(CN) - In a setback for Aereo, a federal judge has issued a six-state injunction after finding that the business needs a license to air network television's copyrighted programming.
Major broadcast networks, including ABC, CBS, NBC and Fox, have been locked in ongoing litigation with Aereo, owned by Coca-Cola director Barry Diller, ever since his subscription service debuted in major cities in 2012.
Aereo maintains that copyright law protects its service, allowing customers to watch network content on their computers, mobile devices and televisions with a small delay after live broadcast.
Last year, a divided three-judge panel of the 2nd Circuit in New York rejected the networks' copyright claims against Aereo. The U.S. Supreme Court will have the final say this term.
A key part of Aereo argument is the 2008 decision from the 2nd Circuit, Cartoon Network LP v. CSC Holdings Inc., abbreviated in the court record as Cablevision.
The court in that case found that a system that allowed viewers to watch content through remotely located DVRs was not a "public performance" under the transmit clause of the Copyright Act and therefore did not require an additional license.
Aereo argues that its customers access only a unique signal from one of thousands of dime-sized antennas. In that sense, Aereo contends, it is offering customers something like traditional rabbit ears where customers view the networks' content "privately."
A local Fox affiliate in Utah, taking issue with that line of reasoning, sued Aereo in October 2013.
U.S. District Judge Dale Kimball in Salt Lake City found Wednesday that Aereo's streaming service is "indistinguishable from a cable company."
"It is undisputed that plaintiffs license its programming to cable and satellite television companies and through services such as Hulu and iTunes," Kimball wrote. "These companies and services are providing paying customers with retransmissions of copyrighted works. Similarly, Aereo uses 'any device or process' to transmit a performance or display of plaintiff's copyrighted programs to Aereo's paid subscribers, all of whom are members of the public. However, Aereo's retransmissions are done without a license to do so."
Noting that it is "uncontroverted that an individual's retransmission of a broadcast to himself, his family, or circle of friends is not a public performance," under the Copyright Act, Kimball nonetheless found that in Aereo's case the court is bound by "standards defining a public performance in the transmit clause."
Suggesting the 2nd Circuit had spun the "language of the transmit clause, the legislative history, and prior case law into a complicated web," Kimball said that the court's decision in Cablevision was unsupported by the transit clause, which "states clearly that it applies to any performance made available to the public."
"Paying subscribers would certainly fall within the ambit of 'a substantial number of persons outside of a normal circle of a family and its social acquaintances' and within a general understanding of the term 'public,'" Kimball wrote.
Kimball preferred U.S. District Judge Denny Chin's dissent in the New York appellate court's Aereo decision.
Chin had noted that cable companies' had paid licensing fees, while Aereo did not. Likewise, customers were viewing content under authorized cable subscriptions, while in contrast "no part of Aereo's system is authorized."
Rejecting Aereo's claim that it is merely providing a service that individuals "could do for themselves" with their own antennas, televisions or DVRs, Kimball said lawmakers had "specifically rejected" similar arguments through passage of Copyright Act.
"Despite its attempt to design a device or process outside the scope of the 1976 Copyright Act, Aereo's device or process transmits plaintiffs' copyrighted programs to the public," the judge wrote.
Kimball said Fox had made the case that Aereo's business could cause its affiliates "irreparable harm." Aereo's argument that its "infringement is a drop in the bucket," found no traction with the judge.
Aereo is diverting viewers away from the networks' websites, threatening the networks "position in the competitive marketplace for Internet content," and increasing the likelihood of piracy, Kimball said.
In balancing harms, the court said that an injunction covering the 10th Circuit's jurisdiction in Wyoming, Colorado, Utah, New Mexico, Kansas and Oklahoma "will not put Aereo out of business, it merely impacts its expansion."
"Aereo took a calculated risk in designing its business around the Cablevision decision and a perceived loophole in the 1976 Copyright Act," Kimball wrote. "The court concludes that the balance of harms weighs in plaintiffs' favor and supports the court's issuance of a preliminary injunction."
Aereo can stay proceedings in the case pending the Supreme Court's decision, but it cannot move the case to the Southern District of New York, where the company is defending two similar cases, the ruling states.
In 2013, a federal judge in Washington, D.C., issued a nationwide injunction against Aereo's competitor Film On X's paid subscription service, barring it from streaming live TV shows over the Internet through a similar mini-antenna technology.
A New York federal judge ruled that same year that Film On X violated a settlement and court injunction by streaming the networks' programs.
Aereo has largely fared better in the courts. It won a favorable ruling from U.S. District Judge Nathaniel Gordon in Boston last year when the judge refused to enjoin Aereo from streaming the original programming of ABC affiliate, WCVB-TV.
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