• by Wendy Davis  @wendyndavis, April 1, 2013

In a blow to TV networks, the 2nd Circuit Court of Appeals ruled on Monday that the Barry Diller-backed Web video service Aereo can continue to operate.

The appeals court ruled 2-1 that Aereo's paid subscription service does not infringe the TV networks' right to publicly perform programs -- a right that is exclusive to content owners.

The ruling upheld a trial judge's decision denying the TV networks' request for an injunction banning Aereo from operating.

Aereo argued that its system is legal based on its technological design, which the company says complies with the requirements of copyright law. Before launching in New York last year, the company installed thousands of dime-sized antennas in a building in Brooklyn. Those antennas capture over-the-air shows, which are then streamed live to subscribers. Consumers also have the ability to “record” shows for streaming at a later date.

Aereo says that it has the same legal right to install antennas that receive over-the-air TV as any individual, and that the streams to users are legal because the streams are made on an antenna-to-user basis. Aereo argues that the one-to-one nature of the streams means they're not public performances. The company relies on a 2008 2nd Circuit ruling that Cablevision's remote DVR service -- which transmits programs to individual households on a DVR-to-user basis -- doesn't infringe copyright.

But the TV networks argued that Aereo is functionally equivalent to a cable television company, and is illegally transmitting TV shows without a license.

The 2nd Circuit agreed with Aereo that its design complied with copyright law. “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,” the majority wrote.

The judges specifically rejected the TV networks' argument that Aereo wrongly took advantage of a loophole by installing unnecessary antennas -- which the company did in order to comply with the letter of the ruling legalizing remote DVRs. The majority said in its decision that prior rulings stood for the proposition that “technical architecture matters.”

Circuit Court Judge Denny Chin dissented from the decision. Writing separately, he called Aereo's technology platform “a sham,” and said that he thought the company should have been ordered to stop operating.

“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,” Chin wrote.

He added that Aereo's system differs from Cablevision's remote DVRs in key ways. “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. 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.”

A separate court, the 9th Circuit Court of Appeals, is considering the same issue in a case involving Aereokiller, an Aereo rival. In that case, a trial judge in California sided against Aereokiller and banned it from streaming TV shows.
Copyright expert James Grimmelmann said that Monday's ruling in the Aereo case highlights problems with the concept that a technology's legality depends on whether it transmits so-called public performances.

“Thousands of tiny antennas are a perfect illustration of the perversities that this doctrine creates," says Grimmelmann, a visiting professor at Georgetown Law School. “Either offering DVRs to customers should be legal full-stop, or it shouldn't. But it shouldn't depend on the antennas.”

The National Association of Broadcasters said it was “disappointed” with the 2nd Circuit's ruling. “We agree with Judge Chin's vigorous dissent and, along with our members, will be evaluating the opinions and options going forward," the group said.

But digital rights groups hailed the ruling as a victory for consumers. “Only in the the world of copyright maximalists do people need to get special permission to watch over-the-air television with an antenna,” Public Knowledge attorney John Bergmayer stated. “Just because 'the Internet' is involved doesn't change this.”