August 31, 2021 – The U.S. District Court for the Southern District Of New York has ruled in favor of the largest U.S. broadcast television networks in their copyright infringement lawsuit against Locast, a “non-profit” streaming service that makes local, over-the-air television available for free online.[1] The Court’s decision denies Locast’s motion for summary judgment, rejects Locast’s affirmative defense, and grants summary judgment in favor of the TV broadcasters.

Lawsuit Background

The broadcast TV networks filed their lawsuit in July 2019, alleging Locast’s streaming service was stealing their copyrighted content and illegally retransmitting it at will over the internet.[2] They are seeking statutory damages for a massive number of instances of copyright infringement, and a permanent injunction enjoining and restraining Locast from offering its service.

Locast, in response to the complaint, claimed its service does not infringe the copyrights of broadcasters because Locast believes its service is covered by the exemption in Section 111(a)(5) of the Copyright Act that applies to nonprofit organizations.[3] Here’s the language from the exemption claimed by Locast:

The secondary transmission of a performance or display of a work embodied in a primary transmission is not an infringement of copyright if the secondary transmission is not made by a cable system but is made by a governmental body, or other nonprofit organization, without any purpose of direct or indirect commercial advantage, and without charge to the recipients of the secondary transmission other than assessments necessary to defray the actual and reasonable costs of maintaining and operating the secondary transmission service.[4]

Locast’s Service

Locast’s over-the-top, free streaming service is available in many of the largest metropolitan areas in the U.S. Locast’s service is “available to users via all manner of devices and platforms, including applications for Android and Apple smartphones and devices, and applications for Roku, Chromecast, Amazon Fire TV, Apple TV, and Android TV television-viewing devices.”[5] To support the costs of its free service, Locast relies on donations from customers and corporations. AT&T recently donated $500,000 to Locast.[6] Users generally have the choice of a free or paid service:

Locast’s retransmissions are available online to any registered user in the designated geographic area, even those who can access the original OTA signal using OTA television antennas. Locast recipients have free access to the full repertory of news and entertainment channels; but non-paying users’ programming is interrupted after every fifteen minutes of watching a single channel with a fifteen-second video requesting donations, and viewers then lose time re acquiring the program.

To avoid that interruption in service, users can pay $5 a month for “preferred” (i.e., uninterrupted) access to the service, or can request that the service stop displaying the donation requests based on their financial circumstances. Users who choose to pay receive the uninterrupted service for time correlating to the amount of the payment. For example, if the user pays the minimum $5 amount, she receives uninterrupted service for the entire month. If the user pays less, the time period during which she receives uninterrupted service within the month is decreased on a pro-rata basis (e.g., $1 paid provides uninterrupted service for 20 % of the month).[7]

The Parties Agreed To Limit The Scope Of The Litigation To The Issue Of Applicability Of The Section 111(A)(5) Exemption

After the suit was initiated, both parties agreed to limit the scope of the litigation to the issue of applicability of the Section 111(a)(5) exemption, and each party subsequently filed for summary judgment in favor of their interpretation of the exemption. Locast, to be specific, sought summary judgment on its affirmative defense – that the copyright infringement suit should be dismissed because it qualifies for the exemption in Section 111(a)(5). That exemption rests on Locast’s secondary transmission of copyrighted content “without charge to the recipients of the secondary transmission other than assessments necessary to defray the actual and reasonable costs of maintaining and operating the secondary transmission service.”

The Court Says Locast Is Using “Donations” To Expand Service – The $5 Monthly Fee Is Being Used For More Than Just Covering Actual And Reasonable Costs Of Maintaining Service

The Court, however, said “it is clear that the Locast service is not offered without charges other than those ‘necessary to defray the actual and reasonable costs of maintaining and operating’ its service.” It didn’t buy Locast’s characterization of the $5 monthly fee as a recommended donation:

“The payments defendants elicit from users are charges assessed on users to avoid constant service interruptions, regardless of whether defendants euphemistically call them publicly “recommended donations.” Locast users pay the minimum $5 monthly fee in exchange for month-long, uninterrupted service. It is not merely a recurring gift to a charitable cause. It is of no consequence that a number of users employ the service without paying. [Locast] still solicits, and receives, substantial amounts in charges from recipients for its uninterrupted service.”[8]

In the end, the Court said portions of users’ payments are actually used to fund the expansion of Locast’s service. The Court explained that this exceeds the statutory exemption granted in Section 111(a)(5). All told, the Court denied Locast’s motion for summary judgment, struck Locast’s affirmative defense, and granted summary judgment in favor of the TV broadcasters.

Locast Suspends Operations

Shortly after the Court issued its decision, Locast shut down its streaming service. Locast posted the following statement on its website:

We are suspending operations, effective immediately. As a non-profit, Locast was designed from the very beginning to operate in accordance with the strict letter of the law, but in response to the court’s recent rulings, with which we respectfully disagree, we are hereby suspending operations, effective immediately.

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[1] American Broadcasting Companies, Inc., et. al., v. David R. Goodfriend and Sports Fans Coalition NY, Inc., Opinion And Order, Case 1:19-cv-07136, U.S. District Court for the Southern District of New York (Aug. 31, 2021) (Opinion).

[2] American Broadcasting Companies, Inc., et. al., v. David R. Goodfriend and Sports Fans Coalition NY, Inc., Complaint For Damages And Injunctive Relief, Case 1:19-cv-07136, U.S. District Court for the Southern District of New York (July 31, 2019) (Complaint). The following broadcasters are the lawsuit’s plaintiffs: American Broadcasting Companies, Inc., Disney Enterprises, Inc., Twentieth Century Fox Film Corporation, CBS Broadcasting Inc., CBS Studios Inc., Fox Television Stations, LLC, Fox Broadcasting Company, LLC, NBCUniversal Media, LLC, Universal Television LLC, and Open 4 Business Productions, LLC.

[3] The defendants are David R. Goodfriend, the founder of Locast, and Sports Fans Coalition NY, Inc., a non-profit advocacy group which initially launched the Locast service in New York City in January 2018. https://en.wikipedia.org/wiki/Locast; https://www.sportsfans.org/bringing_the_public_interest_back_to_sports. Mr. Goodfriend is the President, Director, and Treasurer of Defendant Sports Fans Coalition NY, Inc. Complaint at ¶27.

[4] 17 U.S.C. § 111(a)(5). Locast does not ask for or obtain consent from broadcasters to retransmit their content. Retransmission consent, enacted as part of the 1992 Cable Act, requires cable operators and other video programming distributors to obtain permission from TV broadcasters before retransmitting their programming. 47 U.S.C. § 325(b). The Supreme Court has described the retransmission consent requirements as a “highly detailed compulsory licensing scheme that sets out the conditions, including the payment of compulsory fees, under which cable systems may retransmit broadcasts.” American Broadcasting Companies, Inc. v. Aereo, Inc., 134 Sup.Ct. 2498 (June 25, 2014).

[5] Complaint at ¶47.

[6] Complaint at ¶10.

[7] Opinion at 2-3.

[8] Opinion at 6.