Disruptive TV Startup Aereo Is Winning in Court

The major broadcasters, including ABC, CBS, NBC and Fox, have asked the U.S. Supreme Court to shut down video startup Aereo

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Bebeto Matthews / AP

Chet Kanojia, founder and CEO of Aereo, Inc., stands next to a server array of antennas in New York, Dec. 20, 2012.

Several of the nation’s largest media companies have petitioned the U.S. Supreme Court as part of their ongoing quest to shut down Aereo, the scrappy Internet video service that’s become an enemy of major TV broadcasters. The move, which was expected, comes after Aereo scored another legal win this week when a federal judge in Boston refused to issue an injunction shutting down the startup. Aereo’s Boston victory comes three months after the U.S. Second Circuit Court of Appeals in New York declined to reconsider an April ruling in which that court also refused to issue an injunction halting the service. If the Supreme Court agrees to review the matter, it would set the stage for a major test of federal copyright law.

Aereo launched in February 2012, after raising more than $20 million from media mogul Barry Diller’s Internet conglomerate IAC and other investors, and was immediately sued by the major broadcasting titans, including Comcast-owned NBC, News Corp.-owned Fox, Disney-owned ABC, and CBS. Aereo picks up free, over-the-air broadcast signals using an array of tiny antennas, and then sends those signals to its customers via the Internet. Aereo’s users technically lease the tiny antennas, which the company houses in nearby “antenna farms.”

Aereo says that because each user receives programming over the Internet via his or her own leased antenna, the system is legal. The broadcasters maintain that Aereo — which doesn’t pay for the TV signals it captures over the air — is violating copyright law and stealing their programming. After the Second Circuit Court of Appeals declined to revisit an earlier ruling in which a three-judge panel refused to shut down the service, a Fox spokesperson told TIME that the media giant was considering seeking a hearing on the case before the U.S. Supreme Court.

(MOREAereo Spat Could Prompt Fox Supreme Court Challenge)

On Wednesday, the entertainment industry publication Variety reported that the major broadcasters planned to petition the Supreme Court to review the Second Circuit Court of Appeals rulings in favor of Aereo. Citing “sources familiar with the case,” Variety reported that “a decision has been made to file a petition, or writ of certoriari, by a deadline of Oct. 15.”

On Friday, the major broadcasters, including ABC, CBS, NBC and Fox formally asked the Supreme Court take the case. “This Court’s intervention is urgently needed,” the broadcasters wrote in their petition. “This Court has had little tolerance for business models built on the for-profit exploitation of the copyrighted works of others. And this Court has repeatedly recognized the important public interest in protecting the viability of over-the-air broadcast television.”

In an email, a Fox spokesperson said: “Today’s filing underscores our resolve to see justice done. Make no mistake, Aereo is stealing our broadcast signal. As do so many businesses both large and small, broadcasters rely on enforcement of the law to receive fair value for the high quality news, sports and entertainment we create and in turn deliver to millions of Americans each day.”

Virginia Lam, a spokesperson for Aereo, said: “We will respond, as appropriate, in due course.”

In the Boston case, U.S. District Judge Nathaniel Gorton denied a request by a Hearst-owned television station, WCVB-TV, to shut Aereo down. “After considering the relevant factors, the Court finds that a preliminary injunction is unwarranted,” Judge Gorton wrote in his decision. “Hearst has not demonstrated a sufficient likelihood of success on the merits nor the requisite irreparable harm and therefore it is not entitled to that ‘extraordinary and drastic remedy.'”

In his ruling, Judge Gorton sided with Aereo’s argument that it is transmitting “private performances” not copyright-protected “public performances.” As BTIG analyst Rich Greenfield explains, “A broadcaster transmitting from their facilities to antennas across a city is a public performance, but someone capturing that signal via their own personal antenna for their own personal use and then transmitting it via sling-like technology to one of their personal devices would be a private performance.”

In a slight setback for Aereo, Judge Gorton denied the company’s motion to transfer the case to New York. “The court was right to keep this case in Boston, the home of WCVB-TV,” a station representative said in a statement cited by Variety. “We will immediately appeal the court’s decision that allows Aereo to continue to engage in a commercial business that unlawfully profits by using WCVB’s copyrighted broadcasts and shows. We expect to prevail in this case.” An appeal would be heard in the First Circuit Court of Appeals in Boston.

(MOREMurdoch’s News Corp. Threatens to Pull Fox Off the Air in Aereo Dispute)

Aereo CEO and founder Chet Kanojia said in a statement that Judge Gorton’s ruling, coupled with earlier decisions in favor of the company “shows that when you comply not only with the letter, but the spirit of the law, justice will prevail. Today’s victory belongs to the consumer and today’s decision makes clear that that there is no reason that consumers should be limited to 1950s technology to access over-the-air broadcast television. Using Aereo, a consumer can simply and easily use an individual remote antenna and cloud DVR via the Internet to record and watch-over-the air programs.”

In a sign of how much Aereo has annoyed the major broadcasters, News Corp. COO Chase Carey said in April that the media giant’s flagship Fox network might cease broadcasting over the U.S. public airwaves because of the Aereo dispute. He suggested that Fox — home of “The Simpsons,” “Glee” and “American Idol” — might simply move to pay-for-TV cable. At least one other broadcaster is also reportedly mulling such a move.

It’s by no means certain that the Supreme Court will grant certoriari in the Aereo case, and in fact, some industry analysts believe that the high court is unlikely to take the case at this time. “Our sense is broadcasters will have to overcome general Supreme Court reluctance to address cases at the preliminary injunction phase, rather than on the merits after trial(s), given the caseload,” Stifel analysts Christopher C. Kingand David Kaut wrote in a note to clients. “We believe broadcasters would have to make a very strong showing that they would likely both win on the merits and suffer irreparable harm in the meantime (the two key injunctive criteria).”

Meanwhile, Aereo, which is currently available in New York City, Boston, Atlanta, Salt Lake City, Miami, Houston and Dallas, is pushing ahead. On Thursday, the company announced that it will release its first mobile application for Google Android devices later this month.

Update Oct. 11, 6 p.m. EDT: This post has been updated to include details from the broadcasters’ Supreme Court filing and statements from Fox and Aereo.

2 comments
MyaB
MyaB

How is this any different than before where I could use my home antenna and receive these signals for free anyway?

Mr-X
Mr-X

@MyaB Well the difference is that these media conglomerates want you to pay to be able to watch your shows on your iPad, Home Computer, or other media playback device.  They sell episodes and seasons of their shows on outlets like iTunes and they don't want anyone cutting into those pure profit dollars.