Memo To TV Networks: FilmOn And ivi TV Are Different Companies

The similarities between ivi TV and FilmOn are clear: both companies stream live television channels over the internet. They launched within two weeks of each other. And they were sued for copyright infringement by the four major TV networks within three days of each other. Both companies say they deserve to win those lawsuits, because legally they should be treated the same way cable systems are treated. And media executives and recent news reports have treated the companies as being more or less in the same boat.

But there are a few key differences between the two streaming services that have been largely overlooked. And those differences have already led to different legal outcomes for the two companies, and are likely to impact their chances going forward as well.

»  Free vs. Paid: ivi TV charges, while FilmOn doesn’t. Or at least, it didn’t. FilmOn has been broadcasting licensed international channels for two years, according to FilmOn CEO Alki David, but launched its unlicensed broadcasts of U.S. networks, for free, on Sept. 23. But that was just to make a splash-in an interview with paidContent, David said that starting Monday, FilmOn will become a subscription-only service.

FilmOn’s release of network content out on the open internet is likely the biggest reason why it has already been slapped with a temporary restraining order by the New York federal judge overseeing the separate copyright lawsuits against both companies. When that order was put in place two weeks ago, ivi TV CEO Todd Weaver even sent out a press release saying he agreed with the networks’ position: that FilmOn was infringing copyright law, because it was simply allowing content to go online without any restrictions.

ivi TV, by contrast, charges $4.99 a month and another $.99 for certain premium features like pausing and rewinding. In an interview with paidContent, Weaver said the creation of a “closed loop” is key to why he fits into the legal definition of a “cable system” while FilmOn doesn’t.

Still, the free launch gave the networks legal ammunition they didn’t have against ivi TV. In asking for the TRO against FilmOn, the networks’ lawyers noted that “FilmOn makes its service available to the public at large without registration, payment, or the downloading of any software, in standard mobile phone and computer web browsers”-an argument they couldn’t make against ivi TV.

»  Legal results so far: While FilmOn is languishing under a temporary restraining order preventing it from re-broadcasting content belonging to the U.S. networks, ivi TV is being allowed to continue to transmit similar broadcasts. Judge Naomi Buchwald, who is overseeing both lawsuits, has chosen to let ivi TV continue its operations until preliminary injunction motions are heard. And those won’t be heard until a venue dispute is resolved (the question is whether ivi TV’s case will be heard in Seattle, where ivi TV is based, or New York). That means the judge may be granting ivi TV months of broadcast time-time she was unwilling to give FilmOn.

David maintains that while he’s respecting the judge’s decision to grant a TRO to the networks, the judge was “totally unqualified” to make a decision. “She wasn’t educated about the internet,” he says.

In addition, the networks tried to lump the lawsuits together, but Judge Buchwald rejected that strategy. Instead, she returned the later-filed FilmOn lawsuit to the “wheel” that randomly assigns federal cases to judges in the Southern District of New York. (Coincidentally, she wound up pulling the FilmOn case from the random assignment system, which is why she is now overseeing both cases.)

»  Can a “cable system” possibly include the internet?While it may sound like a wild idea at first glance, take a look at the section of U.S. copyright law defining a “cable system”: It consists of “a facility” that “receives signals transmitted or programs broadcast by one or more television stations… and makes secondary transmissions of such signals or programs by wires, cables, microwaves, or other communications channels to subscribing members of the public who pay for such service.” [emphasis mine] That seems like a law that could be read to encompass a lot of new communications technologies-although not free ones. ivi TV founder Weaver says that Congress wrote the statute deliberately broad to accommodate new technologies.

And while it certainly isn’t standard business practice today, it is actually legal for a cable system to transmit network content without permission. That content is subject to a “compulsory license” under copyright law. As long as cable systems pay a portion of their revenue to the copyright office to reimburse any TV stations they re-broadcast, they’re in the clear. Both ivi TV and FilmOn say they will pay those fees in full. That percentage depends on the size of the cable company, but it’s less than 1 percent.

Make no mistake about it: ivi TV still has an uphill legal battle against well-funded incumbent players. But Weaver seems to at least have a shot. And he’s cognizant of the history of the satellite and, yes, cable systems that came before him-and that have already won this battle.

For FilmOn, already operating under a TRO, the battle to get the rights to transmit the networks’ content may be insurmountable. The law firm David usually works with was conflicted out of representing him against the television networks, so FilmOn is being represented by New York attorney Scott Zarin, who just came on board at the end of October. But David says that he’s looking towards expanding the site with or without the networks’ content-he’s set to add more than a dozen new channels next week.