Court Rules on Streaming, Recess Appointments, and Corporate Religious Rights

July 7, 2014

The United States Supreme Court issued a flurry of decisions in the last two weeks of its term. The three cases summarized below relate to some of the most hot-button issues the Court addressed this year. These decisions may prove particularly impactful for the technology industry and closely held for-profit corporations.

Court Holds Aereo’s Streaming Is Copyright Infringement

On June 25, 2014, the Supreme Court ruled in American Broadcasting Companies v. Aereo, Inc. that Aereo committed copyright infringement. Aereo is a start-up internet company that allowed users to stream television shows as they air for a nominal fee. It used small antennas, each assigned to a specific user, to grab TV signals, which it subsequently uploaded to a personal file and transmitted via the Internet. The Court based its decision on the Transmit Clause of the Copyright Act of 1976, which gives copyright owners exclusive rights to “perform the copyrighted work publicly.” The main points of contention in this case were whether Aereo “performed” the copyrighted works by transmitting them and whether the transmission of a show to individuals qualified as a “public” transmission. The majority of the Court concluded that Aereo both performed the copyrighted shows and transmitted them publicly. The Court attempted to narrow its decision by emphasizing that its ruling might not apply to other types of technology, such as cloud-based storage services.

The tech industry views this ruling as a blow to innovation, fearing that it will disincentivize technological advances. The broadcasting industry believes this decision affirms the value of copyright protection. Several broadcasters indicated that they would have removed their signals from the airwaves if Aereo were permitted to continue its practice, a change that would have dramatically altered how viewers obtain broadcasted materials.

Court Outlines Limitations for Presidential Recess Appointments

 On June 26, 2014, the Supreme Court issued its unanimous decision in National Labor Relations Board v. Noel Canning. The dispute in this case was whether President Obama abused his appointment power when he named three people to the National Labor Relations Board during a three-day Senate break. Article II of the Constitution gives the President the power to fill vacancies when the Senate is in recess. The Court held that President Obama’s appointments during the Senate’s three-day break were unconstitutional. The Court outlined that a break of more than ten days would qualify as a recess and appointments made after ten days would be constitutionally permissible. The Court sided with the government in part by holding that presidents may fill vacancies that arise outside of a recess, as opposed to those that occur only within the Senate’s break.

It is unclear how much of an impact Noel Canning will have on presidential recess appointments. On one hand, in November 2013, the Senate altered its rules to eliminate the minority party’s ability to filibuster presidential nominees. This change allows the Senate to stop confirmation-stalling debates by a simple majority vote, rather than a 60% supermajority. Without filibusters, the need to make recess appointments is diminished. On the other hand, the Court’s decision permits the Senate to effectively avoid recesses altogether. Under the Court’s ruling, the Senate is permitted to call sessions in which no business occurs and only one Senator is present in order to end a recess. This could effectively prohibit presidents from ever having the opportunity to make a recess appointment, although presidents still retain the power to make emergency appointments.

Court Requires Religious Exception for Closely Held Corporations to ACA

On June 30, 2014, the Supreme Court ruled in Burwell v. Hobby Lobby that closely held for-profit corporations whose owners have religious objections to certain types of contraceptive care can opt out of some of the mandated coverage under the Affordable Care Act. The Department of Health and Human Services’ regulations require large employers to either provide certain types of contraceptive care or pay significant penalties. The basis of the Court’s decision rested on the Religious Freedom Restoration Act of 1993, which generally prohibits the federal government from burdening a person’s exercise of religion unless the government has a compelling reason to do so and it employs the least restrictive means possible. As a preliminary matter, the Court first found that a closely held for-profit corporation could exercise religious beliefs. The Court then found the mandate unlawful because the government did not use the least restrictive means of accomplishing its goal.

The Court limited its opinion by emphasizing that closely held for-profit corporations whose owners seek religious exceptions cannot opt out of every generally applicable law based on their religious beliefs; there must be a less restrictive accommodation available. The Court’s dissenting opinion argues that the opinion has “startling breadth” and will result in increased litigation and controversy as employers seek additional reprieves from the ACA and other laws.

If you have any questions about how the information in this article may affect you or your business, please contact your Stroud attorney. 

DISCLAIMER: The information in this article is provided for general informational purposes only, is not necessarily updated to account for changes in the law, and should not be considered tax or legal advice.  This article is not intended to create, nor does the receipt of it constitute, an attorney-client relationship.  You should consult with your own legal and/or financial advisors for legal and tax advice tailored to your specific circumstances.