locales. The appellate court said in its decision that compulsory licenses are only available to systems that transmit shows to restricted markets.

FilmOn then re-launched using the same system as the defunct streaming video company Aereo. That platform relied on individual mini-antennas to capture over-the-air shows in particular locales and stream them to consumers. FilmOn says it authenticated people's geo-locations, and only streamed programs to people who could have received them over-the-air.

Broadcasters including Fox, ABC, NBC and CBS sued both streaming companies for copyright infringement, arguing that they couldn't transmit shows without first obtaining licenses.

Aereo and FilmOn stopped streaming unlicensed programs in 2014, soon after the Supreme Court ruled that Aereo infringed copyright by transmitting TV shows without a license. Aereo suspended operations altogether, but FilmOn still streams programs in the public domain, and programs it licenses. Although FilmOn stopped offering some television programs, it continued to battle the broadcasters in court.

In its most recent arguments, the company contended that it should be considered a cable system due to the Supreme Court's 2014 decision -- which said Aereo's platform was "for all practical purposes a traditional cable system."

Wu agreed with FilmOn, writing that the Supreme Court's characterization of the technology is "about as close a statement directly in defendants' favor as could be made."

But Wu acknowledged that the question was unsettled, and authorized the broadcast networks to seek immediate review of his ruling from the 9th Circuit Court of Appeals. He also continued an injunction that prohibits FilmOn from streaming copyrighted material without a license.

The broadcasters appealed to the 9th Circuit, arguing that FilmOn didn't meet the Copyright Act's definition of cable system as a "facility" that receives and retransmits signals.

FilmOn, the broadcasters argued, didn't fit that description because it retransmitted signals via the Internet, as opposed to a "facility."

Broadcasters also argued that granting over-the-top services compulsory licenses would strip copyright owners of their ability to control the distribution of their work.

FilmOn countered that the Copyright Act should be interpreted in a "technology agnostic manner to include technologies developed over the last 40 years."

The 9th Circuit judges concluded that the Copyright Act was ambiguous, and that both the broadcasters and FilmOn "can make plausible arguments about the statute’s purposes and legislative history."

Given that ambiguity, the judges accdepted the Copyright Office's decision that online video providers aren't cable systems.

"The Office has on at least four occasions specifically and unequivocally said that, in its view, Internet-based retransmission services are not 'cable systems,'" the judges wrote. Because the Office’s views are persuasive, and because they are reasonable, we defer to them."

This decision might not be the final word on the matter. FilmOn has asked two other appellate courts -- the D.C. Circuit and 7th Circuit -- to rule that it's entitled to a compulsory license. Those cases are still pending.

The battle between FilmOn and the broadcasters drew attention by a host of outside parties, ranging from digital rights groups -- who sided with FilmOn -- to other entertainment companies, who took the broadcasters' side.

Public Knowledge, one of the groups that supported FilmOn, criticized the 9th Circuit's ruling.

“Traditional pay TV services already have many advantages over online video services," John Bergmayer, senior counsel, said in a statement. "Adding legal barriers to those existing advantages benefits incumbents at the expense of consumers and potential new entrants."

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