The major broadcast networks failed to persuade an appeals court to shut down Aereo Inc., the Barry Diller-backed online TV service that they claim violates their copyrights.
Broadcasters including Walt Disney Co.'s ABC and Comcast's NBC unsuccessfully petitioned the U.S. Court of Appeals in New York to overturn a lower-court order denying a preliminary injunction that would have put New York-based Aereo out of business.
"Plaintiffs have not demonstrated that they are likely to prevail on the merits on this claim in their copyright infringement action," the appellate judges said in the opinion.
The networks sued Aereo in March 2012, claiming that it infringed copyrights by capturing their over-the-air signals and retransmitting the programming to subscribers on computers and smartphones without paying for the rights. The networks argued that Aereo would devalue their programming and cut viewership, jeopardizing revenue from advertisers and pay-TV providers.
"Aereo is a retransmission service by its own design," Bruce Keller, a lawyer for the broadcasters, told the three-judge appeals panel during oral arguments in November.
The networks said that Aereo, by streaming programs to its subscribers, engaged in public performances of their copyrighted works, which requires a license. U.S. District Judge Alison Nathan had denied an injunction in July, ruling that Aereo's retransmissions weren't public performances.
Aereo said that its service gives subscribers access to broadcast programming and lets them record it using remotely located individual antennas and digital video recorders for playback later. That constitutes a private performance under copyright law, Aereo said.
"Customers have the right to make private performances," David Hosp, a lawyer for Aereo, told the appeals court in November. "Supplying the technology to accomplish this does not violate the public-performance right."
One analyst said the ruling may not be as significant as it seems, saying the litigation process has a long road ahead before arriving at a final answer. "Further, the scope of the argument for the pre-trial injunction was somewhat narrow and our Industry sources say the broader scope in the full trial makes the pre-trial injunction ruling potentially less relevant than it appears," said the analyst, David Bank of RBC Capital Markets, in a research note following the ruling.
Despite all the "noise" around Aereo, the broadcasters' business will ultimately absorb "any outcome without major disruption," Mr. Bank added.
~ Bloomberg News and Ad Age staff ~