The claim by ivi is that they are protecting the copyright holders with their system. According to their "protecting copyright" web site: "Copyright owners have been improperly taken down a rabbit hole by technology companies promising to protect their content the wrong way."
The issue here is whether or not ivi is a "passive carrier" under the Copyright Act. The copyright laws have a specific exemption for this type of activity. It requires anyone doing the retransmitting, in this case over the internet, not to have control over the content being transmitted so ivi must rebroadcast the entire stream untouched. From the copyright act: "(3) the secondary transmission is made by any carrier who has no direct or indirect control over the content or selection of the primary transmission or over the particular recipients of the secondary transmission, and whose activities with respect to the secondary transmission consist solely of providing wires, cables, or other communications channels for the use of others: Provided, That the provisions of this clause extend only to the activities of said carrier with respect to secondary transmissions and do not exempt from liability the activities of others with respect to their own primary or secondary transmissions;"
The intent is (underlined parts by me) that as long as someone like ivi is not fiddling with the content or controlling who gets to see it they are not infringing the original copyright.
So it would seem that ivi needs to convince the court that its a "passive carrier".
It would also seem the strategy in the case of ivi is to start up a company that does this kind of rebroadcasting, wait to get sued by the Media Industrial Complex, and win confirmation as a "passive carrier" from the courts.
This is how cable TV started. In 1974 cable companies captured broadcasts and sold them to their subscribers. Ultimately the Supreme Court decided Teleprompter Corp. v. Columbia Broadcasting System, Inc. 415 U.S. 394, 408-09 (1974) in favor of the cable companies. This decision was replaced by new Federal law in 1976 that specifically creates "compulsory licensing" for cable companies, satellite companies, and the like.
One imagines that ivi wants to be included in "the like". If you read the rest of ivi's copyright page you will see that there system is designed to do exactly this.
The broadcasters, of course, view all this differently (from this), and sued ivi: "Our complaint filed today with the U.S. District Court of New York underscores our commitment to protect our rights vigorously," said the plaintiffs. "This is a company that's simply stealing our broadcast signals and copyrighted programming and streaming them on the Internet without permission."
One imagines that this is exactly what was said in 1974.
ivi has counter-sued claiming that they are not infringing.
Though the Copyright Office does not believe that internet distribution systems fall into the category of passive carriers there is still the tide of technological change to consider. According to this WSJ article 43% of all North American internet traffic is realtime streaming movies, up from 10% in 2008.
This is very much like the music model with Napster initially infringing and ultimately being replaced by things like iTunes and Hula. There are more complex issues with this type of broadcast, e.g., local sports blackouts. Though the NFL and others are considering creating their own streaming applications - perhaps to replace having to rely on the Media Industrial Complex for distribution of their products; imagine a day when your favorite NFL game is available only by subscription on your iPad.
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