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Supreme Court to Hear Aereo Case

The Supreme Court will hear broadcasters’ challenge to the legality of startup Aereo, in a case that may determine not only the future of digital streaming of station signals but of network television itself.

Without comment, the justices on Friday agreed to accept ABC Television Stations vs. Aereo, in which the television networks are seeking to halt the Barry Diller-backed venture, contending that its offering of streams of station signals in New York and other markets violates the public performance provisions of the Copyright Act. Justice Samuel Alito took no part in the consideration of the petition, the court said, without elaborating. Typically such recusals are for a potential conflict of interest, and Alito has previously said that his family owned stock in the Walt Disney Co.

“We are pleased the Court has agreed to hear this important case,” Fox, Univision, PBS and other plaintiffs said in a joint statement.  “We are confident the court will recognize that this has never been about stifling new video distribution technologies, but has always been about stopping a copyright violator who redistributes television programming without permission or compensation.”

CBS, along among the plaintiffs, said that they “believe that Aereo’s business model, and similar offerings that operate on the same principle, are built on stealing the creative content of others. We are pleased that our case will be heard and we look forward to having our day in court.” ABC and NBC also released a joint statement, saying they were “gratified” that the high court is taking the case.

Chet Kanojia, founder and CEO of Aereo, said that “it was our hope that this case would be decided on the merits and not through a wasteful war of attrition. We look forward to presenting our case to the Supreme Court and we have every confidence that the court will validate and preserve a consumer’s right to access local over-the-air television with an individual antenna, make a personal recording with a DVR, and watch that recording on a device of their choice.”

Aereo argues that it is well within legal boundaries. It assigns each subscriber a dime-sized remote antenna, with individual copies of broadcast feeds recorded to a remote hard disk and, after a delay of at least six seconds, streamed to the viewer.

Aereo contends that its users, not the company, have “control” over the system, making it a private use akin to time-shifting on a VCR or DVR. It is relying in large part on a 2nd Circuit Court of Appeals decision in 2008 that determined that Cablevision was within the bounds of copyright law when it offered a remote DVR.

The next year, the Supreme Court declined to review the Cablevision case, letting the decision stand in what ultimately turned out to be an example of the unintended consequences of challenging emerging technology in the courts. Before declining media congloms’ petition to review, the justices asked then-Solicitor General Elena Kagan to weigh in, and she and other staff attorneys concluded that the Cablevision decision was “insufficiently important” to warrant it.

But Aereo was launched in March, 2012, the company mindful of the precedent of the Cablevision case. Several months later, U.S. District Judge Alison Nathan relied on the Cablevision decision in refusing to issue an injunction to halt Aereo, and a split panel of the 2nd Circuit affirmed her ruling. Another federal judge, in Boston, also has sided with Aereo.

Interestingly, as the TV networks sought review from the Supreme Court, Aereo also urged the justices to take the case, concluding that it would be better to have the issue resolved rather than to have a patchwork of decisions across the country as it launches in new markets. Broadcasters also are challenging Aereo in such places as Utah, and they have had greater success at putting a halt to one of Aereo’s rivals, FilmOn X. Federal judges in Los Angeles and Washington DC ruled against FilmOn X, and a decision is pending on that startup’s appeal in the 9th Circuit.

But the implications for broadcasters are greater than just whether the two companies continue to exist. They contend that Aereo threatens to undercut the growing stream of revenue coming from retransmission fees, estimated at more than $3 billion annually, money broadcasters say is more important in helping to finance original programming. If Aereo continues, broadcasters say, cable and satellite operators will see little need to pay those retransmission fees and can merely develop their own streaming services. Last year, News Corp. COO Chase Carey even threatened that they would consider putting its Fox network on a subscription platform if services like Aereo were not stopped.

The broadcast networks are confident that the justices will see the Cablevision decision as an outlier in an otherwise straightforward interpretation of the Copyright Act, particularly a provision that says a performance can be defined as ‘public’ whether viewers “receive it in the same place or in separate places and at the same time or at different times.” They argue that lawmakers who wrote the Copyright Act in 1976 intended it to restrict future new technology like Aereo from transmitting their signals without permission.

Aereo, meanwhile, argues that the Supreme Court’s opinion could affect the future growth of cloud computing, in that users are accessing a host of content stored remotely.

“The landmark Second Circuit decision in Cablevision provided much needed clarity for the cloud industry and as a result, helped foster massive investment, growth and innovation in the sector,” Kanojia said in his statement. “The challenges outlined in the broadcasters’ filing make clear that they are using Aereo as a proxy to attack Cablevision itself and thus, undermine a critical foundation of the cloud computing and storage industry.

He added, “The broadcasters are asking the Court to deny consumers the ability to use the cloud to access a more modern-day television antenna and DVR. If the broadcasters succeed, the consequences to consumers and the cloud industry are chilling.”

The prospect of courts shutting down Aereo has not stopped its expansion into other markets, although it is doubtful it would expand to Los Angeles any time soon, nor has it prevented it from raising additional money from investors like Diller. Earlier this week, Aereo announced that it had raised another $34 million to help it grow.

For its part, Cablevision has said that it believes that Aereo infringes on copyright, but that the Cablevision decision was sound. “Cablevision remains confident that while the Aereo service violates copyright, the Supreme Court will find persuasive grounds for invalidating Aereo without relying on the broadcasters’ overreaching — and wrong — copyright arguments that challenge the legal underpinning of all cloud-based services,” Cablevision said in a statement on Friday.

Jonathan Steinsapir, partner at Kinsella, Weitzman, Iser, Kump & Aldisert, noted that Aereo represents the biggest copyright case involving new technology to reach the high court since MGM vs. Grokster, in which the justices decided that a file-sharing company could be held liable for distributing devices with the purpose of making infringing copies.

Studios, he said, are anxious to see the Cablevision decision overturned. “I think there is a feeling that it was too focused on the form [of the technology] rather than the substance,” he said. A Supreme Court ruling also could have an impact on another case that is in the 9th Circuit, the broadcast networks’ challenge to Dish Network’s introduction of its Hopper service, which includes an automatic ad-skipping feature. The networks are in the midst of appeals over that technology.

Broadcasters are taking the chance that they will get an adverse ruling from the Supreme Court, Stensapir said, but they have too much at stake not to seek a review. “It is a risk they have to take,” he said.

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