Broadcasters stymied by court losses in New York are turning to judges in California and Massachusetts in their campaign to shut down the Aereo online streaming TV service, potentially creating a patchwork of rulings that would need to be resolved by the Supreme Court.
Aereo, which relays broadcast TV to subscribers over the internet, is continuing to expand its service to more U.S. cities even as CBS Corp., Comcast's NBC, Walt Disney Co.'s ABC and Twentieth Century Fox's Fox pursue copyright litigation that may wind up before the U.S. Supreme Court.
A federal court in Los Angeles granted Fox's motion to close a similar service originally called Aereokiller, and lawyers are set to argue over that decision today before the U.S. Court of Appeals in Pasadena, Calif. If judges uphold Fox's victory, that would create a split on essentially the same technology between federal appeals courts in California and New York, which could propel the question to the nation's highest court.
The federal courts in New York and Southern California are "two of the most copyright-savvy" in the U.S., said David Wittenstein, who leads the media and information-technology practice at the law firm of Dow Lohnes. "And they've come to opposite conclusions."
There are "pretty good odds" the Supreme Court will take on the issue, said Corynne McSherry, a lawyer with the Electronic Frontier Foundation, the digital rights group supporting Aereo and the former Aereokiller, now FilmOn X.
"You don't want the same technology you can get in New York not available in California because two courts have gone in the opposite direction," Ms. McSherry said.
Broadcasters say their argument will prevail. "They're retransmitting content they don't own and charging a fee for it without the permission of the content owners," said Dennis Wharton, a spokesman for the National Association of Broadcasters. "This case has united the broadcast industry like no other."
The broadcasters say they're fighting to preserve the business model that generates revenue to produce TV programs. Cable and satellite services might balk at paying to carry their channels if Aereo can legally get the signal for nothing, they said. And broadcasters don't need to lose any more leverage in negotiations with pay-TV operators.
While broadcasters reaped $2.36 billion in retransmission fees in 2012 from services including Time Warner Cable and DirecTV, the annual rate of increase in retransmission revenue declined to 34% last year from 42% in 2011, according to researcher SNL Kagan, which projects another decline this year.
Other streaming services, including Hulu, Netflix and Amazon, pay licensing fees to the broadcasters.
The only cable channel New York-based Aereo offers is Bloomberg TV.
Aereo scored early victories against the networks in New York, where an appeals panel has affirmed a lower-court ruling that its transmissions are private performances under copyright law and don't require licenses. The broadcasters' bid for a review by the full appeals court was rejected.
"We are pleased that the federal district court in New York looked in depth at our technology and rejected the broadcasters' assertions that it violated copyright law," Chet Kanojia, Aereo's founder and chief executive officer, said Monday in an e-mail. "The road ahead is long, but we remain confident that we will continue to prevail."
In July, TV-station owner Hearst Corp. sued Aereo in Boston, the market Aereo targeted after New York. Aereo, expecting CBS to sue there, had already filed a complaint against that network in New York seeking a declaration that it wasn't an infringer.
Aereo plans to operate in 22 cities by the fourth quarter. Broadcasters may take legal action in markets where they anticipate decisions banning the service, said Mr. Wittenstein, the Dow Lohnes attorney.
"One of the reasons you won't see broadcasters file a lot of suits is they don't want to tip the scales and have them consolidate all in the same place, such as New York, which is not favorable to them," Mr. Wittenstein said.
Aereo's strategy, meanwhile, may be to expand where courts share its view of copyright law, he said. "Their rollout is dictated not by business decisions but by legal decisions," Mr. Wittenstein said.
New York litigation is not over. Aereo's early victory was a rejection by U.S. District Judge Alison Nathan of broadcasters' attempt to quickly close the service. Aereo has now asked Ms. Nathan to dismiss the entire case, arguing that because she found that its transmissions are private performances, they couldn't have violated network copyrights.
The networks can still try to persuade Ms. Nathan to find infringement on other grounds, including their exclusive right to make copies of their programming. If she rejects Aereo's motion to dismiss the case, a non-jury trial could follow.
"It's more likely the judge will not dispose of this on summary judgment," Mr. Wittenstein said. "It's more likely the judge will give the broadcast plaintiffs a chance to present the facts."
Aereo contends its service is a simply a technologically advanced version of the rabbit-ear antennas viewers once used to pull in free over-the-air TV signals. In New York, the broadcasters argued -- and one of three appeals judges agreed -- that Aereo's antennas are a gimmick to circumvent copyright laws and that making thousands of copies of programs and transmitting them to thousands of viewers constitutes public performances of their content.
"In the end," Mr. Wittenstein said, "I think the judge may hold Aereo is not an infringer."
How the Supreme Court might view the conflict is less certain. Aereo has argued that the Supreme Court already ruled in its 1984 decision on the Sony Betamax video recorder that consumers have the right to record TV shows and play them back at will without being liable for infringement. The question now is whether the recording is being done by Aereo or the viewer.
~ Bloomberg News ~
Marketers and agencies rethink their work out loud at the 10th annual Ad Age Digital Conference. What is advertising now -- an ad or an experience? How does it get done -- and by whom? We hash out pressing industry issues like ad blocking, ad fraud, and kickbacks. We set the agenda for the year ahead. Save $400 before February 19.Learn more