Fate of Digital Television Split on the Coasts

MANHATTAN (CN) - Setting the stage for a circuit split, the 2nd Circuit affirmed that Aereo does not infringe on public television broadcasts by disseminating them online.

Several major networks, including ABC, CBS and NBC, sued Aereo in Manhattan last year, claiming that the company infringed on their broadcasts by transmitting them to subscribers.

The same networks later filed a separate lawsuit in Los Angeles against a different and unassociated company named Aereokiller.

Both companies work by assigning their subscribers a distinct antenna with nearly live transmissions of television broadcasts. They reportedly acquired similar names during a standoff between their billionaire owners: Barry Diller of Aereo and Alki David of Aereokiller.

David founded a company called FilmOn, perceived as an early player in the digital-television distribution business.

The Hollywood Reporter said Aereo then "launched and stole some of FilmOn's thunder," leading David to create new services named BarryDriller and Aerokiller.

Diller then sued David for cybersquatting, while FilmOn pressed trademark claims against Aereo.

The companies have meanwhile been fighting off infringement claims from the networks, with support from digital rights advocates who herald their business model as expanding public access to the airwaves.

The networks condemn them as pirate operations.

Courts on the East Coast have been more sympathetic to the platform. Finding that the networks are "not likely to prevail" on their Manhattan lawsuit, U.S. District Judge Alison Nathan refused to cut off Aereo's feed in July.

Months later in Los Angeles, however, U.S. District Judge George Wu ruled against Aereokiller, setting the stage for a fight in the 9th Circuit Court of Appeals.

The Electronic Frontier Foundation, or EFF, has filed briefs supporting the Internet TV entities on both coasts.

On Monday, a divided three-judge panel of the 2nd Circuit found in favor of Aereo.

"Aereo's system ... provides the functionality of three devices: a standard TV antenna, a DVR, and a Slingbox-like device," Judge Christopher Droney wrote for the majority. "These devices allow one to watch live television with the antenna; pause and record live television and watch recorded programing using the DVR; and use the Slingbox to watch both live and recorded programs on internet-connected mobile devices."

In the District Court, Judge Nathan likened Aereo's case to another filed after Cablevision launched its Remote Storage Digital Video Recorder.

The 2nd Circuit's holding in Cablevision created a two-part test to see whether similar technologies violate copyright law, Droney explained.

"First, the RS-DVR system created unique copies of every program a Cablevision customer wished to record," he wrote. "Second, the RS-DVR's transmission of the recorded program to a particular customer was generated from that unique copy; no other customer could view a transmission created by that copy ... The same two features are present in Aereo's system."

In his dissent, Judge Denny Chin called Aereo's platform a "sham" and chastised his colleagues for "elevat[ing] form of substance."

"The system employs thousands of individual dime-sized antennas, but there is no technologically sound reason to use a multitude of tiny individual antennas rather than one central antenna; indeed, the system is a Rube Goldberg-like contrivance, over-engineered in an attempt to avoid the reach of the Copyright Act and to take advantage of a perceived loophole in the law," he wrote. "After capturing the broadcast signal, Aereo makes a copy of the selected program for each viewer, whether the user chooses to 'Watch' now or 'Record' for later. Under Aereo's theory, by using these individual antennas and copies, it may retransmit, for example, the Super Bowl 'live' to 50,000 subscribers and yet, because each subscriber has an individual antenna and a 'unique recorded cop[y]' of the broadcast, these are 'private' performances. Of course, the argument makes no sense. These are very much public performances." (Emphasis in original)

Chin added that the majority's DVR citation did not apply.

"Most significantly, Cablevision involved a cable company that paid statutory licensing and retransmission consent fees for the content it retransmitted, while Aereo pays no such fees," he wrote. "Moreover, the subscribers in Cablevision already had the ability to view television programs in real-time through their authorized cable subscriptions, and the remote digital video recording service at issue there was a supplemental service that allowed subscribers to store that authorized content for later viewing. In contrast, no part of Aereo's system is authorized. Instead, its storage and time-shifting functions are an integral part of an unlicensed retransmission service that captures broadcast television programs and streams them over the Internet.

"Aereo is doing precisely what cable companies, satellite television companies, and authorized Internet streaming companies do - they capture over-the-air broadcasts and retransmit them to customers - except that those entities are doing it legally, pursuant to statutory or negotiated licenses, for a fee."

It is unclear what effect, if any, the ruling will have on the West Coast.

As Judge Wu noted in his ruling against Aereokiller, the 2nd Circuit's precedent is not binding in California.

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