In a 2-to-1 ruling, the Court of Appeals for the Second Circuit found that Aereo’s streams of TV shows to individual subscribers did not constitute “public performances,” and thus the broadcasters’ copyright infringement lawsuits against the service “are not likely to prevail on the merits.”
The appeals court affirmed an earlier district court decision that denied the broadcasters a preliminary injunction against Aereo. The broadcasters, including CBS Corporation, Comcast, News Corporation and the Walt Disney Company, filed two suits against Aereo more than a year ago, weeks before the service was made available to residents of New York City last March.
They asserted that the service was illegal. But courts have now ruled against them on two occasions, giving momentum to Aereo as it tries to expand to other major metropolitan areas.
A spokeswoman for Aereo declined to comment on Monday morning, saying the company was still assessing the appeals court ruling.
CBS, one of the plaintiffs, said in a statement, “As the courts continue to consider this case and others like it, we are confident that the rights of content owners will be recognized, and that we will prevail.”
A group of other broadcasters, including Fox and PBS, said: “Today’s decision is a loss for the entire creative community. The court has ruled that it is O.K. to steal copyrighted material and retransmit it without compensation. While we are disappointed with this decision, we have and are considering our options to protect our programming.” The broadcasters said they would move ahead toward a trial.
While the broadcasters have lost in New York’s federal courts so far, they have won a district court case in California last December against an Aereo-like service named Aereokiller, backed by the billionaire Alkiviades David.
Aereo is backed by a number of venture capitalists, chief among them Barry Diller, who created the Fox network for the News Corporation 30 years ago. Mr. Diller’s IAC/InterActiveCorp led a $20.5 million round of financing for Aereo after Mr. Diller met with its founder, Chet Kanojia, and came away convinced that the legal underpinnings of the service could withstand legal scrutiny.
Aereo is able to stream broadcast stations by operating an array of tiny antennas that pick up over-the-airwaves signals. Then it gives subscribers control over one antenna and streams the selected programming over the Internet, essentially turning the subscriber’s phone or tablet into a small television set, but without the rabbit ears that would normally be needed.
The array of antennas has become known as the “Aereo loophole,” for it allows Aereo to avoid paying the retransmission fees that operators like Time Warner Cable and DirecTV pay for access to stations. Those fees are an increasingly important revenue source for the stations, so it is not surprising their owners have sued to protect them.
Aereo also includes a remote digital video recorder feature, not unlike the remote DVR system that was operated by Cablevision and was upheld in court several years ago.
Judge Christopher F. Droney pointed to that decision as he affirmed the previous court ruling in favor of Aereo.
Another appeals court judge, Denny Chin, dissented on Monday, calling Aereo’s antenna workaround “a Rube Goldberg-like contrivance, overengineered in an attempt to avoid the reach of the Copyright Act and to take advantage of a perceived loophole in the law.” He concluded that the Aereo streams to subscribers were “public performances” and thus violations of copyright.