A federal judge has refused to dismiss a lawsuit alleging that Netflix violates the Americans with Disabilities Act by failing to provide closed captioning on Web video streams. 

U.S. District Court Judge Michael Ponsor in Massachusetts rejected Netflix's argument that its online video service isn't considered a "place of public accommodation" under the ADA.

Netflix argued that the 1990 federal law -- which prohibits discrimination against people with disabilities -- applies to brick-and-mortar retailers, but not to businesses that exist solely in cyberspace. The company also argued that the ADA didn't apply because people used the service at home, and not in public. 

Ponsor rejected both of those arguments. "In a society in which business is increasingly conducted online, excluding businesses that sell services through the Internet from the ADA would run afoul of the purposes of the ADA," he wrote in a decision issued last week. "The Watch Instantly Web site is a place of public accommodation and defendant may not discriminate in the provision of the services of that public accommodation -- streaming video -- even if those services are accessed exclusively in the home."

Netflix still could prevail at a later stage, but the ruling appears to clear the way for similar lawsuits against online video services, according to Santa Clara University law professor Eric Goldman. "The decision is potentially quite significant," Goldman says. "This opinion is a green light to plaintiffs' lawyers that Web sites are potentially covered by the ADA."

He adds that Ponsor's ruling potentially could affect a wide swath of online video companies -- including startups like Aereo and companies that offer video games.

The litigation against Netflix dates to last June, when the National Association of the Deaf sued Netflix for failing to caption streams. The group is seeking an injunction requiring Netflix to provide closed captioning. The organization said in its complaint that it has received many complaints about Netflix directly from deaf and hard-of-hearing individuals, including from its members, from all over the country. 

Netflix is not the only company to be sued for operating a Web site or service that potentially violates the ADA. eBay was sued in 2010 for allegedly discriminating against deaf people by requiring sellers to use a telephone to verify their identities. The auction site, which is fighting that lawsuit, has argued that it isn't covered by the ADA; that case is pending in federal court in the Northern District of California.

In 2008, Target agreed to pay $6 million and make its site friendlier to people who access the Web via screenreaders in order to settle a lawsuit brought by the National Federation of the Blind. But unlike Netflix, Target operates brick-and-mortar stores, and the company's Web site was viewed by the court as connected to the physical retail outlets.

In the lawsuit by the National Association of the Deaf, Netflix also unsuccessfully argued that the case should be dismissed because a more recent federal law governs online closed captioning. But Ponsor said that newer law complements the ADA, but doesn't trump it.

The video company also said it couldn't start captioning material without the copyright owner's consent. Ponsor found that argument was premature. "There is currently no evidence before the court concerning how much of the streaming content and associated copyrights defendant owns, what the terms of defendant’s agreements with other copyright owners may be ... and whether content is delivered to defendant with or without captioning," he wrote.