Aereo Spat Could Prompt Fox Supreme Court Challenge

A New York federal appeals court has denied a bid by the major TV broadcasters to shut down New York-based tech startup Aereo, which picks up free, over-the-air TV signals and streams them onto the Internet

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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.

A New York federal appeals court has denied a bid by the major TV broadcasters to shut down New York-based tech startup Aereo, which picks up free, over-the-air TV signals and streams them onto the Internet. On Tuesday, the U.S. Second Circuit Court of Appeals declined to revisit an April ruling in which a three-judge panel refused to issue an injunction halting the service.

In response, Fox is considering taking the case to the U.S. Supreme Court, a spokesperson told TIME. Until then, Aereo can continue to offer its online video service. Earlier this year, Aereo expanded to Atlanta and Boston, and last month, the company said it plans to offer service in Chicago.

Aereo has spooked the major broadcasters by using a new twist on an old fashioned technology to test the TV industry’s iron-clad grip on broadcast television. Aereo picks up free, over-the-air broadcast signals using an array of tiny antennas — each antenna “leased” to a single customer — and then sends those signals to customers via the Internet. Aereo pays nothing to perform this service, but it charges its customers for each tiny antenna, which the company houses in nearby “antenna farms.”

(MoreNews Corp. Threatens to Pull Fox Off the Air in Aereo Dispute)

Aereo launched in 2012 after raising more than $20 million from media mogul Barry Diller’s Internet conglomerate IAC and other investors. Shortly thereafter, the major broadcasters – Comcast-owned NBC, News Corp.-owned Fox, Disney-owned ABC, and CBS — initiated a joint legal challenge to shut down the upstart company. Aereo says that because each user receives programming over the Internet via his or her own leased antenna, the system is legal. Thus far the broadcasters have failed to win an injunction halting the service.

As of now, Aereo’s service is legal, according to the U.S. Second Circuit Court of Appeals. In April, that court found that Aereo’s Internet streams do not constitute “public performances” in violation of U.S. copyright law. The court also found that the broadcasters’ lawsuits against Aereo “are not likely to prevail on the merits.” The full court has now declined to review the case in a so-called ‘en banc’ hearing. If the broadcasters want to fight the injunction defeat, they’ll have to appeal to the U.S. Supreme Court.

“The fact that Aereo keeps winning means that the court has found that this service complies with the law,” says John Bergmayer, senior staff attorney at D.C.-based digital rights group Public Knowledge. “Broadcasters make over-the-air-signals available for free. Just because the antenna happens to be located in another building doesn’t mean the signal is no longer free.”

The broadcasters maintain that Aereo is stealing their TV signals without payment. For now, at least, the only legal opinion that matters is that of the U.S. Second Circuit Court of Appeals, which has repeately ruled in Aereo’s favor. The court was not unanimous, however. In a scathing dissent joined by one other colleague, Judge Denny Chin declared Aereo to be a “sham” designed to circumvent U.S. copyright law.

“The 2nd circuit’s denial of our request for an ‘en banc’ hearing, while disappointing was not unexpected,” a Fox spokesperson said in a statement emailed to TIME. “We will now review our options and determine the appropriate course of action, which include seeking a hearing in the U.S. Supreme Court and proceeding to a full trial on the merits of the case.”

(MOREAereo: The Fight for Streaming TV)

In the meantime, Aereo has filed a motion for summary judgment with the Second Circuit to get the whole case thrown out. That hearing will take place later this year, and if Aereo wins, there won’t be a full trial on the merits of the case in this jurisdiction. That would make a Supreme Court hearing more likely, experts say.

If the broadcasters choose to pursue a full trial on the merits in the Second Circuit, they will face an uphill battle, according to Rich Greenfield, a media analyst at BTIG Research. “I don’t see a way that the broadcasters can win at a full trial in the Second Circuit if what Aereo is doing is not a public performance,” Greenfield said. “And if Aereo wins summary judgment this fall, it could be game-set-match.”

In April, News Corp. COO Chase Carey said 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.

Matt Wood, Policy Director at D.C.-based public interest group Free Press said that threat is just saber-rattling, because Fox makes a fortune in advertising and fees from its network broadcasts. “Over the air broadcasting is very profitable, so it’s a bit overblown to say that Aereo threatens their business model,” Wood said. “These guys are still bringing in a ton of money. It’s unlikely they’re going to take their ball and go home.”