Aereo’s Plan Flies With Appeals Court

PANEL CITES SIMILARITIES TO RS-DVR IN BACKING STREAMING FIRM
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WASHINGTON — If Aereo keeps winning in court, the Federal Communications Commission’s decision about whether the must-carry and retransmission-consent regime applies to over-the-top providers could become moot.

Barry Diller-backed Aereo provides subscribers in New York and its suburbs access to time-shiftable Web versions of local broadcast stations for a monthly subscription. Broadcasters sued the startup last month, citing copyright violations because the company did not get their permission to retransmit the signals or pay them for their content.

Cable operators, whose complaints over retransmission consent have been rising in pitch to match the levies by broadcasters seeking lots more cash for carriage, could get a big boost from last week’s decision by the U.S. Court of Appeals for the 2nd Circuit.

The court said it would not prevent Aereo from delivering TV-station signals over the Internet while a district court decides whether that violates copyright protections.

CABLEVISION PRECEDENT

Even better, from the perspective of cable operators — at least those without co-owned TV station groups — the 2nd Circuit made it clear that it thinks Aereo’s antenna farm copying and transmission of TV-station signals are similar to Cablevision Systems’ networked Remote Storage-Digital Video Recorder. The same appeals court ruled in 2009 that the Cablevision approach does not infringe on public performances subject to copyright restrictions.

Aereo declared at least partial victory last week, while broadcasters, including Comcast-owned NBC, vowed to fight on. That highlights the split between pure-play cable operators and those with a dog in both sides of the fight. The National Cable & Telecommunications Association offered no comment on the decision.

While the battle is not over, this is the second court that has weighed in with an opinion that Aereo is not violating copyright. A district court also had concluded that broadcasters were unlikely to prevail in court.

Establishing a likelihood of success is one of the standards for granting an injunction, which two courts have now failed to do.

The district court must still hear the case, and broadcasters will likely make new arguments.

In addition, last week’s 2-1 decision by a three-judge panel of the court could be appealed to the full court, and then to the U.S. Supreme Court. Broadcasters could make the case that the high court has a split decision it needs to resolve.

That’s because, in a separate broadcaster challenge to FilmOn, which tried similarly to stream TV station signals over the Internet without payment or permission, a district court judge in the 9th Circuit did grant an injunction, saying he disagreed with the 2nd Circuit district judge and, in that case, the Cablevision precedent did not apply to the 9th Circuit.

Federal appeals court rulings only apply to the circuit in which they are issued — in this case, New York, Connecticut and Vermont. In the meantime, Aereo is free to stream and to expand its service to other markets, as it has pledged to do, at least until it is challenged in a market outside the 2nd Circuit. That expansion would be just fine with some cable operators.

Time Warner Cable chairman and CEO Glenn Britt told a media conference audience last year that cable operators have a rooting interest in an Aereo victory, as it would call into question consumers being made to pay for otherwise free broadcast signals. Paying for broadcast signals forms the basis for the retransmission-consent and must-carry compensation regime cable operators have been living with for more than two decades.

In a recent talk with reporters, American Cable Association president Matt Polka said an Aereo model would be one means of bypassing the retransmission-consent talks his small, indepenent cable members argue are now stacked in favor of broadcasters.

Andrew Goldstein, an intellectual property attorney and partner at Freeborn & Peters in Chicago, said if the district court rules in Aereo’s favor, which appears likely, he sees three legal options for broadcasters.

The first, he said, would be to go after Aereo for contributory infringement, rather than the direct infringement the court said Cablevision was not guilty of.

“The Cablevision ruling said that Cablevision was not a direct infringer because it was the customers that directed the copying and recording, but they left the door wide open to a contributory infringement complaint,” Goldstein said. He said he was surprised that issue was not raised as part of the Aereo injunction request, but it might be raised in the trial.

OTHER AVENUES

Other legal or legislative options, he said, would include seeking a Supreme Court review, given the ruling in the 9th Circuit, and lobbying Congress to clarify the “transmit clause” given that the court seemed to indicate that Aereo “cleverly” followed the law — by setting up antenna farms — and therefore has no liability. “The Copyright Act is full of lobby-generated special interest exceptions,” Goldstein said.

In any event, the Aereo case will be winding through the courts or the halls of Congress likely for a year or more. In the meantime, Aereo can expand to other markets or strike those deals with cable operators.

“In my practical experience,” Goldstein said, “once a technology takes root, it is hard to get that genie back in the bottle.”

TAKEAWAY

A U.S. appeals court’s decision not to shut down Aereo could have fallout for cable operators frustrated by retransmission-consent costs.

Point in Aereo’s Favor

WASHINGTON — A majority decision by a three-judge panel of the 2nd U.S. Circuit Court of Appeals determined this about the online TV-streaming service:

• “We conclude that Aereo’s transmissions of unique copies of broadcast television programs created at its users’ requests and transmitted while the programs are still airing on broadcast television are not ‘public performances’ of the plaintiffs’ copyrighted works … As such, plaintiffs have not demonstrated that they are likely to prevail on the merits on this claim in their copyright infringement action.”

— John Eggerton

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